Imagine you had the choice between investing your money with the Harvard endowment fund managers or going with a lazy passive index fund approach? Which would you choose?
Harvard is one of the top universities in the world, home to the most brilliant professors and students. A Harvard degree is basically a ticket to professional success. So you would think that Harvard endowment returns would surpass the returns of the most basic passive index fund investment strategy.
The Harvard Endowment Lost Almost $2 Billion in 2016
In fiscal year 2016, ending on June 30 of this year, the Harvard university endowment fund reported a 2 percent loss. The fund’s value sunk from $37.6 billion down to $35.7 billion. The explanation for the loss was, a combination of low interest rates, market volatility and execution. In other words, economic factors and the fund managers are to blame. Volatility is an investing reality, nothing new. Interest rates have been low since 2009. The explanation for Harvard’s poor performance is weak.
Certainly, anyone can have a bad year, but Harvard? Sure, even Harvard misses the mark on occasion, but President and CEO Robert A. Ettl’s explanation is feeble.