Endowment Turmoil

While employment by university endowments (and other nonprofit endowments) can be an attractive financial career option, jobs may be disappearing as universities are forced to retrench in the face of brutal investment losses over the past year or so. Undoubtedly you've received one or more communications from the presidents or deans of the institutions you attended, discussing their money crunches and trying (lots of luck!) to prise more donations out of alumni like you who themselves have been battered by the market crash.

The March 16 issue of Forbes magazine offers a case study in what went wrong at the biggest endowment of them all, that of Harvard University. After a lengthy run of impressive market-beating results, Harvard's portfolio has taken a nosedive recently. Various strategies that did well in up markets have now blown up. Perhaps most worrisome of all, one of these strategies was pushed by Lawrence Summers during his recent tenure as president of the university. Summers is, of course, a former Secretary of the Treasury under Bill Clinton, and now head of Barack Obama's National Economic Council. Hopefully, he'll give better advice to the President and the nation.

According to Forbes, Harvard has laid off 25% of the staff at its endowment (called the Harvard Management Company). Moreover, there is a game of musical chairs surrounding the top spot: five heads in the last four years. As Harvard goes, so probably do other institutions.