How is an endowment's governance structured and how does that affect its IPS?

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An endowment is a permanent fund supporting a mission (university, hospital, museum). Governance typically has three tiers: 1. **Board of Trustees** — ultimate fiduciary authority, sets IPS and spending policy. 2. **Investment Committee** — delegated authority, selects managers, monitors risk, approves allocations. Often includes external experts. 3. **Investment Office / CIO** — day-to-day implementation, manager sourcing, operational due diligence. Key governance features driving portfolio design: - **Perpetual horizon** allows substantial illiquidity tolerance — private equity, real assets, venture capital can dominate. - **Spending policy** (typically 4-5% of a trailing multi-year average of assets) provides operating budget smoothing. - **Intergenerational equity** — today's students shouldn't benefit at future students' expense. Real return target is usually spending rate + inflation + fees ≈ 7-8%. - **Peer comparison** is politically important; underperforming peers invites trustee pressure. ```mermaid flowchart TB A[Trustees] --> B[Investment
Committee] B --> C[CIO /
Staff] C --> D[Managers] A --> E[Spending
Policy] B --> F[Asset
Allocation] ``` Example: the endowment of Brightmoor University, led by CIO Temperance Ashworth, holds 55% in alternatives (PE, hedge funds, real assets) and only 20% in public equity — the opposite of most DB plans. This is defensible because the horizon is perpetual and the spending rule smooths short-term volatility. **Risk**: underfunding spending in a prolonged downturn triggers budget cuts that can hurt the institution's mission. So liquidity buffers (10-15% in liquid assets) and stress-testing spending scenarios are governance staples. The 'Yale model' popularized by David Swensen institutionalized heavy illiquidity tilts; recent debate questions whether all institutions can replicate Yale's manager-access advantages.

How is an endowment's governance structured and how does that affect its IPS?

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