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Harvard Donations Slide 15% as School Warns of Rising Costs

A gate to Harvard Yard. (Scott Eisen/Photographer: Scott Eisen/Getty )

(Bloomberg) -- Harvard University’s donations tumbled the most in nine years amid a surge in alumni anger over the school’s handling of antisemitism on campus, and its top financial official sounded a warning on rising costs.

Cash gifts fell 15% to less than $1.2 billion during the fiscal year ended June 30, Harvard said in a financial report Thursday. Some of the largest donors, including billionaires Len Blavatnik and Ken Griffin, have paused donations to their alma mater over the past year, as did other less-wealthy graduates.  

Harvard’s endowment picked up some of the slack as the oldest and richest US college navigated the financial impact of the most tumultuous year in decades on American campuses. The fund, now valued at $53.2 billion, posted a 9.6% investment return, the best in three years, and provided a “welcome boost,” said Chief Financial Officer Ritu Kalra. But she warned future expenses will need to be reined in as cost increases again outpaced revenue growth. 

“The pace of our recent spending underscores the need for prudence going forward,” Kalra said in a discussion of Harvard’s finances posted on the university’s website. “While it has been purposeful in the short term, it won’t be sustainable without a commensurate growth in revenue over the long term.”

Some outlays are tied to investments in technology capabilities, artificial intelligence and campus facilities that are intended to foster future growth, she said. Still, spending growth was driven primarily by higher compensation costs. Operating expenses grew 9% compared with a 6% increase in operating revenue, the second straight year in which costs expanded more quickly.

The university ended the fiscal year with a surplus of $45.3 million and the institution is spending more on financial aid, especially for undergraduates at Harvard College.

Campus Turmoil

Like other US colleges, the Cambridge, Massachusetts-based school has been in turmoil since Hamas’ attack against Israel on Oct. 7, 2023, and the Jewish state’s subsequent invasion of Gaza. 

Harvard’s former president, Claudine Gay, was slow to condemn comments by student groups that blamed the Hamas assault solely on Israel. Gay resigned in January following a much-criticized appearance before a congressional panel and allegations of plagiarism in her academic work. 

Since she left, Harvard’s handling of antisemitism on campus has remained under scrutiny by lawmakers and the university community. Harvard’s current president, Alan Garber, has been meeting with donors and alumni in an effort to repair the damage. 

He told the student newspaper this month that he was disappointed by the fundraising results over the past year, but held out hope for “improvements in the future.” Indeed, in a statement Thursday, he emphasized “growing levels of support over the course of the year” from alumni and other supporters. 

This year’s gift haul was the lowest since fiscal 2015, when Harvard raised a little more than $1 billion. 

Endowment Returns

The endowment’s performance during the most recent fiscal year ranked third among the six Ivy League peers that have reported results so far. Yale University and Princeton University are expected to disclose their returns soon. 

More broadly, US college endowments earned a median 10.6% before fees, according to Wilshire Trust Universe Comparison Service, which doesn’t name individual schools. Funds with less than $500 million outperformed their larger peers, in part because of a greater allocation to plain-vanilla US stocks. The S&P 500 index jumped 23% during the 12 months ending June 30. 

University funds typically play down the comparison with benchmark US stock indexes, saying their endowments are designed to support colleges over the long term with broad asset mixes. Moreover, putting an entire endowment in stocks would incur a lot of risk. 

Since N.P. “Narv” Narvekar took the reins at Harvard Management Co., which runs the endowment, in December 2016, he has cut exposure to real estate and natural resources while raising bets on private equity. 

“Given the scale of the endowment, this took some time, and we are now well positioned,” Tim Barakett, treasurer and chair of the HMC board, said in the statement. “HMC’s performance was suboptimal before Narv’s appointment, and he inherited a portfolio that was overweighted in natural resources and real estate and underweighted in private equity and hedge funds.”

Harvard’s 10-year annualized return was 7.6%, ranking fifth among the six Ivy League schools to report this year’s results. But Harvard’s return over the last three years ranked second in the group. 

In the latest year, the endowment’s largest allocation was to private equity at 39%, followed by hedge funds at 32% and public equities at 14%.

The endowment distributed $2.4 billion toward the university’s operating budget, funding financial aid, professor salaries, research and more. The school has become more reliant on the fund over time. It now provides 37% of the budget, compared with 31% a decade ago and 21% two decades ago. 

--With assistance from Jack Witzig.

(Updates with scope of decline in first paragraph, endowment details in last two paragraphs.)

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