What Can a Trust Reasonably Expect to Earn on its Assets…

…and What’s the Problem with Getting it Wrong?

PBI’s Article in Issue 12 of the Journal of Aboriginal Management



In today’s markets, what is a reasonable long-term target return for a trust, and consequently a reasonable spending rate?  The article Finding the Right Balance Now, and for Future Generations in JAM’s October 2012 issue claims a “7.5% target is a steep one in today’s markets, and likely requires heavy exposures to risky investment assets.” The article shows 7.5% is the total return that is required to maintain a 4% spending rate.

But is 7.5% really steep?  We can judge this by considering a hypothetical trust with 40% of the trust’s funds invested in bonds and 60% in public equities, therefore avoiding “heavy exposures to risky investment assets”.  Testing whether 7.5% is beyond reach will be as simple as determining reasonable target returns for the bonds and equities(…)

Click to read “What Can a Trust Reasonably Expect to Earn on its Assets and What’s the Problem with Getting it Wrong?”

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