Harvard Endowment Reports ‘Disappointing’ 8.1 Percent Return

But perhaps no previous chief executive has upended the endowment to the degree that Mr. Narvekar is attempting. Mr. Narvekar, who took office in late 2016, is making broad changes in how Harvard invests and in the management that oversees those investments. Already, a greater share of the endowment’s investments is being handled by outside managers, as is more typical of university endowments.

For years, Harvard differentiated itself from other schools with an extensive internal team. But as managers became more successful, they often left to start their own funds where they could make more money and where their pay would not be subject to criticism from the university community.

Additionally, the endowment’s staff will no longer specialize in asset classes but will be responsible for the overall portfolio. Moreover, managers’ compensation will be determined by the overall performance of the portfolio rather than the specific asset class the individual oversees.

Perhaps out of an awareness that the returns this year were disappointing, Mr. Narvekar pointed out in his statement that he had run another “successful” endowment for 14 years. He was alluding to his tenure as head of Columbia University’s endowment. He wrote that he was convinced that at Harvard, a talented and successful team would overcome “legacy issues” as it shifted gears.

Since he arrived, Mr. Narvekar has been aggressively selling off holdings in private equity and real estate. Since those transactions were executed in the fiscal year ended in June, the endowment may have taken some losses and written down other assets that would potentially let its future returns look better in comparison.

“He took the year to do a deep dive in the portfolio and recognize some of the holdings that could not be justified,” said D. Ellen Shuman, who is a co-chief of Edgehill Endowment Partners, which manages $650 million for nonprofits. “In terms of sales, the interesting question is whether he got the full value for those assets since he sold as quickly as he did.”

Perhaps because there has been so much turnover at the endowment and the recent performance has been so disappointing, a note was attached to the release from Paul J. Finnegan, chairman of the Harvard Management Company board, which oversees the endowment, who said that the board was patient and was backing Mr. Narvekar’s efforts.

The board, he said, “is fully supportive of these efforts, and the time…

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