The most prestigious and exclusive American university just reported a $1.9 billion loss in its endowment.
The 2% decline in the Harvard endowment for the fiscal year ended June 30 was its worst performance since 2009, when it lost $11 billion following the financial crisis.
In its annual report, the endowment’s temporary President and CEO Robert Ettl attributed the loss to “the low interest rate environment and market volatility of the past fiscal year” as well as to poor execution.
Ettl, a former executive vice president and chief information chief information officer at Pimco, had been the chief operating officer at the Harvard Management Company, which runs the endowment, before assuming its top leadership position in May, when CEO Stephen Blyth took a leave for medical reasons before eventually resigning in July.
The underperformance of the endowment, which is still the largest university endowment in the U.S. with $35.7 billion in assets, was due primarily to two underperforming sectors: public equity, accounting for 29% of assets, and natural resources, comprising 10% of assets. Both sectors lost about 10% in the latest fiscal year.
In contrast, the S&P 500 was up slightly during the same time period and the endowment’s equity benchmark, which includes foreign equity and emerging markets, stocks was off 6.1%.
“A number of our domestic equity external managers underperformed for the first time in many years amid a difficult period for active management overall, particularly for value-oriented strategies,” Ettl wrote.
The endowment’s losses in natural resources reflected the decline in commodity prices and the limited liquidity in timber and agricultural land markets, according the annual report.