Harvard axes 275 as slump hits wealth

©Getty Class of 2009: graduates from Harvard’s Kennedy School of Government protest this month at cuts in staffing at the Ivy League university

Harvard University said on Tuesday that it would cut 275 jobs this week as the recession had eaten into its $30bn endowment and forced it to curb spending.

Facing “extraordinary financial challenges”, Drew Faust, president of the US’s richest educational institution, said that previous moves to freeze salaries and encourage early retirement had not been enough. The cuts would affect administrative, professional, clerical and technical jobs throughout its schools, while an additional 40 workers would be asked to reduce their hours.

“Such decisions, in their human dimensions, are among the hardest that an institution like ours can make,” Ms Faust wrote in a letter to Harvard’s faculty. “But difficult circumstances have called for difficult decisions.”

Harvard is the oldest US university and its $30bn endowment has been the envy of its elite peers. During the past 10 years it averaged annual returns of 13.8 per cent.

But the financial crisis is expected to bleed nearly 30 per cent of those holdings, which fund nearly a third of its annual operating budget. Harvard has put some development projects on hold and frozen hiring.

In an interview with the Financial Times this month, Ms Faust said that the plunging endowment would have significant implications for what the university will be able to do in the future. People at Harvard had been “startled” by the dramatic shift in its fortunes, she said.

Harvard has flexed its financial muscle to attract the best academic talent and offer generous financial aid packages, upsetting institutions with smaller resources.

Marilyn Hausammann, vice-president for human resources at Harvard, said that Tuesday’s decision reflected a need to “adjust to the institution’s new economic reality”.

That new reality has forced the university to shift away from risky bets on mortgage-backed securities and distressed assets and has led to several recent departures from Harvard Management Company, which runs the endowment. On Monday, Marc Seidner and Michael Llodra, two prominent bond managers who were unhappy with this more conservative approach, announced they would leave.

Harvard, based in Cambridge, Massachusetts, employs about 16,000 faculty and staff. Tuesday’s cuts represent about 2 per cent of its workforce.