Key Takeaways
- • Harvard Management Co. reported a 2.9% return for the fiscal year ended June 30, 2023, leaving the endowment at $50.7 billion, down from $50.9 billion a year earlier.
- • The return beat Yale (1.8%), the University of Pennsylvania (1.3%), and Stanford (4.4%) trails Columbia (4.7%), while MIT reported a 2.9% loss, according to Reuters.
- • The endowment distributed $2.2 billion to Harvard's operating budget, exceeding the $2.1 billion distributed the prior year, and the university posted a $186 million operating surplus, down from $406 million.
- • With only an 11% public equity allocation, CEO N.P. "Narv" Narvekar said the FY23 return did not reflect a significant impact from the S&P 500's 16% gain, which was concentrated in public markets.
Summary
Harvard University's endowment, the world's largest university endowment, posted a small investment gain in fiscal 2023, but its value declined as payouts to university operations exceeded investment returns, according to Reuters. Harvard Management Co. said on Thursday, October 19, that the fund earned a 2.9% return for the fiscal year ended June 30, leaving the total endowment at $50.7 billion. A year earlier the endowment lost 1.8% amid tumbling markets and ended at $50.9 billion.
The result compared favorably with several peers. Yale University returned 1.8% and the University of Pennsylvania returned 1.3%. Columbia University gained 4.7% and Stanford earned 4.4%, while the Massachusetts Institute of Technology reported a 2.9% loss. Reuters noted that returns from these schools are closely watched because they pioneered allocations to hedge funds and private equity.
Harvard's portfolio structure largely explains its muted public-market exposure. The school holds an 39% allocation to private equity and a 31% allocation to hedge funds, with only 11% in stocks. In a letter, Chief Executive Officer N.P. "Narv" Narvekar wrote that "the endowment's FY23 return does not reflect a significant impact from public equity movements." Private markets lagged public equities on the upside, as the S&P 500 climbed 16% in the twelve months to June 30. Narvekar said the portfolio is designed to "brace against significant swings in either direction," noting that the FY22 return of -1.8% was not meaningfully affected by a double-digit public equity decline. He also described Harvard's risk level as "somewhat lower than many peer endowments."
On the operating side, the endowment distributed $2.2 billion to Harvard's budget to support financial aid, faculty, and research initiatives, up from $2.1 billion a year earlier. The university ended the year with an operating surplus of $186 million, compared with $406 million the prior year. Reuters attributed the higher spending to students returning in force to campus after the pandemic and to rising wages and other expenses.
The result compared favorably with several peers. Yale University returned 1.8% and the University of Pennsylvania returned 1.3%. Columbia University gained 4.7% and Stanford earned 4.4%, while the Massachusetts Institute of Technology reported a 2.9% loss. Reuters noted that returns from these schools are closely watched because they pioneered allocations to hedge funds and private equity.
Harvard's portfolio structure largely explains its muted public-market exposure. The school holds an 39% allocation to private equity and a 31% allocation to hedge funds, with only 11% in stocks. In a letter, Chief Executive Officer N.P. "Narv" Narvekar wrote that "the endowment's FY23 return does not reflect a significant impact from public equity movements." Private markets lagged public equities on the upside, as the S&P 500 climbed 16% in the twelve months to June 30. Narvekar said the portfolio is designed to "brace against significant swings in either direction," noting that the FY22 return of -1.8% was not meaningfully affected by a double-digit public equity decline. He also described Harvard's risk level as "somewhat lower than many peer endowments."
On the operating side, the endowment distributed $2.2 billion to Harvard's budget to support financial aid, faculty, and research initiatives, up from $2.1 billion a year earlier. The university ended the year with an operating surplus of $186 million, compared with $406 million the prior year. Reuters attributed the higher spending to students returning in force to campus after the pandemic and to rising wages and other expenses.
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