HARVARD
ENDOWMENT FUND IS INVESTING IN AGRICULTURE------By Shan Saeed
STRATEGIC
INSIGHT ABOUT THE ENDOWMENT WORKING
It would be surprising
for many investors/readers/people in general. Harvard Management Company, the
endowment fund of Harvard University is investing in farmland in New Zealand and
other Real Estate projects globally. The total fund stands at $30 billion in
which 10% portfolio has hit the Real Estate allocation in farmland. For some people
Harvard University endowment works in secret environment and nobody knows the
amount of investment it is making globally.
Indeed, the entire crew at Harvard Management
Company is routinely described as “secretive” and “tight-lipped.” It uses its
status as a non-profit to keep its dealings as hush-hush as possible. Not even the students know how it operates or
where it invests. But I got this information from my networking who is an alumni
of Harvard Business School with strong inside connections. The school's student
magazine, The Crimson,
recently noted: “The managers operate behind a veil of secrecy under the
pretext of losing competitive financial advantage.”
They certainly have an advantage.
The fund has tens of billions more under management than the next closest fund
over at Yale. It raises more money than any other non-profit in the United
States. And it does so with zero fundraising expenses, so people are literally
throwing money at it. Why not? It's returned an average 12.9% for the past two
decades — far better than the average return of the Dow, S&P, or
NASDAQ. However, Harvard Endowment lost the highest money among the major
endowments during the financial market crisis running from 2007 to 2009. In the modern era of information, nothing
stays secret for long. And if you look closely enough, over the past few years,
some of this fund's secrets have started to be revealed...
Endowment has become Land Barons: New financial
investors
HARVARD ENDOWMENT IS GOING TO NEW ZEALAND------INSIDE STORY
Harvard Management Company bought over 400,000 acres of the
Kaingaroa forestry estate in New Zealand in 2003. Though the price wasn't
disclosed, it's rumored to have sold for over $800 million. The question is why
New Zealand. Since one of the alumnus who is a Kiwi and handles the funds has
taken this position in the farmland in New Zealand. It helped that Andy
Wiltshire was from New Zealand and had worked for the New Zealand Forest
Service, which originally developed the Kaingaroa Plantation. He also went to
school with the CEO of Kaingaroa Timberlands. After that investment, Harvard
set its sights on Maniototo's Big Sky Dairy Farm, New Zealand's first
“superfarm” with 6,000 cows on 4,000 acres. Financialization of commodities is happening
now as big financial investors are taking position in this new asset class for
wealth preservation and protection
RATE OF RETURN FOR ENDOWMENT
The bets have paid off nicely: Last year the portion of Harvard's
portfolio that owns real estate posted an 18.8% return. Meanwhile, major market
indices only posted a 5% return. Already this year, the fund has made a $4.0
million profit on the dairy farm alone. And the party is just getting started. Under
Wiltshire's watch, forests, farms, and other real estate have grown to 10% of
Harvard's portfolio, over $3 billion. Of course, making lucrative profits on
billion-dollar investments isn't hard when you run in the same circles as
Harvard alumni.
Many of the funds it manages come from wealthy graduates — a list
that includes countless heads of state, congressmen, governors, Nobel and
Pulitzer winners, and chief executives. Names like Obama, Romney, and Bernanke
are all on the list.
IN THE HARVARD CLUB, OUT OF THE MARKET PLAYERS.
The Harvard Management Company ['management' and 'company' certainly
aren't nonprofit words] is definitely “in the club.” It shares an office with
the Federal Reserve Bank in Boston — the same building from which Jane
Mendillo, head of the fund, gave a rare interview this year that offered some
insight into their strategy...According to her, what is she looking for in property
deals that produce something that the world is going to want more of, and the
increase in the supply is difficult. Makes sense to many potential investors.
NETWORKING IS THE KEY IN
THE END:
Harvard endowment fund people rub elbows gives it a distinct
advantage. A lot of other investors don't have the expertise, don't have the
team to go out and look at individual [real estate opportunities]...”Armed with
that expertise, Harvard is the first endowment fund to directly buy real estate
outside of the United States.
After it became one of the largest foreign landholders in New
Zealand, it bought the majority of a company that's one of the largest
landholders in Romania, with over 86,000 acres. Most recently, it bought three
huge farms in Brazil. And here's the most important thing in all of this: These are investments you and I typically
can't be a part of. These investments are for Ivy League people only. There's
an Ivy League/Insider velvet rope. They aren't delivering monster returns by
investing in publicly-traded land ETFs or real estate funds. They know that stuff's
for us underlings. No, they buy the assets directly and manage them
themselves...And this is their key to success: They play the insider game.
JIM ROGERS FAMOUS WORDS:
FUND MANAGERS WOULD BE ACTING LIKE FARM MANAGERS
I had the pleasure of meeting Jim Rogers in Singapore and London
who shared an investment advice for the next 5-10 years. Become a FARMER. I
have penned down in one of my articles published in Investors Guide Magazine: http://investorguide360.com/aig/press-release/agriculture-is-the-best-investment-for-the-next-5-10-years-by-shan-saeed/
BLOOMBERG REPORTED
According
to Bloomberg in September-2012, “It was Harvard’s
early and enthusiastic embrace of alternative assets such as private equity and
hedge funds that turned it into one of the top performers among endowments.”
For too long, surefire investments like these have been off the
table for everyday folks, reserved instead for Ivy League graduates and their
cocktail party buddies. In recent years, there have been thrown some scraps as
similar funds, like The Carlyle Group (NASDAQ: CG), Blackstone (NYSE: BX), and
Kohlberg Kravis Roberts (NYSE: KKR), have taken a portion of their assets
public.
But you don't get to profit directly
from their deals. You still have to buy a stock and be at the whim of the
market. While the heads of those firms and the people they make deals with have
undoubtedly made billions this year, each of those stocks is only up between 5%
and 15%.
The key to investing and profiting
like these funds is not to own a piece of the fund — but to do the same
kind of deals they do on your
own. It's something I've spent a great deal of time researching lately. And I have found a way for people like us
to do it without having been introduced to a senator or private equity
billionaire...You see, there's an overlooked way you can make real estate
investments just like these top-notch people do — without buying a single share
of a public company. They are private deals with extraordinarily high returns
and they are available to people now It may not get you in their club, but it
will allow you to similarly profit without touching the actual stock market.
Disclaimer: This is just a research piece and not an investment
advice. All financial transactions carry a RISK
