Harvard University Cashing In On Inflation

Fed Chairman Ben Bernanke recently spoke at Harvard University. He told Harvard College’s graduating class that "I see the differences between the [inflationary] economy of 1975 and the economy of 2008 as more telling than the similarities."

Meanwhile, elsewhere at Harvard, Harvard's money management team was witnessing huge profits from their bets on inflation.

The Harvard Crimson reports, "Harvard's endowment posted returns of approximately 9 percent through the first 10 months of this fiscal year, according to data from the University. The increase puts the endowment's value at around $38 billion as of this April, up from $34.9 billion as of last June."

During the same period the S&P 500 Index lost 8 percent. So how did Harvard do it?

Heavy bets on inflation.

The John Harvard Letter that was released last August shows that Harvard's investment in commodities was at 17 percent of the endowment for fiscal year 2008, making it their single largest investment by asset class. That number reflects a near tripling of the share of the endowment invested in commodities since 2000. Further, the endowment held another 7 percent of its portfolio in inflation-indexed bonds. Thus, a full 24 percent of Harvard's endowment was a bet on inflation.

With commodity prices soaring, it was the place to be, and Harvard was there.