The Need for Endowment Exposure

Harvard’s annual financial report for fiscal year 2022 reflected a $2.3 billion fall in our endowment, as market instability and inflation nudged us towards net losses for the first time since 2016. But the report’s release saw University affiliates and stakeholders lose something else too, something less tangible than that princely sum: Transparency.

In a departure from previous years, Harvard’s most recent Annual Endowment Report failed to include underlying data on the performance of investments disaggregated by asset class. The Harvard Management Company, which oversees the endowment, had previously disclosed returns from University investments in specific asset classes such as public and private equities, real estate, and natural resources. This year, that transparency is gone.

Harvard University President Lawrence S. Bacow has sought to justify this change, arguing that previous levels of transparency exceeded those of peer institutions and could therefore prove a competitive liability with respect to endowment performance. The validity of this argument seems uncertain even to financial experts, and we wish that Bacow would make a more substantial argument to the community.

We acknowledge that the interests of HMC may be at least broadly aligned with those of the broader Harvard community — namely, maximize endowment returns. In light of this fact, it may seem that concerns over declining transparency are trivial. But even if incentives are perfectly aligned, the protection of nondisclosure can result in insular and sclerotic decision making. There’s a reason that shareholders do not trust executives to run their company without transparency and oversight. In fact, data on asset class performance has explicitly motivated past scrutiny: The 2016 underperformance of natural resources was covered critically in the press, and HMC soon reportedly reconsidered some of its investments.

We also worry about the potential for cracks in the incentive alignment of HMC with Harvard writ large. Perhaps administrators and HMC executives, understandably desiring job security, are seeking to blunt any future criticism for low returns by robbing it of specificity. Less transparency might lessen pressure from outside skeptics to reconsider current strategy or even personnel. Even if this policy change is not malicious in intent, we generally believe that actors’ performance improves when they are exposed to external criticism.


Based on these concerns, we propose a compromise: The HMC should provide a detailed breakdown of returns by asset class to major donors in lieu of releasing this data publicly. This solution strikes a balance between transparency and pragmatism. It enables a group with a vested interest in the success of the endowment to act as an external check on the administration and HMC, but it also mitigates the danger that public reporting might pose to our competitive advantage by keeping this detailed information from our competitors.

As the endowment grows, both in size and complexity, the need for transparency and accountability becomes more and more apparent. The decision to obscure data on asset classes is a step in the wrong direction.

This staff editorial solely represents the majority view of The Crimson Editorial Board. It is the product of discussions at regular Editorial Board meetings. In order to ensure the impartiality of our journalism, Crimson editors who choose to opine and vote at these meetings are not involved in the reporting of articles on similar topics.

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