[Column] Harvard University Begins Investing in Bitcoin

Prestigious American universities are major players in the investment world. Harvard University (approximately $53.2 billion), Yale University ($41.4 billion), and Princeton University ($34.1 billion) each manage funds of tens of trillions of won. Traditionally, their asset allocation was typically 60% stocks and 40% bonds. But the landscape shifted when David Swensen, formerly of Wall Street, took over Yale’s endowment management in 1985. He significantly increased the proportion of alternative investments, which require a long-term approach, achieving an average annual return of around 13% over 20 years. As other universities benchmarked this approach, the 'Yale Model' became the standard for American university endowment management.

However, this model has gradually revealed its limitations. Alternative investments such as hedge funds, private equity, real estate, and commodities have relatively high fees and management costs. Most notably, since these assets are hard to liquidate quickly, it was difficult to respond swiftly when asset values fluctuated. As a result, the average annual return of U.S. university endowments over the past decade was 6.8%, lagging behind many sovereign wealth funds. Even last year, during a bull market, the average was only 11.2%, lower than the roughly 14% return from a 70% stocks/30% bonds portfolio. The Financial Times (FT) predicted the ‘end of the Yale Model’ last April for this reason.

Following the launch of Donald Trump’s second administration, these weaknesses became even more pronounced. Trump used federal subsidies as leverage to suppress progressive tendencies at universities. Despite managing vast sums, Ivy League schools struggled to withstand the pressure of subsidy cuts, as much of their endowment was tied up in alternative investments and their liquidity was limited. Many universities, including Columbia University, revised their campus policies to compromise with the government. Only Harvard University, the foremost of the Ivy League, is still resisting the $2.2 billion subsidy freeze with a lawsuit.

Harvard University recently purchased a Bitcoin Exchange-Traded Fund (ETF) worth $120 million (about 160 billion won). This is the first large-scale cryptocurrency investment by a U.S. university endowment. Although Harvard is the wealthiest university in America, about 80% of its endowment is invested in alternative assets, making diversification crucial. The Bitcoin investment also aligns with Trump’s plan to position the United States as a ‘cryptocurrency capital’. It remains to be seen whether this move could become a new breakthrough for Harvard University, which faces both declining investment returns and political pressure.

By Ukjin Seo, Editorial Writer venture@hankyung.com