Harvard Management Co. President and Chief Executive Officer Jane Mendillo intends to step down at the end of the year, potentially paving the way for someone friendlier to private equity to take her place.
Mendillo, who took over leadership of the endowment during the financial crisis year of 2008 and who will continue to serve on certain boards and committees after she steps down, seemed to become bearish on private equity of late.
In the annual letter she wrote alongside the endowment’s annual financial report in September, Mendillo characterized private equity performance at Harvard as only “fair.” The portfolio returned 11 percent in fiscal 2013, which was “well below” the return on public equities and only slightly above the 10.6 percent benchmark Harvard set, Mendillo wrote in the letter.
The endowment expects an “illiquidity premium” over public markets from its private equity portfolio because of the long lock-up nature of the asset class. “Over the last 10 years, however, our private equity and public equities portfolios have delivered similar results,” she wrote.
To boost private equity returns, Harvard planned to concentrate management of its portfolio with the best performing managers (like most LPs in the world today).
Earlier this year, the endowment hired Richard Hall, former private equity chief at the Teacher Retirement System of Texas, to run the private equity and venture capital portfolio.
Several questions arise now that Mendillo is leaving (Harvard is already searching for a replacement). Among them, what ideas will the new chief of the endowment have about alternative investing, the importance of private equity in the portfolio, and the potential for venture capital returns in the future? And how will those ideas mesh with Hall’s support for private equity?
Whatever the answers, it’s safe to assume the endowment will continue to play an important role as a major private equity LP.
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