Harvard Management Company achieved a 33.6 percent return on its investments for the fiscal year ended June 2021, which skyrocketed the value of the university’s foundation to $ 53.2 billion, the largest sum in its history and an increase of $ 11.3 billion over the previous fiscal year.
The returns were disclosed in a notice from HMC CEO NP “Narv” Narvekar in the university’s annual financial report released on Thursday.
Narvekar wrote in his announcement that the public and private equity markets were the main drivers of the foundation’s “huge returns”. The foundation’s public and private holdings showed returns of 50 and 77 percent, respectively.
“The public and private markets continued their strong performance which enabled the Foundation not only to increase its distribution to the university, but also to continue to grow during this critical time when pandemic financial pressures are challenging all higher education,” wrote Narvekar.
The foundation distributed just over $ 2 billion to the university’s operating budget, which accounted for 39 percent of Harvard’s annual revenue stream, according to the report. The university ended fiscal 2021 with an operating profit of $ 283 million, which also included income from the foundation.
At the end of fiscal 2020, the foundation made 7.3 percent of its investments and was valued at $ 41.9 billion.
In late September, experts predicted Harvard’s foundation capital could generate returns of at least 20 percent, spearheading strong market performance and record-breaking foundation returns at colleges and universities across the country.
In the early days of the pandemic, experts speculated that the coronavirus pandemic could leave the Harvard Foundation in “grave” condition. Your concerns have not come true.
However, Harvard’s returns have consistently lagged their Ivy League competitors, a trend that appears to have continued over the past fiscal year. Of the schools that announced their return of foundations, Dartmouth College reported 47 percent returns, while the University of Pennsylvania posted 41 percent returns.
Narvekar acknowledged that Harvard’s investments were “an opportunity cost of lower risk” when compared to the university’s peer schools.
“Over the past decade, HMC has taken fewer risks than many of our peers, and setting the right level of risk tolerance for the university in the years to come is a key administrative responsibility,” wrote Narvekar.
In 2018, HMC formed a Risk Tolerance Group to assess how the Foundation could take more risks while balancing Harvard’s financial positioning and the need for budgetary stability. Under Narvekar’s leadership, HMC has dramatically reduced its assets in natural resources, real estate markets and public equity while increasing its exposure to hedge funds and private equity.
At the end of his message, Narvekar warned that despite the success of the year, Harvards Foundation was unlikely to generate such strong returns annually.
“There will inevitably be negative years, so it is important to understand risk tolerance,” wrote Narvekar. “It is more important that our team, investment process / analytics, organizational structure, culture and coordinated incentives give HMC the framework for long-term success.”
The university’s foundation has been scrutinized in recent years because of its size and connections to the fossil fuel industry, prison industrial complex, and Puerto Rican debt.
After over a decade of student, faculty, and alumni activism, the university’s president, Lawrence S. Bacow, announced in September that Harvard would separate itself from the fossil fuel industry by phasing out its remaining fossil fuel investments.
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