Tags: Harvard | Endowment | Emerging | Markets

Harvard's Giant Endowment Trips Over Emerging Markets

Wednesday, 26 September 2012 05:19 PM

Harvard University said Wednesday that the value of its $30.7 billion endowment slipped 0.05 percent in fiscal 2012 as its stock investments in emerging markets took a beating.

It was a far cry from the school's performance in fiscal 2011, when its endowment grew 21.4 percent.

But Harvard's return for the fiscal year that ended June 30 beat its benchmark by 98 basis points, or nearly one percentage point. While it was the third straight year Harvard Management Company beat its benchmark, it underscored what analysts say will be weaker returns at many of the nation's top colleges and universities.

Last week, the University of Pennsylvania said its endowment gained only 1.6 percent during fiscal 2012, lifting its endowment to $6.8 billion.

In a statement, Harvard Management Chief Executive Jane Mendillo described choppy markets "highly sensitive to unresolved macroeconomic headwinds."

"While investment performance over the last 12 months was well below long-term averages, we nevertheless found good investment opportunities through both internal and external management that we believe will sow the seeds for future growth," Mendillo said.

Harvard said it remains committed to investing in emerging market stocks, even though that asset group experienced a 17.43 percent decline, lagging their benchmark by 148 basis points.

Overall, though, Harvard's investments in public equities fell 6.66 percent, but that was 239 basis points better than the benchmark, Harvard said.

"We should note that Harvard carries relatively more exposure to both foreign and emerging markets than many of our peers," the university said in its report. "... We remain convinced that active investing in emerging and international markets is not only wise, but imperative over the long-term."

Unlike many other big universities, Harvard manages a chunk of its portfolio in-house. It also uses outside managers, some of whom previously worked for the university's investment arm.

After Mendillo took the top job at Harvard Management in 2008, she was forced to reposition the school's portfolio dramatically as the financial crisis took a huge bite out of the endowment.

Harvard said distributions from the endowment in fiscal 2012 contributed more than a third of the university's operating budget. Endowment income supports Harvard's academic programs, science and medical research, and student financial aid, the school said.

The endowment has earned an average annual return of 12.3 percent over the past 20 years, outperforming its so-called policy portfolio benchmark by more than 300 basis points per year.

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Harvard University said the value of its $30.7 billion endowment slipped 0.05 percent in fiscal 2012 as its stock investments in emerging markets took a beating.
Wednesday, 26 September 2012 05:19 PM
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