Mendillo Resigns After Leading Harvard Recovery From Crisis

Photographer: Justin Ide/Harvard University News Office via Bloomberg

Jane Mendillo, chief executive officer of Harvard Management Co. Close

Jane Mendillo, chief executive officer of Harvard Management Co.

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Photographer: Justin Ide/Harvard University News Office via Bloomberg

Jane Mendillo, chief executive officer of Harvard Management Co.

Jane Mendillo, who helped Harvard University recover from the worst recession since World War II, is resigning at the end of this year as head of the world’s largest school endowment.

Mendillo, president and chief executive officer of Harvard Management Co., said in an interview she’s leaving to pursue personal interests and isn’t looking for another high-profile finance job. She has worked for the university’s investment arm for 21 years, including the past six at the helm of the company, which is located in Boston.

“I wanted to choose a moment when things were on a positive trajectory and the future looked bright,” Mendillo, 55, said by telephone. “The organization and the portfolio are in excellent shape and I feel like we’re firing on all cylinders.”

While Mendillo is widely credited with helping stabilize the university after the size of the endowment fell almost 30 percent in 2009, she has also come under scrutiny for failing to deliver superior investment returns. Harvard, the world’s wealthiest university with $32.7 billion of assets under management, has recently posted gains that are among the lowest in the Ivy League, a group of eight elite colleges in the northeastern U.S.

Risk Management

Harvard President Drew Faust has restructured the university’s leadership since the recession, increasing the size of the board, known as the President and Fellows of Harvard College, to 13 members from seven and bringing in new expertise. Faust, who became head of the Cambridge, Massachusetts-based university in 2007, selected Mendillo to run the endowment in 2008, working closely with her throughout the financial crisis.

“Jane has strengthened risk management and operations, introduced new ways of thinking and investing into the portfolio, and has fostered greater alignment with the university,” Faust said in a statement. “She has repositioned the endowment and re-established a world-class investment platform to support Harvard and all of its activities for many years to come.”

Harvard is still seeking to recoup losses after the endowment peaked at $36.9 billion in 2008. The university posted a one-year investment return last year of 11.3 percent, the lowest among the Ivies. Its five-year annual average gain of 1.7 percent is also the worst of the eight schools, according to data compiled by Charles Skorina, founder of San Francisco-based executive search firm Charles Skorina & Co.

Mendillo drew compensation of $4.8 million in 2012, according to university tax filings.

Alternative Assets

“Considering what she’s paid and the resources Harvard has made available to the investment team, it’s fair to expect better performance than Harvard has delivered,” said Skorina, whose firm specializes in investment management.

Mendillo started her career at Yale University under David Swensen, who pioneered an investing style that helped endowments beat market benchmarks by aggressively buying alternative assets such as private equity and real estate. Universities use endowment proceeds to subsidize operating costs, including paying professors, providing student aid and covering the costs of academic programs.

Harvard Management hired her in 1987 where she rose in the ranks under Jack Meyer, another legendary investor who transformed the endowment from a mix of blue-chip stocks and bonds into a virtual hedge fund. It was there that Mendillo made perhaps her most famous bet, recommending in the 1990s that the university add timberland in Oregon, Washington and later Pennsylvania to its portfolio.

Global Crisis

A mother of two, Mendillo left Harvard in 2002 to run the endowment at Wellesley College, an elite women’s campus located in the Boston suburbs. She returned as head of Harvard Management in 2008 after a phase of upheaval in which Meyer was replaced by emerging-markets specialist Mohamed El-Erian, who exited in less than two years.

A global financial panic had taken hold when Mendillo was put in charge and Harvard would suffer severe financial losses, including a 27 percent investment decline and a cash crisis brought on by its exposure to financial derivatives. Like the rest of the university, the endowment was forced to cut costs and staff.

“The first year or two was managing those situations to get the right people and pieces in place,” Mendillo said in the interview. “I feel a tremendous sense of accomplishment for doing that and I feel very proud of the team here.”

Successor Search

Mendillo has sought to rebuild the endowment’s internal trading team in the years since the crisis, making it less dependent on outside asset managers, while attempting to lower risk by increasing cash-on-hand and cutting leverage, which is borrowing money to boost investment returns. She has also tried to build on her success buying U.S. timberland in the 1990s by focusing on direct investments in natural resources in developing economies such as Brazil.

Stephen Blyth, a managing director in charge of public markets, oversees internal trading. He joined the company in 2006 from Deutsche Bank and was paid $5.35 million in 2012. Andrew Wiltshire is in charge of most external investments such as private equity, real estate and natural resources. He was hired in 2001 and made $7.9 million in 2012, the top earner at Harvard Management.

A search for a successor has already begun, Harvard said in the statement. Mendillo said in the interview that she told Faust of her desire to resign two months ago.

Boston Community

“I’m not looking for another job,” Mendillo said. “This job is the best job in the world. There’s just a lot of things on a personal level that I want to do. I’m very interested in music, in education. I’ve been intrigued by projects going on in the Boston community.”

While the endowment has recently committed to making more environmentally sustainable investments, Harvard students and faculty have continued a campaign to push the university to divest from fossil-fuel companies blamed for global warming.

William Helman, a member of Harvard Management’s board, said that when Mendillo decided to step down, there was pressure to ask her to stay.

“When Jane arrived there was stress beyond the financial stress of the market crash of 2008,” said Helman, a partner at venture capital firm Greylock Partners. “She just went to work and did an unbelievable job fixing things.”

To contact the reporters on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net; John Lauerman in Boston at jlauerman@bloomberg.net

To contact the editors responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net Chris Staiti

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