Solution-Mr. Smith     Entity Allocation Overall Allocation Direct Holdings         Diversified public equity 0.0%   0.0%   Private equity fund 0.0   0.0   Taxable 10-year AA bond 0.1   0.0   Tax-exempt 5-year bond 46.3   22.4   Taxable money market fund 53.0   25.6   Hedge fund 0.6% 100.0% 0.3% 48.4% 401 (k) Retirement Account         Diversified public equity 0.0%   0.0%   Private equity fund 0.0   0.0   Taxable 10-year AA bond 0.0   0.0   Tax-exempt 5-year bond 0.0   0.0   Taxable money market fund 100.0   3.2   Hedge fund 0.0% 100.0% 0.0% 3.2% Charitable Remainder Trust         Diversified public equity 79.3%   25.6%   Private equity fund 0.0   0.0   Taxable 10-year AA bond 0.0   0.0   Tax-exempt 5-year bond 20.7   6.7   Taxable money market fund 0.0   0.0   Hedge fund 0.0% 100.0% 0.0% 32.3% Foundation         Diversified public equity 16.3%   2.6%   Private equity fund 23.6   3.8   Taxable 10-year AA bond 0.0   0.0   Tax-exempt 5-year bond 0.0   0.0   Taxable money market fund 0.0   0.0   Hedge fund 60.1% 100.0% 9.7% 16.1%         100.0% was to hold a lower-yielding asset that generates ordinary income. The optimal location strategy increases the expected future value of the foundation by reducing Mr. Smith's ongoing income tax liability. In the case of uniform asset allocation in each entity, Mr. Smith was projected to pay $38.5 million in income and capital gains taxes over the 15-year period. In the optimized solution, this declined to $23.9 million. Table 31.7 compares the optimal 8 percent volatility results for the two investors. The calculation of annualized return is net of both income and estate taxes. Mr. Smith's annualized return is much greater because he will not pay estate taxes. The asset allocation solutions are not that different but the asset location solutions were very different, reflecting differences in the goals and objectives. Minimizing estate tax