New US administration policies could leave Harvard University’s endowment fund facing a severe financial squeeze, according to new analysis from Ortec Finance.
The research suggests the fund, currently the largest in the US, could fall from $53bn to $43bn by 2040—and even lower to $29bn once inflation is accounted for—if proposed policies and regulatory changes take full effect.
The analysis highlights the risks posed by a mix of tax hikes, cuts to research funding and restrictions on international student enrolment. Under the most aggressive scenario mapped by Ortec Finance, the so-called ‘full policy scenario’, the university could see a 40% decline in its endowment over the next 15 years. Even the ‘limited policy scenario’ predicts a nominal drop to $50bn by 2040, or $34bn after inflation, leaving Harvard’s finances under sustained pressure.
Liquidity concerns loom large in Ortec Finance’s report, with the top 10 US endowments holding more than 70% of investments in illiquid assets like private equity—assets that have traditionally delivered high returns but offer little flexibility when cash is needed quickly. Only 20% of total assets are held in public equity.
Richard Boyce, managing director, North America, Ortec Finance said: “Given the increased liability from payouts and tax hikes and lower private equity investments, we see both scenarios leaving lasting impacts on the viability of Harvard’s endowment, with its size declining roughly 30% to 40% compared to a scenario with no policy and regulatory change. The only certainty ahead for Harvard and other US endowment funds is that there are big decisions to make – not without major risks and downsides.
“While there is no hard and fast path to managing unfolding scenarios, scenario analysis can help to manage the complexity of policy and investment decision-making. For all US endowments trying to navigate what the new policy and regulatory changes could mean, scenario analysis and stress testing provide the means to become better prepared, no matter what scenario ultimately comes into effect, as well as answering important decision-making questions.”
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