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Long-Term Capital Appreciation Pool (LTCAP)

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The Long-Term Capital Appreciation Pool (LTCAP) consists of the University’s endowed trust funds and a few other funds of a permanent or long-term nature. In addition, certain other entities have invested in the LTCAP, such as university affiliated organizations and funds having the university as a beneficiary. The LTCAP represents the pooling of invested assets accumulated by or donated to the University for endowed purposes.

The LTCAP is a unitized pool that is structured somewhat like a mutual fund. The fair value of an LTCAP unit is set each month representing the market value of investments of the LTCAP divided by the total number of units held. Each endowment account has an assigned book value (nominal amount of dollars contributed to the endowment) and an allocation of LTCAP units based on the number of dollars contributed and the unit value on the dates of contribution.

See the GTFM section on Investments for Investment Management and Oversight of the LTCAP and other investments.

Investment Return Objectives and Risk Tolerance

The University, through the Business Board of Governing Council, is responsible for establishing the investment return objective and specifying the risk tolerance for LTCAP, which reflect the liability requirements and are reviewed on an annual basis. The University’s investment policy for LTCAP has a real investment return objective of 4% and the risk tolerance of an annual standard deviation of 10% over 10 years. This means that the real return is expected to be between -6% and 14%, two thirds of the time over a ten-year period.

Endowment Funds

Endowment funds are established through donations of cash, securities, and property by individuals, corporations and foundations; and through endowed grants provided by the Government. Each endowment is assigned a separate account to ensure that the endowment maintains its uniqueness for commitments, historical, ongoing and financial reporting purposes. The endowment capital is held and invested in perpetuity, and the investment earnings, a significant ongoing and reliable source of revenue, can be spent for the purposes intended.

Endowments are RESTRICTED FUNDS which must be used in accordance with purposes specified by donors or by Governing Council. Endowments are generally NOT available for use in support of general operating activities unless they are are unrestricted endowments or the use is specifically permitted by the donor.

Endowments are subject to spending restrictions relating to both the capital and to investment earnings. With regards to capital, endowments include externally designated endowment funds and internally designated endowment funds, which have been turned to endowments by the Governing Council in the exercise of its discretion. The Governing Council may have the right to subsequently remove the endowment designation; however the use of such funds may continue to be restricted. With regards to investment earnings, restricted endowments are used to support chairs, professorship, bursaries, scholarships, library acquisitions, research projects or other purposes as specified by the donor or Government. Unrestricted endowments are normally added to the University’s general endowment but may be designated for any purpose consistent with the University’s mission.

Endowment funds are invested in the University’s LTCAP. By grouping endowment funds, the pool allows for strategic investing in a manner that permits broad diversification with attendant protection of principal and stability of income distribution for spending. In addition, it permits economies in administration. While endowment capital is pooled for investment purposes, each individual endowment has its own account and separate unique identity.

Market Value of Endowments


The market value of each endowment can be determined by multiplying the number of LTCAP units held by the endowment fund with the market value per unit.


An endowment fund has donations of $200,000; therefore $200,000 had been added to the LTCAP which purchased 1,025.64 units. At May 1, the market value per unit was $200.

The endowment market value at May 1 is $205,128 (1,025.64 units x $200).

To obtain the number of units held by each endowment, use the Funding: Fund Center or Fund Report (AMS). To obtain the market values per unit, go to LTCAP – Unit Market Value.

Investing in LTCAP


Since endowment capital is intended to be invested in perpetuity, the LTCAP investment strategy has been set with this very long-term horizon in mind. Only endowed donations and grants, and a few other funds of a permanent or long-term nature are invested in the LTCAP.

The LTCAP is a unitized investment pool with monthly valuations (end of each month). The fair value of an LTCAP unit is set each month, and is calculated as the market value of all the investments of the LTCAP divided by the total number of units held. On the first of each month, new funds can be added to the LTCAP and units purchased for the endowment at the prevailing market price per unit.

Endowed donations and endowed grants received are sent to the LTCAP for investment by Trust Accounting. Generally donations and grants received up to the 26th of each month will be added to the LTCAP on the 1st of the following month.


Assume that $100,000 is received in the month of April. If the unit price of the LTCAP is $200 on May 1, this would buy 500.00 units of the LTCAP ($100,000 / $200).

When permitted under the terms of the trust fund, divisions may decide to re-capitalize unused investment income or to endow expendable donations. The division can request the transfer to endowment fund by completing the Endowment of Expendable Funds form. Once the form is properly approved, it should be sent to the Trust Accounting as per the instructions on the form.

