The global economic slide has taken its toll on Harvard University, the wealthiest in the US, as it will cut 25 per cent jobs in Harvard Management Company, its internal firm that handles its massive $28.7 billion endowment fund, after losing $8 billion from the $36.9 billion portfolio at the end of October.

The management company, which has 200 employees on its rolls, will see its staff strength reduced by 50 over the next few months as most of the university's endowment, which is invested in hedge funds, private equity funds, commodities and real estate, has lost nearly 22 per cent in the four months ended 31 October. (See: Harvard endowment takes a loss $8 billion)

HMC said that the job cuts will take place across the company, where investment executives, support staff and other back office personnel will be reduced.

HMC chief executive Jane Mendillo wrote in a statement that the management had made an analysis to restructure the company in wake of the current economic crisis and said that ''the time was right for a significant rebalancing of our staff and our functions.''

''This type of thinking and rebalancing is done, and should be done, continuously, in organisations that are and that want to stay at the top of their field, through all kinds of market cycles and economic conditions,'' she wrote.

Harvard's president, Drew Faust, wrote in an e-mail in November to faculty, staff, and students saying, "We must recognise that Harvard is not invulnerable to the seismic financial shocks in the larger world." (See: Harvard University to tighten belt as kitty shrinks)

''Given the breadth and the depth of the present downturn, even well diversified portfolios are experiencing major losses,'' Faust said in the mail. ''While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint.''

She had also said that the university was looking for ways to reduce spending across the campus, raising the prospect of cuts to programs and compensation, as Harvard's endowment plummets.

Currently, HMC manages about 30 per cent of the Ivy League School's endowment fund while the rest is managed by outside firms and under the previous chief investment officer of HMC, Mohamed El-Erian the endowment fund grew substantially at 8.6 per cent to $36.9 billion till fiscal year ending June.

HMC's consistently posted an average annual return of nearly 14 per cent since the past 10 years and its endowment's executives were very well paid, as the last fiscal year, the front ranking top six executives took $29.6 million in salaries and over $21 million in bonuses.

The criticism by the alumni in 2003 on the very high salaries paid to the executives led to many executives resigning including its CEO, Jack Meyer and again some alumni had written to Drew Faust criticising the multi-million dollar bonuses paid to its executives last year.

The alumni had also not liked the idea that the school depended on its expensive internal executives as most other schools relied on external investment firms to manage a large portion of their endowments and are able to give good returns on its investments.

Harvard insists on relying on HMC although with reduced staff and it said in a statement that ''the internal platform combined with a selectively chosen external management set'' was the correct one.

As the economic turmoil has seen the average annual total return earned from higher education endowments in the US public and private colleges was -2.7 per cent for the fiscal year ending 30 June 2008, down from 16.9 per cent in 2007 as the current global economic meltdown is making some of the prestigious universities tightens their belts. (See: Economic turbulence hits endowment returns in US colleges)

According to a survey released late last month by the National Association of College and University Business Officers (NACUBO), endowments' investment returns fell an additional 23 per cent from July to November 2008 according to the follow-up survey that was conducted on 796 colleges and universities in the US and Canada.

In September, Harvard University, had $36.9-billion endowment and earned 8.6 per cent on its investments in the last fiscal year while stock markets around the world were losing money. (See: Harvard University's endowment fund grows to $36.9 billion)

But with its endowment fund declining, Harvard had put nearly all of the $1.5 billion of stakes it held in private-equity funds on the market last year but withdrew them as the bids were too low although it was still looking to offload these in the market if it is able to get a fair value for it.

In December, HMC was looking to sell holdings in leveraged-buyout funds and to repay commercial paper it sold $1.5 billion in taxable bonds.