Harvard endowment returns -2% for fiscal year, below its benchmark

Harvard University

Harvard University's endowment posted a -2% return and was valued at $35.7 billion for the fiscal year ended June 30, said a report issued by Harvard Management Co., which oversees the endowment for the Cambridge, Mass.-based university.

The return was below the 1% return of Harvard's benchmark policy portfolio.

In the endowment's annual report, Robert Ettl, interim president and CEO at HMC, said the “disappointing returns” were due in part to the “low-interest-rate environment and market volatility of the past fiscal year,” as well as “execution” of its investments.

Harvard's real estate investments returned 13.8% in the year, above a custom benchmark that returned 9.4%, said the endowment's annual report. Fixed income, meanwhile, returned 5.5%, vs. its benchmark of 6.2%.

Private equity returned 2.6% vs. 2.2% for its benchmark; absolute return, -1.2% vs. -0.3%; natural resources, -10.2% vs. 1.4%; and public equities, -10.2% vs. -6.1%.

Mr. Ettl added in an accompanying news release: “We have taken clear steps to strengthen our organization and improve investment performance over the long term. In our public equities portfolio, we have refined our strategy to emphasize deeper relationships with external managers. Within natural resources, we have hired a new head of the portfolio with significant agriculture and timber investment experience who will continue to evolve HMC's strategy and suite of manager relationships.” Colin Butterfield was named managing director, head of natural resources, effective in early October.

The endowment has earned an average annualized return of 5.9% over the past five years, vs. 5.4% for its benchmark; 5.7% for 10 years, compared with 4.8% for its benchmark; and 10.4% over the past 20 years, vs. 7.7% for the benchmark.

HMC's previous president and CEO, Stephen Blyth, resigned in July for personal reasons. Executive search firm David Barrett Partners is conducting a search for a permanent replacement.