Harvard Endowment Returns 7.3 Percent for Fiscal Year 2020

Harvard Management Company returned 7.3 percent on its investments for fiscal year 2020, bringing the value of the University’s endowment to $41.9 billion, the largest sum in its history.

The returns were announced in a note from HMC CEO N.P. “Narv” Narvekar to University affiliates Tuesday morning. The returns marked a slight increase from 2019, when the endowment returned 6.5 percent on its investments.

At the outset of the COVID-19 pandemic, experts speculated that the size of Harvard’s endowment could shrink in the event of an economic downturn. In April, Vice President for Finance and Chief Financial Officer Thomas J. Hollister cited estimates that the endowment could be valued in the mid-30 billion range this year.

Those concerns did not come to fruition.

Still, administrators say that Harvard has faced increased expenses as a result of the pandemic. In an interview with The Crimson on Friday, University President Lawrence S. Bacow said that Harvard has incurred “significant” COVID-related costs, including tens of millions of dollars in testing for University affiliates.

Hollister said the University’s revenue had likely declined in fiscal year 2020 — and would likely decline in fiscal year 2021 — in an interview with the Harvard Gazette, a University publication, last week.

“We face extraordinary, in some ways unprecedented, challenges related to the pandemic and ones that extend beyond it, including the economy, politics, societal inequities, and pressures in higher education. Each of these forces could have an effect, in varying degrees, on the University’s financial outlook for the year,” Hollister said.

Bacow, University Provost Alan M. Garber '76, and University Executive Vice President Katie N. Lapp credited the University’s post-2008 recession planning for the strong returns in an email to University affiliates Tuesday morning.

“This good news is particularly welcome at a time when the University projects revenue losses and budget shortfalls due to the cancellation of many activities, as well as additional outlays related to management of the pandemic. Our ability to absorb those revenue losses and unanticipated costs is greatly strengthened by the substantial steps Harvard has taken since the financial crisis of 2008 to prepare for such contingencies,” they wrote.

Bacow, Garber and Lapp also announced that Harvard will make an additional $20 million available to its degree-granting schools.

“We hope these funds will help each School take measures to protect the health of our community, including testing, contact tracing, and facility modification, as it responds to the unique challenges that it faces as a consequence of the pandemic,” they wrote.

Bacow, Garber and Lapp wrote that nearly 700 eligible staff members elected to participate in the University’s 2020 Voluntary Early Retirement Incentive Program.

Other Ivy League schools also reported positive returns for the year. Yale’s endowment returned 6.8 percent to total $31.2 billion, and Dartmouth’s returned 7.6 percent to total $6 billion. MIT's returned 8.3 percent for the fiscal year, totalling $18.4 billion.

In light of the pandemic, activists have pressured the University to use its endowment to cover worker expenses.

The Harvard Corporation has since announced that Harvard will make 3 percent of all restricted funds in the endowment available for immediate use as part of a “special assessment” of the University’s finances.

Through the years, the size and use of Harvard's endowment has drawn scrutiny. Student groups have long advocated for the University to divest its endowment from a number of entities, including fossil fuels, the prison industry, and Puerto Rican debt.

The University recently announced that it will transition its endowment to become fossil-fuel neutral by 2050, a move that has received criticism from divestment activists.

Narvekar noted in his message that the University is in the process of restructuring its endowment management and shifting its portfolio as part of Harvard Management Company’s five-year plan.

“Our team remains confident that the changes being made to both the portfolio and the organization’s systems, structure, and culture will serve the university well and generate the long-term returns on which Harvard relies,” Narvekar wrote.

Narvekar wrote that further details on HMC’s portfolio performance will be available in the University’s financial report in October.

—Staff writer Ellen M. Burstein can be reached at ellen.burstein@thecrimson.com. Follow her on Twitter @ellenburstein.