Harvard University’s endowment has faced challenges in generating returns over the last 20 years, with its performance ranking as second-to-last among Ivy League schools. Yale University, on the other hand, has managed to generate impressive annualized returns of nearly 10.9% over the same period. Princeton University follows closely behind with 10.5%, while other Ivy League schools like Dartmouth, Brown, Columbia, and UPenn have also outperformed Harvard.
Despite having the largest endowment of any university in the country at $50.7 billion, Harvard has not been able to keep up with its Ivy League counterparts. The University of Texas, with an endowment nearing $45 billion, is poised to surpass Harvard in terms of total assets. UT’s significant endowment is partially due to its ownership of over 2 million acres of land in Western Texas, which has allowed the university to benefit from royalties from oil and natural gas production in the region.
Harvard’s struggles in generating strong returns can be attributed to turnover in investment management personnel since the departure of longtime treasurer D. Ronald Daniel. During Daniel’s tenure, Harvard Management Co, the school’s in-house hedge fund responsible for managing the endowment, experienced significant growth and success. However, the fund has faced challenges with seven top executives since Daniel’s departure, leading to difficulties in generating impressive returns despite significant investments in talent.
According to finance expert Mark Williams, Harvard Management Co has made poor decisions in investment choices, resulting in assets losing value and taking on excessive risks just before market downturns. The fund has been criticized for playing catch-up ball and failing to deliver strong returns despite efforts to recruit top talent. HMC, in response, has stated that it is focused on generating risk-adjusted returns to support the university’s operations and has made changes to its investment model, organizational structure, and portfolio to improve performance.
Harvard University continues to be the wealthiest university in the world, with a sizable endowment to support its operations. Despite its challenges in generating strong returns compared to its Ivy League counterparts and other universities with large endowments, Harvard remains focused on ensuring the long-term sustainability of its endowment. The university has made efforts to position itself for future success, but the impact of the recent changes may take time to be fully realized. With the passing of D. Ronald Daniel, Harvard faces the task of navigating its investment management strategy to improve performance and meet its financial needs.
