Harvard Seeks Short Sellers Amid Market Volatility
Harvard Eyes Short Sellers to Navigate Frothy Markets
Harvard University’s $38 billion endowment fund is taking precautions as market conditions become increasingly unstable. The university is looking to hire short sellers—investors who bet on declining stock prices—amid concerns of “frothy” markets, according to Stephen Blyth, Harvard’s Chief Investment Officer.
Blyth, who took over the endowment in January, emphasized the challenges posed by current market conditions. In a recent letter, he noted that the economic environment is expected to deliver lower returns compared to the recent past, and that volatility may become a more frequent occurrence.
Seeking Short-Selling Expertise
In an effort to hedge against potential market turbulence, Harvard is seeking managers experienced in short selling. Blyth highlighted concerns over market liquidity, referencing the sudden decline in U.S. Treasuries on October 15, 2014, as a “stark manifestation of the evaporation of liquidity” in markets. He warned that liquidity could disappear even without significant economic triggers.
Endowment Struggles Compared to Peers
Harvard’s endowment has underperformed in comparison to fellow Ivy League institutions like Yale and Columbia. While the endowment grew by 5.8% in the fiscal year ending June 2015, these gains fall short of what is needed to regain the top spot among elite institutions.
Real estate and venture capital were among the highest-performing sectors in Harvard’s portfolio, with the university’s investment team continuing to explore opportunities in life sciences, laboratory space, and retail.
Market Bubble Concerns Spread
Harvard’s concerns come as other prominent financial voices raise alarms about current market conditions. Germany’s finance minister recently suggested that the markets may be experiencing a “bubble,” signaling that risks are becoming more apparent globally.
While the S&P 500 has soared more than 200% during a 6-year bull run, the stock market experienced a sharp downturn in August, followed by a 10% correction. Since then, market volatility has remained high, keeping investors on edge.
