When people describe Harvard, they often times point to its academic and research pedigree and almost 500 years of its storied history. But few would want to praise its financial acumen or point to its impressive record as one of the most prominent hedge funds in the usa.
Most would be surprised to listen to the school described this way. Yet because of the university’s enormous endowment fund, in a lot of ways, a hedge fund is exactly what Harvard C and many other Ivy Leagues and colleges that boast a considerable endowment C is. And managing the fund’s returns is where Harvard’s major business interest lies.
The top dollar tag for carrying on classes in the Cambridge, Massachusetts school is $37,000 per year — over double what it cost to go to the school a little more than two decades ago. Of course, this number doesn’t take into account the substantial quantity of financial aid that the university typically extends to its students, but when every student who attended classes around the school’s Gothic campus paid their tuition entirely, the total amount coming in to the school’s coffers could be somewhere between $200 and $250 million dollars each year.
A number to create many a smaller school envious, no doubt — but it pales compared to what the university considers its chief way of revenue generation, which is the management of its endowment fund. That means during the financial collapse that plagued the system in 2008, like all similar institutions, Harvard fell victim to economic realities coupled with to take extreme measures to prevent insolvency.
Unlike universities, the company plan of large and aggressive hedge funds is notoriously volatile, and during the 2008 Economic crisis, Harvard lost $11 billion on its net holdings, teetering near bankruptcy since it\’s highly illiquid assets couldn\’t easily be redeployed to pay for hundreds of millions of dollars in ongoing capital commitments to various private equity funds. The desperate hedge fund-ahem, academic institution-was forced to borrow $2.5 billion in the credit markets, laid off hundreds of university employees, and completely halt construction focus on a huge expansion project, ultimately surviving and then recovering in exactly the same as did Goldman Sachs or Citibank.
However, this concentrate on raising money might be counterproductive for an institution that wishes to remain atop the academic pile. There has been numerous assertions in the past ten years that Harvard primarily looks to attract students from wealthier families specifically because it anticipates substantial donations from them afterwords. Admissions spots themselves seem to be for sale C something which was mainly thought to be gossip previously but was recently given more credence by the Daniel Golden\’s book?The Price of Admission.
According to The American Conservative, continuing such policies might see Harvard lose its good name in the coming years.
But if such claims are true, then Harvard is following an absurd policy, selling off its good name and track record of just pennies on the dollar, most famously because the sums involved represent merely a day or two of their regular endowment income. Harvard surely ranks because the grandest academic name in the world, carrying fat loss of prestige that may be leveraged to extract much better revenue at cheaper cost of academic dignity.