Harvard Consolidates Its Portfolio of Direct Holdings Amid Shift Toward Private Equity

The Harvard Management Company pared down the direct holdings in its public equity portfolio last year to fewer public stocks than Harvard has held since 2017, continuing a sharp pattern of consolidation that began in 2016 under CEO N.P. “Narv” Narvekar.

HMC currently directly holds only 15 public stocks, a significant drop from 121 in 2016, according to its latest filings with the Securities and Exchange Commission. Harvard’s direct holdings plummeted from 121 in 2016, then rose slightly during the pandemic, hitting a high of 48 holdings in 2023.

When Narvekar took over as the steward of Harvard’s endowment, moving asset allocation away from direct holdings in public equity was a cornerstone of his five-year revival plan.

Over Narvekar’s eight years at the helm, the endowment’s public equity asset location shrank from 31 percent in 2018 to 14 percent in 2024, reflecting a deliberate shift to private equity and hedge funds.

This approach fundamentally restructured the endowment and led to layoffs of half of HMC’s 230-person staff, as HMC moved towards a model of greater external management.

Russell Wermers, a business professor at the University of Maryland, said this shift in investment strategy reflected the “Yale Swensen” model, named after Yale University’s former Chief Investment Officer David F. Swensen.

Under Swensen’s 35-year tenure, Yale’s endowment saw gains of $45.6 billion, which were largely due to a transition of its investments from public to private markets.

“He was famous for turning the Yale endowment into being heavily allocated to private equity investments and probably hedge funds,” Wermers said, adding that university endowments “have the luxury of sitting on money” and “investing for the long run.”

“Swenson’s genius was that he took this simple fact and he said, ‘Why are we putting so much money into public markets that are liquid, when we could be investing in private markets that are not very liquid and earning higher returns?’” Wermers said.

In Harvard’s fiscal year 2024 financial report, Narvekar attributed the endowment’s higher returns in part to a “major portfolio shift” towards private equity.

“Public equity returns are often outpaced by private equity — both buyouts and venture capital,” Narvekar wrote.

This shift was likely exacerbated, Wermers added, by the decrease in market size of public equity “over the last 10 to 20 years.”

“If you want to invest in the entire United States business economy, you’re going to have to tilt more toward private equity than you did 10 years ago, because there’s more private equity relative to public equity,” Wermers said.

Narvekar also cited an increase in the endowment’s hedge fund investments — which he said limited portfolio risk and equity exposure — as a driver of improved fund performance.

“It’s an attempt for Harvard likely to hedge against the tail event happening, another big crash happening, or even more minor downturns,” said Wermers.

As the number of publicly disclosed investments has fallen, so has visibility into Harvard’s overall strategy. While the SEC requires disclosure of direct public holdings, the vast majority of HMC’s portfolio — now dominated by private equity and hedge funds — remains opaque, and is frequently the subject of speculation and questions from donors and faculty.

NYU finance professor David L. Yermack ’85 said the reduction in direct holdings since Narvekar’s takeover is due to the prevalence of external management.

“It’s very likely that Harvard owns hundreds of stocks, and when you look at the asset managers who Harvard hires to manage indirectly, it’s probably thousands of stocks that they own,” Yermack, a former Crimson managing editor, said.

While this decrease in transparency is a byproduct of HMC’s shifted strategies, it may be considered an added benefit.

“More disclosure by mutual funds can actually have harmful effects to those who disclose because you’re revealing your strategy,” Wermers added. “So Harvard may want to keep its strategy close to their vest. They don’t want to show their cards to everybody in the entire marketplace.”

Additional details on HMC’s direct public holdings for the final three months of 2024 will be made publicly available in early February by the SEC.

—Staff writer Avani B. Rai can be reached at avani.rai@thecrimson.com. Follow her on X @avaniiiirai.

—Staff writer Saketh Sundar can be reached at saketh.sundar@thecrimson.com. Follow him on X @saketh_sundar.