Harvard Endowment Has an Excellent Year

F. Scott Fitzgerald wrote: "Let me tell you about the very rich. They are different from you and me." He was right: The rich get better returns on investment. The Harvard endowment rose 21.4% to $32 billion in the university's fiscal year, which ended on June 30. Harvard has the largest endowment of any university in America.

The Harvard Management Company wrote, "Over the past two decades the average annual return on the endowment has been a robust 12.9%." Those are Warren Buffett-class returns, and the management company crowed about how well it has done in volatile markets. That may be true, but the fund is still a bit shy of its peak level in 2007. The drop in the endowment that accompanied the fiscal crisis' stock market collapse forced Harvard to trim staff and curtail some activities.

The best performing part of the endowment was its investment in domestic equities, with a return of 34.6%. Investments in private equity funds also did well. But as endowment officials looked forward, they expressed concerns about market conditions. "Since the end of the fiscal year the markets have been exceptionally volatile, driven by concern and uncertainty related to the debt ceiling debate, the fate of the eurozone, the S&P downgrade of the U.S. Treasury securities, and indications of slowing growth in economies at home and abroad. The impact of these issues on our portfolio is unavoidable."

Harvard has a secret weapon when it comes to the size of its endowment: It has some tremendously rich and generous alumni. Harvard offers a number of ways for the wealthy to give the university money, and those include ways they can make gifts and collect the returns on those gifts for the rest of their lives. Harvard has, in order to get the most from its graduates, become a wealth management machine.

Harvard is at or near the top of most rankings of universities. The most important contributor to those rankings may be its unprecedented access to that huge endowment, which allows it to hire the most talented faculty and give them tools available almost nowhere else.


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jr15dds

I wonder if Elizabeth Warren feels the same about the rich paying their fair share now. After all, her employer's endowment fund just grew by tons of money because of the 'fat cats' on wall street

September 25 2011 at 2:01 AM Report abuse rate up rate down Reply
ebreit19

Harvard's endowment has grown because they got rid of Larry Summers and sent him back to his office where he doesn't belong either.

September 24 2011 at 10:19 AM Report abuse rate up rate down Reply
maf12300

They must have invested in wind power like Obama

September 23 2011 at 6:31 PM Report abuse rate up rate down Reply
ragtophemi

Isnt this the school that our worse president ever elected was educated?

September 23 2011 at 5:13 PM Report abuse +1 rate up rate down Reply
Cualquier

Really, no one asks the obvious? What did the DJIA or SP500 return in the same period? Well, glad you asked: The DJIA returned 22.38% from July 2nd 2010 to June 30 2011 and the S&P returned 22.65%. Now, had the geniuses at Harvard invested in Vanguards dividend reinvested SP500 fund, then they would have earned 22.11%, just a little above the 21.4% returned here, now that extra 0.71of a % is big bucks on 32B trust me. Now just imagine, I turn up to work at the Harvard Endowment trading room, stick a cocktail umbrella in my drink and hit the "trade" button for the day which effectively means sending my money to VFINX, and then I get some *********** article telling me what sort of guru investor I am. Give me a break. Not only that, but the article hints at some sort of difference between big shot institutional investors and regular shmoes. Douglas McIntyre, you suck.

September 23 2011 at 3:20 PM Report abuse rate up rate down Reply
linmarco

Tough posts. Snideness reigns.Why disparage Harvard? It is a world class university with many well known graduates.
Furthermore it has served this nation well. Puzzling!

September 23 2011 at 3:17 PM Report abuse rate up rate down Reply
i4truthnow

A monkey throwing darts at a Wall Street journal did well from June 30th 2010 to June 30th 2011. Readers, don't let envy get the best of you over this poorly timed article. Harvard's numbers are considerably lower at this moment in time than they were June 30th. Also, you can bet they are back down below their 2007 peak as well.....

September 23 2011 at 3:05 PM Report abuse rate up rate down Reply
3 replies to i4truthnow's comment
itacurubi

Where at least some of this money goes:

Harvard University offers tuition assistance to any student that shows a financial need. Families with income below $180,000 are given financial assistance, and parents of families with incomes below $60,000 are not expected to contribute at all to college costs. Currently, more than 60 percent of Harvard students receive some form of this assistance.

September 23 2011 at 2:46 PM Report abuse rate up rate down Reply
savemycountry911

Oh good. Now the Marxist professors can polute more of our youth.

September 23 2011 at 2:09 PM Report abuse rate up rate down Reply
2 replies to savemycountry911's comment
savemycountry911

pollute

September 23 2011 at 2:09 PM Report abuse rate up rate down Reply
itacurubi

Given what we know about genetics, if I were you I wouldn't worry to much about my offspring being polluted by Harvard ... or any other good school.

September 23 2011 at 2:21 PM Report abuse rate up rate down Reply
1 reply to itacurubi's comment
itacurubi

too (really, how tiresome that one feels the need to make these sort of nitpicking corrections ... alas ...

September 23 2011 at 2:21 PM Report abuse rate up rate down
MONTOOTH

Large and sophisticated institutional investors can afford to take higher risks. But for the average investor, I say: TRUST THE MARKETS. Active management, timing the markets, looking for inefficiences, etc.., is a waste of time and a loser's game. Diversify your investments among index funds with low cost and fees, and you'll thank yourself in the morning. Harvard, Yale, Princeton and a handful of other universities are the exception. Most public and private schools are struggling for endowments and still in recovery mode. I do not support taking away any tax exemptions or other public support for education. The large endowments and spectacular returns at the handful of schools mentioned above, translate into scholarships, fellowships, and other student financial aid that, is obviously needed to attend these institutions. The question really is: Is the high cost of higher education worth the money? Does an Ivy League education provide the value, i.e., do graduates make more money at graduation with low or no student debt? The research I've read suggests that it does...HOWEVER, not by much. Therefore, I would challenge Harvard, Yale, Princeton, Penn, et al, to provide more help to deserving students and their families; and I would challenge all of higher education (with the exception of community colleges and certain public universities) to lower its costs, seek new business models for educating America's brightest and best.

September 23 2011 at 2:01 PM Report abuse rate up rate down Reply
1 reply to MONTOOTH's comment
itacurubi

Harvard University offers tuition assistance to any student that shows a financial need. Families with income below $180,000 are given financial assistance, and parents of families with incomes below $60,000 are not expected to contribute at all to college costs. Currently, more than 60 percent of Harvard students receive some form of this assistance.

September 23 2011 at 2:44 PM Report abuse rate up rate down Reply
1 reply to itacurubi's comment
MONTOOTH

Glad to hear it....I did say "provide more." Harvard could afford to provide 100% of its students and families aid, if it lowered its costs. But Harvard is only one school, there are thousands of private and public schools that have placed a lower priority on education and a higher priority on "amenities" that cost a lot more over time and do little to enhance and focus students' attention on the goal of higher education. There is no excuse for the astronomical inflation of higher education that has taken place over the last 10 years. It is outrageous.

September 24 2011 at 1:15 PM Report abuse rate up rate down