The endowment's asset allocation as of June 30 was: 34% private equity, 33% hedge funds, 14% equities, 8% cash, 5% real estate, 4% fixed income/TIPS, and 1% each to natural resources and other real assets.
In a note to Harvard associates, Nirmal P. "Narv" Narvekar, president and CEO of Harvard Management Co., which oversees the university's endowment, attributed the performance to strong public and private markets and the portfolio's overall risk levels.
"For each of the last three fiscal years, asset allocation/risk level was a significant determinant of returns — the higher the risk taken, the higher the return generated," wrote Mr. Narvekar. "The level of portfolio risk is ultimately the most important and fundamental aspect of portfolio construction."
Over the past few years, HMC has reduced its exposure to real estate, natural resources and equities, while increasing its exposure to private equity and hedge funds.
"While reducing public equities proved to be painful in FY21, we needed to do so in order to remain within our portfolio risk budget," Mr. Narvekar wrote. "Overall, we are exceptionally pleased that we made these asset allocation moves, as they added about 5 percentage points to the FY21 portfolio return as compared to the FY17 allocation."