Harvard Investment Management Responds to Inquiry re their divestment of Israeli securities:
John Longbrake, Senior Communications manager at the Harvard Management Company:
Thank you for taking the time to write.
The Management Company’s most recent SEC filing details changes in holdings, as is routine, but no change in policy. The University has not divested from Israel. Israel was moved from the MSCI, our benchmark in emerging markets, to the EAFE index in May due to its successful growth. Our emerging markets holdings were rebalanced accordingly. We have holdings in developed markets, including Israel, through outside managers in commingled accounts and indexes, which are not reported in the filing in question.
A source says: Israeli High Tech Business Model Continues to Implode (HaAretz Aug 23) — before you knee jerk berate Harvard and others, it is not political it is responsible finance re underperforming assets:
Venture capital funds are to startups what banks are to businesses. With all due respect to “angels,” who finance startups that are little more than “an idea in a briefcase,” the venture funds are the main source of funding for young technology companies. If their model implodes, hundreds of startups throughout Israel could be at risk. Moreover, if the funding for these brash, innovative companies dries up, there will be less incentive for business giants of the world such as Intel and BMC to set up shop in Israel.
The worldwide venture capital model is at a crossroads. Here in Israel, it’s been four years since a technology company floated on the stock market, which is typically a point for venture capitalists to exit with profit. Israeli VC funds have had difficulty coming up with fresh capital for investment. But U.S. VC funds, the heart of the global venture industry, aren’t in much better shape. Is the entire model, based on the potential of high returns for great risk, crumbling? Some argue a shakeout is inevitable, but others say there are no viable alternatives.
An article titled “The VC Shakeout,” by Joseph Ghalbouni and Dominique Rouzies of the Harvard Business School, claims the model is mortally ill, and that many funds will disappear before it recovers. In the last year the funds’ quarterly IRR, or internal rate of return, has been in the single digits or negative, mainly because the companies haven’t been floating. In the first six months of 2010, only 26 companies went public on Wall Street, up from 12 the year before and 9 in 2008.
