Harvard University's $34.9 billion endowment earned returns of 23 percent in its fiscal year ended June 30, its best investment performance in seven years, the university said today.
The world's largest university endowment grew from $29.2 billion the previous year and distributed $1.1 billion to Harvard to spend on teaching, research, and student aid. It was the first time the endowment distributed more than $1 billion in a year to the university.
Harvard's investment performance was the best since it earned 32.2 percent in 2000. Harvard Management Co., the university's investment arm, manages the endowment but also uses outside firms to invest some of the money.
In its annual letter to the university, Harvard Management also said huge losses at the Boston hedge fund Sowood Capital Management had inflicted a decline of about 1 percent in the university's endowment in July, after the close of the 2007 fiscal year. Harvard was the initial backer and perhaps the largest investor in Sowood Capital, which was launched by former Harvard Management portfolio manager Jeffrey Larson.
But Harvard Management said other investments in the endowment, hedging against events that hurt Sowood, balanced off the decline. It said the endowment gained an estimated 0.4 percent in July, while the Standard & Poor's 500 index lost 3.1 percent.
The endowment's 23 percent investment gain for the full 2007 fiscal year exceeded the 20.6 percent gain of the S&P 500 over the same period and an advance of 17.2 percent by a benchmark designed to match the way Harvard allocates money to different kinds of investments.
The Trust Universe Comparison Service, with current data on 151 institutional investors, such as pension funds, reports a median return of 17.7 percent for the June 30 fiscal year. The top 5 percent performer in that group earned 20.9 percent.
But most other university endowments have yet to post their annual reports. Some of those endowments investing with greater emphasis on certain asset categories such as real estate and private equity may exceed Harvard's 2007 return.
Harvard Management Co. said the endowment's performance in its last fiscal year was driven most by its investments in emerging markets, international stocks and US equities. But Harvard did not detail specific performance by asset categories, as it has done in the past.