Hushed VoicesSacred and secular, the University’s observance of Sep-tember 11 proved both a moving memorial to the thousandswho lost their lives to terrorists, and a reassuring reminderof the ordinary routines and responsibilities of daily life.

The service itself was extra-ordinary. Several thousandpeople gathered in Tercente-nary Theatre at noon, in breezybut temperate weather, undera shifting sky of gray and blue.Those nearest the terrace infront of Memorial Church saton the lawn, but most in theaudience stood during the 40-minute program, or sat on theWidener Library steps. Un-like a Commencement crowd,or the celebratory audience forNelson Mandela’s appearancefour Septembers earlier, thisone was utterly quiet, called to order by thetolling of the church bell, the blowing of theshofar, the chanting of the adhan and of theBodhicaryavatara. (The program for the cere-mony noted that the bell, donated by PresidentAbbott Lawrence Lowell to honor Harvard’sWorld War I dead, is inscribed, “In memory ofvoices that are hushed.”)

The welcomes and invocations were ecu-

menical, too, beginning with remarks by SwamiTyagananda, president of Harvard’s United Min-istry. He recalled that selfless acts by those whoresponded to the terrorist attacks “brought outthe best in human nature, and that filled us withcourage and strength.” Leaders of Hillel, the Is-lamic Society, and the Zoroastrian Association atHarvard echoed his wish that on this date everyyear people could observe a day of “remembranceand hope.” Then students read from the texts of

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Scenes from a memorial service: Jonathan Esensten ’03 (above, left)blows the shofar as L. Priyadarshi Shukla, Div. ’03, looks on; the ChoralFellows of the University Choir perform a commemorative work(above, right); Swami Tyagananda, president of the United Ministry atHarvard, helps distribute daffodil bulbs (bottom).

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52 November - December 2002

seven sacred traditions, beginning withthe Koran and concluding with the Jew-ish memorial prayer, El-Maley. After thefourth reading, choral fellows of the Uni-versity choir sang “Canticle: Mosaic inRemembrance and Hope,” composed forthe occasion by Carson P. Cooman ’04.

Recalling the shock and grief he helpedaddress exactly one year earlier in thesame venue, President Lawrence H. Sum-mers said, “We vowed then that we wouldremember and we have.” In current per-spective, he said, “we cannot evade thetruth that what we commemorate heretoday is more than just the tragedy ofhuman lives lost….It is the result of a calcu-

lated plan to murder unsuspecting peo-ple…because they were members of thisnational community enjoying the fruits offreedom.” Confronting “the eternal exis-tence of evil,” he said, “we regard theworld with understanding and openness,but we must also face it with moral clarity.We may debate the nature of truth, butthere are truths beyond debate. Pursuit ofthat truth is our particular objective.”Those “privileged to be part of a great uni-versity,” he said, must “use our knowledgeto build a world of deeper understanding,greater justice, and heightened respect forhuman life. For centuries, Harvard hasbeen proud to serve the American nation;

and now, increasingly, we are called toserve the world as well.” That service hedefined as “pursuit of truth—our highand common purpose.”

The bell resumed its somber tolling, theassembly rose for the benediction by PeterJ. Gomes, Pusey minister in the MemorialChurch, and the observance ended. Thosewho wished to took da≠odil bulbs, do-nated by a local nursery, to plant in memo-rial gardens around campus.

Unscripted were the abundant signs ofeveryday activity during the ceremony.Jets climbed overhead on routine flightsfrom Logan Airport, where only militarycraft flew a year before. Patrons exited

J O H N H A R VA R D ’ S J O U R N A L

Six days after helping to bring the community together atHarvard’s observance of September 11 (see preceding page),President Lawrence H. Summers broached what proved to be asharply divisive topic. On the first day of the fall term, while de-livering the brief address that forms part of Morning Prayers atMemorial Church, Summers spoke “as a concerned member ofour community” about what he called “disturbing evidence of an upturn in anti-Semitism globally” and also about “somedevelopments closer to home.” (The full text appears atwww.president.harvard.edu/speeches/.)

