Publications, Speeches, and Papers by James P. Garland

Published Papers

“A Cash-Flow Focus For Endowments and Trusts”

This long paper (what the Research Foundation calls a “Brief”) argues that trustees of endowment funds and long-lived trust funds should turn their backs on market values and focus instead on their funds’ capacity to generate cash.  The paper’s four primary points are as follows.

(1) Basing spending on market values doesn’t work very well.

(2) A dividends-based spending rule, first mentioned in my 1989 paper, works better.

(3) Still better is an earnings-based spending rule created by former Sanford Bernstein economist David Levine.

(4) Cash flows, rather than market values, are a better measure of intergenerational equity.

This paper is available for free on the Research Foundation website or as an Apple iBook, and for $0.99 from Amazon Kindle. 

Download: A Cash-Flow Focus For Endowments and Trusts (PDF)

“What Is the Most Useful Definition of Risk for Family Investors?”

Wealth of Wisdom, subtitled The Top 50 Questions Wealthy Families Ask, is a book containing slightly over 50 submissions from investment professionals on subjects such as asset allocation, family communication, selecting trustees, charitable giving, and so on.  My contribution was a 2,000 word essay about risk.  Risk is the possibility of not having available the money you need at the time that you need it.  The standard definition of risk — i.e., return volatility — is not always as useful as you may think.

“Long-Duration Trusts and Endowments”

The purpose of long-duration trusts and endowment funds is to put cash in their beneficiaries’ pockets.  The author uses the word “fecundity” (meaning fruitfulness) to refer to these funds’ ability to generate sustainable, spendable cash.  Most trusts and endowments base spending on market values.  A focus instead on fecundity is more productive and leads to several important insights.

An abbreviated version appeared in Economics and Portfolio Strategy on September 15, 2004.

“The Smith Company”

The president’s message from the 2000 Jeffrey Company Annual Report, disguised to mask the Company’s identity.

“The Problems with Unitrusts”

Unitrusts are trusts whose distributions are a fixed percentage of the trusts' market values.  The author believes that unitrusts are generally a poor idea.  Many beneficiaries cannot tolerate significant declines in their distributions.  Because unitrusts are in effect bets on market values, trustees of unitrusts will attempt to time the markets.  Such attempts are always expensive and usually unsuccessful.

“The Market-Yield Spending Rule Revisited: An Update Through 1998”

The author’s original paper on this subject, published in 1989, included a backtest of the rule from 1950 through 1986.  This update provides out-of-sample results from 1987 through 1998 and offers further thoughts on this rule and on the more commonly used spending rule based on market values.

“The Attraction of Tax-Managed Index Funds”

Most taxable investors try to improve net returns by improving gross returns.  A simpler way to improve net returns is to reduce costs.  The largest cost usually is taxes.  The author shows how a new type of mutual fund, the tax-managed index fund, should be particularly effective at reducing taxes, thereby reducing costs and improving net returns.

“A Market-Yield Spending Rule for Endowments and Trusts”

Trustees of long-lived endowment and trust funds often use spending rules as guides in making even-handed distributions, ones that are sustainable and that do not erode real capital.  The most popular rules are default rules (e.g., spend all cash income) and market-value rules (e.g., spend 5% of the market value).  The author offers a new rule that may be superior to either of these popular rules.  This new rule produces smoother distributions, has an economic underpinning, is easy to apply, and takes into consideration some important matters, such as management expenses, that the other rules ignore.

“Taxable Portfolios: Value and Performance”

A study of (1) the relationship between a security's market value and its cost, (2) how this relationship affects the security's realizable value after capital gains taxes, and (3) the "life insurance" value of the step-up of a security's cost at death.


“Memo to the Darcy Family: To Thine Own Self Be True”

Download: Memo to the Darcy Family: To Thine Own Self Be True (PDF)