Harvard’s pitch to donors paints a best-of-both-worlds scenario.

“The main objective of any investor who’s in there for the long term is to get maximum return with as little risk as possible,” Scudder said. “The way the Harvard endowment has been run, that has been its achievement.”

“And, boy, if that isn’t an attractive picture, I don’t know what is,” he continued.

Still, while Harvard and its donors share an interest in maximizing returns, analysts said that fund managers looking out for the long-term health of the endowment could conflict with the short-term concerns of donors.

“While they’re in harmony, there’s always a potential conflict,” Schulz said. “Harvard has an interest in keeping its donors happy, but certainly...their major interest is with their long-term endowment.”

MORE CASH

Meyer said the trusts invested with the Harvard endowment would not count towards the annual endowment figure announced by the HMC. That number stood at $19.3 billion for fiscal 2003, which ended June 30.

But the trusts, which amount to roughly 1 percent of the endowment investments, could place further, if minimal, strain on the HMC.

Meyer said the additional cash would have little effect on the endowment’s performance.

“It hurts a very small amount,” he said. “Size is difficult for us, and having a larger endowment makes it more difficult.”

$216 million in charitable remainder trusts, the most common variety, had switched to the endowment as of yesterday, McClintock said. An additional $31 million in lead trusts had already made the changeover.

“This is like an internal mutual fund,” said Marc D. Hoffman, editor-in-chief for the Planned Giving Design Center.

IRS RULING

Fund managers at the nation’s largest non-profit organizations, including Harvard, are typically restricted by IRS tax laws in their investing of charitable trusts.

But the IRS letter ruling, requested by the HMC in January 2003, permits Harvard to invest in areas which would ordinarily produce disqualifying taxes. Most of those taxes will be paid by donors at a rate of 35 percent, Scudder said.