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Endowment Strategy & Returns

Tax-efficient Strategy & Returns

 

Endowment Strategy & Returns

Objective
Harvard's endowment adopts a long-term growth strategy that supports Harvard University's annual spending rate without exceeding the University's risk tolerance.

Description
The Harvard endowment strategy is composed of a wide variety of asset classes. This option is only available to remainder trusts that name Harvard as the sole remainder beneficiary.

Advantage
Attractive risk/return ratio

Disadvantage
Payments from a remainder trust will likely be taxed at the donor’s highest marginal tax rate.

Sample Trust Performance Return History
(Total Annualized Return)1

YEAR2

SAMPLE TRUST IN ENDOWMENT

Policy Portfolio3

1 year

6.9%

4.8%

3 years

9.9%

8.6%

5 years

8.8%

7.5%

7 years 3.2% 2.7%

10 years

7.4%

5.7%

1 Past performance is not an indication of future returns. The returns of the Harvard Endowment have been internally calculated, using consistent valuation methodologies.
2 Year ended December 31, 2014.
3 The Policy Portfolio is a theoretical portfolio allocated among asset classes in a mix that is judged to be most appropriate for Harvard University from both the perspective of potential return and risk over the long term. The HMC Board sets the Policy Portfolio and reviews it for continued fit with the University’s risk profile, as well as projections of long-term market returns, volatility, and correlations.

Tax-efficient Strategy & Returns

Objective
The objective is to earn an attractive return and to minimize, to the extent possible, taxes paid on the distributions made to income beneficiaries.

Description
The tax efficient strategy invests in a diversified portfolio of tax efficient mutual funds and exchange traded funds. Additional funds that may be less tax efficient are used to improve diversification and provide more stable returns. This option is available to trusts that name Harvard and/or other charities as the remainder beneficiary.

Advantage
After-tax payment of the beneficiary is expected to be maximized

Disadvantage
Returns of a trust invested in such a strategy will generally be limited to returns from non-active strategies

Performance Return History
(Annualized Return)1

YEAR2

RETURN

BENCHMARK

1 year

4.7%

4.1%

3 years

9.7%

9.3%

5 years

7.9%

7.9%
7 years 4.6% 3.8%

10 years

5.8%

5.2%

1 CRT invested according to our proposed allocations in the tax-efficient funds. Past performance is not any indication of future returns.
2 Year ended December 31, 2014.

 

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