Tuesday, June 23, 2009
Harvard cutting risk
Harvard is cutting risk in its monster endowment portfolio. The rationale for holding these risky assets was that as Harvard has a long term horizon (basically infinite), it can tolerate the ups and downs of risky assets. Turns out that the horizon isn't really as long as they thought. The endowment is expected to generate regular income for the school. The ups and downs (mostly downs) severely reduced this income generation. If Harvard was never planning to pull money from the portfolio, then this wouldn't matter, but then that would raise the question of what the point of the endowment was in the first place.