Harvard Endowment Soars to $34.9 Billion

It is already, by far, the richest university in the world, but Harvard University just increased its lead over the competition even more.

The Harvard endowment grew 23 percent during the fiscal year, which ended June 30, swelling to a new high of $34.9 billion, the Harvard Management Co., which oversees the university's endowment, said yesterday

This growth represents some of the strongest in the history of the university and was spurred by strong performances from investments in emerging markets, private equity and real estate, Mohammad El-Erian, HMC's chief executive, told ABC News.

Harvard's endowment has been hit hard since its fiscal year ended two months ago. In July, it lost about $350 million through investments with Sowood Capital Management, a hedge fund founded by Jeffrey Larson, the former manager of Harvard's foreign stock holdings.

Despite those losses, Harvard's endowment saw a net gain of 0.4 percent last month, said El-Erian, who led the emerging markets portfolio team at Pacific Investment Management Co. before being appointed HMC chief in 2005.

El-Erian said he views this year's gains as a "windfall" that will not necessarily repeat itself next year, particularly with the turmoil in today's market. He said Harvard has responded to these threats by further hedging its risks, investing in a wide diversity of assets.

"We are relatively, defensively positioned, and we manage this on a day-to-day basis," he said. "What served us well this year was that we were in 11 different asset classes and that we were able to navigate some pretty big potholes that occurred in the markets."

Harvard's enormous endowment is unrivaled among other universities. Yale, which has the second-largest endowment, posted a figure of $18 billion last year. Only three other universities — Stanford, the University of Texas and Princeton — posted endowments of more than $10 billion last year, according to the Chronicle of Higher Education.

"This means that Harvard is not only getting richer, but it's giving itself a much bigger distance between itself and the rest of higher education," said Jeff Selingo, assistant managing editor of the Chronicle of Higher Education. "There are very few of them — in fact none — that are anywhere close to Harvard."

Last year, Harvard funded nearly a third of its operating budget through $1.1 billion in distributions from the endowment. Those funds, normally earmarked by donors for specific purposes, finance projects like student financial aid, faculty salaries and maintenance of the university's libraries, classrooms and dormitories.

Selingo said Harvard is able to see strong returns because its already-large endowment allows it to hire a full-time professional staff of investors and also to take risks most universities cannot afford to take, especially on hedge fund and private equity ventures.

"What's telling is that Harvard lost $350 million in [Sowood] hedge funds. For most colleges, that would wipe out its entire endowment. They can't afford to take this type or risk," he said.

Besides providing Harvard with a yet-bigger dollar amount to flaunt in front of prospective students and faculty, it is unclear how much, if at all, these returns will impact the institution's mission as a university.

One place where that impact might be felt is in the realm of financial aid.

Page
  • 1
  • |
  • 2
null
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...
See It, Share It
PHOTO: In this stock image, a lumberjack is pictured.
Joze Pojbic/Getty Images
PHOTO: The tires of a Studebaker, missing since 1971, are visible in Brule Creek near Elk Point, S.D. in this undated file photo.
South Dakota Attorney General?s Office/AP Photo
PHOTO: Left, an undated file photo provided by the Spokane County Sheriff shows Bombing Kevin William Harpham; right, in this undated photo provided by the Johnson County Sheriff, Frazier Glenn Cross, Jr., appears in a booking photo.
Spokane County Sheriff/AP Photo| Johnson County Sheriff via Getty Images