Harvard Endowment

September 16, 2022
By AdmissionSight

Harvard Endowment

What is the current Harvard endowment? Established in 1636,  Harvard University is not only the oldest university in the United States but also one of the most prestigious educational institutions in the entire globe.

More than 45 Nobel laureates, over 30 presidents of state, and 48 Pulitzer prizewinners have connections to the private Ivy League institution. It has more than 323,000 surviving alumni, with more than 271,000 of them located in the United States and approximately 52,000 alumni located in 201 other countries. The most recent honorary degree, which was bestowed upon John F. Kennedy in 1956, is one of the thirteen that have been received from this educational establishment.

Notable alumni who have been honored with a Nobel Prize include former Vice President of the United States Al Gore, who was awarded the Nobel Peace Prize in 2007, and Poet Seamus Heaney, who taught at Harvard from 1981 until 1997. Among the faculty members who have been honored with a Nobel Prize in recent years are chemist Martin Karplus and economist Alvin Roth. Other notable alumni who have been honored with a Nobel Prize include Gore and Heaney.

In addition to the Radcliffe Institute for Advanced Study, two theaters, and five museums, the 5,000-acre campus of Harvard University, which can be found in Cambridge, Massachusetts, is home to a total of twelve schools that provide degrees. In addition, it is the location of the largest academic library in the world, with a collection that includes 20.4 million volumes, 180,000 serial titles, an estimated 400 million manuscript items, 10 million photographs, 124 million archived web pages, and 5.4 terabytes of born-digital archives and manuscripts.

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On campus, there are over 400 different student organizations, and Harvard University’s medical school has affiliations with ten different local hospitals.

The university receives one of the largest financial endowments of any higher education institution in the world; it created $1.5 billion in the fiscal year that ended in June 2013 – more than a third of Harvard’s total operating revenue in that year. In addition, the university has one of the most prestigious alumni networks in the world.

The Harvard endowment provides a portion of the funding for Harvard University. The Harvard endowment is comprised of the thousands of philanthropic gifts that have been given to Harvard since the university’s earliest days. Many of these gifts were given to support particular facets of Harvard’s academic and research endeavors.

Together, these donations constitute a stable source of financing that will, in the present as well as the foreseeable future, provide opportunities at Harvard to students and researchers who come from a wide variety of different backgrounds.

How much is Harvard University Endowment?

How much is Harvard University endowment? The endowment of Harvard University, which is the greatest financial asset held by the institution, serves as an ongoing source of financial assistance for the University and the pursuit of its educational and scholarly goals. There are almost 14,000 individual funds that make up the endowment. The professorships and financial aid for undergraduate students, graduate fellowships, and student life and activities are the two major categories of funds that support the institution’s faculty and students.

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The Harvard Management Company achieved a return of 33.6 percent on its investments during the fiscal year that will end in June 2021. As a result, the value of the University’s endowment skyrocketed to $53.2 billion, the highest amount in its history. This is also an increase of $11.3 billion from the endowment’s value during the previous fiscal year. The returns were disclosed in a letter written by HMC CEO N.P. “Narv” Narvekar and included in the Annual Financial Report published by the University.

In his announcement, Narvekar stated that the “tremendous gains” of the Harvard endowment were mostly the result of the performance of the public and private equity markets. The return on the endowment’s public equity assets was fifty percent, while the return on its private equity assets was seventy-seven percent.

“Public and private markets both continued their strong performance,” Narvekar wrote in his email, “which allowed the endowment to not only increase its distribution to the University but also continue to grow during this critical time when pandemic-related financial pressures challenge all of higher education.”

According to the study, the endowment contributed slightly more than two billion dollars toward the University’s operating budget. This figure represented around 39 percent of Harvard’s yearly revenue sources. The University was able to finish the fiscal year 2021 with an operational surplus of $283 million. This figure includes income from the endowment

The endowment generated a return of 7.3% on its investments at the end of the fiscal year 2020, and it had a value of $41.9 billion at that point.

