We interrupt the GM hearings for this brief moment of schadenfreude:

Harvard’s endowment has now blown through over $8 Billion, or 22% in the last four months.

Correct me if I am wrong, but wasn’t Harvard’s endowment outperforming the broad indices for a long time? And didn’t their Board of Trustees fire/replace/chase awayt hese outperforming managers because they were getting paid too much?

Let’s see, if this adds up:

Savings on fund management staff: $50 million

Losses on endowment fund: $ 8 billion and counting

Finding out the supposedly smartest college in the nation is run by idiots: Priceless.


And that’s your “really really bad call of the day.”


Harvard Endowment Loses 22%
NYT, December 3, 2008


Harvard Money Managers’ Pay Criticized
NYT, June 4, 2004


Category: Hedge Funds, Markets, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

46 Responses to “Harvard: Not So Smart After All”

  1. karen says:

    Barry, I think you’re overlooking the fact that El-Erian headed the endowment in 2005 til he returned to Pimco.

    Harvard recruited El-Erian to fill the void left in September 2005 by the departure of 15-year investment chief Jack Meyer, who took almost three dozen Harvard officials to start a Boston-based hedge fund. El-Erian rebuilt the staff and guided the fund to a 23 percent gain in the fiscal year ended June 30, adding $5.7 billion to the world’s biggest university endowment.

    On September 12, 2007, it was announced that El-Erian would return to PIMCO and take up his new roles starting January 1, 2008. The above dates are from Wikipedia… but i’ve been following he guy for years.

    BR: The outperforming guys who were chased away was in response to the criticism in 2004.

    See link above.

  2. DL says:

    The price of being politically correct.

  3. catman says:

    knit one purl two Harvard!

  4. Ny Stock Guy says:

    I thought it was the Yale endowment that was doing so well. But whatever…

    Seems like a lot of so called smart people have really f****d the dog lately.

  5. heather says:

    I don’t want to look like an idiot too, but isn’t a 22% loss in the last quarter still outperforming the market?

  6. constantnormal says:

    So how’s the Boston-based hedge fund doing that Jack Meyer built with all these supposed “outperforming managers”?

    It’s one thing to compare performance of two sets of managers across similar market climates, and another thing entirely to compare performance during glorious Fed-fueled boom times to dismal Fed-fueled disasters. That kind of comparison really tells you very little about the relative merits of the fund managers.


    BR: What’s a matter, your Google doesnt work?!

    Do some home work and post the answer!

  7. constantnormal says:

    @heather — Yes — the S&P 500 is down over 31% over the past four months, so at least they’re beating the index funds.

  8. Apples and oranges

    They have lots of other non stock assets — they are not just running equities.

  9. danm says:

    Would these outperformers have lost less than 8B? Not sure.

  10. Ny Stock Guy says:

    And another thing…

    It’s a very, very sad commentary when extremely average-intelligence me is beating Harvard YTD.

    Nice goin’, collage boy!

  11. James says:

    Correct me if I am wrong, but wasn’t Harvard’s endowment outperforming the broad indices for a long time? And didn’t their Board of Trustees fire/replace/chase awayt hese outperforming managers because they were getting paid too much?


    Oh come. There are plenty of highly paid hedge fund managers who made money hand over fist in years past who are now down at least as much. In fact, there are plenty of formerly highly paid hedge fund managers who are now out of business.

    I wouldn’t place too much weight on past performance in this environment.

  12. john haskell says:

    My Google doesn’t work. No matter how many ways I think of to find “Jack Meyer” and “Convexity” all I find are junk matches about how much he raised at inception.

    Makes you wonder if there is some kind of law that prohibits hedge funds from advertising their performance or something!

  13. Ny Stock Guy says:

    And another thing…

    It’s a very, very sad commentary when extremely average-intelligence me is beating Harvard YTD.

    Nice goin’, college boy!

  14. leftback says:

    The measure of an investor is not how he/she performs in a bull market. That’s monkeys with typewriters stuff.

    It’s whether he/she can negotiate the minefields of a bear market without spending day after day curled up in the fetal position saying “Mummy, mummy, please make it stop..”

    I reckon El-Erian is a smart bloke and he looked at all the crap they were getting into before booking a new gig.

  15. leftback says:

    BTW, Barry, we all love a spot of Schadenfreude.
    Please do keep on calling out the over-rated and highly opinionated at all available opportunities.

  16. Groundhogday says:

    I have to agree with “danm” and others who question whether the guys let go would have done better. A LOT of high flyers have had their leveraged wings clipped with this downturn.

  17. SpeakToMe says:

    Heh, I’d forgotten about that. Having read the comments, I still think you’re right — that was not a smart move by the Harvard board.

