<li><p>Harvard will have to take a hard look at hiring, staffing levels, and compensation, the university president, Drew Faust, and the executive vice president, Edward Forst, wrote in a letter informing deans of the losses.</p></li>
<li><p>Reduce Financial Aid or need blind admissions</p></li>
</ol>
<p>When looking at the drop in value of the endowment, one needs to look at its historical growth. This is not the first time that the avlue had gone down (or up) and the smart managers who rode the wave up must have known that it would not last forever. That is why the disbursements from the endowment are maintained at a very conservative level.</p>
<p>Also, the Harvard endowment is not a monolithic instrument; it comprises hundreds, if not thousands, of separate trusts and entities all with desiderata spelled out. </p>
<p>Harvard will survive nicely and there is nothing like a bit of bad financial news to force spendthrifts to realize that one can live without the excesses that go hand in hand with a financial nirvana. Cutting the fat and tossing out the dead wood is not always a bad idea. Hogs and pigs? Some get to live; others get slaughtered. </p>
<p>Last but not least, the drop might keep at bay the greedy paws of the Mass. legislators who wanted to confiscate part of the H treasure on an annual basis.</p>
<p>If US economy can go from a surpluses to trillion dollars in deficit then Harvard endowment can go from $36 billion to $18 billion in no time unless appropriate actions are taken. When the endowment was growing Harvard came out with its hefty need blind admission policies and FA up to $180,000. Time might have come to look into those policies and have more non FA students than those with need for FA.
By cutting compensations, staffing it will reduce the quality of education but by cutting FA it won’t reduce the quality of student body.</p>
<p>On June 30, 2008, the overall value of the University's endowment stood at $36.9 billion. In fiscal 2008, distributions from the endowment totaled $1.6 billion. </p>
<p>While scholarships and awards to students from University funds have more than doubled from fiscal 2001 to fiscal 2008, the number is still "only" equal to $321 million from $156 million. In the meantime, a recent study suggests that tuition has risen 439% since 1982 while median family incomes have increased only 137% during that period. If tuition continues to rise at that rate, few families will be able to afford college. Cutting scholarship aid is the last thing Harvard should consider! </p>
<p>Since Harvard seeks to spend about five percent of the endowment annually on University programs, it could increase that number to absorb the reduction in endowment value. In 1969, Harvard's endowment was $869,757,933—about $5.2 billion in 2008 dollars. If one could live with 5 billion once, one should be able to "survive" with 600% of that number.</p>
<p>PS The endowment's overall value stood at $17.5 billion on June 30, 2002.</p>
<p>Tighten its belt, just like every other college and university on the planet.</p>
<p>Sorry for the sarcasm, but it's difficult to seriously analyze Harvard's "situation" when it's got an $80-gatrillion endowment, while there are small, worthy LACs out there struggling like the rest of the world.</p>
<p>It's kinda like asking if Bill Gates will make it through the recession alright.</p>
<p>"Since Harvard seeks to spend about five percent of the endowment annually on University programs, it could increase that number to absorb the reduction in endowment value. In 1969, Harvard's endowment was $869,757,933—about $5.2 billion in 2008 dollars. If one could live with 5 billion once, one should be able to "survive" with 600% of that number."</p>
<p>The reduction of $8 billion means at 5% reduction of $400 million for university programs. In 1969 Harvard didn't have a need blind admissions or FA upto $180000 income.</p>
<p>So it might need to tighten its belt to reduce FA to less than $80000 income only.</p>
<p>What is need blind admission?
I know the basic principle, but my understanding is that on the application form you are being asked if you are applying for aide or no. Am I correct?</p>
<p>Harvard and many other top universities indicates that even though you need to specify on the main application whether or not you will be applying for FA, the question's answer is not used in their process to select the incoming class. That is what they indicate need blind process.</p>
<p>Which I think won't be true any more or at least this year as it will be very difficult for admission officer to reject an equally capable fully paying student in lieu of FA applicant when their own survival is at stake.</p>
<p>Xiggi-you quote figures based on June 30, 2008. Harvard has lost 22% of its endowment in the 4 months since then. This statement also made me laugh, "the smart managers who rode the wave up must have known that it would not last forever." This whole financial mess occurred because the "best and brightest" on Wall street bet that housing prices would keep on going up. They mispriced the assets they were holding based on this incorrect assumption of risk. Being "smart" doesn't mean you won't make big mistakes. People aren't totally rational beings. It has been shown that many decisions are influenced by emotions and other social factors.</p>
<p>
[quote]
Xiggi-you quote figures based on June 30, 2008. Harvard has lost 22% of its endowment in the 4 months since then.
[/quote]
</p>
<p>Do you *really *believe that I did overlook that fact? FYI, Harvard anticipates its losses for fiscal 2009 to be around 29%. Still well ahead of the $17.5 billion of June 30, 2002. </p>
<p>Harvard's endowment grew by assuming a number of risks and the correction in the endowment value should not a great surprise. That is why the endowments tend to distribute only 1/20th of their assets. The performance is viewed over a long term period. </p>
<p>Crying about the 8 or 10 billion correction makes little sense. And neither did thew wild cheering or expression of envy when Harvard announced annual gains in the billions. During the presidency of Bush, Harvard gained more than 20 billion dollars. Given the tendency of people to believe that our country fared horribly on the domestic economic front, perhaps we should be happy that Harvard did not lose half of its endowment since 2001.</p>
<p>xiggi: Harvard announced most of its lenient FA policies after the dramatic increases in its endowment as it have given it enormous amount of funds to give away. But with similar dramatic decreases in endowment it will have to take measure in terms of either going back to 2002 FA policies and expenses or drawing increasing % from the endowments from 1/20th to 1/15th which might not be economically viable plan.</p>
<p>Hey, the thing I found amazing is that Harvard lost 22%. Its investment counselors are probably fielding hundred of calls from other universities to determine how they managed to keep the loss so low in the disaster to the economy that occurred.</p>
<p>I think a true need blind process would ask you no financial questions up front.
Once admitted, a student should then contact the financial office and proceed from there. I am sure you guys have discussed it on this forum many times though :)</p>
<p>^^ drubsa,
Interesting discussion on a related thread suggests Harvard's losses may be much larger than the 22% they've reported so far. A good chunk of what's left is in illiquid assets that there's just no market for right now, consequently difficult to value. They've apparently had to go out and borrow heavily to cover current spending and cash calls on some sour investments.</p>
Even investment newsletter editors, who are sneered at by many on Wall Street, accused of being nothing more than a bunch of lunatic self promoters, have on balance done better than that: The average five-month return through Nov. 30, among the nearly 200 newsletters tracked by the Hulbert Financial Digest, was a loss of "just" 28.9%.