Late in September, financial analysts projected that the Harvard endowment might generate returns of at least 20 percent, citing the robust performance of the market as well as record-setting endowment returns at schools and universities across the country as their primary justification.

Experts speculated that the coronavirus pandemic could put Harvard’s endowment in “grave” condition during the early days of the epidemic. They discovered that their worries were unfounded.

On the other hand, Harvard’s returns have persistently fallen below those of its counterparts in the Ivy League, and this pattern appeared to continue during the most recent fiscal year. Dartmouth College reported endowment returns of 47 percent, while the University of Pennsylvania posted endowment returns of 41 percent. These are the results of the colleges that have disclosed their endowment returns.

When comparing Harvard’s investments to those of the University’s contemporaries, Narvekar admitted that there is a “cost of opportunity” associated with adopting a lesser level of risk.

According to what Narvekar noted, “Over the past decade, HMC has taken lower risk than many of our contemporaries,” and “setting the correct risk tolerance level for the University in the years ahead is a key role for stewardship.”

In 2018, HMC established a risk tolerance group with the purpose of analyzing how the endowment may take on more risk while maintaining a balance between Harvard’s current financial condition and the requirement for stable budgetary spending. Since Narvekar has taken the helm at HMC, the company has made significant cuts to its holdings in natural resources, public equity, and real estate markets, while simultaneously boosting its exposure to hedge funds and private equity.

At the end of his speech, Narvekar issued a word of warning, stating that despite the success of the past year, the endowment at Harvard should not be expected to achieve such substantial returns on an annual basis.

According to what Narvekar noted, “There will invariably be negative years, and as a result, it is important to establish your risk tolerance.” The fact that our team, investment process/analytics, organizational structure, culture, and aligned incentives provide HMC with the framework for long-term success is what is more important.

In recent years, the University’s endowment has come under examination for a number of reasons, including its size as well as its connections to the fossil fuel business, the prison industrial complex, and Puerto Rico’s debt.

After more than a decade of activism on the part of students, faculty, and alumni, in September of 2021, University President Lawrence S. Bacow announced that Harvard would divest from the fossil fuel industry by letting its remaining investments in fossil fuels expire. This decision was made in response to the activism that had been taking place at Harvard.

What is an Endowment?

What is an Endowment? The endowment of Harvard University is a committed and permanent source of revenue that ensures the university can continue to fulfill its purpose of education and research. The returns generated by the endowment, which is comprised of more than 14,000 separate funds invested as a single entity, have made it possible to establish innovative financial aid programs, make ground-breaking discoveries in scientific research, and fill hundreds of professorships in a wide variety of academic fields.

Each year, a portion of the Harvard endowment is paid out as an annual distribution to support the budget of the University. Any appreciation that is in excess of this annual distribution, however, is held within the endowment so that it can continue to develop and assist future generations. As a consequence of this, the endowment has the potential to serve as the University’s primary source of revenue for many years to come.

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One of the most important sources of revenue for the University comes from distributions made from Harvard’s endowment. During the fiscal year that ended on June 30, 2021, the endowment made distributions totaling $2 billion, which contributed more than a third of Harvard’s entire operating revenue during that year. The vast majority of the funds that make up Harvard’s endowment are required to be spent in accordance with the terms that were stipulated by the donor and are only allotted to particular programs, departments, or purposes (dedicated scholarships, named professorships, etc.).

These restrictions can be found on the endowment’s website. The distributions made from these funds are restricted to being used exclusively for the purpose for which they were established. Unrestricted funds, which make up less than 20 percent of Harvard’s endowment, are characterized by a greater degree of adaptability and play an essential role in sustaining both the structural operational needs and the transformative, strategic efforts of the university.

There are twelve Schools at Harvard, and each of those Schools “owns” a portion of the endowment. More than eighty percent of the money that makes up the endowment is specifically designated by the donor to go to one particular school. The revenue profiles of schools are extremely diverse, and each institution derives a unique percentage of its annual budget from its endowment.

The spending pattern of the university needs to strike a balance between two competing goals: the requirement to provide funding for the operating budget in the form of a consistent and predictable distribution, and the obligation to preserve the real value of the endowment assets over time, taking inflation into account.

