Friday, September 23, 2016

Harvard Loses Almost $2 Billion in Endowment Value: Bad Investments

Harvard Management Company lost almost $2 billion in endowment value during a “disappointing” fiscal year 2016, posting its worst endowment returns since the nadir of the financial crisis and marking the latest in a string of underwhelming investment results for the world’s largest university endowment, reports The Harvard Crimson.

The negative 2 percent returns, which HMC announced Thursday evening, bring the endowment’s total value to $35.7 billion, down from its $37.6 billion value at the end of fiscal year 2015.

Repeatedly characterized as “disappointing” in interim CEO Robert A. Ettl’s annual endowment report, the returns come during a difficult year for large institutional investors, particularly universities, amid volatile global markets. Still, the University’s investment arm fell short of its internal benchmark of returning 1 percent on its endowment—equivalent to hundreds of millions of dollars—during the turbulent fiscal year, which ended on June 30.

In his report, Ettl attributed the loss in part to the “low interest rate environment and market volatility of the past fiscal year,” but he also acknowledged that HMC’s internal performance was also to blame.

“[W]e recognize that execution was also a key factor in this year’s disappointing results,” he wrote.

This year’s returns represent the largest dollar loss on the endowment since fiscal year 2009 when the financial crisis drained almost $11 billion from Harvard’s coffers, according to The Crimson.



  1. About $1.7 billion of the decrease was due to spending to support university operations. As with many large endowments, a lot of their investments are private and allocation decisions from even before the financial crisis still have an impact on current returns and how much flexibility they have to redeploy into new opportunities.

  2. $37.6 B down to $35.7 B is a -5% return (not -2%).