Harvard’s peers are making up ground by following a model that’s most closely associated with Yale’s longstanding investing chief David Swensen. While all the schools favor equities over bonds, and have pushed heavily into private investments over public markets, Harvard maintained an internal trading desk and did more direct investing in real estate and timberland. Yale and others sought the best outside fund managers for each asset class.
While that worked under Jack Meyer, Harvard’s investing chief—who, for 15 years, often beat or matched Yale—it didn’t under his successors. Most recently, N.P. “Narv” Narvekar was hired as Harvard Management Co.’s chief executive officer from Columbia University’s endowment. He has been shaking things up, shuttering internal hedge funds and spinning out investing teams as he seeks to halve the endowment’s 230-person staff. He has also targeted compensation, which surpassed all peers despite the middling performance.
Narvekar’s revolution hasn’t had the desired effect, at least not yet. In the year ended June 30, the endowment had an 8.1 percent gain, the worst among larger endowments, according to data compiled by Bloomberg. By contrast, Stanford gained 13.1 percent while Yale was up 11.3 percent over the same period. Fellow Ivy league member Princeton University is also closing the gap. The New Jersey school’s endowment grew almost 50 percent, to $24 billion, from 2008 through June this year.
“Our performance is disappointing and not where it needs to be,” Narvekar wrote in Harvard’s annual report this year. A university spokesman declined further comment.
In the end, Narvekar is hoping for results akin to those achieved by his previous employer. Columbia’s endowment reached a record $10 billion this year, fueled by a 7.3 percent return over a decade, the best in the Ivy League.
Brad Barber, a finance professor at the University of California at Davis who has studied endowments, said that investment strategies are critical to the overall success of a university endowment. “One of the big messages is that returns have a dramatic effect on the accumulation of wealth,” he said.
Be that as it may, the fat days for elite college war chests may be coming to an end. Endowments have recently been mentioned as a target for Congressional Republicans, who have proposed a tax on investment earnings at richer colleges.
This article was provided by Bloomberg News.