Harvard University got an F in finance recently when Avenue Entertainment filed for bankruptcy. The Hollywood production company, best known for The Player, set up shop in 1987 with $5 million in backing from the university’s $5.7 billion endowment fund. Couldn’t some of the school’s noted economists, such as John Kenneth Galbraith or Jeffrey Sachs, have stepped in to offer the fund a little free advice?
Like most colleges with endowment funds of over $1 billion, Harvard regularly dedicates a portion of the money to speculative investments. Scott Sperling, partner at the Aneas Group, which manages the fund’s venture capital, says the Avenue loss was unforeseeable. ”Unfortunately, you can’t control audience response,” he says. The fund has had its successes, too, most notably with an $8 million investment in TriStar Pictures that netted the university $30 million when Sony took over in 1990. But last October, Harvard took a beating when it reevaluated $200 million worth of highly speculative stock. At that point, the fund reportedly downgraded the value of its Avenue stock to a modest…zero.
Nonetheless, Harvard is still willing to pursue risky entertainment business. ”We’re not interested in the glamour part,” Sperling stresses. ”We’re interested in making high rates of return on our money.”