on Jan. 25, staffers at Harvard University’s endowment streamed into the boardroom on the 14th floor of its offices in the Federal Reserve Bank of Boston’s building. In back-to-back sessions, endowment executives told them big changes were coming to Harvard’s investment strategy, and that half the firm’s 230-person staff would be laid off. Harvard was once the envy of the endowment world. From 1990 to 2005, the endowment returned an average of more than 14% a year.
At that time, then-chief Jack Meyer built an in-house hedge fund and embraced investing in outside hedge funds and private-equity funds, early compared with most endowments. Harvard’s endowment was one of the first to make a major play in timber, investing in swaths of forestland in the early 2000s in New Zealand.
Mr. Meyer and a crew of traders left in 2005 following criticism from some faculty and alumni that they were paid too much. They were among the highest paid university employees in the 2000s. In 2003, bond traders David Mittelman and Maurice Samuels earned more than $34 million apiece. Then-Harvard President Lawrence Summers made less than $1 million, according to a tax filing.
Harvard posted a 27% loss during the financial crisis, the worst in the Ivy League, and sold stakes in private-equity funds at losses. The endowment’s annualized gains of 5.7% over the 10 years ended June 30, 2016 are the second-lowest in the Ivy League and below the comparable 8.1% returns of Yale University and Columbia University.