Business As Usual At HMC

Impact on Harvard Assets Uncertain

While the early hours of war started a powerful economic wave through international markets, the initial influence of the crisis on Harvard Management Company (HMC) had little to do with money.

As a precautionary measure against terrorism, security guards required everyone entering the Federal Reserve Bank of Boston, where the HMC offices are housed on the 15th and 16th floors, to walk through a metal detector and pass their belongings through scanners like the ones used in airports.

Within the confines of the Harvard investment firm, however, it was essentially business as usual. Except for the headlines on the Wall Street Journals in the lobby and the constantly flashing news tickers, the operations of managing the endowment seemed undisturbed by the distant combat in the Gulf.

Although predicting that markets would open "quite strongly," HMC President Jack R. Meyer said the war's long-term effects on the endowment were a lot less certain.

"Initially the reports all seem to be very positive from the American standpoint," Meyer said, "But obviously if we get reports that things are going less well, the market could turn around very quickly."


"Clearly, no one except perhaps the Iraqis were surprised by the attack." Meyer said. "What the market was waiting for was some indications as to how it goes. In general, as of the opening today, our assets are going to be sharply higher."

Despite the fact that Harvard is heavily invested in oil and gas holdings compared to other universities, Meyer said the University will probably not make large-term gains unless Iraq knocks out key Saudi Arabian oil facilities. That would reduce the world's oil supply and cause large increases in the price of oil, which would benefit the oil companies in which Harvard holds stock.

But Meyer cautioned that mere day-to-day fluctuations in the price of oil would have little effect on such assets. "Harvard holdings are influenced by the forward [long-term] price of oil," Meyer said. "Even if you get a big spike in the current price, the forward price will stay in the twenties."

Meyer said that the value of the general protfolio would not necessarily increase as a result of the conflict, because production for the war efforts, because production for the war effort has largely already taken place.

"A war is not necessarily good for the endowment," Meyer said. "It's being fought out of inventory, they don't need anything new."

Although Meyer said HMC will not make "big bets" on the word of "some military analyst," he said the firm has been preparing for the unlikely possibility that the price of oil skyrockets.