Harvard Offloads $1 Billion of Private Equity Stakes Amid Financial Strains and Political Pressure

In the face of growing financial uncertainty and escalating political tension, Harvard University is reportedly in advanced discussions to sell about $1 billion worth of its private equity holdings, marking one of the largest such moves by a U.S. university endowment.

The planned sale comes as Harvard grapples with mounting liquidity challenges, a sluggish private equity market, and increasing scrutiny from former President Donald Trump, whose recent actions have threatened the university’s financial and institutional autonomy.

According to sources familiar with the matter, Harvard Management Company (HMC) — which oversees the university’s $53 billion endowment, the largest in U.S. higher education — is working with Jefferies Financial Group Inc. to facilitate a secondary sale of private equity fund stakes. The potential buyer? Lexington Partners, a prominent player in the secondaries market and a subsidiary of Franklin Resources Inc.

While the exact terms are still under negotiation and could change, insiders say Lexington may bring in partners to participate in the deal, signaling the complexity and scale of the transaction.

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The move isn’t entirely unexpected. Nearly 40% of Harvard’s endowment is tied up in private equity — a traditionally high-return asset class but one that’s also illiquid and slow to deliver returns in today’s market. Amid delays in distributions from private equity managers, many endowments, pensions, and family offices are turning to secondary markets to raise much-needed cash.

Harvard’s decision to explore a sale began last year, even before the Trump administration intensified its rhetoric and actions against elite institutions. But recent developments have only heightened the urgency.

In a controversial move earlier this month, the Trump administration froze $2.2 billion in multi-year federal grants to Harvard, accusing the university of failing to protect Jewish students under civil rights laws. Harvard responded by filing a lawsuit, arguing that the administration’s demands infringed on the university’s independence and far exceeded the issue at hand.

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In retaliation, Trump publicly floated the idea of revoking Harvard’s tax-exempt status, labeling it a “political entity” — a threat that, if realized, could severely damage the university’s ability to raise donations and sustain its financial foundation.

Faced with this volatile environment, Harvard has already implemented a hiring freeze and issued $750 million in bonds in April to shore up liquidity.

Harvard isn’t alone in rethinking its investment strategies. Yale University, with a $41 billion endowment, is also exploring the sale of private equity stakes on the secondary market. An official confirmed that Yale has retained Evercore Inc. as an advisor, though no target amount has been disclosed. Yale maintains that it remains committed to private equity and continues to make new investments in the sector.

Secondary sales — once seen as a last resort — have become more mainstream as returns from private equity have slowed and cash needs have surged. Lexington Partners, for example, recently closed a record-breaking $22.7 billion secondaries fund, highlighting growing demand from institutions seeking liquidity.

Harvard’s embrace of private equity came relatively late, but it has ramped up its exposure in recent years. The fund reported a 9.6% return for its most recent fiscal year and a 10-year annualized return of 7.6% — respectable figures, but perhaps not enough to offset the mounting pressure from political challenges, delayed payouts, and looming financial commitments.

As elite universities navigate an era of uncertainty — where financial strategy, public scrutiny, and politics are increasingly intertwined — decisions like Harvard’s secondaries sale may become the new normal.