The End of Endowments

The economic swells of the last 18 months stress-tested the system of charitable endowments. Headlines announced spectacular losses to these long-term funds. My favourite was the headline to a Vanity Fair article that chronicled “Harvard’s Big, Dumb Financial Train Wreck.” The world biggest endowment lost $11 billion of its $36.9 billion.1 While it is tempting to chortle along with the voyeurs and cynics, Harvard is experiencing the worst financial crisis in its 373-year history. When the need to draw down capital is factored in, it will probably take more than a decade for the endowment to return to its peak.