Harvard University Endowment Boasts 21.4% Return

(September 23, 2011) — Harvard University’s endowment has returned 21.4% on its investments and was valued at $32 billion for the fiscal year ending June 30, according to a report by the largest endowment in the United States.

This marks the second consecutive year of strong growth for the endowment, which fell by $11 billion to $26 billion during the fiscal year that ended June 2009. The fund has earned an average 12.9% annualized over the past two decades.

“At HMC we focus on actively managing our investments to satisfy three primary long-term objectives for the endowment: growth, liquidity, and risk management,” Jane Mendillo, president and CEO of Harvard Management Company (HMC), said in a statement. “We are pleased to report that our progress in fiscal year 2011 was significant along each of these dimensions. We are committed to our stance as long-term investors, refining our edge and maintaining our discipline, through up and down markets.”

James Rothenberg, University treasurer, added: “Jane Mendillo has built a strong team and done an excellent job positioning the endowment during the current economic uncertainty. We are increasingly conscious of the importance of results, liquidity, and risk management, given the University’s high level of dependence on the endowment and also the significant downturn in the markets since our fiscal-year close.”

Mendillo has indicated that she plans to increasingly shift money in-house as she decreases the endowment’s reliance on outside asset managers. The report also revealed that returns on hedge funds, real assets such as commodities, and fixed-income assets surpassed internal benchmarks. Meanwhile, gains by private equity, real estate, and public stocks fell short of targets. Commenting on the endowment’s stellar performance, the report by the endowment stated:

“This performance is notable when we remember that there were three very difficult periods in the financial markets during these twenty years: the collapse of Long Term Capital Management in 1998, the bursting of the tech bubble in 2000-2001, and the financial crisis of 2008-2009. Despite these challenges, over this twenty year period, performance across all asset classes has been strong in both nominal and relative terms.”