Requests received by the 25th of the month will be added to the LTCAP on the 1st of the following month.


Withdrawals from endowment funds should be rare. Funds added to the LTCAP are intended to be invested in perpetuity. Withdrawals are permitted for internally designated endowments which have been turned to endowments by the University’s decision. For externally designated endowments where restrictions on the capital have been imposed by external parties, the withdrawal is limited to LTCAP payout that has been re-capitalized or when it’s explicitly agreed by the external party.
A particular fund or part thereof may be withdrawn from the pool once a month, subject to the required approvals. For this purpose, a written request should be submitted to the Trust accountant as follows:

Trust Accountant

Financial Services Department

215 Huron Street, 2nd Floor

The equivalent number of units which will be redeemed is determined by dividing the amount of the withdrawal by the prevailing market value per unit. Requests received by the 25th of the month will be withdrawn from the LTCAP on the 1st of the following month.

The market value of LTCAP units is published and updated regularly in our website. For historical market value per unit please go to LTCAP – Historical Unit Market Value ; the number of units of a fund is found onthe header section of the report. For market value per unit for the current and previous fiscal years please go to LTCAP – Unit Market Value.

Allocation for Spending (Payout) and Preservation of Purchasing Power


The LTCAP provides funding to faculties and departments of the University to be used for purposes in accordance with the terms of each endowment or trust. The LTCAP is subject to the Policy for the Preservation of Capital of Endowment Funds currently in place and as may be amended from time to time. As such, the distribution and reinvestment rates must be harmonized on an inflation-adjusted basis.

The purpose of the LTCAP is to provide cash flows that will grow each year at least at the rate of inflation in order to preserve the purchase power of the fund and to provide the same or better level of support for future generations. This necessitates a balance between the desire to reward unit holders in the present, and a long-term view toward developing a sustained or increasing contribution from endowed assets. Therefore, the University’s Policy for the Preservation of Capital of Endowment Funds identifies the following:

  • The need to maintain the inflation-adjusted value of endowment capital; and
  • The need to provide a stable flow of expendable income for the purpose of each fund.

The target allocation for spending is about 4% of fair value of the endowment. The 4% real (i.e. 4% plus inflation) investment return objective reflects this target and the need to preserve the inflation-adjusted capital of the pool. The allocation for spending is expressed as a payout per investment unit. The payout is normally increased annually by the rate of inflation to reflect growth in the fair value of the endowments. The payout as a percentage of the fair value per unit must fall within a range of 3% to 5%. Please note that prior to fiscal year 2003, the target allocation for spending was set at 5% of fair value of endowment. This reduction reflects the University’s objective to reduce the volatility associated with endowment returns.

In any given year, if net investment income exceeds the amount allocated for spending, the excess is reinvested and added to the pool. If net investment income is less than the amount allocated for spending, or negative, the shortfall is funded from the accumulated investment income which has previously been added to the pool. However, for individual endowment funds without sufficient accumulated reinvestment income, donated endowment capital is used for the allocation and the capital is expected to be replenished by future net investment income.

Each endowment fund receives income (payout) in April based on the number of units held throughout the fiscal year.


Continuing with the example above and assuming a LTCAP payout rate of $7.00 per unit, the income distribution for the fiscal year is $3,500 ($7.00 x 500). If units were purchased on July 1 instead of May 1 the annual payout is prorated: $2,916.67 ($3,500 x 10/12).

This payout (investment income) is distributed annually in April to each endowment fund and the corresponding budget is set up making funds available for spending.

Each year, the endowment payout rate is normally announced during February and it’s subsequently published on the home page of our website, together with historical payout rates. To obtain current and historical endowment payout rates, go to LTCAP – Payout Rates.



The University of Toronto Endowments – Annual Report, a comprehensive report on the University’s endowments and the LTCAP is issued annually.

To obtain the latest number of LTCAP units held by a particular endowment fund, please use the Funding by Fund Centre or Fund Report.

UTAM also publishes investment reports for the LTCAP in the UTAM annual report. Information provided by the UTAM annual report is based on calendar year, whereas the information provided in the University of Toronto Endowments – Annual Report is based on the University’s fiscal year. To view the UTAM annual report, please go to the UTAM website.

Finally, donors of endowments over $95K also receive donor financial report on the financial activities of the specific fund.



Last revision: September 22, 2010