Harvard endowment’s PE generates highest returns for 2018 on lower allocation

  • Assets under Management: $39.2 bln
  • PE allocation: 16 pct
  • Whom to contact: Patrick McKiernan (mckiernanp@hmc.harvard.edu)
  • Why this is important: Harvard’s PE portfolio boosted its overall returns

Harvard University endowment’s private equity portfolio returned 21 percent, the highest among all asset classes for the fiscal year ended June 30, 2018.

Harvard’s endowment returned 10 percent for fiscal 2018, up from 8.1 percent the year earlier.

“Asset allocation — or risk level — was the dominant factor in the overall returns,” Nirmal Narvekar, chief executive of Harvard Management Co, wrote in an October 2018 status letter.

“While we are not pleased with this performance, we are mindful that ours is an organization and a portfolio in transition,” Narvekar wrote.

Harvard Management, which manages the $39.2 billion endowment, is 19 months into a five-year execution plan under Narvekar, who joined in December 2016.

The PE portfolio had an allocation of 16 percent as of July 1, 2017, down from 20 percent for the same period in 2016. That year, the PE portfolio returned 2.6 percent.

The composition of the current private equity portfolio is unclear. In fiscal 2016 it was made up of U.S. corporate finance, international corporate finance and venture capital.

Harvard endowment’s portfolio was being restructured by scaling commitments to a core group of top managers and selectively adding new relationships to address gaps in the portfolio, Narvekar said in his September 2017 letter.

Overall the total portfolio has shifted significantly since 2016. The relative value and credit platforms were spun off. The internal real estate platform was spun off to Bain Capital, Narvekar said in his most recent letter.

Natural resources remained the only internally managed portfolio; it sold certain assets and improved management of others in its portfolio repositioning, Narvekar said in the letter.

“Observers should not expect future letters to recount dramatic changes,” Narvekar said in his letter.

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