"It's a five-year proposition to reshape a portfolio of this kind," says Mendillo, attired in a crimson knit suit and a strand of pearls.
Mendillo's bosses say they're willing to give her time. "Jane has been spectacular," says James Rothenberg, a Harvard Management board member who helped hire Mendillo. "It hasn't yet shown in terms of investment returns very dramatically, but I don't think that's been the issue in the past couple years."
After a phase of upheaval in which her two predecessors, 15-year veteran Jack Meyer and emerging-markets specialist Mohamed El-Erian, exited within a three-year span, the board wanted someone who would spend at least a decade at Harvard, says Rothenberg, 64, who's also the university's treasurer and chairman of Capital Research & Management Co., the owner of American Funds.
In her first months on the job, Mendillo had to hasten to raise funds to extricate the university from interest-rate swaps it had entered into under former President Lawrence Summers, a Harvard economics professor who's now an adviser to U.S. President Barack Obama. The White House said in September that Summers would resign and return to Harvard by year-end.
Battling Factions
Mendillo has also had to deal with battling factions: alumni unhappy with the ways the school is spending its money, students facing cuts in services and faculty looking at diminished resources. Two top managers left to join El-Erian at Pacific Investment Management Co., where he's now CEO. Several others quit. El-Erian declined to be interviewed for this article.
"She got dealt a tough deck of cards," says Walter Cabot, who was Harvard's chief investment officer for 16 years until he left in 1990. "It's going to take a while to work off their private placements and time to work off their future commitments. Hopefully, they've learned something."
Still, the market crash didn't deflect Mendillo's focus from her long-term goal of growing the endowment while managing risk. "We are acutely aware that the investment portfolio must support current university operations and maintain the purchasing power of the endowment over time," she says.
Virtual Hedge Fund
Mendillo honed her investing skills during the years she spent working under Meyer, who transformed the endowment's portfolio from a sleepy mix of blue-chip stocks and bonds into a virtual hedge fund with stakes in real estate, private equity and natural resources.