The annual endowment distribution is decided by the University after a number of considerations, one of which is the guidance provided by a payout formula. This formula is designed to provide a consistent stream of income to support current needs while preserving the endowment’s ability to purchase goods and services in the future. This procedure is comparable to those that are followed at a great number of different educational institutions.

In general, Harvard strives to achieve an annual endowment distribution rate that is between 5.0 and 5.5 percent of the market value of the fund. Over the course of the previous 20 years, the actual payout rate at the University has seen significant swings, ranging from a low of 4.2 percent in the fiscal year 2006 to a high of 6.1 percent in the fiscal year 2010.

This difference arises due to the fact that the monetary value of the distribution for the following fiscal year is established a significant period of time before the beginning of that year and before it is known what the market value will be at the conclusion of that year. This procedure is followed in order to provide schools and units with sufficient time for budget planning.

Because of the use of a payout formula, the yearly payout rate is normally lower following years with relatively high investment returns and higher following years with lower investment returns. This is because the formula is designed to compensate for the volatility of investment returns. Adjustments may be made in subsequent years, but it is important to keep in mind the long-term payment goals of maintaining budgetary stability while also preserving the purchasing power of the endowment. The ultimate amount of each year’s distribution is subject to the approval of the Harvard Corporation.

What Investment Firm Handles Harvard Endowment?

What investment firm handles Harvard Endowment? Since 1974, the Harvard University endowment portfolio has been managed by Harvard Management Company (HMC), a non-profit organization that is a wholly-owned subsidiary of Harvard University. HMC is solely focused on achieving successful investment outcomes in order to contribute to the University’s efforts to advance its educational and research missions.

HMC is responsible for the management of the endowment in such a way that it is sustainable so that it can provide capital to support the long-term goals of the University. It is governed by a board of directors that is appointed by the President of Harvard University and the Fellows of Harvard College.

Where is Harvard Endowment Invested?

Where is Harvard Endowment invested? The endowment continues to be the primary contributor of funds toward the operating budget of the university. Endowment distributions for operations accounted for 39 percent of the University’s revenue in the fiscal year 2021. This percentage ranged from 80 percent of the revenue earned by the Radcliffe Institute for Advanced Study to only 20 percent of the revenue earned by the Harvard T.H. Chan School of Public Health.

The funds from the endowment are used to support almost all aspects of the university’s operations. The two greatest categories of funds cover faculty salaries, including professorships, as well as undergraduate and graduate student financial aid, student life and activities, and graduate fellowships. Financial help for undergraduate students is also a significant source of funding. Endowments are another source of funding for academic programs, libraries, art museums, and other facilities at Harvard, in addition to a wide range of other activities.

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Even with the support of its endowment, Harvard must fund nearly two-thirds of its operating expenses ($5.0 billion in the fiscal year 2021) from other sources. These include gifts from alumni, parents, and friends, as well as federal and non-federal research grants, student tuition and fees, and gifts from organizations that are not the federal government.

According to a financial report that was released by the institution that is situated in Cambridge, Massachusetts, the endowment of Harvard University returned a net 33.6% for the fiscal year that concluded on June 30. This brought the worth of the fund to $53.2 billion.

The return on the endowment was 7.3% on a net basis during the last fiscal year, which concluded on June 30, 2020. Over the course of the most recent fiscal year, the endowment saw an increase of $11.3 billion.

Private equity returned a net 77% for the fiscal year that ended on June 30. This was followed by equities, which returned 50%, hedge funds, which returned 16%, real estate, which returned 13%, fixed income and TIPS, which returned 3%, other real assets, which returned 1%, and natural resources, which returned -1%.

As of the 30th of June, the endowment’s asset allocation was as follows: 34% was allocated to private equity, 33% was allocated to hedge funds, 14% was allocated to equities, 8% was allocated to cash, 5% was allocated to real estate, 4% was allocated to fixed income/TIPS, and 1% was allocated to natural resources and other real assets.

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