The Boston Globe reports that in a February 14, 2007, message detailing the decline of high-risk subprime mortgages, Goldman executive Daniel Sparks wrote to colleagues: “That is good for us position-wise, bad for accounts who wrote that protection.’’ He cited Harvard University and three others as being on the losing end of a $500 million derivatives trade.
The e-mail indicates Goldman’s chief executive, Lloyd Blankfein, was sent a copy, according to the Globe.
Harvard spokesman John Longbrake confirmed the university made the investment. “The investment referenced in the e-mail was deliberately unwound, and was part of an investment strategy that is no longer pursued,” he said.
The school in fiscal 2008 lost 27% of its $37 billion endowment and another $1.8 billion in operating cash because of bad investments (see Harvard Endowment Slammed with $11B FY Loss). Harvard also paid $500 million to get out of interest-rate swaps that failed when rates fell instead of rising (see Harvard Reports Large Cash Loss).
In the year of the Goldman trade, fiscal 2007, the endowment posted a gain of 23%.
Mohamed A. El-Erian, who was running the endowment at the time, declined to comment to the Globe.