Harvard Earnings Above Average

The results are in, and, according to almost all sources, 1994 was a good year for Harvard's endowment.

In the fiscal year ending June 30 the endowment gained 9.8 percent, which marked a decline over the previous year's return.

The endowment did, however, significantly outperform several market indicators during the tumultuous fiscal 1994.

It beat the Standard and Poor's 500 stock index by over 8 percent and the TUCS index of large institution funds by 6.7 percent.

Many insiders familiar with the field praised Harvard Management Company (HMC) for its success during the past year.

"The 9.8 [percent] was very good because of the first sixth months of 1994," said Overseer Peter Malkin '55. "Most managers did well in '93 and poorly in '94 and would have been happy to have broken even during the first half of the year."

Others echoed the belief that making any money at all during the first half of calendar 1994 was an accomplishment.

Former HMC President Walter M. Cabot also said he thought his former company had done extremely well.

"It was a terrific performance,"

"It was a terrific performance," Cabot said. "The mean of comparable endowment funds was 3 percent, and the 9.8 percent would probably put it [Harvard's endowment] in the top 10 percent; especially for a fund that size that's terrific."

One source close to HMC said he attributed the "phenomenal performance" of the company to its "running smoothly on the public side" and the great success of a few key traders.

The source added that the returns were great "in any universe."

Baker Professor of Business Administration Jay O. Light echoed that assessment.

"I'd say the results were excellent because the people really know what they are doing," Light said. "Any positive growth compares favorable to just about everybody and is well in excess of the averages of other institutions."

In the early 1990s, HMC had come under criticism for its lack of performance. It was beaten by the S&P 500 in several consecutive years.

The general feeling, though, was that those years had been forgotten.

"It's all what have you done for me recently," said Ernest E. Monrad '51 of Northeast Investors Trust. "It looks good and that's particularly encouraging entering a capital campaign," Monrad said.

The praise of the endowment's performance, however, was not unanimous.

Albert F. Gordon '59, a long-time HMC critic and generous University donor, called the 9.8 percent "lack-luster."

"A 9 percent return is not a very good return given the expense of running HMC and the amount of risk they have in the portfolio," Gordon said. "I don't see why Harvard doesn't join something like the Common Fund and save money."

The Common Fund manages the endowments of a group of universities.

Gordon added that his biggest fear is the amount of derivatives in the HMC portfolio.

"We know they have derivatives, but they won't tell us how much," he said. "The key issue here is disclosure of what they have.

"It was a terrific performance," Cabot said. "The mean of comparable endowment funds was 3 percent, and the 9.8 percent would probably put it [Harvard's endowment] in the top 10 percent; especially for a fund that size that's terrific."

One source close to HMC said he attributed the "phenomenal performance" of the company to its "running smoothly on the public side" and the great success of a few key traders.

The source added that the returns were great "in any universe."

Baker Professor of Business Administration Jay O. Light echoed that assessment.

"I'd say the results were excellent because the people really know what they are doing," Light said. "Any positive growth compares favorable to just about everybody and is well in excess of the averages of other institutions."

In the early 1990s, HMC had come under criticism for its lack of performance. It was beaten by the S&P 500 in several consecutive years.

The general feeling, though, was that those years had been forgotten.

"It's all what have you done for me recently," said Ernest E. Monrad '51 of Northeast Investors Trust. "It looks good and that's particularly encouraging entering a capital campaign," Monrad said.

The praise of the endowment's performance, however, was not unanimous.

Albert F. Gordon '59, a long-time HMC critic and generous University donor, called the 9.8 percent "lack-luster."

"A 9 percent return is not a very good return given the expense of running HMC and the amount of risk they have in the portfolio," Gordon said. "I don't see why Harvard doesn't join something like the Common Fund and save money."

The Common Fund manages the endowments of a group of universities.

Gordon added that his biggest fear is the amount of derivatives in the HMC portfolio.

"We know they have derivatives, but they won't tell us how much," he said. "The key issue here is disclosure of what they have.