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Faust Says Harvard Endowment Should Seek Appropriate Return

Harvard University President Drew Faust said she would like to see the next head of the school’s endowment generate returns that are “appropriate.”

Faust, who has led the Cambridge, Massachusetts-based university since 2007, said that Jane Mendillo, the endowment’s outgoing chief executive officer, repositioned the portfolio in the wake of the downturn and made “substantial contributions.”

The endowment’s next leader should produce the kinds of “returns that are appropriate in an era in which the model that was developed under Jack Meyer of finding underpriced assets” has passed, Faust said today in an interview with Bloomberg Television in Aspen, Colorado.

“A lot of people have figured out the same kinds of techniques,” Faust said. “What’s the next new thing? How do we understand how to position ourselves for long-term growth in an era in which investing is quite different from what it was when Jane came or when her predecessors came?”

Harvard, the world’s wealthiest school with a $32.7 billion endowment, has struggled compared with its peers since Mendillo was hired in the midst of the credit crisis in 2008. The university posted a gain of 11.3 percent in the year that ended in June 2013 and an annual average return of 1.7 percent over five years, both the lowest in the Ivy League, according to data compiled by Charles Skorina & Co.

Mendillo announced her resignation on June 10 from Boston-based Harvard Management Co., saying she will leave at year’s end. Meyer was CEO from 1990 to 2005.

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