After stating that “much in Israel’s foreign and defense pol-icy…can and should be vigorously challenged,” he indicatedthat anti-Semitism and “views that are profoundly anti-Israeli,”traditionally the “primary preserve of poorly educated right-wing populists,” had increasingly found support in “progressiveintellectual communities.” Last among five academic actionsthat he called “anti-Semitic in their effect if not their intent”were two touching on Harvard: student fundraising for “organi-zations of questionable political provenance that in some caseswere later found to support terrorism”; and a petition callingfor divestiture of endowment funds from businesses operatingin Israel (see www.divest-from-israel-campaign.org). The latterstatement implicitly criticized the position of several dozen fac-ulty members, some of them Jewish, who have endorsed di-vestiture. (Summers noted that “the University has categoricallyrejected this suggestion.”)

After the Crimson reported the remarks, related articles ap-peared in national newspapers. A Crimson editorial titled “Sum-mers Stifles Israel Debate” called his treatment “disingenuousand divisive” and said his “arguments discredit the academicrigor of this institution.” The Boston Globe, while editorially op-posing divestiture, said that it was possible to do so “without as-cribing base motives to its proponents” and that labeling themanti-Semitic in effect “is needlessly inflammatory and tends tofreeze the debate.” “Instead of a critique,” the Globe concluded,

“Summers could offer an education.” The Wall Street Journalpraised Summers for focusing on “the selective targeting of Is-rael” and for making use of “the Harvard Bully Pulpit” in general.

That level of discourse was restrained compared to facultyreaction. In a scathing letter published in the Crimson on Sep-tember 19, professor of psychology Patrick Cavanagh called thepresident “either uninformed or a dupe” for equating “our anti-Israel petition with anti-Semitism.” Maintaining that “[Ariel]Sharon’s policies deserve every bit of criticism,” he urged that ifHarvard’s president “has nothing constructive to say, he shouldsay nothing at all.”

In a Crimson op-ed essay on September 23, psychology pro-fessors Elizabeth S. Spelke and Ken Nakayama said the object ofdivestiture was to press Israel, in accord with U.N. resolutions,to end its “occupation of the West Bank and Gaza,” abandonsettlements, and cease using torture and deportation. “Accusa-tions of anti-Semitism have been used effectively for decades tostifle criticism of Israeli policy,” they wrote. On the same page,Frankfurter professor of law Alan M. Dershowitz announcedthat after 38 years of teaching at Harvard, he was “writing inpraise” of an action by the institution’s president for the firsttime.

In his installation address in October 2001, President Sum-mers insisted that, even as “All ideas are worthy of considera-tion here…not all perspectives are equally valid,” a themereprised at Commencement (“Openness does not mean sup-posing that all ideas are created equal”) and again this Septem-ber 11 (“…there are truths beyond debate”). He has expressedhis opinion on issues of interest within the academy and be-yond (grade inflation, ROTC and military service), and hasproved his ability to attract attention for those views. In thatlight, the critical reactions to his Memorial Church remarks ap-pear to reflect not only substantive differences but also con-cern in the community about the ability to engage on an equalfooting in that search for truth that is the University’s hallmark.

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Steady StateDiversification pays. So do e≠ectiveinvestment disciplines. Those are the twosignal lessons from recent Harvard Man-agement Company (HMC) stewardship ofthe University’s endowment funds. Thereturn on investments, after all expenses,was -0.5 percent for the fiscal year endedJune 30.

As most individual investors know, the“investment climate was once again harsh”during that period, as HMC presidentJack R. Meyer, M.B.A. ’69, describes it,with “sharply negative” returns for themajor U.S. equity markets, including pri-vate equities such as venture capital. “Wemay not be out of the woods,” Meyerwrote in September, in his annual letterreviewing performance, “but the endow-ment has weathered the two-year stormin fine shape.” (During those two years,the chief U.S. stock-market indexes de-clined 32 percent and 63 percent.) Butcoming out of that storm, the endow-ment’s ability to propel further growth inUniversity spending on its academic pri-orities may need to be reexamined.

