Let’s put this in perspective, shall we. Yes, a 22% drop in 4 months is pretty gruesome. But Harvard’s endowment is still ginormous, by any standards, even those of the relatively recent past.
Here’s how Harvard’s endowment has grown of late; the chart’s taken from the last annual report and therefore doesn’t show the most recent decline.
By the standards of this chart, Harvard’s endowment is still comfortably in the crimson. A 22% drop from $36.9 billion puts it at $28.8 billion, roughly where it was in 2006. And nobody thought that the Harvard endowment was in any trouble in 2006.
It’s true that Harvard has become increasingly reliant on its endowment for income of late: while the endowment contributed just over $1 billion in 2006, that number grew to more than $1.6 billion in 2008. But as that growth shows, there’s no particular reason why the endowment’s contribution to Harvard’s budget should be any fixed percentage of its total value. With the endowment still comfortably over $20 billion, it can easily afford to spend a few billion more over the next couple of years and remain big enough to support the university in perpetuity.
To put it another way: if you’re big enough to lose $8 billion on mark-to-market investment losses, you’re certainly big enough to find $1.6 billion to spend on your stated purpose of helping to run the university. Obviously, Harvard would prefer it if the endowment had gone up rather than down. But the fact of its decline is no reason for panic.