Harvard and Stanford Nearly Make Up Financial Crisis Losses

Harvard and Stanford, two of the nation’s richest universities, say that endowment returns for fiscal 2011 brought them to within striking distance of where they stood before the financial crisis lopped off billions of investment value.

The Harvard Management Company, which manages the university’s endowment, reported a gain of 21.4 percent – or $4.4 billion – in fiscal 2011, which ended on June 30. That gain increased the size of Harvard’s endowment to $32 billion.

The gain, on top of fiscal 2010’s return of 11 percent, marks a strong reversal for the giant endowment, which plummeted 27 percent – or $11 billion – in fiscal 2009, from a pre-crisis peak of $36.9 billion in fiscal 2008. That leaves Harvard just $4.9 billion shy of where it was before the financial crisis.

Private equity was a strong component of Harvard’s strong performance. The university’s private equity program logged a 26.2 percent gain, which was still shy of returns earned by the university’s public equity program, which returned 28.3 percent.

But as strong as private equity performed at Harvard, the endowment’s chief executive, Jane Mendillo, has moved during the last two years to reduce its exposure to private equity and other illiquid assets, like real estate, to increase the fund’s liquidity.

At Stanford, the university’s “merged pool,” which includes the endowment and funds for future hospital spending, rose by 22.4 percent to $19.5 billion in the year that ended June 30th. That is less than a billion short of where the pool was at its peak at the end of fiscal 2008, when it was valued at $20.4 billion.

The university’s resources are managed by the Stanford Management Company and its chief executive, John Powers. Earlier this year, Ken Frier unexpectedly resigned as the university’s chief investment officer after serving for less than a year. A replacement has not yet been named.

The endowment itself, the nation’s fourth largest, was valued at $16.5 billion and rose by 19.5 percent during the year that ended on August 31st. About 12 percent of Stanford’s endowment is allocated to private equity and venture capital, which would amount to about $2 billion.