Troubles at Harvard’s Endowment

The Harvard Endowment has had troubles for a while now. After a long period of success, especially in the 1990s, students and alumni began to regularly complain that the staff of the endowment should be paid dramatically less. That’s led to a lot of turnover and changing strategies at the endowment. The endowment’s also had mediocre returns for a while. Read the details here.

The about-face is the latest in a long series of setbacks for Harvard Management, now on its sixth CEO since 2005, while struggling to generate the returns needed to sustain the university’s formidable academic and research budget. In terms of investment returns, Yale University, whose endowment is smaller, left Harvard in the dust years ago. Indeed, Harvard has lagged behind most of the eight-member Ivy League since 2011. Only Cornell University has done worse.

The new shift to rely more on external money managers represents a reversal of longtime Harvard policy of using in-house staff. “I’m really surprised they would dismantle it that quickly,” Verne Sedlacek, former chief financial officer of HMC, said of the equity team. “That’s not a good sign for what the strategy is.”

The developments shocked HMC employees. Blyth had told staff last year that new investment strategies take years to be evaluated, according to people close to the endowment. Harvard Management had also approved hiring researchers to support the group this year, the people said.