Harvard University Explores $1 Billion Private Equity Stake Sale Amid Financial Pressures

CAMBRIDGE, Mass. — Harvard University's endowment, the largest in U.S. higher education, is in advanced discussions to sell approximately $1 billion in private equity fund stakes, a move driven by financial uncertainties and a sluggish market for illiquid assets, according to a source familiar with the matter. The Harvard Management Company, which oversees the $53 billion endowment, is working with Jefferies Financial Group to facilitate the sale to private equity firm Lexington Partners.

The decision comes as Harvard faces mounting pressures, including threats from the Trump administration to cut federal funding. The administration has already frozen $2.3 billion in grants, primarily from the Department of Health and Human Services, and is reviewing $9 billion in federal contracts and grants, citing violations of Title VI of the Civil Rights Act during last year's Israel-Hamas war protests. Harvard has filed a lawsuit against the administration, arguing that the funding cuts are an attempt to control academic decision-making.

Harvard's endowment, with nearly 40% allocated to private equity as of June 2024, is navigating a challenging environment where private equity returns have underperformed. "Harvard had 39% of its funds into private equity assets in 2024, according to the annual Harvard financial report," noted a Reuters source. Selling these stakes could provide liquidity but may result in losses if market conditions remain unfavorable.

The move aligns with similar strategies at other Ivy League institutions. Yale University is exploring a sale of up to $6 billion in private equity holdings, representing about 30% of its private equity investments, advised by Evercore Inc. Both universities are grappling with budget challenges stemming from lackluster investment performance and political pressures.

Harvard's financial strategy also includes a recent plan to borrow $750 million from Wall Street as a contingency measure, while Princeton is considering selling $320 million in taxable bonds. These actions reflect a broader trend among elite universities to diversify funding sources amid federal scrutiny and economic uncertainty.

The sale, if completed, would liquidate nearly 5% of Harvard's private equity portfolio, a significant step for an endowment that distributed $2.4 billion last fiscal year, 70% of which was restricted to specific purposes like financial aid and professorships. While the endowment's $53 billion size offers a buffer, experts warn that tapping illiquid assets like private equity is complex and could signal a shift in investment strategy.

Harvard's negotiations highlight the delicate balance between maintaining academic independence and securing financial stability in a politically charged climate. As the university continues its legal battle with the Trump administration, the outcome of this sale could set a precedent for other institutions facing similar challenges.