Harvard University's endowment fund is larger than any other university in the world. This is partly due to its innovative investment strategy.

Daniel passed away at the age of 93. During his tenure as the chairman of the fund's board of directors, he witnessed the amazing growth of the school's endowment fund. Under his leadership, the university established an internal hedge fund, namely Harvard Management Company (HMC). HMC, located in the Boston Federal Reserve Bank building with a view of the harbor, was a pioneer in adopting a long-term investment strategy, investing in private equity and hedge funds, exotic at the time.

"HMC is considered one of the world's leading investment management companies," said Jonathon Jacobson at Daniel's February memorial service. He was a manager at Harvard University and later left to start his own hedge fund.

However, in recent years, Harvard University's returns have lagged behind competitors such as Yale University and Brown University.

Over the past 20 years, Harvard's endowment fund's annualized return rate of 8.8% ranks seventh among the Ivy League schools. According to data from the National Association of College and University Business Officers in the USA, Harvard manages over $5 billion but lags behind 60% of university funds in terms of returns. Harvard's 10-year return rate lags behind by 80%.

Former Harvard University President Lawrence Summers complained that if the growth rate of the endowment fund over the past 20 years could reach the industry average, the university's funds would increase by about $20 billion, almost equivalent to the entire endowment fund of the University of Pennsylvania. (Summers is a Harvard University professor and former US Secretary of the Treasury).

Harvard is not stingy when it comes to compensating investment talent. Tax filings for Harvard Management Company show that over the past twenty years, the endowment fund has paid approximately $0.8 billion in total compensation to its top investment managers and executives, enough to cover the university's undergraduate scholarship budget for over three years. (The endowment fund has not disclosed the compensation for the most recent year). As of June 2023, Harvard University's endowment fund size is $50.7 billion, still the largest in higher education, but this may not last long; the Texas A&M University System, driven by oil revenue, may surpass it.

The reason for Harvard University's endowment fund underperformance stems from a typical investment mistake: changing strategy at the wrong time, chasing returns, in short, buying high and selling low. Since 2005, Harvard University has had seven fund managers, including three interim managers and two managers with less than two years of tenure.

The school increased risk before the market downturn, then reduced risk exposure before the market recovery. It bought into once popular investments, only to watch them deteriorate. Recently, Harvard University made significant investments in private equity before its performance faltered. "You just feel like they're chasing trends," said Mark Williams, a finance lecturer at Boston University who has been monitoring Harvard University's endowment fund for many years.