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Harvard Endowment Reports 11% Return For Year

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A year after a disastrous 27 percent decline that prompted layoffs, salary freezes and a halt to some campus expansion, the Harvard endowment on Thursday reported a solid 11 percent increase in its $27.4 billion portfolio for the fiscal year ended June 30.

In her first year as president and chief executive of the Harvard Management Company, which oversees the endowment, Jane Mendillo struggled as the portfolio she had inherited faced heavy cash demands in the area of alternative investments when the stock and commodities markets fell.

Since then, Ms. Mendillo has put her stamp on the endowment, increasing its readily available cash and generating a respectable if not spectacular return, several endowment specialists said of the latest performance. The return does lag that of stock market averages for the period by a few percentage points, though it is better than the internal benchmark the endowment uses.

Ms. Mendillo said that the endowment was more liquid and “well aligned with the long-term need of the university and with regard to the world more broadly.” She said she was happy with how the portfolio did last year, but struck a note of restraint, adding “there are areas where we need to be more muted in our expectations.”

Harvard is the first of the major university endowments to report returns and, as such, its performance is closely watched by institutional investors. For years, Harvard’s endowment, the nation’s largest university endowment, seemed to defy gravity as it posted sterling gains, bested only by Yale’s endowment.

Those returns fueled grand plans at Harvard and led it to cover about 35 percent of its budget with endowment money.

One question is whether Harvard can continue to count on the endowment for such a large part of its spending or whether it must raise tuition or cut costs further.

Considering the state of the economy an 11% return is quite good, although it's still no where near generating what it once was.

Perpetual growth you can't beat it.

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