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Large University Endowments Down Average of 20.5 Percent

By William N. White, Crimson Staff Writer

A new report found that university endowments declined an average of 18.7 percent in the fiscal year ending June 30, confirmation that Harvard has not been alone in suffering large endowment losses—though the average university’s losses have been significantly less severe.

Of the 842 U.S. universities surveyed, the 52 institutions with endowments valued at $1 billion or more reported the largest declines—an average of 20.5 percent—according to a report released yesterday by the National Association of College and University Business Officers. Harvard’s investment losses this past year amounted to 27 percent of the endowment’s total value, or about $10 billion.

Several of Harvard’s wealthy peer institutions faced similar losses in fiscal year 2009. Last year, Yale’s endowment—higher education’s second largest after Harvard—fell 25 percent, and Stanford’s endowment fell by 27 percent.

Despite last year’s shock to the endowment, Harvard’s endowment returns over the past 10 years have beaten those of university endowments on average, according to figures from NACUBO’s report. Harvard’s endowment has grown 8.9 percent since 1999, while the average university endowment netted a 4 percent gain.

“At Harvard, we’re long-term investors,” University spokesman John D. Longbrake said. “We have a very strong track record.”

The report also found that universities increased their use of “alternative strategies”—branching into private equity, real estate, and commodities—and held more cash and short-term securities in 2009 compared to 2008. The percentage of holdings invested in both domestic and international equities declined on average across universities.

These alternative assets contributed significantly to the decline in Harvard’s endowment—private equity holdings, which represented 13 percent of the University’s portfolio in 2009, fell 31.6 percent. Harvard Management Company’s investment strategies came under fire in the past year for investing the University’s endowment in private equity and other illiquid assets, which could not be sold easily to meet cash obligations.

Similarly, Yale’s endowment managers blamed much of their losses in 2009 on real estate, energy, and commodities.

In a speech yesterday to university financial officers at the NACUBO conference in New York City, HMC’s chief executive Jane L. Mendillo addressed concerns about liquidity and endowment risk management.

“One lesson we have taken away from the last couple of years is that it is essential to reconcile liquidity needs, investment opportunity, and endowment dependence, with our long-term view,” Mendillo said.

—Staff writer William N. White can be reached atwwhite@fas.harvard.edu.

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University Finances