Unveil the Top Three Assets Comprising Harvard University's Investment Holdings (Note: Nvidia Doesn't Making the Cut!)
Regarding college prestige, Ivy League institutions often rank highly in the hierarchy. In exchange for a substantial sum – for instance, $60,000 annually for Ivy League schools in the 2022-2023 academic year – aspiring students are promiseda superior education and the opportunity to secure well-paying jobs upon graduation.
The argument over which Ivy League school is the "best" based on education may be contentious. However, there's no room for debate when it comes to which of these esteemed universities boasts the largest financial resources.
By the end of fiscal 2023 (June 30, 2023), Harvard University's endowment amounted to $50.7 billion. This considerable war chest was amassed over the years through generous donations and shrewd investments overseen by the independent Harvard Management Company (HMC).
With an enormous amount of capital at its disposal, HMC has undeniably distributed Harvard's wealth among various investments. This expansive portfolio includes private equity, bonds, natural resources, real estate, hedge funds, and even individual stocks.
Within 45 calendar days following the conclusion of a quarter, institutional money managers handling at least $100 million in assets are obliged to file Form 13F with the Securities and Exchange Commission. This document provides a detailed overview of Wall Street's most astute investment strategists' transaction activities within the preceding quarter. Given HMC's management of assets exceeding $100 million, it must divulge the securities it's acquired, disposed of, and continues to hold.
When the first quarter concluded, Harvard Management Company was in possession of 12 securities for Harvard University's endowment, totaling almost $1.6 billion. One of these 12 investments is AI pioneer Nvidia. Despite its prominent position, it only accounts for near 3% of the invested assets.
On the other hand, the top three securities held by HMC account for an impressive 78.4% of Harvard University's investment portfolio.
Alphabet: 32.93% of invested assets
Harvard Management Company made two purchases during the quarter that concluded in March. One of these acquisitions was an addition of 750,800 shares of Alphabet (specifically Class A shares) to an existing position. Alphabet, the parent company of internet search engine Google, streaming platform YouTube, and cloud infrastructure service platform Google Cloud, is the primary attraction for more than half a billion dollars of Harvard's endowment.
What draws investors to Alphabet's Class A stock is its seemingly unassailable position in internet search. Over the past nine years, Google has accounted for at least 90% of the worldwide monthly internet search share, and it's unlikely to relinquish this substantial market share in the near future. Google serves as the go-to option for advertisers who wish to target consumers with their marketing campaigns.
While Google is the cornerstone of Alphabet's core business and has the potential to generate substantial cash flows during periods of economic growth, HMC might also be captivated by the rapid growth of Google Cloud.
Businesses are poised to devote a greater percentage of their capital expenditures to cloud services in the coming years. This burgeoning trend will undoubtedly benefit global No. 3 cloud infrastructure service platform Google Cloud, given that the associated margins are significantly higher than those associated with advertising.
Though Alphabet's balance sheet may be enough to instill confidence, its board also recently authorized a $70 billion share buyback program.
Meta Platforms: 26.31% of invested assets
The second-largest holding in Harvard University's nearly $1.6 billion equity portfolio is social media sensation Meta Platforms. Meta was HMC's largest holding at the end of 2023, but investment managers sold 428,000 shares (around one-third of the previous stake) during the first quarter.
One of the advantages of Meta's business model is its cyclical nature. While recessions are inevitable, economic cycles are not linear. Recessions typically resolve in under a year, whereas most growth periods span multiple years. Since Meta generates nearly 98% of its revenue from advertising, its operations are well-suited to thrive during these prolonged economic expansions.
Moreover, something that works to Meta's advantage is its top-notch social media real estate. It is the proprietor of the leading social networking site, Facebook, as well as other popular social destinations such as Instagram, WhatsApp, Facebook Messenger, and Threads. During the March-ended quarter, these apps collectively attracted 3.24 billion daily active users. At present, no other social media platform offers marketers access to a larger audience than Meta.
Keeping with the theme, Meta Platforms boasts a strong balance sheet. As of the end of March, the company had more than $58 billion in cash, cash equivalents, and marketable securities, and is projected to generate $77 billion in net cash from operations this year, based on its net cash generated from operations reported in the first quarter.
A robust financial statement is vital for Meta, considering CEO Mark Zuckerberg's ambition to invest in the future. Meta's Reality Labs division is pouring resources into AI-boosted data centers, AR/VR tech, and the metaverse. Zuckerberg's visionary projects often require time to mature before monetization kicks in, and Meta's financials offer Zuckerberg the financial leeway to make such future-oriented investments.
Invesco QQQ Trust: 19.16% of investments
The third-largest investment in Harvard University's portfolio managed by Harvard Management Company is the Invesco QQQ Trust (QQQ -0.85%).
The Invesco QQQ Trust is an index fund designed to mimic the performance of the Nasdaq-100. It was the second security, apart from Alphabet, that HMC purchased during the first quarter of the year. After having no investment in the Invesco QQQ Trust at the end of 2023, HMC bought 686,000 shares during the quarter ending in March.
The appeal of the Invesco QQQ Trust likely stems from gaining access to all the "Magnificent Seven" stocks, such as Alphabet, Meta, and Nvidia, at the touch of a button. Although the Nasdaq-100 comprises a few value stocks, it's predominantly made up of high-growth tech and healthcare companies. As a result, it's an index fund that provides Harvard University with exposure to forward-thinking, groundbreaking businesses.
Since index funds are passively managed (meaning there's minimal turnover since the index's constituents rarely change), the Invesco QQQ Trust comes with a modest net expense ratio of just 0.2%.
Furthermore, as the Invesco QQQ Trust is driven by some of the most influential businesses on Wall Street, it has more than doubled the performance of the benchmark S&P 500 over the past 10 years (405% vs. 176%, as of May 29, 2024). As long as the current bull market persists, there's a good chance that high-growth companies will remain outperforming.
Investors like Harvard Management Company often allocate a significant portion of their funds towards investments, utilizing strategies that can generate substantial returns. For instance, in the case of Harvard University's endowment, the management team scrutinizes various financial instruments to maximize returns.
To make informed investment decisions, financial institutions and money managers regularly review quarterly reports and financial statements, such as the Form 13F filed with the Securities and Exchange Commission. By disclosing their transactions, these institutions enable the public to gain insights into their investment strategies and analyze trends.
){kind=link}