A year after a disastrous 27 percent decline that prompted layoffs, salary freezes and a halt to some campus expansion, the Harvard endowment on Thursday reported a solid 11 percent increase in its $27.4 billion endowment portfolio for its fiscal year ended June 30. In her first year as head of the Harvard Management Company, which oversees the endowment, Jane Mendillo struggled as the portfolio she had inherited faced heavy cash demands in the area of alternative investments when the stock and commodities markets tanked, The New York Times’s Geraldine Fabrikant reports. Since then, Ms. Mendillo has put her stamp on the endowment, increasing its readily available cash and generating a respectable, if not spectacular return, several endowment experts said of the latest performance. The return lags that of stock market averages for the period, though it is better than the internal benchmark used by the endowment.
A word of advice to any asshats currently hard at work figuring out how to cause the next financial crisis: AK Barnett-Hart is watching you. In fact, you’re the reason the second year investment bank analyst, who wrote her senior thesis about the market for subprime mortgage-backed CDOs (which Michael Lewis called “more interesting than any piece of Wall Street research on the subject”), got into this line of work. To police you fuckers, and clean this place up. From Deal Journal: Read more »
Obviously, bold displays of ostentatious wealth, power, elitism, or exclusivity seem misplaced in the present environment. So much so that one wonders if, some years hence, we might not look back on this period as the “anti-too-big-to-fail” period. Or the “anti-big” period. Or the “anti-too” period. Or just a reactionary spasm of frothing (and highly communicable) anti-crowd rabidity.
Attacks on Goldman Sachs are routine (and quite a bit more potent than in prior years). Warren Buffett is a cheater (haven’t you heard?) Institutions from the Federal Reserve to the Treasury to the SEC have been literally run through with vicious, biting (and potentially well-deserved) criticism from all corners. Just watching these goings on, you would think that, after rising above a certain strata, any inclination towards self-preservation would repress a lust for fame. Or any notice at all. Or… maybe not:
Harvard University, the world’s richest school, licensed its name to a maker of designer clothes to take advantage of a taste for seersucker, khakis, loafers and other “preppy” attire.
The clothing line, labeled Harvard Yard, will be made by New York-based Wearwolf Group Ltd., which licensed the Cambridge, Massachusetts, school’s name through its Verus Group subsidiary, Verus said today in an e-mailed statement. The financial terms weren’t disclosed.
Well, at least they got this last part right. Regardless, we aren’t so sure the timing was well played here…
“Harvard is the ideal — the pinnacle,” Wolf said. “When you think of modern prep, you think of New England and the Northeast. You think campus, quads, and you think Harvard.”
…and Wolf obviously needs to get out more.
Harvard Licenses Clothing Line Amid ‘Preppy’ Upswing [Bloomberg]
Earlier: My Harvard Tie
Poor, poverty-stricken Harvard. Gazing at 30% losses for their latest fiscal year and the tatters of a management team for the endowment, it is unsurprising that they would start trying to fill the ranks. You have to like their chances. It would be pretty hard to look all that bad given the endowment’s recent performance, though we have confidence that the new recruits will give it their full effort.
Harvard Management Co., manager of the nation’s largest college endowment, said it hired a new equity portfolio manager from New York-based hedge-fund firm Caxton Associates.
Emil Dabora, who specialized in event-driven investments at Caxton, is the second recent hire by Harvard Management.
Just wanted to pop in and tell you not to fear that tomorrow’s business leaders will get us into another sticky situation, ’cause Harvard MBA students, like the ones above, are now taking an oath promising not to do anything wrong, like some alums from their school.
The MBA Oath
As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can build alone. Therefore I will seek a course that enhances the value my enterprise can create for society over the long term. I recognize my decisions can have far-reaching consequences that affect the well-being of individuals inside and outside my enterprise, today and in the future. As I reconcile the interests of different constituencies, I will face difficult choices.
Therefore, I promise:
There’s a lengthy article in Boston Magazine about how Harvard has been hemmoraging money (the endowment has lost $11 billion, bringing it down to 2005′s mere $25 bill, due in no small part to Harvard Management Company, which one alum privy to the details of the school’s balance sheet told the author, “took the university right to the edge of the abyss…Meaning, you’re out of cash. That…is the definition of insolvency.”) Very few insiders would speak on or off the record, as Harvard is attempting to downplay the perception that its people are soiling themselves in fear, but one brave
fool soul did offer this absolutely harrowing take:
While the failed presidency of Lawrence Summers generated more headlines, this quiet crisis is actually a greater threat to Harvard. The university has been so rich for so long that most of its denizens can’t remember a time when money was a concern. While Harvard officials are doing their public-face best to downplay the problem, the numbers don’t lie, and this economic crunch will leave the school a profoundly changed place. Harvard will have to become smaller and academically more modest, and as it does it will chafe at having grand plans without the resources to fund them. For the first time in decades, it will worry about merely paying its bills. The university will have to decide: If it is no longer so rich that it doesn’t have to make choices, what does it really value? What are its priorities? It won’t be a comfortable debate.
