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John Harvard's Journal

Money Matters

March-April 2007

An updated, second edition of Managing Harvard’s Resources—with reports from the University’s treasurer, James F. Rothenberg, and chief financial officer, Elizabeth Mora, vice president for finance; simplified financial statements; and details on giving, the endowment, and physical resources—has been published by Alumni Affairs and Development. (The report is available on line at Among the highlights:

  • Endowment. Income distributed from the endowment, $933 million in fiscal year 2006, totaled 31 percent of University revenue. But the endowment, $29.2 billion as of last June 30, “measured in terms of market value per student,” trails Princeton’s by 27 percent, and is “roughly equal to Yale’s.” The proportional contribution of endowment income to institutional budgets “also trails Princeton’s and is comparable to Yale’s.”
  • Investment results. The total return on investment funds, measured by the compound annual growth rate, was an extraordinary 15 percent for the period from 1996 through 2006. The real endowment growth—investment returns, reduced by income distributed, increased by gifts received, and then adjusted for inflation—was a robust 10.1 percent annually during those years.
  • “Extra” returns. During the waning months of his presidency, Lawrence H. Summers spoke of Harvard having $7 billion more available than anticipated. The report explains that claim: from the end of fiscal year 2003, annual investment returns repeatedly exceeded Harvard Management Company’s long-term goal of 8.25 percent. (Returns were 21.1 percent in 2004, 19.2 percent in 2005, and 16.7 percent last year.) This “additional appreciation” totals $7 billion, and has prompted the Corporation to authorize a series of “supplemental strategic endowment distribution[s].” They could make available to the faculties an aggregate of $700 million more than would otherwise be released during the fiscal years from 2006 through 2010—a boost of perhaps 13 percent in the endowment income planned to be distributed in that period.
  • Allston revenues. The “Strategic Infrastructure Fund,” a half-percent assessment on the endowment’s year-end value, totaled $124 million, as reported, in fiscal year 2006. Subject to Corporation review, the assessment will remain in place through fiscal year 2031.
  • Allston spending. Even so, academic development in Allston will entail significant debt financing. The report delicately explains that “as the University’s horizons expand, we will need to make greater use of financial leverage for capital activities.” Expect the growth in debt outstanding (about $400 million per year recently) to accelerate sharply. As the Allston master plan proceeds through regulatory reviews (see "Harvard's 50-Year Plan"), the “Managing the University’s Physical Resources” section of the report gives some sense of the near-term scope of work envisioned. Phase I of the project, it says, “comprises its first 4 million square feet”—equal to one-sixth of Harvard’s entire “property assets” today.