Porter County Foundation hears Capital Cities analysis showing portfolio growth, trade‑offs of higher spending

The Porter County Foundation board on an unspecified date heard a presentation from Capital Cities consultant John Williams on the foundation’s investment performance and the effects of possible changes to its spending policy.

Williams told the board the portfolio’s market value is about $196,204,000 and that performance for the most recent quarter was roughly +5%, year-to-date +6.5% and +9.7% over the trailing 12 months. He said the firm projects a long‑term expected return of about 6.56% for the current asset mix and contrasted that with the foundation’s current spending policy and several alternative distribution scenarios.

“The way your spending is constructed today, you’re absolutely expected to preserve purchasing power in the future and experience real growth of these assets,” Williams said, summarizing the analysis that underlies the recommendation to keep the investment policy statement up to date.

Why it matters: the consultant ran Monte Carlo scenarios showing three outcomes over a 50‑year horizon: the current 3.25% spending rule (in perpetuity) produces real growth in the median simulation; a one‑time 5% withdrawal in 2026 reduces the ending median real total-assets level only slightly; but a permanent 5% annual spending rate would, on median projections, erode purchasing power and shrink real assets substantially over 50 years.

Details and trade‑offs: Capital Cities’ analysis assumes 2.5% long‑term inflation and the firm’s 6.56% expected return on the present asset allocation. Under those assumptions, the board’s current 3.25% spending rate is lower than the expected real return and therefore preserves purchasing power; a 5% perpetual spending rate exceeds sustainable withdrawals and produced a median ending real‑value of roughly $119 million in the firm’s 50‑year scenario compared with roughly $292 million under the 3.25% rule. Williams also showed a one‑time 5% distribution in 2026 would lower the starting balance and reduce ending assets modestly (median ending value about $288 million in the firm’s simulation).

Board members asked technical questions about the mechanics of the analysis, including the portfolio’s smoothing method for calculating the annual spending amount. Williams said the model applies the spending smoothing in the same way the foundation’s policy does: the calculation uses an average of quarterly market values over a five‑year trailing window, which can make the reported spending ramp look less immediately responsive to a large one‑time withdrawal.

Several board members framed the analysis against local budget questions. One board member noted the foundation was created from the sale of a hospital and described the funds as Porter County money that could be used for county needs. Williams and the board discussed alternatives to one‑time or permanent withdrawals, including loans or other financing to bridge short‑term budget gaps, but no decision or motion to change the spending policy was recorded.

The board was also told of a housekeeping update to the investment policy statement (redline and clean versions were provided in meeting materials). Williams said the firm had executed a manager change: the Wasatch Growth fund was replaced with a “Congress small” fund on May 28, and that one manager (AQR large cap defensive fund) remained under monitoring because of its concentration limits and style differences.

The presentation closed with questions from board members about timing of projected declines under a higher spend scenario and confirmation that the investment materials include distribution tables, spending projections and the assumptions used in the analysis. No formal vote to change policy or to authorize a spending change was taken at the meeting.

Ending: The board did not adopt any new spending rule at the meeting; members and the consultant agreed the investment policy statement materials and the distribution analysis will remain part of future budget and policy discussions.