Harvard endowment posts 10 percent return
Harvard University’s endowment — the largest academic fund in the world — posted its highest returns in four years, although it continued to lag behind several other Ivy League institutions.
Harvard University reported on Friday that its endowment posted a 10 percent investment return in the fiscal year that ended in June, compared with an 8.1 percent increase in the prior year. The fund’s assets, which also include gifts, climbed to $39.2 billion from $37.1 billion.
Harvard has been restructuring its investment team and portfolio in recent years after a string of disappointing results and criticism of its large employee compensation packages. In 2016, the Harvard Management Company hired N.P. “Narv” Narvekar as its chief executive officer. Narvekar, the former Columbia University endowment chief, has cut the number of employees at Harvard, sold off certain investments, marked down the value of its extensive natural resources assets, and relied more on outside consultants to manage funds.
“As is well known, HMC, as an organization, and the endowment portfolio are still in the early stages of a multi-year transition, with much work ahead,” Narvekar said on Friday in a short letter to the university community. “We are confident in the direction of the organization and the long-term prospects for the endowment.”
It will take Narvekar and his team least another two years to turn things around in an endowment as large and complex as Harvard’s, but Friday’s results indicate that they are on the right path, said Charles Skorina, an executive recruiter in San Francisco who follows endowments and pensions.
“Ten percent is pretty decent,” Skorina said. “He’s slowly closing the gap.”
Unlike most other universities, Harvard had long thrived on an endowment strategy that relied on a crew of in-house experts to manage complex and exotic portfolios that included hedge funds, real estate, and natural resources, such as timberland and wineries.
But the endowment was battered by the financial crisis a decade ago and has struggled to regain its footing. Harvard has posted returns significantly behind other Ivy League colleges for the past decade. Since the 2005 departure of Jack Meyer — the legendary manager who oversaw Harvard’s investments for 15 years and grew assets by five times — the endowment’s leadership has also been marked by frequent turnover. The endowment has gone through five chief executives since Meyer.
Rival institutions continue to out-perform Harvard. The Massachusetts Institute of Technology’s $16.4 billion endowment posted gains of 13.5 percent in the last fiscal year. Dartmouth College’s endowment returned 12.2 percent and ended the year with $5.5 billion in assets. The University of Pennsylvania’s endowment saw returns of 12.9 percent and was valued at $13.8 billion.
Harvard’s endowment funds more than a third of the university’s operations, paying for scholarships, aid to students, and professor salaries.
Harvard has little trouble fund-raising and just concluded a $9.6 billion capital campaign, exceeding its original goal by $3 billion. But the university and donors made sure that some of those funds could be used for current needs and weren’t tied up in the lackluster endowment.
The university is also facing outside threats to its endowment. Congressional Republicans last year passed a tax plan that will require Harvard and several other institutions to pay a 1.4 percent levy on their investment returns.
And earlier this month, Massachusetts Democratic gubernatorial nominee Jay Gonzalez revealed his plan to pay for the state’s transportation needs, early childhood education, and public education, by taxing private colleges. Under his plan, Gonzalez estimates that Harvard would have to pay $563 million in taxes.
Harvard and other colleges continue to lobby against the federal tax plan.