What Transparency?

Harvard Management Company (HMC) has long been a clandestine organization. Though it manages Harvard’s $34.9 billion endowment and its annual returns are announced each year in a closely-watched press release, HMC’s portfolio, trades, and practices are generally shrouded in secrecy.

Thanks to Mohammed A. El-Erian, HMC’s soon-departing president and CEO, HMC has been making a concerted effort to be more open. In a letter to investors two months ago, El-Erian wrote that “many of you have told us that […] we should nonetheless be more transparent about HMC’s structure, activities, and governance. We agree.” A main component of El-Erian’s program is hmc.harvard.edu, a Web site—HMC’s first—launched in September.
Given the importance of the endowment to Harvard’s donors and all its beneficiaries—nearly every part of the University—increasing transparency with the goal of improving the relationship between HMC and the Harvard community seems like a win-win situation—at least in theory. In practice, however, the new Web site is replete with photos and fancy pie charts but little new information. In fact, it seems to be merely a more user-friendly and aesthetic version of the Harvard’s Annual Financial Report. It’s hardly fit to be the cornerstone of a new era of openness.

Indeed, it would be hard to argue that new site improves the relationship between the University community and HMC. It touts the achievements of HMC, which are indeed impressive. Several tables and charts allow users to understand HMC’s profits. There is even a bare bones organizational chart which shows the seven subunits of HMC, in case you wanted to know that HMC has its own internal IT department. Yet crucial information about HMC’s structure and investments is notably absent.

This veil of secrecy, however, is to some extent a necessity because openness could hurt the bottom line. If other investors knew how HMC was making its money, they could make the same investments, bidding up asset prices and cutting into its returns. Its techniques would also be laid bare for others to imitate.

Many of HMC’s publicly-traded investments, however, are already made public due to regular disclosures Harvard is forced to make to the Securities and Exchange Commission (SEC). To maintain some secrecy, these disclosures are lagged by about six weeks, though they occur quarterly and are archived in readily accessible databases like the SEC’s online EDGAR database. Any motivated investigator could satiate their curiosity about HMC’s publicly-traded balance sheet two months ago fairly easily. In fact, The Crimson has reported on Harvard’s investments in companies connected to Darfur through Harvard’s SEC disclosures.

Given the existence of these disclosures, putting more information about Harvard’s investments derived from the public disclosures on HMC’s website would improve the Harvard communities’ trust of HMC without diminishing its financial edge. Consequently, we hope it revamps the site again in a way that consolidates specific investment and structural information in a readable format. Doing so would create real transparency, not just a pretty Web site.