Harvard's Endowment Loses $8 Billion

CAMBRIDGE, Mass. — Harvard officials say the university's largest-in-the-nation endowment lost about 22 percent of its value, or $8 billion, in the four months since the end of the last fiscal year.

The endowment was worth $36.9 billion as of June 30.

Harvard will have to take a "hard look at hiring, staffing levels, and compensation," university President Drew Faust and Executive Vice President Edward Forst wrote in a letter informing deans of the losses.

They say the university should plan for a 30 percent drop in endowment value by the end of next June.

Forst tells The Harvard Crimson student newspaper that the 22 percent estimate may be conservative because some university money is handled by external managers that have yet to report figures.

Comments

[smag]

Who gives a sh*#.

[Dap]

CUT Professor Alan Dershowitz salary ! >:-) heehe

[alted1663]

I guess that'll cut back on the spankings at the Skull and Bones fraternity meetings.

[Marlyn]

Skull and Bones is at Yale.

[jamesspada]

I don't have an MBA, but it seems to me that $34 billion should be enough to run a college for a while. And this is above and beyond the tuition they charge.

[poster1122]

That's not how endowments work.

A financial endowment is a lump of money given to an institution on the condition that the principal isn't touched. Instead, the interest on that principal is what is used to fund things. So a $30 billion endowment returning 5% would yield $1.5 billion a year.

That sounds like a lot of money (and it is), but keep in mind the stuff that an institution like Harvard has to fund: building maintenance, research institutes, employees, utilities, etc, etc. Not to mention really expensive items like their world renowned medical center. That's why they need outside sources of funding above and beyond their regular endowment.

[Titus Pullo]

And will it be state universities with renowned medical centers -- who cater to the uninsured via state funds -- or the Ivy league renowned medical centers that keep operating when nut meets but?

[taceva]

Whats happening with these Universities and Wall street corporations, they are hiring so-call intellects with fake MBA"S and BS degrees over common sense experience in management. THESE ARE THE RESULTS....

[KathyinCT]

BE REASONABLE, PEOPLE!!!

Harvard is Harvard. For every Harvard, there are thousands of small colleges like the one where I am a trustee, where we struggle every year to hold the line on tuition (while students and parents expect more and more, and faculty pray for a 3% raise and energy costs skyrocket). Our endowment is as cautiously invested as it can be to still generate some interest, which is used for STUDENT AID.

Right now we already have kids who are saying "I can't come back in January," and we are desperately trying to find money to help them.

So scoff at Harvard if you must, but be REASONABLE -- do you really, seriously, honestly think ALL colleges are Harvard?

If so -- you need to go back to school and get some facts.

[MirrorImage]

Great post !

[scottowego]

A good point! I didn't really equate Harvard with the smaller colleges in the country. I guess if Harvard is having a tough time then it's gotta be even worse for other schools.

[scottowego]

I've also gotta say " so much for the Harvard Business school" every MBA craves. Looks like they've screwed up as much as detroit and Citi.

[Veritas 1]

Good post. There are only a handful of universities in the world whose endowments are large enough to generate the income needed to pay for all the operating costs of an university (maybe 4). Others have enough funds to offer decent grants for financial aid. Beyond the top 30 universities, schools are --significantly-- dependent upon tuition. Furthermore, its not likely that the managers did anything wrong or are suffering loses any greater than other universities, pension funds, or the general stock market.

[loki]

BOO HOO ,,,, I guess not really. The only thing it will really do is turn this Ivy Greed Producing machine into even a more hard core, "Kill em all to get the cash" attitudes they are famous for, and push it more. They feel they deserve the money, and they deserve to have it all. The only thing they deserve is to either close down, or change to a place that teaches people to be human, and not just greedy money making machines leaving a path of murder and destruction . Dont believe me? Just look at where most of the "movers and shakers" from Wall Street to the White House have been educated? Now look at where most of the people who have caused the problems we have right now are from?

[Titus Pullo]

The ultimate irony: school alum destroys school through lack of moral compass, greed and stupidity. Can't beat it!

[Big0725]

Karma's a son of a b!tch, ain't it?

