Harvard University’s endowment lost $2.3 trillion in fiscal 2022, a loss attributed to both the global market downturn and the university’s commitment to climate goals.
This is the fund’s first negative return since 2016, according to the University’s Annual Financial Report released Thursday. The endowment — made up of more than 14,000 individual funds invested as a single entity — is managed by a university investment firm called the Harvard Management Company, or HMC.
In Harvard’s last fiscal year, which ended June 30, HMC lost 1.8% on its investments, bringing the total value of the endowment down to $50.9 billion.
In a letter on Thursday, HMC CEO NP “Narv” Narvekar said “the most significant impact on the fund was the poor performance of global equity markets” in the first half of the trading year.
The S&P 500 and Nasdaq lost 11% and 23% during that time, hit by concerns about rising inflation and rising interest rates.
Another factor, according to HMC, is the university’s commitment to climate goals.
“Many institutional investors leaned into the conventional energy sector, either through stocks or commodity futures, adding significantly to their total returns,” Narvekar wrote. “HMC did not participate in these returns given the University’s commitment to addressing the impacts of climate change.”
Energy stocks rose sharply earlier this year as Russia’s war in Ukraine pushed global oil prices to multi-year highs. Although oil prices have since fallen, the S&P 500 energy sector is up more than 50% this year.
It follows a year of losses for the fund, the world’s largest academic endowment. Its value rose by more than $10 trillion to $53.2 trillion in 2021, the highest in the history of the endowment.
HMC noted the disparity between returns from 2021 to 2022, but said it highlighted the need to focus on long-term returns.
“We remain confident that the steps we have taken, and those still underway, to build a portfolio that serves the University’s long-term interests will sustain and enhance Harvard’s critical support of students, faculty and research for generations to come,” said Narvekar.
Harvard said the endowment supports nearly every aspect of the University’s work, including financial aid, conservation, and funding for both staff and research. The fund contributed more than $2.1 billion to the University’s budget in fiscal year 2022, more than a third of annual operating revenue.