Does Harvard Represent the Perils of Endowments?

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June 18 (Bloomberg) -- Mark Yusko, Chief Executive Officer and CIO at Morgan Creek, and Bloomberg’s Michael McDonald examine the challenges for university endowments as Harvard University faces dwindling returns and the resignation of Harvard Management Chief Executive Officer Jane Mendillo. They speak on Bloomberg Television’s “Market Makers.”

Management faces.

A university endowment is not an easy task.

It is not an easy task at harvard.

Right now, jane mandell oh is still in charge.

She was preceded by mohamed el-erian.

There are offer types of endowments.

There are the small ones run by financial advisors and then there are 50 million to 500 million.

They do not have enough assets to hire their own team and they are usually hired -- usually run by a consultant.

There is usually 500 million to 10 or 15 billion.

Once you get above 15 billion and start getting into 20 billion, now, you are too big to be outsourced in external management.

What they did at harvard, they started to create a internal management.

Running internal management is different than picking external managers.

Michael mcdonnell, how deep is the anxiety at harvard over the performance of the endowment?

Over the past five years, it has posted average annual returns of 1.7%. anyone with two eyes knows how well the market has done it that time.

I apologize for the technical difficulties.

The cable must go through the box.

The anxiety over there, it is difficult to tell.

Clearly they are operating at a much higher level.

Their performance, on one hand, they are defensive about it and say they are beating their own internal policy portfolio, on the other hand, they compare themselves against their peers.

In the last five years, they have been trailing the ivy league.

It has been a difficult time for them.

On one hand, they are trying to reposition the portfolio after difficult -- after a difficult 2009. they are trying to find new opportunities, to try to find this elusive alpha.

Six years into her tenure, she is leaving.

She was going to stay for at least 10. she said she needed five to turn the portfolio around.

We are yet to see the results of that.

At least the kind of results we come to expect to come from a place like harvard where it is the biggest in the world.

It is supposed to be the best when it comes to producing top results.

I am going to go the other way.

If you take the graphic you just showed of first to worst and we took it 10 years, 15 years, and 20 years, it will invert.

The schools on the left have a less private equity, less nontraditional investment, much more traditional stocks and bonds.

Is that looking backwards or forwards?

Over the last five years, you have one of the best five-year period for public equities in the u.s. in the history of the stock market.

If you add the five years before that, when it was not such a good period for stocks, suddenly, things are a little heavy.

All of the things that harvard does spectacularly well and has done well for years.

Those results turn the other way.

The problem is, that is not what people see or focus on.

Are you getting the feeling that whether it was harvard hospices and or -- harvard posco decision or jane -- harvard's decision or jane's decision --. everybody has nothing but great things to say about the work that she has done.

What is fascinating is trying to lift the lid.

Everyone knows it is a black box when it comes to endowment money management.

We do know that there are some issues with the private equity portfolio and emerging markets.

Time will tell to see if she can turn it around.

We have to leave it there.

Michael mcdonnell is in boston.

This text has been automatically generated. It may not be 100% accurate.


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