Outgoing Harvard CFO Says ‘It’s Time to be Very Cautious’ Amid Rising Economic Turmoil

Outgoing Harvard Vice President for Finance and Chief Financial Officer Thomas J. Hollister said in a Thursday interview that the University should be “very cautious” in its financial management as it confronts an increasingly uncertain economic climate.

The United States is currently facing an array of economic challenges, including record-high inflation levels, rising interest rates, recent bank failures, and stock market volatility. During the interview, Hollister said these challenges, which he called a “quadruple whammy,” will affect Harvard’s financial results in the coming years.

“There are storm clouds: Inflation is very clear and present and revealing in construction costs, supplies, services, everywhere,” Hollister said. “Capital market difficulties, bank failures, rising interest rates, and the fear, of course, upon the present — fear of a recession — so it’s time to be very cautious.”

Hollister also said current-use donations so far this fiscal year are “running behind last year.”

“Whether that’s a certain indication that the economy is softening, we don’t know yet. It’s also the year trend – we’re not sure how it will play out,” he said.

Hollister added the financial headwinds will “inevitably” affect Harvard’s endowment returns for fiscal year 2023, “and therefore the endowment’s capacity to make distributions in the next few years in the budget.”

Last fall, Harvard reported a $2.3 billion loss in endowment value for fiscal year 2022 — its first year of negative returns since 2016. Still, the University’s financial report for the last fiscal year cautioned that the reported endowment value, $50.9 billion, may not accurately reflect the current market value of the endowment’s assets due to uncertainty surrounding the valuation of private equity and venture capital investments.

Hollister said the recent financial turmoil has made it even more difficult to estimate the value of private assets in Harvard’s endowment.

“The recent disruption in both venture capital and startup funding as well as bank failures has no doubt further exacerbated the question of what is the proper valuation for certain classes of assets,” he said.

Despite financial challenges, Hollister said Harvard is “fortunate” to have entered fiscal year 2023 in a “sound financial condition.” Harvard reported a $406 million surplus at the end of fiscal year 2022 — its highest in at least the last two decades.

The Thursday interview marked Hollister’s final interview with The Crimson. Harvard announced last November that Hollister would retire at the end of the academic year after serving as the school’s CFO for eight years.

Hollister is credited with preparing Harvard well for financial challenges resulting from the Covid-19 pandemic. In 2019, Hollister led recession planning with financial teams across the University to ensure the school was well-prepared for future economic downturns.

Reflecting on his tenure, Hollister said it is critical for Harvard to remain prepared to weather economic turmoil.

“Harvard in its almost 400 year history has seen many ups and downs, and we’ve certainly seen some of those in the last seven or eight years,” Hollister said. “Staying watchful, being prepared, maintaining sound financial footing were important most recently and in years ahead.”

Hollister’s retirement will coincide with that of University President Lawrence S. Bacow, who will be succeeded by Faculty of Arts and Sciences Dean Claudine Gay in July. Hollister said he was “thrilled” by Gay’s selection.

“I’ve had the opportunity to work with Claudine closely and think she’s terrific,” Hollister said. “One disappointment is that I will not have the chance to work with her or work under her leadership in the years ahead.”

During the presidential search, Hollister said he provided input on the “working relationship” between the CFO and Harvard’s top administrators: president, provost, and executive vice president.

Hollister said he looks forward to new endeavors following his retirement from Harvard.

“It has been a privilege to work at a place with such a worthy mission and so many interesting and dedicated people,” Hollister said. “But I have family, friends, adventures, and hopefully new chapters of contribution that I look forward to.”

—Staff writer Krishi Kishore can be reached at krishi.kishore@thecrimson.com. Follow him on Twitter @tweetykrishi.

—Staff writer Rohan Rajeev can be reached at rohan.rajeev@thecrimson.com. Follow him on Twitter @rohanrajeev_.