Unfortunately, both Gross and most of the posters to this forum seriously underestimate the depth and sophistication of the way that large endowments, most especially Harvard, are invested. As a former professional at a major US university endowment, as well as someone still active in institutional asset management, I believe I can offer some insight.

First of all, it's a mistake to read any endowment's 13-F filings and assume that the positions given are really long-only positions. Endowments may employ index funds or even signle securities as part of complex hedging, pair trading, or portable alpha stategies, or more generally to express any number of potential views on a market / company. Since the other pieces of these trades are not reportable in a 13-F, no one will ever know about them, and its impossible to assess just what the holdings on the 13-F really mean.

Second, the 13-F provides no information about entry valuations, only the current number of shares that are held and their value. While it would be possible to reconstruct this from historical analysis, the author has not done so. Simply looking at their holdings an assuming they've lost money on a position is sloppy at best. Had Harvard bought Weyerhaeuser in the late 70's (as is possible--or more likely bought and sold it several times over the years) they would have at least doubled their money, as well as collecting a rock-sold quarterly dividend that currently exceeds 7%. Maybe not so dumb afterall?

Third, Harvard is a long-term investor. Most investment professionals / people who own a passport agree that China, India, Brazil, etc. still represent excellent long-term investments. If your intent, like Harvard's may be, is to hold the securities for 20 years, you won't be particularly troubled by the current volatility--indeed you may take this opportunity to increase your position and take advantage of historcially low valuations in markets with exceptional growth prospects (or very low PEG ratios, as they're known in the business). Again, a historical analysis might have provided some additional insight.

Finally, to the person who derided these as "passive" investments, I suggest you get up to speed on the way that the largest institutional investors manage their money--it may surprise you to know that most invest in a similarly "passive" fashion. Why? Because decades of expereince and empirical evidence have repeatedly shown that it's virtually impossible for large-cap equity managers to add any value ("alpha" in the investment busienss) above the market return ("beta"). In fact, after you pay them their management fees, you usually underperform the market by several points. Thus, passive, extremely low fee index funds (which are made up primarily of large cap stocks) are the preferred way of obtaining large cap "beta" exposure in any market (which must be at the core of any long-only equity portfolio).

Unfortunately, it seems that the author and most of the posters are engaging in a joyous little round of schadenfreude--but I would suggest the last laugh will be on them.

Nice overview. Only thing missing is that Harvard's endowment has managed to extract fairly significant alpha over it's history.

Most of my thoughts exactly.  Another reporter (Gross) who knows little of the subject but can spot a "newsworthy" trend.  To make it meaningful, Gross would have had to tell us how any market fluctuation losses on paper have operationally put Harvard U. in jeopardy.  Not surprising it's missing.

Apparently by taking advantage of information and investing opportunities that aren't available to the general public. It will be ironic if some of these high "alpha" dog opportunities are now biting the master who has been feeding them.

These blandishments (willfully?) overlook much evidence (both public and not-so-public) that what is happening and has happened at Harvard is very far from normal or consistent with good investment practices. For example, at the very least Harvard has lost 35-40% of its endowment value (and probably more than 50%) over the same time that Yale lost 25%. In addition, in interviews around the globe Harvard Business School students are saying that word is out on Business School campus that Harvard is offering to sell its illiquid investments- timberland, hedge funds, private equity funds..etc at half price but there are no takers (the sale of its private equity alone would be among the largest ever made). Add to that the fact that Harvard just completed over $2.5 Billion in unscheduled borrowing, has announced a hiring freeze and hinted at other draconian plans in the future.

Oh I think the Slate writer is correct. Professor Kaplan, who was managing the endowment for the better part of last year after the former manager Mohammed El Aryan left them for Pimco, stated point blank in presentations to Harvard Business School reunions that “you’ve gotta follow GDP growth when investing in stocks, and that’s all in emerging markets”. Those were his exact quotes which I’m reciting. He went on to say that rising wealth in emerging countries will lead to more demand for commodities and that you therefore must be invested in them and that they (ie Harvard) are. In other words, Harvard's endowment managers drank all the trendy investment cool aid and the effects go through the entire endowment, not just the bit reflected in the public filings. Is that a surprise? Kaplan's history is in running hedge funds that are anything but long-term in their outlook; whover thought it was a good idea to leave him in charge of the endowment was seriusly lacking in judgment. Indeed, in addition to the Kaplan disaster, considering that the Harvard endowment went through FOUR top managers in less than three years (Jack Meyer, El-Aryan, Kaplan and Mendillo, that Meyer took thirty of Harvard's best investment professionals (1/3 of HMC's staff) with him when he left and that El-Aryan left abruptly in the middle of a fiscal year after only 18 months, it would be amazing if performance had NOT been savaged far more than that of endowments that had not had to endure such repeated traumas.

Then there is the fact that the Harvard administration has not squarely addressed these spreading rumors and reports. Harvard President Faust and Vice President Forst must realize how much their credibility and that of Harvard is being undermined. Lables such as "purely pollyannaish" but "self-serving" are hugely expensive. In the financial world, especially during a crisis, credibility can be one's most important asset, but Harvard is tossing its credibility away like an old shoe. Since Yale and other universities have disclosed all of their losses to date, Harvard could do the same. Why the Harvard secrecy? Why the artificial October 31 date? Is there some reason why the Faust administration doesn't want to address widespread rumors in the financial world that Harvard has lost at least 40% and likely more than 50% of its entire endowment? Wouldn't it be worth while to confront those rumors if they are not true? Does "just in case" planning for a 30% drop include an unhealthy dose of hope that markets will recover substantially by June 30? Is that what "just in case" means to the Harvard administration?

Moreover, it is well worth the effort to pick up the phone and speak to a few people now employed at Harvard (especially as faculty), as I have done. There is a palpable sense of doom among the campus. Words like "terrifying losses" drop from Harvard faculty lips these days, and drop all the more easilly from the lips of those closer to the center of the Administration. Things are bad in Cambridge, much worse than in the country as a whole and much worse than at most of its peer institutions. You will be hearing more of this debacle.

They can join the group. I know just how they feel, but I'm not shedding any tears for Harvard even though I spent a couple of years there. Everyone at Harvard from the tenured professors down to the janitors do very well. Some of them should be retired, e.g., Law School Professor Charles Fried who I heard bloviating on NPR today to the effect that it would be a mistake to indict or try Bush or Cheney for violating laws against torture.

I don't recall where, but didn't somebody say there is a relationship between risk and reward. Maybe Harvard's endowment managers who thought they had a better mousetrap forgot that?? When you play musical chairs somebody always gets left standing. Harvard is not exception. Apparently some of their private equity deals, buyouts, and inside dope which has been helping them make Madow like returns for several years tanked together? There was no place to hide in 2008. Harvard will just have to tighten its belt like nearly everybody else.

What's wrong with "passive investments" year in year out they beat assive investments. John Bogle is my kind of investment professional.