Recession drags Harvard and Yale endowments down

The two richest universities in the US, Harvard and Yale, saw their endowment values fall by by over a quarter, reflecting that even the best managed funds are not immune to recession.

In a year of extraordinary market turbulence, the two prestigious universities in the US, long admired for their shrewd fund management skills, regularly gave earnings of approximately 8.6 per cent even as the 2008-2009 global economic meltdown was shaking the foundations of large corporations.

But, Harvard University, the world's richest university and Yale University, the second-wealthiest university in the US could withstand the global meltdown only to a certain extent; while the Harvard endowment saw its biggest drop in 40 years as it fell 27.3 per cent, Yale's endowment dropped 30 per cent in the last fiscal year ending June.

Relying on hedge funds to bring top returns, for the fiscal year 2007-2008, which ended on 30 June 2008, Harvard's $36.9-billion endowment earned 8.6 per cent on its investments compared to the 13.1 per cent fall in the Standard & Poor's 500 index during the same period. (See: Harvard University's endowment fund grows to $36.9 billion)

Cambridge, Massachusetts-based Harvard, said its endowment dropped 27.3 per cent or $11 billion, to $26 billion during the fiscal year ending 30 June 2009.

Despite punishing market conditions and losses, the university's endowment still managed a five-year annualised return of 6.2 per cent and a 10-year annualised return of 8.9 per cent.