Better late than never. This blog has for years kept a tally of the number of times someone in the finance world has the absolute GALL to suggest that donating to, or working as an investment advisor to increase, Harvard University’s $40.9 billion endowment might not be the best use of your money/time.
Of course, given that university’s obvious need, and the need of the very wealthy to give to the world’s very wealthiest university, few people voice this suggestion. But here’s one – and it’s setting the money world, “abuzz,” says the New York Times.
Why make the Harvard endowment any more money? What systemic bias do you perpetuate?
The author of these two questions is described as a “venture capitalist and provocateur.”
And baby you don’t get any more provocateuric than THAT.
… come into conflict with some of its employees. Grudgingly, Harvard arrives at a tentative agreement with its dining workers.
[O]ne of the Harvard endowment’s managers earned more than $11 million in 2013. The school’s president, Drew Faust, makes in the upper six figures, but also has access to perks like an official residence and retirement benefits that take total compensation north of a million dollars annually…
Yet at the same time as the school’s top officials have pulled in lofty salaries and as big corporations beyond school gates have rebounded in the ensuing years, hourly-wage workers have continued to struggle, with median weekly earnings just surpassing a 2009 peak this March. Elite universities, which employ both highly compensated, highly respected academic leaders and low-wage workers who sometimes feel invisible, offer a depressing illustration of the widening gap between the richest and the poorest Americans.
… private colleges’ endowments of more than $500 million. Such a tax, which would not impact individual gifts to the institutions and would be reduced by the amount the schools dedicate to financial assistance, could generate $6 billion for the federal government to use for President Obama’s free community-college proposal. That large sum also could be used more generally for federal student aid programs.
The comment thread for the Washington Post article tells you how profoundly Americans resent it when people interfere with their freedom to subsidize 35 billion dollar organizations.
Shifting the dollars generated under the scheme to community colleges? The rankest Stalinist tyranny. Harvard = The Kulaks.
This guy calls it tragic that
Harvard is paying a team of professional fund managers as much as $5 million [apiece] per year to lose the university more than $9 billion over the last five years compared to a passive, indexed investment in the S&P 500.
He weeps that if they’d invested more wisely, “[Harvard’s] endowment would have grown to more than $42 billion, instead of $33 billion.”
(Does he know that only a few years ago Harvard fund managers were paid $35 million a year apiece? Let us not tell him! He is sad enough.)
Aye, and if they’d invested yet more wisely, Harvard’s endowment might have grown to $420 billion… Howl, howl, howl, howl! Oh, you professional fund managers are made of stone! If I were you with eyes and a tongue to speak with, I’d crack heaven wide open with my laments! Tens of billions gone forever. I know how to tell when an endowment is alive or dead. Harvard’s is as dead as the cold ground. If you have tears, prepare to shed them now.
From Daily Finance:
… Goldman [Sachs] bet that mortgages would default while Harvard gambled that they’d keep paying. In February 2007, while Goldman made a nice profit, Harvard was among those on the losing side of the trade — forfeiting a portion of the $500 million of losses charged to four parties who wagered that the mortgages wouldn’t default.
Goldman’s response? According to the Boston Globe, in a Feb. 14, 2007, message on the plunge of sub-prime mortgages, Goldman executive Daniel Sparks wrote to colleagues including [Harvard graduate Lloyd] Blankfein, “That is good for us position-wise, bad for accounts who wrote that protection,” citing Harvard and three others.
… The Boston Globe [indeed] reported that the Harvard endowment, run by Harvard Management Corp., took on massive risk before the market meltdown of 2008. “The school in fiscal 2008 lost 27% of its $37 billion endowment and another $1.8 billion in operating cash because of bad investments,” The Globe said. The Ivy League school also paid $500 million to get out of failed interest-rate swaps, the newspaper reported.
… To be fair, of the $240 million Bloomberg News reports that Goldman paid him over the last decade, Blankfein has generously donated $2.735 million to Harvard, or 0.55% of the $500 million that Harvard and three other Goldman clients lost in their bad sub-prime bet against Goldman.
What’ll they think of next?
Harvard University is one of 40 colleges that will be audited this year as part of the Internal Revenue Service’s review of the tax-exempt status of some nonprofit organizations, the school said in bond offering documents.
… Harvard is the world’s richest college with an endowment of $26 billion as of June 30, down from a peak of $36.9 billion in 2008. An alumni group criticized pay at the school’s endowment, known as Harvard Management Co., in 2003 after the top six in- house managers earned a combined $107.5 million the prior year.
… Senator Charles Grassley, an Iowa Republican, has been examining finances at universities, including how much funding rich schools give to student financial aid, and drug company payments to university researchers. Grassley called the IRS probe “long overdue” when it began in 2008.
Harvard ten years from now.
… Harvard went under – it could never unwind those risky, un-collaterized debt swaps you-know-who put it in around 2005. … BU snapped up its athletic facilities at the bankruptcy auction. Tufts got the law and medical schools. Surprisingly, there were no bidders for the Harvard Business School. I guess the old adage was right: Without the H, it’s all BS.
Alex Beam, Boston Globe.