How Harvard Lost $11 Billion

Forbes has an interesting breakdown of how the financial wizards running Harvard University's endowment lost an estimated $11 billion (or about 30%) of their money since last November. To put that into perspective, that's roughly the annual GDP (PPP) of Trinidad and Tobago, site of the upcoming Summit of the Americas.

Sure, everybody has seen their investments plummet, but it turns out that outlandishly compensated Harvard money managers didn't have the usual stock portfolio (as we reported on this blog way back in December). It was heavy on commodities, hedge funds, forests, credit default swaps, and private equity partnerships. Every penny and then some was leveraged, so when the markets started melting down, it got ugly real fast.

Since so much of the endowment is tied up in private equity partnerships and other deals that can't be accurately priced until they sell, it's quite likely that the fund has fallen more than most insiders are willing to acknowledge.

Besides the obvious question of why managers of a nonprofit educational institution were making hundreds of millions of dollars, perhaps it's time to ask if this is a rational way to actually fund higher education.

From Forbes:

Rest of article here.