THE MORNING RANT: Harvard’s Endowment Is Having a Cash Crunch

Harvard has long been known as a multi-billion dollar hedge fund attached to an elite communist indoctrination camp. Wealthy donors should have cut the poison Ivy off a long time ago, but Harvard’s embrace of global Jew-hatred finally got their attention.

Headlines like these were welcome news:

“Another billionaire, Len Blavatnik, joins growing list to yank donations to Harvard amid antisemitism, plagiarism scandals” [NY Post – 12/21/2023]

“Harvard has lost a staggering $1 BILLION in donations over its handling of anti-Semitism on campus, alumni Bill Ackman claims” [Daily Mail – 12/11/2023]

“Harvard mega donor Ken Griffin has halted donations to school” [Reuters – 01/30/2024]

But Harvard is sitting on a $50 billion endowment. How much could it hurt Harvard to lose an incremental billon or two? The answer is, it could hurt a lot. It did hurt Harvard immensely.

While the endowment may be valued at $50 billion, it is apparently not weighted very heavily toward liquid investments such as stocks and bonds. Therefore, Harvard relies on the mega-donors’ recurring giving to provide the cash to pay the bills. When those donors closed their checkbooks, Harvard found itself in an asset-rich but cash-poor situation.

So, despite its massive endowment, Harvard finds itself having to rush a bond offering in order to raise the cash needed to keep the lights on.

“Harvard University Floats $1.65 Billion Upcoming Debt Sale” [Bloomberg – 02/26/2024]

Harvard University is considering the sale of as much as $1.65 billion of bonds, marking the latest Ivy League school to sell debt this year, and potentially providing a sign of how it’s financially faring after months of turmoil over allegations of antisemitism on campus.

Some of its most prominent benefactors have signaled they won’t commit more money to the school and it faces costly lawsuits and possible government actions that could take away financial support.

With interest rates the highest they’ve been in decades, this is obviously not the best time to be issuing new debt. The Harvard Crimson noted last week that this will put Harvard’s debt at almost $8 billion, which is higher than any time in recent history, including during the 2008 financial crisis.

The potential ten-figure bond sale, revealed in a University filing on Monday, would see Harvard’s debt reach $7.85 billion — higher than any point in recent history, including during the 2008 financial crisis.

Harvard will be entering a borrowing market plagued with high interest rates, making a potential debt raising effort extremely costly. When the University issued $750 million in bonds during the second quarter of 2022 the Federal Funds Rate sat at 100 basis points [1.00%], today the Federal Reserve is expected to hold steady in the range of 525 and 550 basis points [5.50%].

Chris Rufo has been a crusading disruptor to the woke university cartel, and he offered this insight a few days ago, “Last night I had dinner with a Harvard-educated hedge fund manager and he explained that Harvard’s $50 billion endowment has a relatively large share of illiquid investments. Hence, when donors suddenly pulled back, the need to raise cash. Good.”

Billionaire Bill Ackman wrote the following, which corroborates what Mr. Rufo said:

The substantial majority of the Harvard endowment is invested in illiquid assets, principally private equity, real estate, and venture capital. Not reflected on the balance sheet are commitments to new funds of the same type.

Like most endowments, Harvard models expectations of fund distributions when considering its liquidity and when making future commitments.

Harvard also makes assumptions about inflows from alumni donations.

The model likely did not predict a decline in liquidity events from private equity, real estate, and venture capital and the dramatic decline in donations. That is likely why Harvard announced this recent bond offering, which is being done in a substantially higher interest rate environment than where the funds could have been raised a couple of years ago.

It would be interesting to understand how much the modeled cash flows have declined since original expectations.

I wouldn’t be surprised to see Harvard announce a substantial cost reduction program soon.

I suspect that alumni donations won’t be coming back for some time. At a minimum, alumni will want to know who the next president is, and the status of DEI and antisemitism on campus before resuming donations.

Why would those donors even think of resuming their funding of Harvard? Would they donate to the KKK? And for those thinking of buying Harvard’s bonds, would they buy bonds from Hamas? If not, why would they provide a financial lifeline to Hamas’ Jew-hating affiliate in Boston?

Stop donating to Harvard. Boycott its filthy bonds. Starve the beast.

In other news related to Harvard’s endowment, a bill has been introduced in the Massachusetts legislature to redistribute tax it at a 2.5% annual rate. Let me offer my hearty endorsement.

“Proposed Mass. Bill Would Impose 2.5% Tax on Harvard Endowment” [Harvard Crimson – 02/09/2024]

Two Massachusetts lawmakers proposed a bill which would impose an annual excise tax of 2.5 percent on Harvard’s endowment.

The bill – titled An Act to Support Educational Opportunity for All – affects private educational endowments greater than $1 billion.

Given Harvard’s $50.7 billion endowment, per October’s Annual Financial Report, Harvard would be one of eleven Massachusetts private schools subject to the endowment tax. According to Bloomberg News, the tax would generate approximately $1.2 billion from Harvard, which would fund statewide education initiatives.

My principles wouldn’t normally have me endorsing the public looting of a private endowment, but since the communists at Harvard seem so enthusiastic about the various assaults on my personal and economic freedom, it would be good for them to go on defense for a while to protect their own economic interests.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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