PE HUB Wire Highlights, 10.29.19

Tough sledding for distressed-focused managers, Peaceable Street reaches deal with Declaration Partners

Happy Tuesday!

EndowedHarvard Management Co. has been trying to turn around its performance for a few years, since getting a new leader in CEO N.P. “Narv” Narvekar. In its most recent performance report, Narvekar continued to lament the endowment’s overall sluggish performance. To help boost returns, the endowment is poised to go even heavier into private markets investments, Narvekar wrote in the endowment’s 2019 financial report.

Private equity had a one-year return of 16 percent and made up 20 percent of the portfolio as of June 30, LP watchdog Justin Mitchell reports. That compares to total portfolio return of 6.5 percent in fiscal 2019, down from 10 percent in fiscal 2018 and 8.1 percent in fiscal 2017.

“Today, our central concern is that HMC’s allocation to buyouts, growth, and venture capital continues to be low relative to what likely makes sense for Harvard. We are early in the process of making this allocation transition,” Narvekar wrote.

“Greater exposure to venture capital (a high-risk/high-reward asset class) would have resulted in a significantly higher return,” Narvekar wrote. “Harvard’s exposure to venture capital is notably small in the context of leading endowments.”

The portfolio continues restructuring and is dealing with certain illiquid legacy assets that continue to weight on performance, Narvekar wrote.

“Prudently increasing the size of certain portfolios takes years to complete, as does reducing the size of others,” Narvekar wrote. “We can only have limited impact on performance in a short period of time.”