“We are in trouble,” says one Crimson professor. In the aftermath of deep and damaging cuts, “there is a real chance that Harvard will no longer be considered the best there is.”
This is also good:
Further squeezing Harvard was a transaction Summers had pushed it into in 2004, when he successfully argued that the university should engage in a multibillion-dollar interest rate swap with Goldman Sachs and other large banks. Under the terms of the deal, Harvard would pay Goldman a long-term fixed rate while Goldman paid Harvard the Federal Reserve rate. The main goal was to lock in a low rate for future debt, and if the Fed had raised rates, Harvard would have made hundreds of millions. But when the Fed slashed rates to historic lows to try to goose stalled credit markets, the deal turned equally sour for Harvard: By last November, the value of the swaps had fallen to negative $570 million.
Drew Gilpin Faust and the Incredible Shrinking Harvard [Boston Magazine via The Atlantic]
Of course, it is pretty easy after the fact to point fingers and cast aspersions. But when what would appear to be a pattern of laxity, misfeasance and perhaps even malfeasance begins to emerge out of the mist, well, things become harder to dismiss.
It seems part of the culture of the crisis that the mighty would be made to bow low. Harvard is not only no exception, it is a major recurring theme, on both sides of the blame game. The light shown on the Harvard Management Company by The Harvard Crimson is, therefore, rather a critical bit of theater.
The Crimson winds a twisted path around taxation, endowment management, off-shore entities, off-setting management fees and one Lawrence H. Summers. Take out the names and the narrative sounds quite familiar, actually:
“The general disregard for the rules, procedures and compliance–it was ridiculous,” Rose said in an interview with The Crimson. “You had to be quiet and do it and put blinders on. If you were doing work in other aspects of the company, you could just do your job. But in [my] part of the job, you couldn’t ignore things.”
Harvard Management Company–which oversees Harvard’s multi-billion dollar endowment–was plagued by a culture of ethical laxity, Rose said. Special relationships with funds run by former employees and the use of offshore investment companies–both used to boost HMC’s once-legendary returns–may not be illegal, but are considered to be ethically questionable by some, particularly in light of Harvard’s non-profit status.
HMC Tax Concerns Aided Federal Inquiries [The Harvard Crimson]
Heard in the Suite
Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for non-existent, prestigious and accredited investors only, employing an actively managed, long-short strategy.
Apparently it has become fashionable to bash higher education. And it seems to be even more fashionable to bash higher higher education and the graduate programs that compose it. It doesn’t take an in-depth understanding of non-linear systems in mathematics to draw a straight line right to the premise that bashing the highest institutions of higher higher education [(higher)3 if you will] has become the most fashionable. This little bit of social algebra is borne out by the number of no-nothing articles, petty blogs and opinionated op-ed pieces that have, of late, attacked no lesser a monument than the noble and proud edifice of the Harvard Business School.
A recent Bloomberg piece (written by a Columbia graduate, obviously) went so far as to suggest that a November task-force was formed at HBS as a reaction to scrutinize the ability of HBS to teach risk management and develop a case to facilitate that goal. Of course, this betrays a very poor understanding of the role of cases at HBS. Harvard cases are written to market to other institutions. Attempting to teach actual Harvard cases to Harvard students would result in a massive and near violent revolt of apathy and boredom. The width and breadth of world experience already under the skirt of the matriculating Harvard student makes any attempt to teach the trite and condescending prose that typifies the average Harvard case the height of effrontery. To the extent cases are discussed at all in HBS classes it is to critique them for their eventual redistribution to the Crimson-challenged. Clearly, the task-force discussed in the article is to distribute better risk management teaching expertise to the world and prevent the sort of melt-down that non-Harvard types seem to enjoy causing every 20 years or so. Despite all our efforts to place alumni at the top, and in key positions around the country, incompetent minions, listless staff and executives who cannot learn to take orders manage to scuttle our progress time after time.
We have no idea what the cause might be. Friday? Boredom? Unemployment? Whatever the case, the tips are pouring in to the Bess Levin hot tips hotline(tm). Ironic that this should happen on the afternoon when Bess is on assignment. The latest:
Harvard Management Co will be laying off 25% of its staff.