Several financial experts have predicted that Harvard’s endowment will show returns of at least 20% when it releases FY2021 numbers in October, predicting that strong markets will boost the university’s recovery from the pandemic and carry its endowment at its greatest amount in its history. .
“It was actually a year of historic ROIs so I’m sure the numbers will be at least 20 percent,” New York University finance professor David L. Yermack said. 85. “Are they really up to the standards of other schools and major references in the market, that’s the real question. “
The expectations come as colleges and universities across the country report record returns on their endowments. This month, the University of Pennsylvania reported a 41.1% return on its endowment in fiscal 2021, while Duke University posted returns of 55.9%.
Overall, university endowments reported an average of 27% for fiscal 2021, with the 12-month period ending in June 2021, according to a report from Inside Higher Ed. For universities with endowments above 500 million dollars, returns averaged 34%.
Yermack, a former editor at Crimson, said a strong stock market and promising returns from other investment asset classes have led to high returns for large endowments, including institutions higher education.
“I think overall everyone made money for that time,” Yermack said.
Yermack noted, however, that some higher education institutions with large endowments, including Harvard, tend to invest disproportionately in alternative asset classes such as hedge funds and private equity, adding a layer of uncertainty in forecasting returns.
“We have no idea what they’re going to bring in,” Yermack said. “I am sure the numbers will be positive, but no one can guess if they will be as good as the usual markets”,
Charles A. Skorina, who runs a company of financial executive headhunters, corroborated Yermack’s prediction of a 20% return, saying he expected Harvard’s returns to be higher than in recent years, but not as high as its counterparts. He said HMC CEO NP “Narv” Narvekar tended to pursue a “balanced” investment strategy and did not “lean for fences”.
The Harvard endowment returned 6.5% and 7.3% in fiscal 2019 and 2020, respectively.
Thomas D. Parker ’64, senior associate at the Institute for Higher Education Policy, said there was a big difference between 2020 – when the markets had a slack year – and this year was the gradual recovery of the pandemic of Covid-19.
“We all breathe a little easier because at the end of last year in the midst of Covid, there was real concern that this could be the start of a long-term decline,” Parker said.
Parker cautioned, however, that while the reported returns have been promising, market stability is still uncertain, especially with the rise of the Delta variant.
“In this semi-recovery of the Covid downturn, we really have a rising tide that is floating all the boats,” Parker said. “On the other hand, it’s a strange rising tide because the tide is rising, and then we have a whole bunch of astrologers sitting around us saying, ‘Any tide can go back and we could be back to the shoals. bare mud here very soon because things are too foamy, they are too good.
“It’s such a difficult time trying to talk about what any performance from last year really means,” he added.
Harvard Management Company spokesman Patrick S. McKiernan declined to comment on expectations about the performance of Harvard’s staffing, writing that the HMC’s annual report will be available next month.
Despite her predictions, Skorina said in an email that the October report could still tip in unexpected directions.
“Predictions have a way of pooing on the predictor, which is why I usually don’t make predictions,” Skorina wrote.
– Editor Virginia L. Ma can be contacted at [email protected]
—Editor-in-Chief Kevin A. Simauchi can be contacted at [email protected] Follow him on Twitter @Simauchi.