Harvard Tastes Some of Its Own Financial ‘Veritas’
While Rupert Murdoch's fugly mug steals the front page of every major newspaper this morning, it's Harvard's endowment that's featured front-and-center in today's Money & Investing section of the Wall Street Journal -- and according to the paper, the endowment fund graduates as many sought-after money managers as the university graduates future journalists.
But all isn't good in Crimson Country this morning, as the Journal reports that the university lost $350 million last month through an investment in a hedge-fund firm founded by former Harvard foreign-stock holdings manager Jeffrey Larson.
Seems that Harvard education -- in this case, experience -- isn't quite paying off. How's that old saying go? You shouldn't shit where you sleep?
Though $350 million is a "relatively small hit" for the nation-leading $29 billion Harvard endowment, the Journal says it's a good case of maybe-not-quite-what-to-do for the rest of academe: "It highlights the risks as colleges nationwide embrace nontraditional investments such as hedge funds and private equity."
As it turns out, Larson isn't the only high-profile former Harvard-endowment manager with a mixed record since departing from Cambridge, leading the Journal to conclude that Harvard might be paying its managers a bit too much -- in the millions, more than Nobel Laureates and deans -- to manage Harvard's big baby.
Now this kind of news ain't exactly kegstands and Sharpie-shaming, but it means a lot more for the continued existence of the fabled Ivy heirarchy Newell mentioned in his last post. After all, when it comes to a pissing match, it's all about distance -- and there's no ignoring the New York Times' golden profile of Yale's money man earlier this year.
Ball's in your court, Elis. -- ANDREW NUSCA
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August 1st, 2007 at 11:18 am
Well hopefully the Harvard-educated journos will avoid phrases like “the university lost $350 million last moth” and “how’s that old saying go?”
Is this even English? You need a copy editor my friend.
August 1st, 2007 at 11:21 am
hehehehe, balls…
August 1st, 2007 at 11:22 am
AAhahaha!! Too bad it wasn’t a multi-billion dollar loss. This school needs to get its head out of its ass and quit worshiping the name that every other college student laughs at. Loose the ego, shitheads! Sure, I hate this school, so I’m a little biased, but it’s not like I’m alone in that…
August 1st, 2007 at 2:00 pm
Any Wall Streets on here want to speculate how big the shit storm will be this time next year? How much toxic waste is out there?
August 1st, 2007 at 11:01 pm
@ Crimson’09– for getting into harvard, shouldn’t you know the difference between “loose” and “lose”?
August 1st, 2007 at 11:01 pm
@ Crimson’09– for getting into harvard, shouldn’t you know the difference between “loose” and “lose”?
August 1st, 2007 at 11:02 pm
@ Crimson’09– for getting into harvard, shouldn’t you know the difference between “loose” and “lose”?
August 2nd, 2007 at 12:09 am
@spelling freaky bee-in-your-bonnet: maybe Crimson’09 meant for the shitheads to unleash their egos upon the Harvard endowment.
As for the shit storm rising, it is big and will be much bigger. Go read Kindelberger’s _Manias, Panics, and Crashes_ or MacKay’s _Extraordinary Popular Delusions and the Madness of Crowds_. Then go hit the econometric lit to find out that (oh shit!) real-estate is an inefficient market with persistent autocorrelations. In other words: the market trends strongly and turns around like a supertanker. Right now it’s trending down. And tons of people who bought real-estate on the idea that they’d sell higher are now finding out they can’t (or won’t) sell to anyone. Worse still, we haven’t even yet hit the peak of balloon loan maturations. (That’s coming in the next year.) All the people that didn’t put 20% down on a house and took out one of those loans will owe a good bit of scratch at maturity. (A $30,000 final payment isn’t unusual.) If they haven’t found someone to buy their house for enough to pay that off — or if they’re just a deadbeat who shouldn’t have been so aggressive — then they’ll likely end up defaulting. And then, if they can’t restructure their debts, the house will get foreclosed on. All those houses in foreclosure won’t get the best prices; lenders won’t be getting even close to all their money back.
So what does all that mean? If you own a bunch of mortgages, especially Alt-A or subprime, you are going to get dry-fucked. What about investment funds? As the liquidity in credit markets dries up, each panic seller will push others that much closer to needing to sell themselves. (Think of it like a relay race where the baton is bankruptcy.)
The upside to all this is that if you want to buy a nice house about two years from now, there could be some nice deals for the plucking. And two years from now HBS will have a case study of the meltdown that will manage to completely misunderstand what happened. Huzzah for the MBA mill!
August 2nd, 2007 at 1:48 am
Heh, great headline there.