Harvard Management Co. President and CEO Nirmal P. “Narv” Narvekar expressed displeasure with the performance for Harvard University's endowment during the fiscal year ended June 30.
"While we are not pleased with this performance, we are mindful that HMC is an organization in the midst of significant restructuring and has a portfolio with certain illiquid legacy assets that weigh significantly on performance," Mr. Narvekar wrote in the annual report for HMC, which oversees the Cambridge, Mass.-based university's endowment.
"While some changes will take years to have an impact — and we are keenly aware that we are in a marathon and not a sprint — we can already detect positive indicators of progress," he added.
As reported, Harvard's $40.9 billion endowment returned 6.5% for its fiscal year ended June 30.
Broken down by asset class, private equity returned 16% for the fiscal year; while real estate returned 9.3%; equities, 5.9%; fixed income and Treasury-inflation protected securities, 5.7%; and hedge funds, 5.5%. Meanwhile, other real assets returned -8.3% and natural resources, -12.4%. Benchmark figures were not provided.
"We are obviously disappointed with persistent negative returns in this legacy part of our portfolio," Mr. Nervekar wrote about natural resources' negative return. "However, we are pleased to have cut our exposure by more than half — from 9% to roughly 4% of the overall endowment — since my arrival."
He added that HMC has "completely rebuilt" the team managing the natural resources portfolio.
Mr. Narvekar, who became CEO in December 2016, reorganized HMC's staff 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.
He wrote in the report that HMC is at "roughly the halfway point in the five-year restructuring, and with two full fiscal years complete."
As of June 30, Harvard's endowment has an allocation of 33% to hedge funds, 26% equities, 20% private equity, 8% real estate, 6% fixed income/TIPS, 4% natural resources, 2% to other real assets and the rest in cash.
