Harvard University once again showed the world that it has the largest endowment in academia, but its returns are left a little wanting.
Harvard’s fiscal year
With an endowment of $37.6 billion, the Harvard Management Company expects that it will have the largest endowment of universities in the United States. Neither Princeton or Yale have reported their years but barring something miraculous it’s expected that Harvard will still rule the roost both in the Ivy League and beyond.
Electron Capital returned 3.1% for October, bringing its year-to-date return to 8.3%. The MSCI ACWI gained 6% for October, raising its year-to-date return to -22.3%, while the S&P 500 returned 8% in October for a year-to-date loss of 18.8%. The MSCI World Utilities Index was up 2.7% for October but remains down 13.5% year to Read More
The annual returns were reported by the president and chief executive officer of Harvard Management Company Stephen Blyth in his first letter to alumni having taking the helm of the company in the beginning of the year. All told, HMC managed a 5.8% for the fiscal year that ended on June 30, 2015. Unfortunately, this lagged well behind the 13.2% that the Massachusetts Institute of Technology saw for its endowment; Stanford (the “West Coast Harvard”) managed a return of 7%.
Despite these “disappointing” numbers, Harvard’s return surpassed the Standard and Poor’s 500 index of 4.5% over the same period.
Going forward and short?
In the long letter to Harvard alumni, Blyth signaled that he wanted to continue with the Harvard tradition of having some of the university’s assets managed internally, but suggested that he wanted said money managers working in closer conjunction. It’s believed that he would like to see manager compensation tied not just to the assets they manage but the endowment’s performance as a whole.
He’s also not afraid of going short due to “potentially frothy markets.”
“We have renewed focus on identifying public equity managers with demonstrable investment expertise on both the long and short sides of the market,” he said.
Harvard continues to use endowment returns to finance roughly 35% of its annual budget and expects great things from Blyth. However, he is a bit hamstrung by his inability to meet Wall Street salaries for those that manage the endowment.
Harvard does it different
Harvard is one of the only, if not THE only university, that employs external money managers including those that work for hedge funds. This practice has been responsible for a rift with faculty over what are viewed as outrageous fees when compared to the salaries of those with tenure or those whom work for the university.