It’s easy to forget that Harvard University is in a pinch. A series of unprecedented and ongoing legal challenges from the Trump administration have caused the institution to institute deep austerity measures. Harvard’s endowment is the largest in the world, at $52 billion, making it the wealthiest university in the United States. Growing external pressures along with spending constraints within are starting to strain the system’s fiscal health. The college has issued a hiring freeze. It has rejected climatologically-safe admission to graduate students on the fall-semester waitlist.
The university’s endowment, managed by the Harvard Management Company, comprises 14,600 separate funds, 80% of which are restricted for specific purposes. Of that, $9.6 billion is unrestricted, giving the university some leeway in its financial planning. Now, Harvard is going to draw down roughly 5% of its 50 billion endowment annually. This goal is increasingly hard to meet, given growing external and internal constraints on the process.
In the fiscal year, Harvard’s endowment posted a 9.6% return, thanks to the University’s diversified investment strategy. The endowment is purposefully distributed among a wide range of asset classes. That’s 39% in private equity, 32% in hedge funds, 14% in public equities, 5% in real estate and 5% bonds/TIPs. The university has already taken some remarkable steps to cut its exposure to real estate and natural resources. In fact, it has decreased from 25% in 2018 down to a mere 6% in 2024!
In reality, even given these stellar returns, it’s very clear that all isn’t well with Harvard’s finances. The university has made cuts and other moves to protect its balance sheet during the swirling uncertainty caused by the lawsuit challenges. Gifts for its endowment Revenue Harvard raised $368 million for its endowment in 2024. This astounding sum underscores the prowess of its passionate alumni network and furthering the institution’s financial resilience. Over three-quarters of donations average $150 per donor, indicating widespread support from alumni and supporters. In addition, Harvard has a long history of enormous gifts from rich alumni, which has continued to make its endowment money mountains higher.
As Harvard continues to address these unavoidable difficulties, it is rightly under fire for its failure to use its large endowment in the public interest. “Universities don’t have the ability to break open the proverbial piggy bank and just grab the money in whatever way they want,” said Scott Bok, reflecting concerns about the rigid structure of endowment funds.
As surety, the university’s spokesperson said in light of continued state government pressures, financial responsibility was the top priority. “The government has long exempted universities from taxes in order to support their educational mission,” they stated. They argued that any severe sanctions risk endangering Harvard’s educational mission.
“Such an unprecedented action would endanger our ability to carry out our educational mission. It would result in diminished financial aid for students, abandonment of critical medical research programs, and lost opportunities for innovation. The unlawful use of this instrument more broadly would have grave consequences for the future of higher education in America.” – Harvard spokesperson
Kimball highlighted the competitive nature of higher education funding: “Universities that didn’t want to assume the risk fell behind.” This statement underscores the pressure on institutions like Harvard to continually adapt their funding strategies while managing both their endowment and operational costs effectively.
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