Harvard Endowment Gains 7.3%, Boosts Assets to $41.9 Billion
Harvard Endowment Gains 7.3%, Boosting Assets to $41.9 Billion
(Bloomberg) -- Harvard University’s endowment returned 7.3% in the latest fiscal year, lifting assets at the largest U.S. college fund to $41.9 billion.
The performance for the 12 months through June 30 beat the prior year’s 6.5% gain, according to a statement Tuesday.
Harvard, like many universities, is grappling with revenue shortfalls caused by the Covid-19 pandemic. The university said today that in the last fiscal year it saw revenue decline for only the second time since World War II and that almost 700 employees have agreed to a voluntary retirement buyout.
The Ivy League school overhauled its investment operations beginning in 2016, when it hired N.P. “Narv” Narvekar from Columbia University as chief executive officer of Harvard Management Co. after years of lackluster performance.
“As we continue to make progress in the five-year transition of HMC and our investment portfolio, we are mindful that there is much left for us to accomplish,” Narvekar said in the statement.
Other Ivy League schools that have already reported endowment results include Yale University, which returned 6.8%, Dartmouth College at 7.6% and the University of Pennsylvania, with 3.4%.
Staff Cuts
U.S. endowments earned a median investment return of 2.6% last year, the lowest since fiscal 2016, according to the Wilshire Trust Universe Comparison Service. The funds broadly trailed the S&P 500, which returned 7.5%. Endowments typically seek to earn 7% on average a year to account for transfers to pay for university operations, along with inflation.
Narvekar, 58, downsized the university’s investment arm, cutting staff by almost half to fewer than 150 people, while slashing a trading operation that was known for using its own hedge fund-type strategies. In addition to outsourcing much of the portfolio, he unloaded farm and timber investments after writing down values, and sold poorly performing private equity and real estate funds.
The turnaround has been arduous, as Harvard struggled to deliver returns on par with peers. In fiscal 2019, the endowment rebounded a bit with a gain that tied it for third place in the Ivy League and beat an industry benchmark.
The endowment has almost doubled its exposure to hedge funds under Narvekar, backing Harvard Management spin-outs such as relative-value trading specialist TPRV Capital and getting access to firms including Element Capital Management. Narvekar said in a report last year that he planned to eventually devote more resources to private equity, though at the time it was still too expensive.
Extra Allocation
The university is allocating an additional $20 million from central funds to address challenges related to the pandemic as it plans for the spring semester, Harvard President Larry Bacow said Tuesday in a letter also signed by other senior officials. The university is spending $2 billion from the endowment to support its finances this year, the same as fiscal 2020.
Most staff are working remotely through the calendar year. Almost 700 employees accepted the school’s voluntary early retirement program offered in June, according to the letter.
Bacow called the endowment’s investment returns good news, saying it’s “particularly welcome at a time when the university projects revenue losses and budget shortfalls due to the cancellation of many activities.”
The university will provide further details of the endowment’s performance and organizational progress when it releases its financial report next month.
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