Harvard: The Inside Story of Its Finance Meltdown

Stocks were tumbling last fall as the new school year began, but at Harvard University it was as if the boom had never ended. Workers were digging across the river from Harvard's Cambridge, Mass. home, the start of a grand expansion that was to eventually almost double the size of the university. Budgets were plump, and students from middle-class families were getting big tuition breaks under an ambitious new financial aid program. The lavish spending was ... Full Story »

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3.2
by Margarita Persico - Feb. 28, 2009

Experts in the financial field at Harvard did not see the stocks collapsing a year ago, which put at risk 30 percent of their $36.9 billion endowment. The story is not well sourced, though by now it is common knowledge what happened to this endowment. Worse, one of the most important piece of information was left to the end: "bad bet on interest rates," which dates back to a former Harvard president, who is in a high profile political position now. I believe Forbes could have had a stronger story by bringing this piece of information earlier.

“For a long while Harvard’s daring investment style was the envy of the endowment world. It made light bets in plain old stocks and bonds and went hell-for-leather into exotic and illiquid holdings: commodities, timberland, hedge funds, emerging market equities and private equity partnerships. The risky strategy paid off with market-beating results as long as the market was going up. … Although the full extent of the damage won’t be known until Harvard releases the endowment numbers for June 30, 2009, the university is already working on the assumption that the portfolio will be down 30%, or $11 billion.”

(12 answers)

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