FY 2019: The Good, the Bad, and the Ugly

Harvard Management Company

To many, Harvard’s 6.5 percent return on its investments this year might seem like more of the same. Another year, another drop in the bucket for the wealthiest university in the world. But there’s a lot more to unpack when it comes to Harvard’s fiscal health.

We are concerned that Harvard’s return lagged behind the S&P 500, as well as a standard 60-40 stock-to-bond ratio investment portfolio. But it should be noted that within the Ivy League only Brown was able to beat this second benchmark, which would have yielded nearly 10 percent returns this year.

As economic growth begins to slow in the U.S. and around the world, it’s not totally shocking to see lower returns to the endowment. Additionally, Harvard logged a significant growth in operating surplus, which increased from $196 million to $298 million. This increase speaks well of the University’s financial management under Harvard Management Corporation CEO N.P. “Narv” Narvekar.

Both of these outcomes may be due to increased caution in the runup to a potential recession. Fear of such a crash is building; two weeks ago an article in Bloomberg predicted a 27 percent chance of a crash in the next 12 months, a noted increase from its analogous prediction one year ago, but still less likely than before the 2008 crisis. Either way, Harvard has signaled that it is in the midst of preparing for difficult times. A year ago, we praised University President Lawrence S. Bacow’s efforts to rein in budget inefficiencies and encouraging scenario planning, despite the health of the economy at the time.


One of the reasons Bacow and Harvard pushed for fiscal caution is the federal endowment tax, to which the University is subject for the first time this year. Harvard continues to lobby against the 1.4 percent tax, submitting its formal opposition to the Treasury Department this past month alongside more than 30 other universities. The tax would cost Harvard roughly $48.9 million, though the Treasury has not finalized its guidelines.

We continue to support Harvard in its opposition to the endowment tax, and believe that tight fiscal management is an essential defensive strategy as these lobbying efforts continue. But whatever approach Harvard takes to lessening the burden of the new tax, it should not under any circumstances cut financial aid, which it has cautioned may be necessary in a recent report. The University’s capacity to accept low-income students should not be up for debate, even in a budget crunch.

Finally, as Narvekar reaches the halfway point in his five-year plan for revamping the HMC, we would suggest — alongside many of our peers and others in our broader community — that now is as good a time as ever for the University to think about how it can shift its investments out of fossil fuels. In May, we called on Harvard to divest from fossil fuels. We argued then that symbols matter, and we continue to stand proudly behind that position. But it strikes us that 2019 seems to pose a perfect example of how fossil fuel divestment may not only be symbolically significant but fiscally prudent. Recent reports indicate that some green energy-based exchange-traded funds significantly outpaced fossil fuel investments, which saw only 1 percent growth in 2019, by 32 percent.

A ragtag crew of student opinion editors, we’re no HMC — nor do we aspire to be — but a 32 percent better return seems pretty compelling to us.

This staff editorial solely represents the majority view of The Crimson Editorial Board. It is the product of discussions at regular Editorial Board meetings. In order to ensure the impartiality of our journalism, Crimson editors who choose to opine and vote at these meetings are not involved in the reporting of articles on similar topics.