Tags: harvard | yale | losses

Lose Billions the Ivy League Way

Thursday, 17 Sep 2009 12:05 PM

By Dan Weil

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Economics students at Harvard and Yale may learn more lessons from the mistakes of their alma maters’ respective money managers than from the professors.

Harvard’s endowment plummeted 30 percent in the year ended June 30, leaving the university $10 billion poorer, while Yale’s endowment also plunged by 30 percent, costing it nearly $7 billion.

The universities took big risks on alternative investments such as private equity and hedge funds. Those bets lost big time amid the global financial crisis.

Other universities, which stuck to more conservative strategies emphasizing stocks and bonds, fared batter.

The University of Pennsylvania, another Ivy League school, lost 15.7 percent, for example.

Foundations and endowments with assets exceeding $1 billion averaged a decline of 17 percent for the year ended June 30, according to the Wilshire Trust Universe Comparison Service, cited in The New York Times.

The outcome isn’t too difficult to figure out: cutbacks.

“We want to alert you to the fact that another round of reductions will be necessary,” Yale’s president Richard Levin wrote in a budget update to the Yale community, praising the cost-cutting that already took place, The Times reports.

Harvard lost almost 40 percent on its investment in “real assets:” timber, commodities and real estate, The Wall Street Journal reports.

Harvard’s endowment manager Jane Mendillo wrote in a report that Harvard would have fared better if it had “pursued a more conservative investment strategy,” according to The Journal.

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