[BARRISTER]

Are you saying that Dubya is Karma????

[ripples]

right on!!

[That Guy]

This post speaks truth!

[Jacqattack]

You deserve the Nobel Prize. So profound!

[Uosdwis]

Maybe because there's suddenly no need for lying, cheating, too-smart-for-their-own-good MBAs on Wall St and in the Bush administration. But it's hard to see how they could lose money with the outrageous tuition they charge and the ridiculous prices they charge for textbooks.

[spinns17]

thanks for the great leaders .you and the other ivy leages put out.lol

[Big0725]

Another ESL blogger.

[lilpeg]

Uh oh, I've got a kid headed to college next year. We are going to go hide under the bed now.

[Big0725]

Seriously, buy the kid a reliable, efficient car and blow the rest on vacation. He/she will be better off in the next couple of years working with their hands.

[Cogitoe]

Smart people losing money is nothing new. In fact, the term "bubble" comes from Jonathan Swift and refers to the South Sea Bubble of 1720. In that bubble, it is said that Sir Isaac Newton, arguably one of the smartest humans of all time, lost his life savings. As I was told the story when entering business school (as a warning), Sir Newton originally cashed out at a nice profit becuase he did not understand the madness of the ever increasing stock price only to buy back in out of fear he was missing out on further gains. Pop!

Coming full circle, it was quant jocks (Math PhDs) using Newton's Calculus to convince investors and government regulators they could manage high levels of leverage with their newly created risk managment skills and financial instruments that ultimately led to this particular "bubble'.

[PhilipTaylor]

Harvard, Yale, and Princeton manufactured the graduates who went into the WALL STREET Reeducation Program and became the "FINE Executives" who thought up the SCHEMES that caused this CRISIS. I guess being BRILLIANT has taken on a WHOLE new meaning!

Now they pay the consequences of their former students lack of ETHICS and MORAL BEHAVIOR!

Perhaps every student of these fine universities should have to take one or two ETHICS courses to learn the difference between RIGHT and WRONG!

[Cogitoe]

For the most part it wasn't so much a lack of ethics, other than normal greed, as it was pure hubris to think market forces had been conquered and tamed by superior intellects and their new tools.

[PhilipTaylor]

It was PURE and SIMPLE GREED and a total lack of ETHICS!

I used to teach at Princeton and these students are not required to learn what ETHICS are and how they fit into a GREED Oriented life.

It’s a GIANT SPIN to think that this was stupidity!

If it was STUPIDITY then they should give up their incomes over the last 8 EIGHT YEARS since clearly they were incompetent!

[dctuss]

I read something a few years ago in US news and world report that said- If Harvard increased the amount of money from the endowment that they give for scholarships and assistance by .5 of 1%- everyone undergrad through PhD would go for FREE

Good thing they dont pay taxes

[poster1122]

No way those numbers are correct. .5 of 1% is .00005.

Tuition at Harvard is $50K/year and the university is home to about 25-30,000 undergraduate and graduate students total. That's around $1.5 billion dollars. Their entire endowment (before the financial crisis) is only around $30 billion, so the endowment would have to earn at least 5% every year to pay for everyone's scholarships. However, that would leave nothing left to pay for things like equipment, utilities, salaries, building maintenance, research projects, etc, etc. (not to mention important services like their medical center).

As it is, the endowment only helps to defray the cost of running the institution. This is true of most universities that have them.

[poster1122]

Sorry, I read your post as .5% of 1%. .5 of 1% is .005. Nevertheless, the rest of my post holds.

[Caramba]

GM needs 4 blns, Ford 2 blns?

WHAT'S THE HECK.... Harvrad Graduates gave us the President and so many in his administrations.

HARVARD PLEASE, line up for Federal Bailout!

I've got $25,000 plus College Loan and I am struggling to pay my bills...
Somebody please bail me out of this every day stress.
Soon I will retire? Would be Federal Govt forgive my loans that I owe to Fannie Mae???
SOMEBODY please advise me on this? Thanks!

[Larkinvos]

Caramba,
Did you take any writing courses, while
you were in college?

[Caramba]

WHAT's your question....are you trying to help my bills?