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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

TRUST UNIFORM COMPARISON SERVICE (TUCS)3

1 year

11.5%

15.2%

3 years

8.3%

9.3%

5 years

8.6%

12.1%

10 years

8.4%

6.8%

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, 2013
3 TUCS is a widely accepted benchmark for the performance of institutional assets. Data reflects median returns for assets between $100 million to one billion.

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

YEAR1

RETURN2

1 year

12.2%

3 year

7.6%

5 year

11.5%

10 year

5.9%

1 Year ended December 31, 2013
2 Represents total annualized return of the sample 5% CRT invested according to our proposed allocations in the tax-efficient funds. Past performance is not any indication of future returns.

 

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