    Looks like a certain Larry Summers was president when the managers were let go. Sigh.

  18. karen says:

    Under the title “On Political Correctness”


    blogs the story in a much more acceptable way…

    and John Haskell, I, too, have just about given up searching for current Jack Meyer info. Their website, Convexity Capital Management, is exclusive, you know.

  19. frankzorrills says:

    let’s bail them out… just give me a couple of street smart guys and leave those ivy leaguers in the country club sipping shirley temples

  20. jonbirge says:

    Ny Stock Guy: Please. I love to see Harvard fail as much as the next guy, but: (a) it’s one thing for an individual to do well. we have an advantage in bear markets, as we can liquidate positions easily and quickly. try getting out of billions in private equity deals overnight. harvard’s endowment is one of the biggest concentrations of private wealth in the world. it’s not easy to turn that ship around. (b) let’s just wait to see how all the other endowments did. i wouldn’t be surprised if harvard’s performance is well above average for university endowments. i’m willing to bet MIT’s went down even more, for example.

  21. Robertm73 says:

    In the end most people forget about conservation of capital in lue of returns. High returns means high risk. the sooner everyone understands this the better. Or your High returns mean high losses at some point.

  22. Francois says:

    I agree with you that turning a ship around like Harvard endowment isn’t easy. That said, it begs the question as to how come they were not better hedged.

    Sure, buying large amount of put options and other kinds of hedges hinders total performance but still, these guys and gals spend their waking hours thinking and learning about this stuff. They, at least, must have had a strong indication that something was not right in these markets.

    One more thing: these dudes are NOT compensated to “beat the indexes” but to provide absolute returns. That is why they’re earning so much.

  23. Pat G. says:

    I am beginning to believe that most heads of anything in this country, public or private, are idiots. Everyone has heard of the “Peter Principle” and it’s in full bloom in the U.S.

  24. Jim C says:

    All you had to do to outperform the major indexes back when they were outperforming was be long commodities.

    All you had to do to underperform the major indexes over the last four months was to be long commodities.

    Not so sure the management change would’ve made any difference.

  25. Steeliekid says:

    weren’t the harvard managers spun off to deflect the compensation issue from the profs? they still managed Harvard assets but were free to attract other aum as well. Sowood, one of the first HF’s to blow up this cycle is an example….

  26. inthewoods says:

    Obviously difficult to make the leap as to how Convexity is doing now, but this article from August of this year points out that Meyer had positioned, like Paulson, around the failure of subprime.


    My guess is he’s doing anywhere from good (10-12%) to excellent (25-30%) but obviously can’t confirm.

    The funny thing is that Harvard invested in Convexity, and thus ended up paying far more in fees than they did when they had the fund managers on the payroll. Some people never learn!

  27. donna says:

    Good. I blame Harvard and Yale for most of the FuckedUpedness of this country.

  28. AGG says:

    A freshman student at Harvard asked an upper classman the following question: “Can you tell me where the library is at?”. The upper classman looked disdainfully at the newbee and replied: “At HARVARD we never end our questions with a preposition.”
    The freshman was a friend of Barry so he said: ” Okay, can you tell me where the library is at, asshole?”
    Freshmen rule!

  29. ben22 says:

    @NY Stock Guy

    I feel the same way, it reminds me of the hedge fund manager letter who made fun of the ivy league crew.


    efficient asset management on that level shouldn’t involve them needing to unwind billions in positions overnight. I would hope that those who would be so lucky and you would think… talented enough, to run that kind of money would have just a little more foresight. JimC is correct it’s all about tactical allocation of the assets and as we navigate through this mess and forward that will be no different.

    I agree with those above who say that they should be measured much more by bear market performance, to BR’s point you don’t compare them to the indexes as the holdings are not the same, with that kind of capital you have access to many investments that we’ve got no shot at.

  30. Ny Stock Guy says:

    I know I’m not being totally fair and I know you can’t turn a few billion around on a dime, but geez, difficult situations like these are why we want to hire the smart people from Harvard in the first place.

  31. Moss says:

    El-Erian was big on commodities, alternate investments (hedge funds) and international equities. In his book, When Markets Collide, his allocations to each investment class are documented. I suspect these allocations were responsible for both the good returns and the bad recent returns. I doubt they changed much when he left.

  32. patfla says:

    > Harvard’s endowment is one of the biggest concentrations of private wealth

    Um no. Harvard, presently at $28 bil (the 36 was almost certainly before – so it’s 36 – 8) is relatively small. Large for universities but small for ‘private concentrations of wealth’.

