Harvard University endowment lost almost $2 billion in value for fiscal 2017, The Harvard Crimson reported Thursday.
Advertisement
Harvard’s losses for the year ending June 30 reinforce the challenges facing all college endowments as they wrestle with volatile global markets and a sustained period of low interest rates around the world.
Colleges and universities rely on endowment funds to operate and to help with financial aid, and more than one-third of Harvard’s operating income came from the endowment past year.
“This has been a challenging year for endowments and clearly these are disappointing results”, Paul Finnegan, a private-equity investor who chairs the board overseeing Harvard’s endowment, said in a statement today.
HMC’s leadership has been in transition. Harvard Management’s board is now searching for its fourth chief executive in a decade following the July departure of Stephen Blyth, who left after 18 months in the top job.
The world’s biggest college fund shrunk by US$1.9 billion, to US$35.7 billion after also accounting for ever-expanding spending on buildings, scholarships and research. Get twice-daily updates on what the St. Louis business community is talking about. It’s the single largest annual decline since the financial crisis. Each category reported losses of 10.2% for the full year. It provides more than one-third of the university’s operating budget.
For 10 years, Harvard reported a 5.7 percent annualized gain, compared with 6.9 percent for a 60/40 portfolio of domestic stocks and bonds.
For decades, Harvard has been different from most other schools, including Yale, in that it managed some of its money internally while farming the rest out to external managers. The endowment manager in June said it would eliminate its internal United States stock team. HMC has had three investment chiefs in the past 11 years.
Natural resources investments also dove 10.2 percent, while their benchmarks were up 1.4 percent.
The best performing asset class was Harvard’s direct real estate investment program, which was started under Mendillo and now represents half that part of the portfolio. Mr Ettl said in the report the school planned to hire a new head of “absolute return”, which focuses on hedge funds, and publicly traded stocks, replacing Michael Ryan, a former Goldman Sachs Group partner who was among this year’s many departures. Ettl said Harvard is looking to concentrate its holdings in the sector with top managers.
Advertisement
The medium-to-long-term performance trends show the endowment underperforming key benchmarks.
