Paying Tuition to a Giant Hedge Fund: Harvard

Ron Unz:

Harvard only improved its standing during the successful American postwar decades, and by its 350th anniversary in 1986 was almost universally recognized as the leader of the world’s academic community. But over the decade or two which followed, it quietly embarked upon a late-life career change, transforming itself into one of the world’s largest hedge funds, with some sort of school or college or something attached off to one side for tax reasons.
The numbers tell the story. Each September, Harvard’s 6,600 undergraduates begin their classes at the Ivy-covered walls of its traditional Cambridge campus owing annual tuition of around $37,000 for the privilege, up from just $13,000 in 1990. Thus, over the last two decades, total tuition income (in current dollars) has increased from about $150 million to almost $250 million, with a substantial fraction of this list-price amount being discounted in the form of the university’s own financial aid to the families of its less wealthy students.
Meanwhile, during most of these years, Harvard’s own endowment has annually grown by five or ten or even twenty times that figure, rendering net tuition from those thousands of students a mere financial bagatelle, having almost no impact on the university’s cash-flow or balance-sheet position. If all the students disappeared tomorrow–or were forced to pay double their current tuition–the impact would be negligible compared to the crucial fluctuations in the mortgage-derivatives market or the international cost-of-funds index.
A very similar conclusion may be drawn by examining the expense side of the university’s financial statement. Harvard’s Division of Arts and Sciences–the central core of academic activity–contains approximately 450 full professors, whose annual salaries tend to average the highest at any university in America. Each year, these hundreds of great scholars and teachers receive aggregate total pay of around $85 million. But in fiscal 2004, just the five top managers of the Harvard endowment fund shared total compensation of $78 million, an amount which was also roughly 100 times the salary of Harvard’s own president. These figures clearly demonstrate the relative importance accorded to the financial and academic sides of Harvard’s activities.