For several years, The Winston-Salem Foundation has followed a total return spending policy for all of its permanent endowed funds. Funds are invested for maximum total return (within acceptable risk parameters), without distinction between income and capital gains.

The market value of the fund is measured over the past 12 quarters, and 5% of the average of those values is made available for grants. If a fund is too new to have received income for 12 quarters, calculations are made based on the history of the fund.

This method correctly puts the focus on the long-term growth in the grantable amount. This, in turn, encourages the appropriate use of equities in the fund, helping the fund to grow faster than inflation.

The total return spending methodology has additional benefits. For example, it offers a more predictable grant stream than an income-only approach, because of the smoothing effect of using a 12-quarter moving of market values.