Harvard University endowment fund recovers from global downturn

Harvard University, revealed this week that it endowment fund rose 11 per cent for its fiscal year ended 30 June to $27.4 billion after the global economic slide took its toll last year on the wealthiest university in the US.

The Harvard Management Company (HMC), the internal investment arm that handles the University's massive multi-billion endowment fund, said that the university's endowment increased $1.4 billion to $27.4 billion, earning a return of 160 basis points above what would have been earned by its own benchmark policy portfolio.

''Fiscal year 2010 was an important and productive year for the Management Company,'' said Jane Mendillo, president and CEO of HMC. ''We generated strong returns and improved the flexibility of the portfolio while actively managing our risks and pursuing innovative investment strategies.''

Although the average annual return on the endowment over the last 20 years has been 11.9 per cent per year and 7 per cent over the last decade, the 374-year-old university for the first time in 40 years had lost 22 per cent or $8 billion of its $36.9 billion portfolio, bringing the endowment down to $28.7 billion by the end of October 2009. (See: Harvard feels the economic pinch; axes jobs) 

The University immediately aped multinational companies by adopting cost cutting measures including job cuts, froze salaries, reduced spending across the campus, postponed the completion of new buildings and sold $2.5 billion in bonds.

Harvard invests a substantial amount of its endowment in hedge funds, private equity funds, commodities and real estate.