Harvard Endowment posts record returns driven by selling short an index of Harvard Innovation Lab start-ups


Ted Stickles, Contributor

Following its humiliating loss of almost $2 billion in value last year, the Harvard Management Company announced that over the past six months alone, it had generated returns in excess of 30% — or $11 billion — prompting spontaneous and wide-spread celebrations across campus.

“I chalk our newfound success to a fundamental change in our investment philosophy,” said freshly installed HMC CEO N.P. Narvekar in an interview. “Our strategy now is very simple. We just short every single idea that comes out of the i-Lab. The esoteric, wildly unfeasible, and downright terrible ideas generated by Harvard Business School students generates short opportunities with the consistency of a bond.”

Recognizing an opportunity for partnership with HMC, J.P. Morgan’s Private Wealth Division has bundled and securitized i-Lab startups into IBS, or “i-Lab Backed Securities”. “Our experience packaging mortgage-backed securities with very similar characteristics to IBS before the financial crisis combined with our strong team of like-minded Harvard Business School alumni, we are uniquely positioned to serve this market need”, stated J.P. Morgan CEO Jamie Dimon.

Asked what is driving such consistent low quality, Managing Director of the i-Lab Jodi Goldstein explained: “What do you expect when a group of the most insulated and privileged brats try to solve ‘real world problems’? Did you really think the world was dying for an app to set up neighborhood pick-up squash matches? Posting a SurveyMonkey to your section Slack doesn’t count as market research. We tell our entrepreneurs that we made the Entrepreneurs-in-Residence sign NDAs to protect their start-up ideas, but it’s really to protect the Harvard brand by preventing EiRs telling the world how terrible the ideas are.”

Dean Nohria claims that such obstacles were not a complete surprise. “After years of listening to student comments and reading student final exams, we were obviously worried that the quality of the start-ups by HBS students would be similarly of terrible quality. This was the primary reason why we decided to build the i-lab a quarter-mile west from the center of campus with the hope that it would help students think differently, but it turns out we were still about 3000-miles short from generating anything of quality. Luckily it has presented unforeseen opportunities for alpha.”

Goldstein claims that the i-Lab never had a chance. “People always say they are ‘Looking for the next Google, Microsoft or Facebook’. Well look at those companies – one is started by Stanford alums and the other two are started by guys who were smart enough to realize that coming to Harvard was a mistake”

Meanwhile, Wharton’s Chief Investment Officer, not wanting to miss out on the opportunity, has recently declared a partnership with JP Morgan through which they will be buying large quantities of IBS’s packaged into Collateralized Really Awesome Projects, or CRAP.