A recent WSJ article reports how Harvard's president is telling campus administrators, faculty, and students that the university will need to consider budget cuts and other steps because of hits to university investments caused by the global economic crisis. It was only a few months ago that reporters and bloggers (myself included - see previous post) were discussing how Harvard was reducing its weighting in domestic equities and was investing more in alternative investments, including private equity and hedge funds. Other funds were even beginning to mimic the asset allocation of the Harvard endowment (see previous post). While specific areas and loss amounts were not mentioned, one would have to believe that hedge fund losses are having a negative impact on the Harvard endowment. In what may be typical for most universities, but somewhat shocking for Harvard, President Faust is quoted as saying: "we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraints." You never want to hear the words "unprecedented" and "losses" in the same sentence. Moody's is even projecting a 30 percent decrease in the value of the endowment. Pretty amazing given how just this summer Harvard was being cast as a model for the use of alternative investments for achieving a global diversified endowment. In the end, the Harvard endowment will probably still fare better than most, but the recent news shows that even the benchmark for university endowments may need to patch a few cracks in the ivory tower.