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Updated 10:00 AM September 10, 2007
 

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Donor trusts to benefit from endowment success

The University now offers an opportunity for donors to invest certain gifts in a manner that will generate a rate of return similar to U-M's endowment.

The Michigan Endowment Return Strategy (MERS) was established following a recent government ruling that removes tax barriers and allows the University to invest charitable remainder trusts (CRTs) alongside endowment funds within its highly diversified, long-term portfolio. Michigan has one of the nation's top performing college or university endowments, achieving a 14 percent annualized rate of return during the last decade.

"Creation of the Michigan Endowment Return Strategy places Michigan at the forefront of maximizing the benefit of donors' generosity," says Timothy Slottow, executive vice president and chief financial officer. "MERS offers to enhance donors' returns and increase the impact of their philanthropy to the University."

MERS provides investment access to the endowment portfolio's wide range of asset classes that is typically not available to individual investors. The endowment's proven management strategy offers significant growth potential for CRTs, which have historically been invested in stock- and bond-based mutual funds. Select investment assets in Michigan's long-term portfolio, including private equity, real estate and venture capital, have not been accessible to CRTs because prior to the ruling, they could produce adverse tax consequences for these trusts.

U-M is among the first public universities to receive the government ruling and joins such leading private institutions as Harvard, Stanford, Notre Dame and the Massachusetts Institute of Technology in offering this opportunity for donors.

Established by donors, CRTs may be administered by the University. The donor or designated beneficiary receives a regular distribution based on a percentage of the trust's principal for a specified time period, usually the life of the beneficiary. After the trust ends, its assets go to Michigan to be used according to the donor's wishes.

The U-M serves as trustee for 129 CRTs with a combined market value of nearly $76 million. In addition to the long-term endowment portfolio, the University will continue to provide donors with mutual fund options for trusts that have specific investment considerations.

To learn more about investing charitable remainder trusts through the Michigan Endowment Return Strategy, contact Shari Fox, assistant vice president and director of gift planning, at (866) 233-6661 or by e-mail at sharifox@umich.edu.

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