Harvard endowment takes a loss $8 billion

06 December 2008

Harvard, the wealthiest university in the US, is as vulnerble to the global economic turmoil; it lost 22 per cent or $8 billion of its $36.9 billion portfolio, bringing the endowment down to $28.7 billion by the end of October and is looking at a 30 per cent decline for the fiscal year ending in June 2009.

The Ivy League school, which invests a substantial amount of its endowment in hedge funds, private equity funds, commodities and real estate said that it is looking at a 30 per cent decline as it is not able to determine the level of the actual loss as it is difficult to reflect fully updated valuations in private equity and real estate.

Ten years ago, the endowment provided 17 per cent of Harvard's operating budget. Today that figure is about 30 per cent.

Last month, Harvard's president, Drew Faust, said that the university is looking for ways to reduce spending across the campus, raising the prospect of cuts to programs and compensation, as Harvard's endowment plummets. (See: Harvard University to tighten belt as kitty shrinks)

Drew Faust and executive vice president, Edward C. Forst wrote a letter council of deans at the university outlining the effect of the global financial turbulence on the investments made by the endowment.

''To put a loss of that size in historical context, over the last at least 40 years, Harvard's worst single-year endowment return was a negative 12.2 per cent in 1974, and at that time our endowment stood at less than $1 billion and funded a much less significant proportion of University operations'' she wrote.