Harvard University's endowment posted a 15.4% return and was valued at $36.4 billion for the fiscal year ended June 30, said a news release issued by Harvard Management Co., which oversees the endowment for the Cambridge, Mass.-based university.
The return was 82 basis points higher than the 14.6% return of the benchmark policy portfolio.
Harvard's private equity investments returned 20.3% in the year, trailing an internal benchmark, that returned 21.6%, according to the endowment's annual report. Public equities returned 20.4%, also lagging an internal benchmark, with 21.6%, primarily because of foreign equities holdings.
The report shows that Harvard plans to increase its target allocation in private equity to 18% from 16%. CEO Jane Mendillo said in the report that 73% of the portfolio is currently composed of commitments to funds made from 2004 to 2008 that are “substantially underperforming.”
Harvard also will invest more in hedge funds, increasing that target to 16% from 15%, while cutting public commodities to zero from 2%.
In June, Ms. Mendillo announced her plans to retire at the end of the year. HMC is searching for Ms. Mendillo's successor.
For the five years ended June 30, HMC has delivered investment returns in excess of its benchmark, resulting in a cumulative value-added above the markets of $1.9 billion, net of all costs, the release said. Additionally, over the past five years, HMC has distributed a total of $11.6 billion in cash to the university.
The endowment has earned an average annual return of 11.6% over the past five years, vs. 10.2% for its benchmark; 8.9% for 10 years, compared with 7% for its benchmark; and 12.3% over the past 20 and 40 years, vs. 9.4% and 10.9%, respectively, for the benchmark.
