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Harvard's Endowment Dips Slightly

By Hana N. Rouse and Benjamin M. Scuderi, Crimson Staff Writers

UPDATED: Sept. 26, 2012, at 8:10 p.m.

Harvard’s endowment dipped in value for the first time since the 2009 fiscal year, its investments dropping 0.05 percent and the overall level of endowment funds dropping to $30.7 billion in the 2012 fiscal year, University administrators announced Thursday.

In its annual report, the Harvard Management Company, which manages the University's endowment, noted the volatility in the global financial markets in the last fiscal year, which began on July 1, 2011 and ended June 30, 2012. U.S. stocks ended that period slightly up in a year that included the Standard & Poor's downgrading of U.S. debt in Aug. 2011.

“The markets during the last year continued to be choppy and highly sensitive to unresolved macroeconomic headwinds,” HMC President and CEO Jane L. Mendillo said in a press release. “While investment performance over the last twelve months was well below long-term averages, we nevertheless found good investment opportunities through both internal and external management that we believe will sow the seeds for future growth.”

The annual endowment return was less than the 1.7 percent growth of the S&P 500 Index, which weights the growth of the 500 largest publicly-traded companies in the U.S and serves as a benchmark that tracks the overall performance of major US stocks. Public equities, however, are often seen as more volatile than university endowments, which tend to carry less risk than stocks and therefore might yield lower returns.

According to the report, Harvard’s endowment nonetheless beat HMC’s benchmark Policy Portfolio, a set of assets determined by the HMC board to best serve Harvard’s long-run financial needs, by about a percentage point.

Last year, Harvard’s endowment grew by 21.4 percent to $32 billion. Over the past 20 years, the Harvard’s average annual endowment return has averaged 12.3 percent.

Prior to the financial crisis of 2008, Harvard’s endowment reached an all-time high of $36.9 billion. After the crash the endowment fell 27.3 percent, losing $11 billion--a loss which has yet to be fully recovered.

Many of Harvard’s peer institutions have yet to post endowment returns for for the fiscal year 2012. Princeton has yet to release endowment figures, but Princeton President Shirley M. Tilghman told Bloomberg News recently that she expected the school’s endowment to post a return between zero and five percent. The University of Pennsylvania recently announced a 1.6 percent return, bringing its endowment to approximately $6.8 billion.

Harvard’s flat returns can primarily be attributed to HMC’s unusually large stake in foreign equities, which fared far worse than many other asset classes this fiscal year.

Harvard’s endowment is broken into five asset classes—public equities, private equity, fixed income, absolute return, and real assets. Of those broad asset classes, only public equities, which include foreign equities, posted negative returns for the 2012 fiscal year.

Among Harvard’s foreign equities, the value of investments in developed countries dropped 10.81 percent and the value of investments in developing countries dropped 17.43 percent. Overall, the value of Harvard’s public equities dropped 6.66 percent.

“Despite difficult markets, we are pleased that investment performance remained steady and the endowment was able to provide substantial support to the University,” University Treasurer James F. Rothenberg ’68 said in the press release. “In such volatile economic times, it’s important to note that results in any 12 month period can vary dramatically. Jane and her team have done an excellent job strengthening Harvard’s portfolio and I’m confident the endowment is well positioned for the long-term.”

—Staff writer Hana N. Rouse can be reached at

—Staff writer Benjamin M. Scuderi can be reached at

This article has been revised to reflect the following correction:


An earlier version of this article incorrectly stated that Harvard’s endowment dropped 0.05 percent in the 2012 fiscal year. In fact, its investments dropped 0.05 percent.

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