Posted by: jonglapa | November 21, 2008

Harvard’s Endowment in the news

Ever since President Faust issued the statement about the probable decline in Harvard’s endowment and assets, the situation has made headlines on Yahoo twice in the last week.  It turns out that Harvard is expecting a “30 percent decline in value of college and university endowments in the current fiscal year.” Valued at $36.9 billion, the endowment will lose $11.07 BILLION before the fiscal calendar ends if this prediction holds true.  

Harvard Management Company (HMC), the company that manages $45 billion, $36.9 billion of which is our very own endowment, has been very mum on the losses.  But, every quarter, HMC has to file a “13-F” form, which evidently discloses “a portion” of the positions that HMC holds in the public market.  Granted, this is only a small sample of where $2.9 billion of the $45 billion HMC manages was/is sitting at, but a forecast based on this information is grim to say the least. HMC had “$463 million invested iShares MSCI Emerging Market Fund;” this is down 60% from just the summer! That’s a $277.8 million loss on one fund alone.  Some of the other funds highlighting (or lowlighting…?) the losses include $233 million invested in Weyhauser, down 40% in the last two months for a loss of $93.2 million and $158 million invested in iShares FTSE/Xinhua China Index, down 30% also in the last two months for  another staggering loss of $47.4 million.  Overall, with this look at just $2.9 billion (already about 6.5% of the funds that HMC manages), it’s easy to see how President Faust predicts losses totaling well over $10 billion. 

Take a look at these sites that I got information off of plus some more articles that have come up recently about the endowment if you want to gain some more info about where we’re headed:

An article by Daniel Gross about Business and Finance that appears in a web edition of Newsweek: http://www.slate.com/id/2204827/

An article on bloomberg.com regarding the endowment by J. Ziegler and O. Staley: http://www.bloomberg.com/apps/news?pid=20601103&sid=a_jlYN2Rg5mg&refer=us

 

Some fun facts about Harvard’s endowment in happier times (seen at http://www.hno.harvard.edu/guide/finance/index.html)

-The endowment was started out of gifts from the dead members of classes of 1642 and 1646.  They passed on real estate to the college that is now occupied by Widener Library itself.

-Evidently, one of the first groups to make a financial pledge to annually support Harvard was comprised of ten merchants from New Hampshire.  In 1649, the group pledged 60 pounds a year for ten years and made good on the promise by donating lumber to the college that the college then had sold for profit.

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Responses

  1. On a different note, the Endowment, even after taking such a beating, is still basically worth the 2008 GDP of a country like Lebanon. Not that I’m saying the $11.07B (Jamaica or Senegal) is anything to scoff over! After all, the last time funds were this low was back in… 2005.

  2. Very interesting!


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