(Kitco News) - I don't usually like reading hyperbolic clichés, so I apologize for what I am about to say, but the second quarter was a game-changer for the gold market as Harvard's endowment fund jumped into gold for the first time on record.
After years of ignoring alternative assets, Harvard Management Company bought $101.5 million worth of SPDR Gold Shares, the world's largest gold-backed exchange-traded fund, between April and June. It also purchased 1.906 million shares of BlackRock's iShares Bitcoin Trust (IBIT), valued at approximately $117 million.
An analysis of its equity holdings shows that gold and Bitcoin now represent a combined 15% of its publicly traded portfolio. In comparison, at the end of last year, HMC reported only a 3% exposure to real assets, with less than 1% in natural resources.
It can't be overstated how transformative this move could be for other endowment and public pension funds, a sector that, according to WTW's Thinking Ahead Institute, saw global value grow to a record $58.5 trillion last year.
In its 2025 report, the institute said that pension and endowment funds have an average allocation of 45% in equities, 33% in bonds, 20% in other assets, and 2% in cash. These funds play extremely long games in global financial markets; they buy long-duration bonds and invest in private equity and private credit markets, which can lock up capital for decades. They rarely look at short-term momentum and pay even less attention to alternative assets.
I would love to ask the portfolio managers at HMC what they see in the global economy that makes gold an attractive investment now.
Although gold has a long track record of outperforming equity markets, it has been shunned by pension and endowment funds because it is considered a complicated asset.
Early in my career, I had the opportunity to listen to a panel of public fund portfolio managers discussing the importance of diversification. I was lucky enough to ask one question: Why not use gold as a diversification tool, given its established history of providing low-risk returns and reducing a portfolio's Sharpe ratio?
The panel's answer was fairly unanimous: nobody wanted to invest in gold because it can't be properly valued.
This is a theme I have heard often over the last decade as gold has outperformed both equity and bond markets. The most succinct argument I heard against gold came in June, during an informal conversation with a portfolio manager at a small family office. While he acknowledged gold's impressive run this year, he said, "If it doesn't have an EBITDA, I won't buy it."
The problem with gold is that it is a non-yielding asset, and its value can't be measured in the same way as a stock or bond. This is a risk that public fund managers have traditionally refused to take—until now, apparently.
Harvard "jumped the shark," and that move will likely support gold's long-term uptrend.
Have a great weekend.
