<p>Nina</a> Munk on Hard Times at Harvard | vanityfair.com</p>
<p>so do you think harvard is going to get rid of its paying for students tuitions anymore</p>
<p>I have no doubt that ‘the hole in the ground’ will indeed become a cornerstone
of the Florence-vision and president Faust’s Grecian-Urn-Vision. It may very
well take five decades, but it will happen! :)</p>
<p>This is because generations of poor people like me who have been supported
by Harvard’s generous, unstinting aid will do our utmost to make that happen.</p>
<p>The question I was left with after reading the article was:
How are the Science departments funded; what %A comes from donor directives
and %B from pooled university resources that are susceptible for cuts?</p>
<p>How much will B be impacted by cuts over the next 5 years? The 10% of earnings
cap on student fees does not leave much room for Harvard to improve its finances
through raising fees.</p>
<p>What do rising Harvard sophomores through seniors think of this article? Does it accurately portray the situation or are the financial problems exaggerated in the article?</p>
<p>Omg this is serious. How will this affect future classes?? Will the financial aid policy go down? Will students that apply for fin aid get rejected whereas students that can actually pay get accepted?</p>
<p>As a rising Soph who needs the aid in order to attend, I am not
aware of any cuts Harvard has made that personally impacts me (yet).
(I am not a hot-breakfast type though :))</p>
<p>The article seems carefuly worded to not appear as non-factual and
for the most part suceeds. The % decline on the endowment seems
specualtive and alarmist (i.e. the 50% comment about illiquid assets).
The aspersions cast subtly on the current financial administrator seems
to be speculative as well.</p>
<p>The Allston issue has come to a head due to the immediacy of the current
crisis. The issue about uinadequate donor support existed much
prior to the onset of the current crisis.</p>
<p>Relatively speaking, i.e compared to other top private schools in the U.S.
I believe Harvard will do just as well.</p>
<p>So, is the financial situation at Harvard (and its proposed cuts in spending and programs) similar to that at its peer institutions like Yale, Princeton, and Stanford?</p>
<p>HYPS are in generally bad shape. </p>
<p>However, Harvard is in the WORST shape b/c its investments office is a mess, it overexpanded into Allston, it has much more debt and financed at worst possible time, etc. Yale, for instance, has reduced expansions but not really cut into existing programs anywhere to the same extent.</p>
<p>It is probably a toss-up for the second-worst between YPS, but Harvard is unequivocally the worst off financially right now. The managers were idiots, and they are suffering and will probably continue to hurt… e.g. “Servicing the debt alone [just from Harvard’s bond sale] will cost Harvard an average of $517 million a year through 2038.” Moreover, Harvard switched much of their endowment to cash holdings, so they probably didn’t get a bounce back from the markets as much as everyone else.</p>
<p>booyaksha, are you saying that:
current size of endowment(A) - debts(B) - operating expenses(C)
is worst as an absolute number for Harvard compared to YPS?</p>
<p>Givne the realtive differences in A for H,Y,P,S your statement could not be
correct, can you elaborate? (Quantitatively not qualitatively)</p>
<p>It is very hard to calculate A - B - C because B and C are private projections, and the endowment office only releases A once a year (and even then they won’t tell you about the relative breakdown of equity, private equity, liquid assets, etc).</p>
<p>However, I am NOT saying that Harvard now has an ABSOLUTE number less than that of YPS. Harvard is probably still #1 by quite a bit.</p>
<p>Rather, Harvard has become VERY dependent in recent years on their endowment spending – more so than YPS – and they have financed programs based on future projected growth of that endowment. However, their projections were WAY out of touch with reality… much more so than that of YPS. They also made some very dumb moves like selling bonds at the worst possible time.</p>
<p>As a result, Harvard has a massive GAP from money that was supposed to be financed from the endowment and no longer can be. That is why there is an absolute PANIC among administrators. Even if the endowment is big, when liabilities now exceed expected revenues (as seems to be the case w/ the dropped endowment revenues), the university will have a VERY DIFFICULT time financing programs. It will have to cut into the existing endowment in order to finance committed programs, but even doing that is difficult because many of the assets are illiquid.</p>
<p>In terms of absolute size, Harvard is probably still the biggest by a bit. But the problem with their size is they thought that they could lean on their endowment indefinitely (and lean on it at unrealistically high expected growth rates), and that is why they are in such serious serious trouble.</p>
<p>Thank you for the post Booyaksha.</p>
<p>So in effect there is an amount of cash generated by A (the endowment)
every year … say A<em>op</em>cash and what you are saying
could be interpreted as :</p>
<p>A<em>op</em>cash << C (the operational expenses)
requiring Harvard to borrow on bad terms to get through
the year</p>
<p>versus for YPS
A<em>opp</em>cash >= C</p>
<p>is that correct?</p>
<p>Sounds pretty good.</p>
<p>To be more precise, however, I doubt that YPS have cash exceeding expenses – they probably just have income closer to expenses.</p>
<p>Thus more like
A<em>op</em>cash <<<<<<<<<<< C for H
A<em>op</em>cash <<<< C for YPS, although by no means are they all the same.</p>
<p>booyaksha</p>
<p>“Moreover, Harvard switched much of their endowment to cash holdings, so they probably didn’t get a bounce back from the markets as much as everyone else.”</p>
<p>“It will have to cut into the existing endowment in order to finance committed programs, but even doing that is difficult because many of the assets are illiquid.”</p>
<p>the endowment can’t both be “in cash” and “illiquid”</p>
<p>Sorry, poor writing. We don’t know exactly what distribution is liquid vs illiquid, so much of this is speculation. However, both of those statements are probably true to some extent. How could that be? </p>
<p>Harvard switched some of the easily “convertible” assets to cash in order to pay for immediate financial needs. This cash, however, disappears quickly because they used it up to pay for programs. This money therefore wasn’t invested in the markets during the upturn.</p>
<p>However, many of the remaining “illiquid” assets are “undesirable” to convert because they are in things like real estate markets, and it is a bad time to sell that stuff right now.</p>
<p>Thus the “in cash” part is money that was converted but disappears very quickly because it is used right away to pay for programs. The “illiquid” assets are the remaining holdings of the endowment that will be harder to cut into in the future.</p>
<p>Hopefully that makes sense…</p>
<p>Not really</p>
<p>Your presentation as a whole is more “fantasy” than “speculation”. Had Harvard had liquidity, they would not have needed to issue bonds.</p>
<p>I’ll PM you w/ sources.</p>