Harvard in talks to sell $1 billion in private equity amid financial strain

Harvard Management Co., managing the largest fund in US higher education, is collaborating with Jefferies Financial Group to sell the portfolio to Lexington Partners in a secondaries transaction

By Gillian Tan and Janet Lorin

 

Harvard University’s endowment is in advanced talks to sell about $1 billion of private equity fund stakes, at a time when the school faces financial uncertainty compounded by pressure from President Donald Trump’s threats and a sluggish market for returns on illiquid assets. 

Harvard Management Co., which runs the largest fund in US higher education, is working with Jefferies Financial Group Inc. to offload the portfolio to Lexington Partners in a so-called secondaries transaction, according to people with knowledge of the matter. Lexington may ultimately bring in partners as part of any purchase, said one of the people, who asked not to be identified describing private discussions. Terms of the deal aren’t finalized and could still change.

 

Spokespeople for Harvard Management, Lexington and Jefferies declined to comment. 

 

Harvard has allocated almost 40 per cent of its $53 billion endowment to private equity, according to an annual report for the year ended in June. Along with other universities, the school is facing pressure because investment firms are finding it difficult to sell companies and return money back to their limited partners. Delayed investment returns have pressured liquidity at endowments, pensions and family offices — forcing many to rely on the performance of their public stocks and bonds to meet immediate cash needs or seek secondary sales. 

 

The effort to sell the secondaries portfolio began last year, according to people familiar with the situation. That was before Trump’s announcement of market-roiling tariffs and his heightened conflict with elite universities, including Harvard, Princeton, Northwestern, Columbia and Cornell.

 

The Trump administration this month halted $2.2 billion of multi-year grants to Harvard, claiming it failed to enforce civil rights laws to protect Jewish students. Harvard then sued the government after refusing to bow to the administration’s demands for changes, which they characterized as threatening its independence and going far beyond the issue of tackling antisemitism. 

 

Responding to Harvard’s defiance, the president suggested the Internal Revenue Service should tax the university as a “political entity,” a move that would hurt the school’s finances and make it harder to raise money from donors. In reaction to pressure from the government, the school announced a hiring freeze in March and sold $750 million of bonds this month.

 

Lexington, a unit of Franklin Resources Inc., is one of the biggest investors in secondary transactions, which have gained popularity amid a slump in distributions from private equity managers. Last year, Lexington closed on a record $22.7 billion secondaries fund. 

 

Yale’s endowment is also exploring secondary sales. Evercore Inc. is advising the $41 billion endowment on a process that has been in the works for months, according to a Yale spokesperson. The fund remains committed to private equity and is still making new commitments, the spokesperson said. Yale has not disclosed a target size for a sale.

 

Harvard’s endowment had been late to the private equity asset class, but ramped it up in recent years. The fund’s 10-year annualized return was 7.6 per cent. The most recent fiscal year featured a 9.6 per cent return.