(Bloomberg News) Shortly after she took over as chief executive officer of Harvard Management Co. on July 1, 2008, Jane Mendillo gathered the university endowment's 200- member staff for a town-hall-style meeting at the Federal Reserve Bank Building in downtown Boston, across the Charles River from Harvard University.
What did Mendillo think the outlook was for global markets? asked one of the managers gathered on the fund's 16th-story trading floor. She replied that she didn't follow them closely, according to four people who were at the meeting.
It wasn't long before the markets demanded Mendillo's attention -- and everyone else's. In September 2008, Lehman Brothers Holdings Inc. collapsed, setting off a global rout. By June 2009, 27 percent, or $10.1 billion, of investments at the world's richest university endowment was wiped out. That's more than any other Ivy League school lost in dollar or percentage terms, and it sparked a round of cutbacks in everything from capital spending to student services, Bloomberg Markets magazine reports in the November 2010 issue.
"I certainly didn't expect that we would be in the type of roiling markets and crisis conditions that the whole world found itself in during the fall of 2008," Mendillo, 52, says in an interview. "We had to put the longer-term plans on hold."
Unwinding Investments
Mendillo, who says she doesn't believe she was asked about her view of the markets at the 2008 meeting, has focused on unwinding some of the endowment's investments in private equity and hedge funds made by her predecessors from 2005 to 2008 and bringing more of Harvard's money to in-house managers.
She has started to restructure the school's real-estate holdings, which lost 50 percent of their value in the year ended on June 30, 2009. She has been increasing investments in natural resources and timber, an area that she pioneered during an earlier, 15-year stint at Harvard.
Mendillo has recouped some losses. In the fiscal year ended on June 30, the endowment crept back up 11 percent to $27.4 billion, still 26 percent below its peak. That performance lags behind the 13 percent median for public and corporate pensions, endowments and foundations during that time, according to Wilshire Associates Inc., a consulting firm based in Santa Monica, California.
The endowment of Columbia University, for instance, gained 17 percent in the same period. Yale University's increased 8.9 percent.
'Five-Year Proposition'