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Endowments and Foundations

Harvard endowment returns 8.1% in fiscal year; CEO calls performance ‘disappointing’

Harvard University's endowment posted an 8.1% return and was valued at $37.1 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.

"Our performance is disappointing and not where it needs to be," said Nirmal P. "Narv" Narvekar, president and CEO at HMC, in the endowment's annual report. A benchmark return was not provided.

Mr. Narvekar added, however, that with the changes he's made and plans to make with HMC, he is confident "that HMC will be in a far better position" moving forward.

Since taking over as CEO in December, Mr. Narvekar has undertaken a massive overhaul of the company, reorganizing — and massively reducing — its staff as part of a plan to change its investment strategy from a specialized or "silo" approach to a generalist investment model in which all members of the investment team take ownership of the entire portfolio.

As a result, HMC has largely exited internal management of public markets assets as of June 30. It has also shut down its relative value and internally managed equity platforms.

The credit platform has been repositioned and is currently executing its strategy internally, although the credit team is expected to leave HMC. In addition, the real estate platform responsible for direct investments is also expected to spin out.

HMC plans to work with these teams that have either left or will leave as external managers.

Paul Finnegan, chairman of the HMC board, issued the following statement: "Narv and his team are making excellent progress in reorganizing HMC to ultimately improve investment performance."

Mr. Finnegan added that the board "is fully supportive of these efforts and the time required to reposition HMC" and that it is "confident Narv has the right strategy that will deliver in the years ahead."

The report says that performance reflects strong returns from public equity, private equity and direct real estate. Natural resources, meanwhile, "experienced a challenging year." In addition, HMC executed secondary sales in real estate and private equity "that generated significant liquidity for the endowment."

However, the report does not provide long-term returns or returns broken down by asset class.