Illustration: Lu Ting/GT

Harvard University is currently one of the wealthiest universities in the world, not only because of donations from its successful alumni but also thanks to its strong wealth management capabilities.

Harvard Management Company (HMC), a fully owned subsidiary of Harvard formed in 1974, manages the university's endowments and related financial assets. In the 2013 fiscal year that ended June 30, 2013, the company realized a return of 11.3 percent, bringing the value of the university's endowment to $32.7 billion. Adding this amount to other income sources - such as tuition payments and government grants - the university has more than enough money to cover its daily operations. This diverse funding model has helped it comfortably withstand the financial pressures that have weighed on so many other US schools amid funding cuts to higher education programs.

In my opinion there are many traditional industries which could learn from this famous university's proactive investment approach.

Over the past two decades, HMC has averaged annual investment returns of around 12 percent. As any investor will tell you, it's not easy to realize such results year after year. Indeed, Harvard must shell out a great deal of money to recruit professional investment managers who can maximize the school's assets. A successful asset manager can earn several million dollars every year - far more than even Harvard's president - but spending wisely is usually the first step in earning money.

At first, HMC operated like most other investors hunting for stable profits: by putting a substantial portion of its capital into perennial blue chips such as Avon Co, Xerox Corporation, General Motors Company, Ford Motor Company and Boeing Company. But with time and the accumulation of investment experience, HMC adopted a more diversified investment strategy, with capital flowing not only into publicly traded stocks, but also into private-equity and venture-capital investments, natural resources and commodities, as well as real estate. With US equity markets booming last year amid the country's steady march toward economic recovery, HMC realized a 16.3 percent return from its stock investments in the 2013 fiscal year, while its fixed-income investments generated a 3.3 percent return.

Of course, while HMC has traditionally been cautious with its investments, a certain amount of downside exposure is unavoidable. In 2009, when US markets were wallowing at multiyear lows, Harvard's asset managers saw the value of their portfolio decline by 27.3 percent from the previous year. The company's investments in fixed assets were partially to blame for this loss, since the outbreak of the global financial crisis made it difficult to unload them. But with a reshuffled investment strategy skewed toward stocks, HMC's fortunes have recovered substantially over the past few years. Unfortunately though, most other US universities have failed to widen their income channels and have thus struggled financially as a result.

But again, what are the implications of Harvard's investment approach for other industries? Let's take traditional print media as an example. Everyone in the industry seems to agree that most periodicals can no longer rely on advertisement and subscription revenues to stay in business. At the same time, there is also a consensus that "new media" represents the way forward; even though few seem to have a clear notion of what this actually means.

As SEEC Media Group Ltd, a prominent player in China's media landscape, said in its 2013 annual report: "Even though we can see the upcoming risks, the road to sustainable future development is still being sought ... What is the future of new media? What is the business model of new media? Furthermore, what exactly does 'new media' mean? These questions are still confusing, but they cannot stop us from exploring."

As SEEC points out, there are many uncertainties with the development of new media. But as traditional media groups experiment with ways to monetize their work with digital technology, a sound investment strategy could help shore up their account books in the meantime. For instance, the Wenhui-Xinmin United Press Group (WUPG), which merged with Jiefang Daily to form Shanghai Newspaper Group in October 2013, successfully invested in high-growth industries such as finance. As a major shareholder of Hong Kong-listed Haitong Securities and the unlisted Oriental Securities, WUPG reportedly owns several billion yuan worth of securities at present.

Over recent decades, many media groups have accumulated large amounts of wealth by tapping into new business areas. If this money can be invested into other promising fields, traditional media outlets could find it easier to secure the cash necessary to transform themselves and their business models.

The author is a commentator. bizopinion@globaltimes.com.cn

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