The Makers of Harvard's Millions

Perched atop a veritable goldmine—$19.2 billion and counting—Harvard is richer than any University in the world.

With its coffers full to overflowing, Harvard’s endowment is larger than the budgets of more than 100 countries and larger than the endowments of Brown, Dartmouth, Columbia, Princeton and Cornell combined.

But how the University came to have such staggeringly deep pockets—nearly twice the size of second-place Yale—is the story of one of the University’s least-known sectors—the Harvard Management Company (HMC).

HMC is unique to Harvard for its mission: It makes money. Its only task is to give the University the maximum return on its investments—a task that has by all accounts met with wild success since HMC’s inception in 1974.

Harvard hires the best portfolio managers it can find, offers them multi-million dollar compensation packages and gives them wide autonomy to invest its endowment—with almost a quarter of HMC’s funds going into high-risk assets like venture capital and real estate.

HMC’s strategy is considered cutting-edge for institutional investing, says Michael P. Manning, a senior partner with New England Pension Consultants, an investment consulting firm.

“Harvard Management is the premier university investor; it’s one of the most sophisticated endowments in the nation,” says Mitch Sacks, an analyst with Zachs Industry Research in Chicago. “Generally speaking, it’s one of the most highly regarded investment firms in the nation.”

And though the University’s investments have at times been highly controversial, the sheer magnitude of the final product has caused much of that controversy to fall by the wayside.

“The results speak for themselves,” says D. Ronald Daniel, University treasurer and a member of the Corporation, Harvard’s highest governing body.

Last year alone, Harvard saw its endowment jump almost a third, from $14.4 to $19.2 billion—an increase larger than the entire endowment of universities like Dartmouth, Cornell and Duke.

And that jump was largely thanks to a ground-breaking investment strategy begun during the Nixon administration, when Harvard decided that it could beat the market by privatizing its investments.

From the Cradle

to the Moneybin

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