Ivy League institutions Harvard and Yale have been battered by the financial crisis, losing a combined $18bn (£10bn) in their endowments in the last year.
America's two richest universities warned of further cutbacks after seeing their endowments shrink by 30% due to problems with their hedge fund and private equity portfolios.
Harvard's endowment dropped by $11bn to $26bn in the year to the end of June, a fall of 30%, according to the Harvard Management Company, which oversees the endowment. Excluding donations and distributions, the decline in investment performance amounted to 27.3%, the biggest in four decades. The losses have forced the 373-year-old university to lay off 275 staff and halt plans for a campus expansion across the Charles River in Cambridge, Massachusetts.
Yale's endowment fell by $7bn to $16bn over the period, a worse-than-expected drop of 30%.
"We want to alert you to the fact that another round of reductions will be necessary," Yale's president, Richard Levin, wrote in a letter to the Yale community.
This means that Yale will have an annual deficit of $150m from 2010-2011 to 2013-2014, he wrote. He said the school would cut non-salary expenses by another 5% this year, having already reduced staff and non-salary expenses by 7.5%.
Extreme volatility
Both Harvard and Yale invested heavily in hedge funds, private equity and timber in recent years. Last year many of their bets did not pay off and both universities lost far more than other colleges which focused on stocks and bonds, where endowments shrank by 18% on average, according to research and consulting firm Wilshire Associates.
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America's two richest universities warned of further cutbacks after seeing their endowments shrink by 30% due to problems with their hedge fund and private equity portfolios.
Harvard's endowment dropped by $11bn to $26bn in the year to the end of June, a fall of 30%, according to the Harvard Management Company, which oversees the endowment. Excluding donations and distributions, the decline in investment performance amounted to 27.3%, the biggest in four decades. The losses have forced the 373-year-old university to lay off 275 staff and halt plans for a campus expansion across the Charles River in Cambridge, Massachusetts.
Yale's endowment fell by $7bn to $16bn over the period, a worse-than-expected drop of 30%.
"We want to alert you to the fact that another round of reductions will be necessary," Yale's president, Richard Levin, wrote in a letter to the Yale community.
This means that Yale will have an annual deficit of $150m from 2010-2011 to 2013-2014, he wrote. He said the school would cut non-salary expenses by another 5% this year, having already reduced staff and non-salary expenses by 7.5%.
Extreme volatility
Both Harvard and Yale invested heavily in hedge funds, private equity and timber in recent years. Last year many of their bets did not pay off and both universities lost far more than other colleges which focused on stocks and bonds, where endowments shrank by 18% on average, according to research and consulting firm Wilshire Associates.
We out perform 98% of our peers.
Our clients love the slowing of volatility. That is why endowment money is coming under our management.
Successfully,
Alex L. Wasilewski
Co-Founder & Head Trader
Trades That Work
www.puretick.com
1-877-GOLONG1 (1-877-465-6641)
