Part of the problem at Harvard, which I didn’t see in this story (other than a passing reference to issues in compensation) is that Harvard began to pay their investment team like an investment bank— if you want to make big money for yourself, you must take huge risks with someone else’s money. I have read in other stories that there wasn’t any balance in their investing strategy, because the investment officers would have to work for peanuts in order to protect the University’s position....
hh
Well, you could direct pay and keep them, but Harvard wouldn’t do that. Basically, they got cheep.
Interesting point. Compensation aside--which may have lead to the evolution of a default position that had more risk than is currently thought appopriate--it was the heads of the investment team which warned Summers and Bok that it was time to throttle back risk.
The main fuss in this article isn't about the size of the loss (like I said, 27% overall wasn't bad, considering), but the size of the loss in the cash account. Unless the non-cash account was exceedingly non-liquid (in which case its remaining valuation is suspect), they had and have plenty of money. Are they back to their position of 3 or possibly 4 years ago, when Harvard was still by far the best-endowed university?