When we talk about top universities in the world, Harvard University is often at the forefront of the conversation. One major factor contributing to Harvard’s prominence is its endowment.
Over the years, the “Harvard Endowment” has grown to become a crucial source of funding for the university, fueling everything from student financial aid to groundbreaking research initiatives. So, let’s dive into some of the key developments and trends around Harvard’s endowment and how it’s impacting the institution.
What Exactly is the Harvard Endowment?
At its core, the Harvard Endowment refers to the collection of financial assets managed by Harvard University. These assets are invested in a wide range of areas, from stocks and bonds to alternative investments like private equity and hedge funds. The endowment generates returns that help support the university’s programs, research, and student financial aid, among other things.
A Record-Breaking Year for Harvard Business School’s Endowment
In 2024, Harvard Business School (HBS) hit a major milestone, with its endowment reaching a record $5.4 billion. This increase of $300 million was largely thanks to impressive returns of 9.6% on the school’s investments. What’s especially notable is that HBS’s endowment alone is larger than the total endowments of several prominent universities, including Carnegie Mellon, Boston College, and Georgetown University.
The growth in the HBS endowment has had a significant impact on the school’s ability to support its students. For example, in fiscal 2024, the school used its endowment to provide $53 million in fellowships to its MBA students. This amount covered 28% of the total tuition for all students, which is a huge help considering the rising costs of education. The average fellowship support per student was nearly $47,000, which is a 7% increase from the previous year.
The Bigger Picture: Harvard’s University-Wide Endowment
But it’s not just Harvard Business School and its impressive MBA program that is seeing endowment growth. Harvard’s overall endowment also reached impressive heights in recent years. For instance, Harvard’s endowment grew to $53.2 billion in fiscal 2024, which is a significant jump from previous years. The increase in value comes after a few years of decline, which made this year’s results particularly meaningful.
In FY 2024, Harvard’s endowment grew by $2.5 billion, with a 9.6% return on investments. This marks a solid recovery for the university’s endowment after two consecutive years of declines. The total market value of the endowment is now nearly $53.2 billion, continuing Harvard’s position as one of the wealthiest educational institutions in the world. Despite a drop in endowment gifts, Harvard’s strategic investments have helped bolster its financial stability.
The Role of Investment in Harvard’s Endowment
Harvard’s endowment growth is largely attributed to the strong performance of its investments. Harvard Management Company (HMC), the team responsible for managing these funds, reported a return of 9.6% for the fiscal year. This return is significantly higher than the previous year’s 2.9%. HMC typically targets an 8% return on its investments, and over the last seven years, the average annualized return has been 9.3%.
The composition of the endowment is quite diversified, with major portions invested in private equity and hedge funds. In fiscal 2024, 39% of the endowment was invested in private equity, and 32% in hedge funds. Interestingly, despite the strong performance of public equities in 2024, only 14% of Harvard’s endowment is allocated to public stocks, reflecting the university’s conservative approach to risk.
How Harvard Uses its Endowment
Harvard’s endowment isn’t just a bank account sitting in the backgroung. It also plays a key role in funding various aspects of university life. In fiscal year 2024, the university spent $30 billion from its endowment, and the largest share—48.1%—went to student financial aid. Harvard has long been committed to making education accessible, and the endowment helps cover a significant portion of financial aid costs to help students cover tuition and other expenses.
Endowment funds support faculty salaries, campus maintenance, and research initiatives. At Harvard Business School, for example, the endowment helped fund MBA fellowships, which covered 28% of the total tuition costs for students in fiscal 2024.
Interestingly, Harvard’s reliance on endowment distributions to fund its operations has been steadily increasing. Twenty years ago, endowment distributions accounted for about 21% of the university’s budget. Today, that number is close to 40%. This shift highlights how much more dependent the university has become on these funds over time.
Future Challenges and Opportunities for the Harvard Endowment
Despite the growth in Harvard’s endowment, there are challenges ahead. The recent decline in endowment gifts, down from $561 million in FY 2023 to $368 million in FY 2024, points to potential hurdles in future fundraising efforts. This drop can likely be attributed to ongoing controversy surrounding the university’s handling of issues like campus antisemitism, which may have led to some donors reconsidering their contributions.
However, despite these challenges, Harvard remains optimistic. The university continues to focus on strategic investments, alongside Harvard’s focus on promoting innovation and technology, will help grow its endowment even further. The Harvard Management Company has demonstrated its ability to generate strong returns, even in volatile markets, and the university’s endowment remains a crucial tool for supporting its mission of education, research, and service.
The Harvard Business School Endowment: A Case Study
Let’s zoom in a bit more on the Harvard Business School (HBS) endowment, which is not only a key part of the larger Harvard endowment but also serves as a shining example of how endowment growth can directly impact students. In fiscal year 2024, HBS’s endowment growth helped fund a significant increase in fellowship support, enabling the school to provide more financial assistance to its MBA students. This is just one of the many ways Harvard’s endowment helps shape the future of higher education.
Moreover, despite challenges in the online education space, Harvard Business School’s online education program remains a significant revenue generator. While enrollment in some online programs like CORe (Credential of Readiness) has declined, the university, especially through Harvard Extension School, remains committed to enhancing its online offerings, with plans for new courses in leadership, finance, and digital strategy.