Harvard loses $1.8 billion in cash from investments

While Most large corporations and institutions opt to keep cash accounts in banks or low-risk money-market mutual funds to ensure that the cash is readily available for daily expenses, Harvard instead chose to invest a large sum of cash with its endowment.

Money held by the Harvard Management Company, which manages Harvard’s endowment, is generally invested in higher-risk assets, such as stocks or hedge funds.

Harvard Chief Financial Officer Daniel Shore said in an interview with The Boston Globe that the investment of the cash was worth the risk when the stock market was on the rise. But when the markets faltered last year, the losses were disastrous: The value of Harvard’s endowment fell 30 percent over the 2008-09 fiscal year.

When that fiscal year began on July 1, 2008, Harvard had “university balances” of $3.2 billion in its general operating account, the report stated. At the fiscal year’s end, on June 30, 2009, the account held only $506.5 million. Harvard issued $1.5 billion in bonds last December to increase the amount held in liquid assets.

Provost Christopher Eisgruber ’83 said on Oct. 12 that, of Princeton’s peer institutions, only Harvard’s College of Arts and Sciences relies more heavily than Princeton on its endowment for its funding. Princeton issued $1 billion in bonds after the University began to see a double-digit decline in the value of the endowment, Bloomberg News reported in January. On Sept. 29, President Tilghman announced that the value of the endowment fell 22.7 percent in the fiscal year that ended on June 30.

In December, Harvard President Drew Faust and Vice President for Human Resources Marilyn Hausammann sent a letter to the members of the university community announcing both the endowment losses and the prospect of imminent layoffs.