Harvard slashes staff

Harvard University is sending pink slips to about one-fourth of its investment management staff after the school’s endowment shrank by about 22%, and its president said that cost cuts would follow.

Harvard Management Co. (HMC), which oversees the Ivy League school’s multibillion-dollar endowment, began laying off employees in late January. HMC is expected to slash about 25% of its staff, or 50 jobs, in the next several months, said John Longbrake, a university spokesman.

“Targeted reductions will occur throughout the HMC and will include some investment professionals, as well as ‘back office’ and other support personnel—operations, IT, human resources and legal,” Longbrake said in a statement.

The news comes about two months after Harvard shocked the investment community with news that its endowment had shrunk to about $29 billion after having lost about $8 billion in the first four months of the fiscal year that began in July.

Harvard had delivered an average annualized investment return of 13.8% over the last decade, far better than most universities, and its investment choices were closely watched in the industry.

Citing “severe turmoil” in the world’s financial markets, Harvard President Drew Faust warned in December that losses could climb further, leaving Harvard on track to deliver its worst annual returns in 40 years.

The school, located in Cambridge, Mass., across the Charles River from Boston, relies on its endowment to cover about 35% of its operating budget. Faust warned the school and alumni that cost cuts were inevitable.

HMC joins a string of prominent money management firms, including Fidelity Investments and State Street Corp., that have announced job cuts as assets under management have shriveled.

Separately, HMC and endowments at Columbia University and Duke University have joined the parade of sellers on the secondary market, saying they need to distribute cash to their universities. In late December, Harvard and Columbia, both seeking to rebalance their portfolios, received low-ball bids for a combined $2.5 billion in private equity assets they recently put on the market, and were contemplating how to proceed. —Svea Herbst-Bayliss, Reuters