October 26, 2017 / 9:01 PM / 2 months ago

Harvard marks down natural resources holding in fiscal 2017

BOSTON (Reuters) - Harvard University reduced its holdings of domestic bonds by roughly $10 billion while also cutting real estate investments and marking down its natural resources holdings, all part of a dramatic shift in how it invests its $37.1 billion endowment.

At the end of fiscal 2017, the Ivy League school’s domestic fixed-income holdings totaled $1.6 billion compared with $12 billion a year earlier, according to its annual report for the year ended June 30 that was released on Thursday.

Real estate holdings shrunk to $5.3 billion from $6.4 billon and its natural resource holdings were listed at $2.9 billion compared with $3.9 billion at the end of fiscal 2016.

”Fiscal year 2017 reflects a significant decrease in gross investment assets and gross investment liabilities primarily given Harvard Management Company’s (HMC) change in

investment approach,” the school wrote in the report.

The mark downs Harvard took on its natural resources portfolio in fiscal 2017 weighed on returns, HMC’s chief executive Narv Narvekar wrote in a letter that was included with the report. Narvekar arrived from Columbia University late last year and is working to reposition the portfolio by letting outsiders manage more of the money, shutting down internal funds and laying off half of HMC’s staff.

Harvard’s investments gained 8.1 percent in fiscal 2017, trailing arch-rival Yale University which gained 11.3 percent and other prominent universities including neighboring Massachusetts Institute of Technology which posted at 14.3 percent gain and the University of California endowment which gained 15.1 percent.

Performance illustrates “deep structural problems” at the endowment, Narvekar said. In the natural resources portfolio, Narvekar said that “markdowns do not imply sales,” noting that Harvard may hold onto some investments and that it will take years to reposition this part of the portfolio.

Reporting by Svea Herbst-Bayliss; Editing by Cynthia Osterman

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