August 6, 2007
Harvard Hedge Takes a Beating
No, not that kind of hedge. Harvard lost $350 million by investing in a hedge fund. Maybe they thought the hedge fund would rake in the cash because it was run by a man who used to manage Harvard's foreign stock holdings. They were wrong.
When Jeffrey Larson left the confines of Harvard to run his own firm, Harvard gave him a parting gift of $500 million. Larson lost the $350 from that and sold off the rest to Citadel Management Group. That's just play money for Harvard. Their endowment is still $29.2 billion.
As always, Ivy Gate Blog has something to say about Harvard's judgment: "Seems that Harvard education -- in this case, experience -- isn't quite paying off. How's that old saying go? You shouldn't shit where you sleep?"
This isn't the first time a university has gambled its money on market. The University of California at Berkeley was named the lead plaintiff in the Enron mess. At least Harvard is loaded and won't hurt too much from this, but it proves that the Harvard management is as vulnerable as the rest of us schleps when it comes to getting burned in the wallet.
Image of the Harvard shield from Wikipedia.
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Harvard deserved to lose that, and I hope they lose a whole lot more. Harvard profited big time in the Enron scandal by using its insider knowledge of Enron to short the stock (see the story in the Chronicle of Higher Education): http://chronicle.com/weekly/v48/i35/35a03301.htm.
At least UC only lost $145 million in the Enron deal. I look forward to hearing more about Harvard's losses.
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Here's another link to that article:
http://www.dunwalke.com/resources/documents/ArticleScans/Sized/HarvWat-Investing_On_The_Edge.pdf
Sure, it's the smallest of Harvard's crimes. But a quick internet search will lead you to more sources:
"...I watched a pattern of inside dealing between Harvard Endowment, Harvard's Kennedy School and Harvard affiliated appointees at the Department of Housing and Urban Development, the Office of Management and Budget, the Department of Justice, the White House and Congress. The Harvard players continuously pushed for and profited from policies that were not in the interest of the American people and the communities that HUD federal investment and mortgage insurance were supposed to serve."
-Catherine Austin Fitts, Assistant Secretary of HUD under the first Bush administration