Harvard’s Equity Holdings Drop by 24 Percent in Last Quarter

Harvard University’s directly held U.S.-traded securities decreased in value last quarter by 24 percent, falling from $1.2 billion to $921 million, one of the largest drops in recent history.

The drop in value comes during a time of increased volatility on domestic and international markets as investors have grappled with a widening European debt crisis. During this time period—June 30 to Sept. 30—the S&P 500 tumbled nearly 14 percent. The Dow lost 11 percent of its value.

At this time last year, Harvard’s U.S.-traded securities were valued at $1.54 billion. In the last few years the total value has fluctuated around $1.4 billion. It is unclear whether last quarter's decrease in value was the result of market contractions or the selling of equities.

This most recent filing includes only those stocks that are directly managed by the University and does not include externally managed equities. These funds represent the portion of the Harvard endowment that is directly managed by the Harvard Management Company. HMC contracts with outside money managers for the remainder of its equity investments.

In the last year, the University has made significant investments in emerging markets—a strategy that remained in place during this most recent quarter.

The filing shows that Harvard’s largest stock holdings are in developing countries. The University currently holds $257 million in exchange-traded funds in Brazil, $68 million in China, and $42 million in South Korea.

The University’s investments in Brazil represent its single largest holding reported on last week’s filing, dwarfing the next largest investment by a nearly 4 to 1 ratio.

Holdings in emerging markets have been particularly volatile over the last several months as instability in Europe has dragged down markets. As of June 30, Harvard Management Company had about 12 percent of its portfolio invested in foreign equities, according its annual report.

The University has invested in India in particular during the last year, including $6 million in WisdomTree Trust and $45 million in a Barclays India exchange-traded note.

Recently, the University has also built ties with Indian business giants. The University announced last week an $11 million gift from Siddhartha Yog, the founder of The Xander Group Inc., an investment firm. Last year the Business School received $50 million from the Tata Foundation and $25 million from Anand Mahindra of Mahindra Motors. University President Drew G. Faust plans to visit India this January.

But according to the filing, the University unloaded most of its investments in the Indian conglomerate Tata Motors since last quarter. The previous quarter’s filings indicated that the University held 80,000 shares in Tata valued at $1.8 million. Now the University has only 10,000 shares, valued at  $154,000.

Harvard continues to hold the same number of shares in real estate group Pebblebrook Hotel Trust, though the value of the shares dropped from $52.4 million to $41 million this quarter.

The University also has invested $67 million in Goodrich Corporation, an aerospace manufacturing company that supplies the defense industry. Previous filings indicate that the University purchased these stocks in the last quarter.

HMC announced in June that Harvard’s endowment saw a 21.4 percent return in fiscal year 2011. This increase represents the first major gains after the financial crisis caused the value of the endowment to plunge nearly 30 percent.

The University’s holdings were reported last week in a mandatory quarterly Securities and Exchange Commission filing disclosing Harvard’s direct holdings of U.S.-listed securities.

—Staff writer Zoe A. Y. Weinberg can be reached at zoe.weinberg@college.harvard.edu.

This story has been revised to reflect the following clarification.

CLARIFICATION: NOV. 13, 2011

The Nov. 12 story "Harvard’s Equity Holdings Drop by 24 Percent in Last Quarter" did not make clear whether the decrease in value was the result of market losses or the selling of equities.