In absolute terms, the endowment wasvalued at approximately $17.5 billion atthe end of the fiscal year—down from$18.3 billion at the end of fiscal year 2001,and a peak of $19.1 billion the year before.The decline, which Meyer terms disap-pointing, reflects three factors. First, therate of return on investments has nowbeen negative for two consecutive years(following the -2.7 percent return in fiscal2001)—a first in modern Harvard endow-ment history. Second, and far more impor-tant, is the actual distribution of fundsfrom the endowment, a sum that now to-tals $750 million or so annually and con-stitutes the largest single source of rev-

enue for Harvard’s programs and opera-tions—about 30 percent of the total. Fi-nally, the endowment varies with the netamount of gifts received. In the most re-cent fiscal year, Meyer estimates, gifts to-taled about $150 million, or half the fundsreceived during the prior year.

On a relative basis, that modestly nega-tive -0.5 percent investment return is causefor celebration. The indexes against whichHMC benchmarks performance in its di-verse classes of invested assets produced a-4.5 percent return, and the median fundwith which the Harvard endowment iscompared yielded -5.9 percent. Althoughthat means HMC achieved a narrowermargin of superiority over peer funds thanin the prior year, the University is still for-tunate. Had HMC only matched thebenchmark returns for its model “policyportfolio” or run at the median institu-tion’s return, Harvard would be $800 mil-lion to $1 billion less well endowed.

HMC’s fiscal year 2002 results reflect“consistency across asset classes,” Meyersays, a result that “pleases us.” As mightbe expected in a year of sluggish economicgrowth, low and declining interest rates,and poor stock-market returns, fixed-in-come investments (about one-quarter ofassets) drove theendowment per-formance overall.Foreign bonds re-turned 32.4 per-cent, more thantwice the bench-mark; domesticbonds returned14.8 percent, morethan 5 percentagepoints above thebenchmark; andthe portfolio ofinflation-indexedbonds, a relativelynew category forHMC, returned 9.2 percent.

Equity holdings—40-plus percent ofthe assets—were laggards, with one ex-ception. Domestic stocks yielded -12.2 per-cent. Private equities were even weaker,returning -19.7 percent; Meyer notes thateven though venture-capital firms remainawash with excess cash and returns re-main terrible, over time Harvard has had

extraordinary results from such invest-ments and seeks to maintain its positionwith the top outside managers. Foreignstocks had negative returns as well. Butthe smaller emerging-market portfolio re-turned 7.5 percent. In all four categories ofequities, HMC managers exceeded bench-mark returns.

The other strongly positive investmentclass was “absolute return”: hedge funds,which can sell securities short or invest inspecial situations. Here, returns totaled10.2 percent, versus a negative result forthe benchmark. Commodities invest-ments (oil, gas, and timber) produced amodestly positive return well ahead ofmarket results, and the high-yield portfo-lio matched the benchmark’s essentiallybreak-even result. Only in real estate didHMC trail the market—a di≠erenceMeyer attributes to timing. Harvard ap-praised its properties at the end of itsfiscal year, and so reflected current marketvalues for the kinds of opportunistic in-vestments it makes. Most funds will dotheir appraisals at the end of the calendaryear. “There should be some pain” then,Meyer says, “and we haven’t seen it yet inthe benchmark.”

In broader perspective, HMC continues

to compile admirable records. Its 10-yearannualized rate of return (see chart)reflects outperformance in every class of in-vestments for which a record that long ex-ists. The 15.2 percent annualized rate of re-turn for the endowment overall exceededinflation by 12.5 percentage points—doubleHMC’s long-term goal of a 6 percent realrate of return. The realized rate of return

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0 5 10 15 20 25 30

and entered Widener, free to pursue theirindividual interests. A professor strode to-ward the Faculty Club. Late-summer in-sects buzzed in the trees. A bus proceededdown Quincy Street, and motoristshonked through Harvard Square. Highabove the Yard, one of the local red-tailedhawks surveyed the silent crowd on a de-liberate, circling transit, west to east. OnSeptember 11, 2001, the very idea of nor-malcy had seemed shattered.

Domestic equities

Foreign equities

Emerging markets

Private equities

High yield

Commodities

Real estate

Domestic bonds

Foreign bonds

Total

Median fund

17.9%12.2%

9.2%6.3%

11.1%6.2%

27.3%19.8%

9.5%3.4%

10.5%7.5%

13.9%8.7%

13.7%7.7%

11.9%5.2%

15.2%11.4%

9.9%

Ten-Year Endowment PerformanceAnnualized Returns

Harvard

Market Benchmark

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