Back in August, after reading Nina Munk’s Hard Times at Harvard article in Vanity Fair, I asked if Poor Spend Management Will Be The End of the Ivy League after Harvard’s endowment lost a whopping 8 Billion in the first four months of its last finical year. This amount, which is greater than the entire endowment of Columbia University (at 7.1 Billion) put Harvard in dire straits, especially since Harvard’s President warned of an expected 30%, or 11.1 Billion, loss. (The actual loss was about 11 Billion, and the full report can be found on the Harvard Web Site. [PDF])
Then I read this article over the weekend, which noted that Harvard University lost 1.8 Billion alone from the cash account it uses for daily operations through investments in high-risk vehicles (which included stocks, hedge funds, and risky assets), I started to wonder if poor spend management is going to spell the end of Harvard, at least we know it. However, what I really want to know is how could Harvard, with the famed Harvard Business School and Harvard Business Review, be so stupid? Even the dumbest companies know that, unless you have more than three months of operating capital, you keep your daily operations cash in savings accounts, and even if you have more than three months, you only invest it in low risk investments like money-market mutual funds which have a long history of slow and gradual changes (and not high risk stocks that can plummet overnight)!
All I can say is that I’m at a loss for words! Anyone want to chime in?