August 24, 2009 / 4:03 AM / 11 years ago

Harvard University mulls selling outside holdings

BOSTON (Reuters) - Harvard University’s new endowment chief may sell off some holdings in hedge funds and other outside money managers and bring more money under the control of the school’s own managers.

Harvard Business School students cheer during their graduation ceremonies in Boston, Massachusetts following Harvard University's 358th Commencement June 4, 2009. REUTERS/Brian Snyder

Harvard Management Co, which runs the Cambridge, Massachusetts, school’s giant endowment, “is considering the possibility of increasing the internal platform over the next few years,” a school spokesman said via e-mail.

Harvard’s plans were first reported in The Wall Street Journal on Monday. The school has used as many as 200 outside money managers in the past, said the spokesman, John Longbrake.

Longbrake declined to give specifics about possible changes. He said Jane Mendillo, Harvard’s endowment chief, was not available to be interviewed today. He also declined to confirm a report by Bloomberg that Mendillo is increasing the school’s allocation to cash.

Analysts have long expected big shifts by Mendillo, as at other schools where endowments took big hits as markets plunged since last year.

According to Wilshire Associates of Santa Monica, California, foundations and endowments with assets greater than $1 billion lost an average of 17 percent in the year that ended June 30.

At the start of the last academic year, Harvard’s endowment was the largest of any school, with more than $36 billion in assets, according to a study by the National Association of College and University Business Officers.

Harvard will not update that figure until next month, though it previously projected a 30 percent fall in the endowment’s value in the last academic year.

Because the endowment had funded many Harvard operations, the projected fall led to layoffs and a halt to building projects at the prestigious school, and put pressure on Mendillo to fix performance.

A Harvard Management veteran, Mendillo ran Wellesley College’s endowment for much of this decade before returning to Harvard last summer, just in time to face the worst market crisis in decades.

Stewart Massey, an investment consultant to endowments and foundations, said the changes at Harvard would mirror shifts other schools are considering.

“There’s a tremendous rebalancing going on that started at the end of last year and will continue over the next 12 to 18 months,” he told Reuters. He expects “both the termination of managers and the hiring of new ones.”

In the past, Harvard has invested funds with firms run by former Harvard Management officers, including Jack Meyer’s Convexity Capital Management and Jonathon Jacobson’s Highfields Capital Management, both in Boston.

Reporting by Ross Kerber; editing by John Wallace

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