Harvard Endowment Prepared for Downturn

The school seems to be better prepared this time around.

In a word, for Harvard, this is not déjà vu all over again. Harvard is a learning institution, and an early reading of its financial circumstances today suggests important differences from those in the first decade of the millennium, which set the stage for the acute vulnerabilities exposed during 2008 and 2009:

    • The University enters this downturn with far greater liquid reserves.
    • Its growth in expenditures has been much more restrained during the past several years than during the effervescent period in the middle of the previous decade.
    • And although the revaluation of investment assets has been historically swift, it has not, so far, been as damaging as the cumulative market collapse leading up to and following the earlier financial crisis and recession.

An essential caveat: Current economic and financial-market circumstances remain extremely volatile, and circumstances could easily change significantly at any time in the weeks ahead. Accordingly, this account is a snapshot in time, and subject to revision, as:

    • The economic outlook could darken, and the recovery from the pandemic and the resulting economic damage may become prolonged; or
    • The unprecedented, multi-trillion-dollar stimulus and recovery measures now being enacted in Washington (and around the world) may offset the crises more swiftly and effectively than can be forecast.

The Financial Fallout, Harvard Magazine

How much is the endowment down so far?

A very crude calculation using these estimates of investment losses yields a decline in endowment value of $5.5 billion to $6 billion: perhaps 15 percent. Gifts received during the year, from fulfillment of Harvard Campaign pledges or new philanthropy, would increase the endowment value somewhat—but distributions during the current year of $2.0 billion or so would reduce it. Overall, it is possible to imagine, at present, a resulting endowment value of $33 billion to $35 billion: a decline of 15 percent to 20 percent. (For perspective, the value of the endowment decreased $11 billion in fiscal 2009—nearly 30 percent.)

By the way, who fixes all the ancient clocks at Harvard?

The work is meticulous and daunting, involving as it does a complex system of gears, wheels, plates, axels, weights, bells, and more. “There’s a whole lot to remember, a whole lot do, but if you’ve done a lot of these … and if you’ve been doing this as long as I have then that becomes easy,” [Richard] Ketchen said.

Ketchen, who earned a certificate in machine shop practice and mechanical design from Wentworth Institute in 1966, started working on clocks 51 years ago as a side hustle. “It was serendipitous,” he said. “I had just gotten out of the Army. I got a job, but I was looking for a hobby. The first time I looked inside a clock I said, ‘Whoa, I can fix that.’ And I did, and I got paid for it. I said, ‘Wow, how long has this been going on?’ And then I found that there was a lot more to it than what I thought, and it was wonderful.”

A Faithful Keeper of Time, The Harvard Gazette

It’s easy to lose track of time when your work is fun.

Richard Ketchen repairing a clock at Harvard.
Twitter @Harvard

Post by Marcelino Pantoja