Friday, December 5, 2008

Harvard Endowment Falls 22% in 4 Months

Wow. Harvard Endowment is supposed to the smartest guys in the room; well along with the Government Sachs folks. Down 22% in 4 months; I guess this bear market is taking no prisoners. Unfortunately, there simply has been no place to hide as all asset classes (ex US Treasuries) are falling apart together. So much for non correlation.
  • Harvard University’s endowment decreased 22 percent, or $8 billion, in the first four months of fiscal 2009, putting the fund on course to have its worst performance in at least four decades.
  • The endowment, the biggest U.S. education fund, had totaled $36.9 billion on June 30 after gaining 8.6 percent in fiscal 2008. The worst annual return that Harvard, in Cambridge, Massachusetts, has recorded in at least 40 years was a negative 12.2 percent in 1974.
  • The 22 percent decline, excluding adjustments for real estate and private equity, outperformed the Standard & Poor’s 500 Index of stocks, which returned a negative 24 percent during the same period. Valuations for the fund’s real estate and private equity holdings have yet to be updated.
  • “The severe turmoil in the world’s financial markets has affected all major asset classes in which the endowment is invested,” Faust and Forst wrote in the letter.
  • Colleges and universities across the U.S. are struggling. (one of our big themes for 2009; we're just getting started) State university systems in Georgia, California, and New York are firing employees, postponing maintenance and cutting library subscriptions.
  • Harvard’s endowment provides funds for more than a third of the university’s operating expenses. Harvard is reconsidering “the scale and pace” of planned projects, such as the expansion of the Allston campus in Boston, and university officials are “taking a hard look at hiring, staffing levels and compensation to consider ways to cut spending,” Faust and Forst said.

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