Six years ago, Jane Mendillo, then head of Harvard’s endowment, spent a week in Brazil, flying in a turboprop plane to survey some of the university’s growing holdings of forest and farmland. That year, Harvard began one of its most daring foreign adventures: an investment in a sprawling agricultural development in Brazil’s remote and impoverished northeast. There, workers would produce tomato paste, sugar, and ethanol, as well as energy after processing crops. The profits, in theory, could outstrip those of conventional stocks and bonds and keep the world’s richest university a step ahead of its peers.
This sentence says it all imo: “Harvard made many mistakes over the last decade, according to Thomas Gilbert, a finance professor at the University of Washington, but almost all of them boiled down to a single miscalculation: the belief that its top money managers—who were paid $242 million from 2010 through 2014—were smarter than everyone else and could handle the risks almost all other endowments avoided.”
Harvard’s endowment return woes have always fascinated me. On the surface it is really astonishing that the most prestigious and richest university on earth has done such a poor job in that regard. On second thought however it is probably the hubris that comes with being the richest and most prestigious university that has led to this.
I think all this will change with Narvekar though. Harvard will most likely rebound, they will manage to get returns comparable to other ivies and their endowment will shoot up further and further away from the rest. Narvekar has had a really great track record at Columbia and has been very decisive and impactful so far in restructuring the mess at Harvard.
@Penn95
Harvard’s lower than average endowment returns is a fairly recent phenomena. There was a time when they were higher than average.
https://seekingalpha.com/article/20922-learning-from-the-harvard-and-yale-endowments
You win some, you lose some.
They were higher than average when almost everyone was higher than average…
What fascinates me is the schools that manage incredibly succesful investments, even in difficult times. If only we mortals got their returns.
What puzzles me is why Harvard, or any colleges with huge endowment fund, would not just use index funds, save the millions it spent on active account managers and use the savings to provide some much-needed relief to students of middle-class families.
Harvard actually already provides excellent financial aid to middle class students.
Apparently they they could do a lot morebut choose to give the lions’ share to money managers.