Discuss actions that Grides should take to alleviate Brodka’s concerns.

Frank Grides is a portfolio manager for Kemney University Foundation and manages the liquidity profile of the university endowment. This endowment supports some of the funding for the university’s operations. It applies the following spending policy designed to produce a 5% long-term spending rate while shielding annual distributions from fluctuations in its market value:
Spending for current fiscal year = (60% × Spending for previous fiscal year) + [40% × (5% × Endowment market value at the end of previous fiscal year)].
Grides is considering allocating more funds to illiquid investments to capture higher potential returns and is discussing this strategy with senior analyst Don Brodka. Brodka has three related concerns given that the higher allocation to illiquid investments may Assessing his concerns, Brodka performs a stress test on the portfolio with both current and proposed investments. Exhibit 1 presents selected data on the university endowment.

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reduce the liquidity profile of the endowment, induce "drift" in the portfolio's risk profile in times of market stress, or alter the endowment's overall risk profile.