Endowment Yields Off Pace

Harvard's endowment performance through the first three quarters of this fiscal year is substantially off last year's pace.

But the University's holdings still outperformed both national and internal benchmark standards over the same period.

In a letter to some of the University's largest donors, Jack R. Meyer, president of Harvard Management Company, said the endowment returned 9 percent between July 1993 and April 15 of this year.

That falls short of the pace necessary to match last year's endowment return of 16.7 percent.

But an official close to HMC said recently that a lower return would not be surprising considering market trends and the endowment's unusually strong performance last year.

Meyer wrote that he wanted to reassure investors in the midst of the recent stock market turmoil. "We have weathered the storm well," the letter said.

In the period between December 31 of last year and April 15 of this year, a time of great stock market volatility, the endowment gained only 0.1 percent.

While this is significantly lower than in recent quarters, the market as a whole was also in a period of decline.

The Standard & Poor's (S&P) 500, an industry-wide measure of stock performance, was down 3.6 percent, and HMC's internal policy portfolio, the benchmark against which the HMC measures its own performance, was down 0.5 percent during this same time.

And it certainly could have been worse; horror stories of huge financial losses in early 1994 are widespread in the investments community.

Meyer also wrote that he believes when the returns of similar institutions are made available they will show that the University has fared well.

For the fiscal year through April, Meyer pointed out that the endowment's 9 percent increase significantly outpaced the 1 percent growth of the S&P 500.

Albert F. Gordon '59, a major contributor of the University and a frequent HMC critic, said his fears regarding the endowment's performance in the current market were not assuaged by the letter.

"I want to know how HMC is involved in derivatives and how it fared there," Gordon said. "I'm very suspicious about how they were able to not lose money while places like Kidder,Peabody got killed. With derivatives it is easy toavoid losses now by making them show up later, soI want to know specifics which they're notgiving."

Gordon also said he did not think that HMC hadperformed as impressively as Meyer made it seem,and he criticized the size of HMC executives'salaries.

"First of all, the endowment should be doingbetter than the S&P--that's a low risk grouping,"Gordon said. "They haven't done anything tojustify their obscene salaries."

According to HMC tax returns, Meyer made$962,213 in fiscal 1993, while two HMC vicepresidents earned over $1.2 million. HMCofficials' compensation includes bonus paymentsbased on performance.

Meyer could not be reached yesterday forcomment on the endowment's performance or hisinvestment strategies

Gordon also said he did not think that HMC hadperformed as impressively as Meyer made it seem,and he criticized the size of HMC executives'salaries.

"First of all, the endowment should be doingbetter than the S&P--that's a low risk grouping,"Gordon said. "They haven't done anything tojustify their obscene salaries."

According to HMC tax returns, Meyer made$962,213 in fiscal 1993, while two HMC vicepresidents earned over $1.2 million. HMCofficials' compensation includes bonus paymentsbased on performance.

Meyer could not be reached yesterday forcomment on the endowment's performance or hisinvestment strategies