Harvard fund top performer, again

Harvard University's $36.9 billion endowment earned 8.6 percent on its investments in its latest fiscal year while stock markets around the world were losing money, the school's money managers reported today.

The return for the year ended June 30 compares with a loss of 13.1 percent by the Standard & Poor's 500 stock index during the same period.

Harvard Management Co., the university's investment arm that manages the endowment, also easily outperformed many other investments funds in its universe. The fund said an index that measures the performance of 165 other large institutional investors had a 4.4 loss percent during that period; the top performers in that group, moreover, earned 3.2 percent. Some other closely watched university endowments, particularly that at Yale University, have yet to report results for the fiscal year.

Harvard Management said its endowment, which grew $2 billion during the fiscal year, distributed $1.6 billion to the university to support teaching, research and student aid.

One reason Harvard's endowment performed so well is that it invests less money in equities than many other funds. Harvard lost 12.7 percent on its US stock portfolio and 12.1 percent on its foreign equity portfolio in the last fiscal year. But those categories accounted for an estimated 22 percent of the endowment's total assets at the end of the fiscal year.

Harvard also invests a substantial amount of its endowment in hedge funds, private equity funds, commodities and real estate. Most of those other investments earned substantial profits in the last fiscal year.

Harvard's "real assets" portfolio, which includes easily tradeable commodities, timber, agricultural land and real estate, earned 35.8 percent. Private equity investments returned 9.6 percent and hedge funds roughly broke even.

The endowment's bond portfolio also posted big gains during the year. Domestic bonds earned 16.1 percent while foreign bonds gained 21.3 percent and inflation-indexed bonds advanced 20.3 percent. The combined bond portfolio accounts for about 11 percent of Harvard's assets.
(By Steven Syre, Globe staff)