Tuesday, October 16, 2012

Harvard University Employs the World’s Best Investment Managers to Manage its Endowment

They Made a Zero Percent Return – How Did Your Investments Do?

Here’s a quick note to all of those savvy investors who think they just need to find the right investment manager, the one who is smart enough to return 15-20% every year, even when the markets go down.  And no, no amount of data and information will ever convince those savvy investors that there is no such investment manager. But don’t tell Harvard University that, you would just be wasting your breath.

See Harvard University prides itself that it is the best at everything, and that it knows more than everybody and that it alone can have an outstanding investment performance.  So here’s how it did with its endowment fund investments.

Harvard University’s endowment was essentially flat in its fiscal year ended June 30, as steep declines in European and emerging markets wiped out gains in other areas.

The nation’s largest college endowment slipped 0.05 percent, or $16 million, according to its annual report released Wednesday.

Now any normal person in the investment world would be at least slightly embarrassed, actually they would be highly embarrassed.  Not so Harvard.

Jane L. Mendillo, chief executive of Harvard Management Co., which oversees the endowment, said she was “pleased that the endowment held steady and was able to provide substantial support to the university,” even amid sliding global equities and losses from hedge funds and commodities.

As for the rest of us, the ones who just invest in a highly diversified portfolio and pay almost nothing to hot shot investment managers, here’s how we did.

The endowment’s slight decline for the fiscal year was on par with that of the $50 billion Massachusetts state pension fund, which invests in a comparable mix of stocks, bonds and alternatives, like timber and private equity. The Standard & Poor’s 500 stock index rose 5.5 percent during the same 12-month period.

Yeah, a lousy 5.5% return.  Tell us again Harvard, how did you do?

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