The Harvard Endowment Is on the Verge of Losing Its Crown

SPEAKER_1 (0:03)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:25)

And I'm Tracy Alloway.

Joe Weisenthal (0:26)

Tracy, we talk about investing all the time on the show. We talk about private credit. We talk about hedge funds. We talk about the market itself. But there are a few of these gigantic institutional players out there. One of them is insurance that just don't get a lot of attention.

Tracy Alloway (0:43)

These huge pools of capital. Yeah, you're right.

Joe Weisenthal (0:47)

So, you know, we want to talk about insurance more. We should probably talk about family offices more, too. That's this whole world that I don't think we've ever really explored, but just this massive and booming source of capital, like what the deal is with those.

Tracy Alloway (1:02)

Yeah, I remember right around the time that I left Hong Kong, that was such a big story, especially in Singapore, everyone opening family offices. But there's another category of massive pools of capital that we need to talk about.

Joe Weisenthal (1:15)

Absolutely, and that one of course is endowments. They're huge and they're distinct from banks, they're distinct from insurance companies, they have their own funding needs and their own funding profiles, and the schedules with which they need to withdraw and disperse their money. If you're a hedge fund or if you're anyone else looking for money for your investment, at the end of the line, there's a good chance that at some point, you're going to be knocking on the door of a really big endowment.

Tracy Alloway (1:43)

Yeah, so I'm really interested in how that became a thing, because of course, university endowments nowadays are known for making investments in things like private equity and hedge funds and stuff like that. I'm curious how all of that began and then obviously how it's been working out.

Joe Weisenthal (2:02)

You know what another cool thing Tracy has? At least when it comes to university endowments, I believe the endowment of my alma mater, University of Texas, is on the verge of becoming the biggest university endowment in the country.

Tracy Alloway (2:18)

Right. So for years, Harvard was the biggest, but it looks like it might be superseded by Joe's college. Congratulations, Joe.

Joe Weisenthal (2:27)

Thank you.

Tracy Alloway (2:27)

Have you been donating? Is this all you?

Joe Weisenthal (2:30)

Can I just say, I've never donated. They have so much money already. They don't need my donation. I probably should. I don't want to talk about how I avoid the calls from my university. And I don't know, I feel a little bad about it.

Tracy Alloway (2:43)

I think in this case, well, we'll get into why, but maybe it's okay not to donate. We'll talk about it.

Joe Weisenthal (2:50)

I don't really want to talk about it. You know, and even talking about how big UT is versus, I think there's actually like 22 universities or something served by the Texas Endowment and other things. So I don't even know if it's a true apples to apples comparison because, you know, the student body of Texas is so gigantic. Nonetheless, if we're just looking at, okay, which university endowment is the biggest, at least current, there's a very good chance it looks like the Texas could eclipse Harvard on that front. So we got to understand what's going on more in endowment world. And then the other thing is not just that Texas has grown and that's great and I love to see it, but that Harvard's performance has been a little bit mediocre in recent years, even compared to just other ivies, the rest of which sort of smaller. The Yale Endowment is sort of famous actually, not necessarily due to its size, but because of its longtime managers' approach to endowment investing. So we got to learn more about what's going on with Harvard and how these big institutional pools of capital, how they're performing and what they're doing.

Tracy Alloway (3:49)

Yeah, it is kind of funny that the Harvard Endowment, which presumably employs a lot of highly paid smart people, I think it was up about 9.6% in 2024 That's the preliminary fiscal year. But of course, the S&P 500 is up like 22% so far. So yeah, what's going on?

Joe Weisenthal (4:11)

Yeah, just by SPY. No, like people will say, oh, you can't really compare. People love to say, you can't compare things. Oh, you can't compare hedge funds return to the S&P. You can't compare endowment funds return to the S&P. Maybe that's true. I don't totally get why. Anyway, should we learn more?