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04-03-2018, 03:01 PM
Harvard Blew $1 Billion in Bet on Tomatoes, Sugar, and Eucalyptus
The university’s highly paid money managers thought they could manage risks other schools avoided.
By Michael McDonald and Tatiana Freitas
Published March 1, 2018, 7:00 PM GMT+8
Updated on March 2, 2018, 4:51 AM GMT+8
Six years ago, Jane Mendillo, then head of Harvard’s endowment, spent a week in Brazil, flying in a turboprop plane to survey some of the university’s growing holdings of forest and farmland. That year, Harvard began one of its most daring foreign adventures: an investment in a sprawling agricultural development in Brazil’s remote and impoverished northeast. There, workers would produce tomato paste, sugar, and ethanol, as well as energy after processing crops. The profits, in theory, could outstrip those of conventional stocks and bonds and keep the world’s richest university a step ahead of its peers.
Harvard bet the farm in Brazil and lost. The university, which invested at least $150 million in the development, is now exiting, according to people familiar with the matter who requested anonymity because they aren’t authorized to discuss the investment. The venture contributed to the decision by its current endowment chief, N.P. “Narv” Narvekar, to write down the value of its globe-spanning natural resources portfolio last year by $1.1 billion, to $2.9 billion. Harvard, which manages $37.1 billion, has said those investments produced strong returns but now face “significant challenges.” Current and former officials otherwise declined to comment.
Harvard made many mistakes over the last decade, according to Thomas Gilbert, a finance professor at the University of Washington, but almost all of them boiled down to a single miscalculation: the belief that its top money managers—who were paid $242 million from 2010 through 2014—were smarter than everyone else and could handle the risks almost all other endowments avoided. “They became loose cannons,” Gilbert says. “When you’re managing donor money, it’s appalling.”
More details in https://www.bloomberg.com/news/articles/...eucalyptus
The university’s highly paid money managers thought they could manage risks other schools avoided.
By Michael McDonald and Tatiana Freitas
Published March 1, 2018, 7:00 PM GMT+8
Updated on March 2, 2018, 4:51 AM GMT+8
Six years ago, Jane Mendillo, then head of Harvard’s endowment, spent a week in Brazil, flying in a turboprop plane to survey some of the university’s growing holdings of forest and farmland. That year, Harvard began one of its most daring foreign adventures: an investment in a sprawling agricultural development in Brazil’s remote and impoverished northeast. There, workers would produce tomato paste, sugar, and ethanol, as well as energy after processing crops. The profits, in theory, could outstrip those of conventional stocks and bonds and keep the world’s richest university a step ahead of its peers.
Harvard bet the farm in Brazil and lost. The university, which invested at least $150 million in the development, is now exiting, according to people familiar with the matter who requested anonymity because they aren’t authorized to discuss the investment. The venture contributed to the decision by its current endowment chief, N.P. “Narv” Narvekar, to write down the value of its globe-spanning natural resources portfolio last year by $1.1 billion, to $2.9 billion. Harvard, which manages $37.1 billion, has said those investments produced strong returns but now face “significant challenges.” Current and former officials otherwise declined to comment.
Harvard made many mistakes over the last decade, according to Thomas Gilbert, a finance professor at the University of Washington, but almost all of them boiled down to a single miscalculation: the belief that its top money managers—who were paid $242 million from 2010 through 2014—were smarter than everyone else and could handle the risks almost all other endowments avoided. “They became loose cannons,” Gilbert says. “When you’re managing donor money, it’s appalling.”
More details in https://www.bloomberg.com/news/articles/...eucalyptus
Specuvestor: Asset - Business - Structure.