Endowment Investment Performance
March 31, 2025
Investing the Endowment
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Proposition 102 in 1998 made two significant changes in how the Endowment can be invested.
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It allowed up to 60% of the endowment to be invested in equities.
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It changed the distribution formula to protect the principal from inflation and contained a 4-year transition from the old formula to the new.
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The measure also included:
o A “Prudent Person” investment standard
o Up to 60% may be invested in equity securities
o Up to 100% may be invested in fixed income securities
o Standards established for calculating ‘total return’ and ‘distributions’
o Distributions equal to 5-year average total return – LESS – inflation (‘net return’),
o Multiplied by the average (prior) 5-year market value of each Fund
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The United States Congress amended the Enabling Act (the Act that admitted Arizona into the Union) to allow Prop 102 changes to go into effect.
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Any change in distribution, management, or investment of the State Trust Land Endowment requires BOTH an Arizona Constitutional change and a Federal Enabling Act change.
Current Constitutional Guidelines
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Article 10, Section 7 of the Arizona Constitution outlines the requirements for the investment and distribution of Endowment Funds.
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Proposition 123, passed by voters in May 2016, added an additional 4.4% to this distribution, for a total of 6.9% per year from FY 2016 through FY 2025 and making permanent the 2.5% per year distribution starting in FY 2026.
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Proposition 118 in 2012 amended the distribution formula to be 2.5% of the 5-year market value for each Fund for Fiscal Years 2013 through 2021.
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The Board of Investment serves as the trustee of the Endowment.
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The State Treasurer’s Office manages the investment activities.