    When the Japan Postal system goes fully public (or fully postal I suppose) it will be the largest at over $1 tril. For the time being, ADIA – the Abu Dhabi Investment Authority – is generally considered the largest. ADIA is ultra-secretive but it’s generally assumed they’re between $600-900 bil.

    Europe’s two largest are ABP (a Dutch entity) and the Norwegian Petroleum Fund. Each around $300 bil Euros I think.

    And the largest in the US is CalPERs (the California Public Employee Retirement System). Maybe $280-300 bil?

    The Harvard number (28) is post 9/15 (Lehman demise and the market has fallen another 35%). The numbers for all the other entities are pre 9/15 ( /2008).

  33. patfla says:

    How did my

    36 minus 8

    turn into a smiley face.

    I’d really like a re-edit your post feature. And/or Preview.

  34. patfla says:

    Ah. A smiley is

    eight followed immediately by a left (closing) parenthesis.

    Makes sense. Sort of.

  35. A. Bailor of Calif says:

    My associate degree in economics from Long Beach City College got me out of the market at the 200 dma. Guess im a genious.

  36. jonbirge says:

    “My associate degree in economics from Long Beach City College got me out of the market at the 200 dma. Guess im a genious.”

    I guess so. Keep doing that.

  37. jonbirge says:

    patfla: i guess i stand corrected. i suppose there really is no difference between harvard and any other fund, just because it’s ultimately owned by one entity. (i will note that most of your examples are pools of assets owned by many people.) anyway, my point stands: it’s harder to invest $30B than $30k.

    ben22: i don’t know why i’m defending these guys, because i generally think that most people in positions of authority are there by luck and not ability, but i still think it’s way too early to say harvard blew it. first, we’ll have to see what their total loss is from all of this. look at the big picture. if they lose 30% or so one year while they unwind, they can afford to because of all the other years they were up 20+%. second, just because you lose money doesn’t mean you screwed up. if you play poker you understand this. you can do everything right and sometimes the cards don’t fall. the possibility for a bad outcome is neccesary in order to expose yourself to a good one. looking at harvard’s endowment over the past decades, i’m still not convinced they made bad choices.

    for all we know, they may have gone into some of their deals saying “this will be tough to get out of in a financial crisis, but we think it’s worth the risk given our expectations for profits before such an event happens.” gloating because they lost 20% is like making fun of tiger woods for losing a tournament.

    anyway, not sure why i’m defending them. harvard can go to hell, for all i care. they certainly have produced some of the worlds leading douchebags and overrated crooks in high places. i truly believe that if harvard were to disappear, the united states would be better for it. harvard’s entire business is producing pieces of paper that exempt the lucky holder from ever having to actually deliver something of real value.

  38. texasradio says:

    Let’s laugh at Harvard some more:


    Note that HES is abbreviation for ‘Harvard Economic Society’.

  39. flenerman says:

    constantnormal certainly doesn’t need me to defend him, Mr. R., but I would suggest that if YOU had done YOUR homework, you should have included the supporting evidence in your post. Post hoc ergo propter hoc? You’re capable of so much better than that.

  40. Lighten up Mary, its a goof.

  41. jonpublic says:

    Ouch, $8 billion is greater than the entire University of Michigan endowment, which is the 3rd largest for a public institution. I think U of M is only off 12% for the year.

  42. dss says:

    texasradio: We need the same type of chart for this market. We can list the idiotic quotes of Kudlow, Cramer, Greenspan, Paulson, etc. for posterity. The only problem I see is that we have not seen the bottom yet, so there will be many more quotes to be added before this chapter in American economic history closes.

  43. dangermole says:


    Not enough econobloggers use the word schadenfreude. It’s deeply pleasing. Can you (unobtrusively of course) work *weltanschauung* into a post somewhere?

  44. Funny follow up to the Harvard endowment story…

    —- Original Message From: RICHARD CZYZYNSKI (MORGAN STANLEY & CO.) At: 12/05 9:16:00
    DENOMS: $100,000 X $1,000

    This notice shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the notes/debentures in any state or jurisdiction in which such offer, solicitation or sale would be unlawful. The notes/debentures will be offered to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended. The notes/debentures have not been registered under the Securities Act or any state securities laws, and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements.

  45. sparrowsfall says:

    As one who has invested wisely using the central tenets of modern portfolio theory–diversity, blah blah blah–I’ll just say that I would be delighted if my portfolio had only fallen by 22%.

    Were these manager friends of yours?

  46. patfla says:

    > Can you (unobtrusively of course) work *weltanschauung* into a post somewhere?

    I think ‘Weltschmerz’ is more appropriate for the times.