08/05/2026
Most universities have a written policy for the endowment. Far fewer have one for the reserve.
That gap is where a surprising amount of institutional risk sits. Reserves rarely fail because the return assumption was wrong. They fail because nobody defined, in advance, what the money was for.
Here is the reframe worth bringing to your next finance committee meeting. Stop asking what return the reserve should earn. Start asking what permission each dollar has to be unavailable.
That single question separates one pool into three horizons.
Some dollars have no permission at all. They cover payroll, debt service, and the next capital call, and they need to be there on a Tuesday morning without a phone call. Some have limited permission. They exist to absorb an unexpected shortfall, and their job is to be whole when needed, not to outperform. And some have real permission. They carry a multi year horizon, and holding them in overnight cash is its own quiet form of risk.
Three purposes. Three time horizons. Three different definitions of what a good outcome looks like.
We call this the Reserve Horizon Framework, and the framework is not the hard part.
The discipline is writing down what would justify moving a dollar from one horizon to another before the pressure to move it arrives. That document is what holds up when a board asks a difficult question in a difficult quarter.
If your reserve policy is a single number and a single benchmark, it is answering one question. Your institution is asking three.
