Harvard University Loses Almost $2 Billion in Endowment Value

CAMBRIDGE, Mass. (Diya TV) — The Harvard Management Company lost almost $2 billion in endowment value during a disappointing fiscal year 2016, posting its worst endowment returns since the country’s financial crisis a few years ago and marking the latest in a string of underwhelming investment results for the world’s largest university endowment.

The negative two percent returns, which the university announced earlier this month, bring the endowment’s total value to $35.7 billion, down from the figure of $37.6 billion at the end of fiscal year 2015. Beyond the poor investment returns, several financial flows affect the endowment’s value, including the $1.7 billion HMC distributed to fund Harvard’s over a third of the Harvard’s annual budget.

Interim CEO Robert A. Ettl repeatedly characterized the news as “disappointing” in his annual endowment report. The returns come during a difficult year for large institutional investors, particularly universities, amid volatile global markets. Regardless, the University’s investment arm fell well short of its internal benchmark of returning 1 percent on its endowment — equivalent to hundreds of millions of dollars — during the turbulent fiscal year, which ended on June 30.

“Low interest rate environment and market volatility of the past fiscal year,” were contributing factors to the result, Ettl wrote in his report, adding that HMC’s internal performance was also to blame.

“[W]e recognize that execution was also a key factor in this year’s disappointing results,” he wrote.

Ettl became the interim chief executive of the Harvard Management Company in late May when Stephen Blyth took a then-temporary medical leave of absence; Blyth eventually resigned as CEO in July after only 18 months in the position. The University continues to search for Blyth’s permanent replacement and is considering at least two higher education investment professionals to next lead HMC.

This year’s returns represent the largest dollar loss on the endowment since 2009, when the country’s financial crisis drained $11 billion from the University. Fiscal year 2016 marks the first time Harvard has lost money on its investments since fiscal year 2012, when it returned a negative 0.05 percent.