Harvard's endowment hits $34.9 billion
BOSTON (Reuters) - Harvard University, already America's richest university, said on Tuesday its endowment grew to a new high of $34.9 billion, boosted by bets on emerging markets, real estate and private equity.
Returns for fiscal 2007, which ended June 30, grew 23 percent, significantly above the 16.7 percent gain posted for 2006 and the 19.2 percent gain reported for 2005.
Harvard, whose investments are closely watched in the asset management industry, also extended its run of beating its internal benchmark and besting the average university's investment returns.
The Ivy League school made headlines last month when it lost $350 million after Sowood Capital, a hedge fund run by a former Harvard employee with whom the university invested, collapsed.
What started with problems in the subprime mortgage market quickly spread and pushed global stock markets lower, hurting many funds, including Sowood.
The school said the Sowood loss would have translated into a decline of about 1 percent on a stand-alone basis.
But the portfolio actually gained 0.4 percent in July because of its positioning and strong risk management. John Longbrake, a university spokesman, declined to say how the portfolio was faring in August, as sharp moves in the yen, metals and stocks left some hedge funds with heavy losses and others able to turn July's declines into gains.
Harvard, unlike many universities, still manages a chunk of its endowment in-house at its Harvard Management Company unit. It also relies on outsiders, including HMC alumni, who have launched their own hedge funds, to invest much of the money donated by former students.
The endowment is not a single fund but roughly 11,000 individual funds, many restricted to specific uses like scientific research or the creation of a professorship, the university said.
Mohamed El-Erian, who replaced Jack Meyer as HMC's president in 2006, is an influential emerging markets bond specialist. And for the second straight year, investments in emerging markets posted the year's highest total return.
Since arriving in Boston, where HMC is located, from California where he worked at Pacific Investment Management Co., El-Erian has rebuilt HMC's depleted staff and implemented other changes. HMC said it restructured the allocations it made to external managers, but gave no details. Looking ahead HMC plans to concentrate on under-exploited market segments to help develop new investment vehicles.
El-Erian said Harvard plans to be more transparent about its structure, activities and governance, setting an example in an industry well-known for its secrecy. Next month, a new Web site will be launched, and in October 2008, HMC will publish its first-ever annual report.
The median large institutional fund returned 17.7 percent in the last fiscal year, according to the Trust Universe Comparison Service.
Harvard, located across the Charles River from Boston in Cambridge, relies heavily on its endowment to cover annual expenses and said it spends about 5 percent of the endowment every year on university programs.
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