Bloomberg has reported that Harvard’s endowment has grown less than others, at a surprisingly small rate of 2%, according to a new report by Bloomberg.  This compares to a 20% growth by Yale, and  44% growth by Stanford.

What’s been working in Stanford, California, and New Haven, Connecticut, that hasn’t in Cambridge, Massachusetts? The answer is simple, according to industry observers. While preeminent in so many categories, Harvard is profoundly mediocre when it comes to investing strategy. In the 10 years ending June 30, its annual average return from investing its endowment was 4.4 percent. That’s below average in higher education and trails the school’s peers—in some cases significantly. Stanford posted an annual average return on investments of 5.8 percent, while Yale generated a 6.6 percent return.

Given the size of Harvard’s still massive endowment (more than $35 billion), I can assure you that these are problems my Jesuit school would love to have.  Still, in the grand scheme of tings, they may be significant for Harvard’s business model:

Harvard spends about 5 percent of its endowment annually subsidizing the university, which is in line with practices at other schools. Traditionally, endowments use the money to drive the quality of schools, subsidizing financial aid and academic operations. The wealthier the college, the more it can spend on scholarships and top faculty. Last year, Harvard tapped its endowment for about $1.8 billion, accounting for 36 percent of the university’s yearly budget, according to an annual report.

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