Harvard’s Huge Endowment, And “Poor” Return Announced

Harvard University once again showed the world that it has the largest endowment in academia, but its returns are left a little wanting.

Harvard's Huge Endowment, And "Poor" Return Announced

Harvard’s fiscal year

With an endowment of $37.6 billion, the Harvard Management Company expects that it will have the largest endowment of universities in the United States. Neither Princeton or Yale have reported their years but barring something miraculous it’s expected that Harvard will still rule the roost both in the Ivy League and beyond.

The annual returns were reported by the president and chief executive officer of Harvard Management Company Stephen Blyth in his first letter to alumni having taking the helm of the company in the beginning of the year. All told, HMC managed a 5.8% for the fiscal year that ended on June 30, 2015. Unfortunately, this lagged well behind the 13.2% that the Massachusetts Institute of Technology saw for its endowment; Stanford (the “West Coast Harvard”) managed a return of 7%.

Despite these “disappointing” numbers, Harvard’s return surpassed the Standard and Poor’s 500 index of 4.5% over the same period.

Going forward and short?

In the long letter to Harvard alumni, Blyth signaled that he wanted to continue with the Harvard tradition of having some of the university’s assets managed internally, but suggested that he wanted said money managers working in closer conjunction. It’s believed that he would like to see manager compensation tied not just to the assets they manage but the endowment’s performance as a whole.

He’s also not afraid of going short due to “potentially frothy markets.”

“We have renewed focus on identifying public equity managers with demonstrable investment expertise on both the long and short sides of the market,” he said.

Harvard continues to use endowment returns to finance roughly 35% of its annual budget and expects great things from Blyth. However, he is a bit hamstrung by his inability to meet Wall Street salaries for those that manage the endowment.

Harvard does it different

Harvard is one of the only, if not THE only university, that employs external money managers including those that work for hedge funds. This practice has been responsible for a rift with faculty over what are viewed as outrageous fees when compared to the salaries of those with tenure or those whom work for the university.

About the Author

Brendan Byrne
While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. To contact Brendan or give him an exclusive, please contact him at theflask@gmail.com