Harvard is dumping $1.5 billion in private equity investments

With the poor performance of stocks since 1999 and with interest rates at historically low levels, private equity investments have become all the rage, especially among university endowments, MoneyWatch reports. The bear market of 2008 may have changed that trend as universities found themselves squeezed for cash after the Lehman Brothers fiasco. Many learned that their need for liquidity was greater than they had anticipated and that the liquidity premium private equity investments have isn't a free lunch -- it's compensation for risk that tends to appear at the worst of times. In 2008, Harvard, the world's richest college, saw its endowment lose a record 27 percent.

Now, Harvard Management Co., which oversees the school's $32 billion endowment, is cutting its investments in the types of private equity investments that caused the large losses in 2008. It announced plans to offer about $1 billion of stakes in predominantly U.S. buyout funds through UBS AG. And it's already taking bids on about $500 million in energy investments…

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