Harvard University’s admission that it lost $8 billion from its $36 billion endowment fund, as staggering as it sounds, may grossly underestimate the true magnitude of the loss between from July 1 through Oct. 31 2008. According to a source close the Harvard Management Corporation (HMC), which runs the fund for Harvard, the loss is closer to $18 billion if the losses on the fund’s illiquid investment are realistically appraised.
…[To take one example, a] huge chunk of the endowment was in private equity placements and hedge funds which imposed restrictions on withdrawals. In the case of so-called “gated” hedge funds, some of which suffered enormous losses, Harvard could only extract its investment by selling its participation at a steep discount to a “secondary” hedge fund.
Another 11 percent of Harvard’s money had been sunk in volatile emerging markets. Here the investments took a double hit: First, the local stock markets collapsed in most of these countries, with, for example, Russian stocks, losing 80%, of their value. Second, on top of these losses. the local currencies lost much of their value against the dollar, with the Brazilian Real, for example losing 40% of its value. Given the true cost of getting its money out of this financial exotica, my knowledgeable source finds the claim by Harvard’s money managers that the fund only lost 22 percent not only “purely pollyannaish” but self-serving (they got increased bonuses for 2008).
… Money managers at other non-profit institutions, no doubt inspired by the dazzling success of the Harvard Management Corporation in rapidly multiplying the notional value of its endowment fund adopted similar strategies, including plunging their funds into the murky get-rich-fast universe of illiquid investments.
… Harvard [has] … yet to fully come to grips with the problematic value of their illiquid investments.
December 22nd, 2008 at 8:34AM
Clearly the financial crash is all a cunning plan for Harvard to lower its endowment in order to get UD off its collective back. Who knew you had such power?
December 22nd, 2008 at 12:04PM
My math skills are suspect but doesn’t that still leave $18BILL left for whatever they want to do (if anything)? Boo hoo.
December 22nd, 2008 at 12:19PM
Yes, still a tidy bundle for one university.