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

[tim0104]

Hmmm... I see a lot of people making comments about this story but maybe they don't realize what that endowment money is used for. I work for a nonprofit childrens hospital. We have a large endowment as well which has also suffered from the economic environment. The revenue from the endowment is used to support research as well as cover treatment costs of children that cannot afford healthcare. The department I work for (transplant) may end up losing 20% of our staff in addition to research dollars.

I know at large universities (we are affiliated with a private university), their endowments pay for research and support staff (not just administrators). So, while it may seem funny that large institutions are feeling the pinch, these situations can have profound impact on all kinds of things, not just the highly paid administrators at the helm of the organization.

[Weltshmertz]

You would think that the idiots on the board of trustees could figure out how to invest all the tax free money that was entrusted to them in a more conservative way! Alas, this is not the case,....o­ne might well wonder why, ...and yet the administrators who make these decisions,­.. they are so strict and so snotty. They are just a bunch of selfish jackasses. First we hear about the wonderful programs that will be unfairly hurt, someone or other pet program, give me a break. Ivy league schools are playgrounds for rich kids and the brain power labor force is indentured on scholarships. The selfish managers of these not for profit institutions truly need to meet a different standard of excellence, one that hopefully would be for the common good..

[Norge]

What a tragedy. The play pen will not be fully stocked.

[poster1122]

I'm not sure the readers understand the potential impact of what this means, not just for Harvard but for elite institutes of higher learning in general. Otherwise, I don't think there would be this much shadenfreude.

Endowments help subsidize the cost of running the school. When they don't have that revenue, there's less to go around for students. An interesting statistic: over 50% of Harvard students receive need-based scholarships. This is generally true of a lot of the top tier schools, if not all of them.

So, if fewer scholarships are funded, it means fewer people from lower-income levels (like the Obamas were) can go. The net effect of this is to concentrate top tier education into the hands of the well to do and to reduce the chance for upward mobility for the poor and working class.

[slaxx]

the fact that it's harder to get student loans and that many states are having budget crises and cutting funding for college will also have an impact...

[RichManPoorMan2009]

The biggest scam in the world is the Federal Reserve which is NOT federal and has NO reserve.

Ask any American and I bet 90 percent of them think it is the govt.

[slaxx]

been watching zeitgeist lately?

[RichManPoorMan2009]

what is that?

[raymurt]

Shed no tears

they should never have been allowed to accumulate such largess

Harvard was an example of greed that other not for profits (now THERE"S an oxymoron) aspire to

[nathananderson]

Jeez, why all the Harvard hate?

[quantumspin]

So the home of the Harvard Business School manages to do such a poor job of investing that they lose 8bn?

This is not only a hilarious commentary on the 'minds' at Harvard, but a clear example that even the experts were willing to buy in to the financial game set up by the banks and Wall Street.

Someone said years ago that a successful business man would 'read the Harvard Business Review,' and then do the opposite.

Still true.

[JJK]

I guess it's the old "Half Empty/Half Full" debate.

Since the S&P 500 has lost 41% of its value in the last six months and since many global markets have fared even worse, keeping overall portfolio losses to 22% (or roughly half the market loss) could be viewed as unwelcome but not unreasonable performance, especially since Harvard's Funds no doubt had/have some large stakes in companies that needed to be unwound slowly so as not to depress prices further.

Clearly, those who got into cash during the summer are looking smart today, but those people were few and far between.

[Veritas 1]

Most of the people on this board have little understanding of the financial world, so i am not surprised that are calling the Harvard Fund Managers stupid even though they are probably outperforming everyone else. Even with a loss of 20% (which is probably mostly unrealized), the performance of the Harvard Endowment over the last decade has been phenomenal.

[Culturemaven]

My daughter is already looking at colleges in preparation for 2010. I'm hoping she'll pick a college as smart as she is. Somehow I don't think Harvard would be a good fit, which is most definitely their loss, not ours.

[nogimmicks]

It will be now harder to support their torture advocate "Prof." Alan Dershowitz. His sterilized needle proposal was so well thought through.

[Yermammy]

Now matter how hard I hit my thumb with a hammer over this, I just can't cry! Why oh why can't I see this as a tragedy? LOL. Oh well, there's plenty of room under the bridge for all of us when the depression hits. Thanks neocons! We really love ya! (to jump out a window).

[Stirner]

Best thing that could happen to Harvard, and all of the universities and colleges in this nation who have too many parasitic administrators who neither teach nor learn. An example: I happened to read in a student newspaper of a local university that they were busy looking for a new "Assistant S.I.D". What's that? S.I.D.? An "Assistant"? Decoded: an "Assistant Sports Information Director." What does this paper-shuffler have to do with education? Oh, by the by, a policy note: if these academic time servers serve more than five years their kids get free tuition! The arrogant attitude which fill the universities with useless but very well-paid vice-presidents, deans, directors and their numerous assistants and secretaries are the fundamental cause for the ever-rising costs of higher education. If you don't believe this, check it out by looking into the "Administrator" listings on the university/college websites. I bet there are very, very few who read this can claim a salary higher than any academic bureaucrat such as the "Public Relations" director. What a scam! Well, as it is said, "If God didn't want them (the parents) sheared, why did he make them sheep?"

[ScoutandBuckGoodDogs]

Amen.

[Anita-indep]

I could not agree with this post more! Im a tenured Prof. at a prestigious Univ. myself, and EVERYONE i know at my Univ. is either a Vice-president or Director. And all have tons of assistants! Even the Assistant Director's assistant has an assistant! needless to say, I dont have any assistants. yet, I pay for 70% of my own salary from grants, and pay for salaries of folks that work for me, and pay another 55% to the univ. to handle the "costs" of paying for these folks. i sit in my teeny office preparing lectures, writing grants, while the Admin. staff sit in spacious cherry paneled offices writing memos designed to make my life even more miserable.

[dashboard]

Next stop....US Congress asking for a bailout.

[Vincero]

most people dont realize the extent that these endowments actually represent.

lost 8 billion and still worth 22 billion dollars.

like the churches they accumilate wealth.

so money is more important than everyone getting educated and in the church example, money accumilation is preferred to children dying of hunger.

[hark]

It just shows that we have no sensible measure of wealth or assets. Nothing has happened to planet earth, to our civilization, to our buildings and roads and vehicles and treasures and land and resources, but somehow we've all become drastically poorer because of the games traders play on Wall Street. It just shows how our defective our financial system is, that it doesn't work for us anymore, that somehow we have become its slaves.

It's just a gambling casino, Wall Street. There's very little real investing done there. All the assets are paper. They have no intrinsic worth, but we act as if they do.

[RJII]

good point. and we're all constantly told our savings, pensions should be in the market.

[Sundialsvc4]

This is what happens when you bed-down with a leprechaun.

Basically, VAST amounts of "wealth" do not actually exist. They are based on "the right to exercise the right to exercise the right to ... the right to collect a dollar from someone." (Otherwise known as "derivative securities­.") It's like tulip-bulbs just not as pretty.

Why don't we admit that it's now morning and that those piles of straw which we took to be "gold" never were? Why don't we recognize that we ARE "The United States of America," still one of the most powerful nations on the planet (and NOT just militarily), and perfectly capable of rebuilding the industrial engine that, not fifty years ago, was the mightiest in the world?

Harvard didn't "lose" $8 billion: it never had it. How much of the "$20-something bilion" they now think they have, actually exists, remains to be determined.