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Harvard's endowment takes 22 percent hit

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Dec 3, 2008 4:29 pm

<SPAN =t>Harvard’s endowment takes 22 percent hit
<SPAN =tt>Wednesday December 3, 10:04 am ET

Harvard's endowment takes 22 percent hit, and is expected to lose more CAMBRIDGE, Mass. (AP) -- Harvard officials say the university's largest-in-the-nation endowment lost about 22 percent of its value, or $8 billion, in the four months since the end of the last fiscal year.

The endowment was worth $36.9 billion as of June 30.

Harvard will have to take a "hard look at hiring, staffing levels, and compensation," university President Drew Faust and Executive Vice President Edward Forst wrote in a letter informing deans of the losses.

They say the university should plan for a 30 percent drop in endowment value by the end of next June.

Forst tells The Harvard Crimson student newspaper that the 22 percent estimate may be conservative because some university money is handled by external managers that have yet to report figures.

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Interesting.  Looks like all of their brilliance and alternative investment approaches didn't really pan out.  It's amazing how widespread this collapse has been.  I haven't seen anything on Yale, but if anyone has numbers, would be interesting to see.
Dec 3, 2008 4:34 pm

That’s still roughly half of what the “market” has done.

  I would be satisfied with a 22% loss in a lot of my accounts.   But yes, it is very amazing how widespread this has been.  Heard something today that it costs 60 bps to buy insurance on a 5 year treasury yielding 1.6 or 1.7%...just insane.
Dec 3, 2008 4:53 pm
snaggletooth:

Heard something today that it costs 60 bps to buy insurance on a 5 year treasury yielding 1.6 or 1.7%…just insane.



I'll write that contract.
Dec 3, 2008 5:47 pm

[quote=snaggletooth]That’s still roughly half of what the “market” has done.

  I would be satisfied with a 22% loss in a lot of my accounts.   But yes, it is very amazing how widespread this has been.  Heard something today that it costs 60 bps to buy insurance on a 5 year treasury yielding 1.6 or 1.7%...just insane.[/quote]   If you think this is tough, be glad you didn't have to go through the 2000-2002 market.   (Man do I get sick of hearing former brokers say that!)
Dec 3, 2008 5:53 pm

[quote=Borker Boy][quote=snaggletooth]That’s still roughly half of what the “market” has done.

  I would be satisfied with a 22% loss in a lot of my accounts.   But yes, it is very amazing how widespread this has been.  Heard something today that it costs 60 bps to buy insurance on a 5 year treasury yielding 1.6 or 1.7%...just insane.[/quote]   If you think this is tough, be glad you didn't have to go through the 2000-2002 market.   (Man do I get sick of hearing former brokers say that!)[/quote]   I wish I would've gone through that market so that I could at least have some perspective.   The one constant that seems to come from every market blow up is that people think it's the end of the world.  So far that's never happened, and if it did, I guess we wouldn't be here to know what it was like.
Dec 3, 2008 6:12 pm

2000-2002 was brutal, but it was nowhere near as bad as this.  A well diversified portfolio actually held up pretty well in that market, as bonds, small value, reits, staples etc did well.

  if you were all in tech and telecom., shame on you.   other than cash and treasuries, how well is diversification serving you now?
Dec 3, 2008 7:36 pm

It’s serving me really well.  I’m able to spread my losses amongst many different assets classes. 

Dec 3, 2008 7:40 pm

They should’ve put it all in an index annuity. 

Dec 3, 2008 7:58 pm
Hank Moody:

They should’ve put it all in an index annuity. 

  Ok, that was hilarious.
Dec 3, 2008 8:09 pm

[quote=snaggletooth]That’s still roughly half of what the “market” has done.

  I would be satisfied with a 22% loss in a lot of my accounts.   But yes, it is very amazing how widespread this has been.  Heard something today that it costs 60 bps to buy insurance on a 5 year treasury yielding 1.6 or 1.7%...just insane.[/quote]   Read it again.  It's lost 22% from July 08 to Oct 08 (the 4 months following the end of the June fiscal year).  You can probably assume from that, that they are down just around the amount of the market (based on their mix of assets).  I wouldn't call that stellar.
Dec 3, 2008 8:32 pm

The yield on that portfolio is probably astronomical. From what I’ve heard, they only take 2 or 3 percent per year, so the managers are no doubt still investing dividends and interest.
And probably much of their portfolio is in bonds priced 60 or 70 cents to the dollar, which means nothing if they are holding those bonds and they don’t default.

Then again, considering that Ivy League eduated bankers and managers blew up the banking system, maybe they’re just as dumb as me, but more highly compensated.




Dec 3, 2008 8:34 pm

What’s 8% of $36.9mmm? 

Dec 3, 2008 9:39 pm

Eleventy Kabillion.