In October, dozens of Wall Street financiers, including activist shareholder Bill Ackman, were invited to a lecture hall at Harvard to scrutinize the university’s lackluster endowment returns—and a plan to revive them.

For more than an hour, the Harvard Business School alumni debated whether the $37.6 billion fund could generate at least 5% a year as markets falter and whether it made sense to try to beat peers such as Yale University and Princeton University. At stake was Harvard’s status as the world’s richest university, with Yale, Stanford University and other schools making up ground through savvier investing and aggressive fund-raising.

“It was kind of reassuring,” says Stephen Blyth, 48, who put together a turnaround plan after being named chief executive officer of Harvard Management Co. in January 2015. “There were people on both sides so I felt we must have it about right.”

Harvard’s endowment, the world’s largest and once the envy of asset managers, has sunk into mediocrity. Over the last five years, the fund has been trounced by chief rival Yale by almost 4 percentage points annually, equating to billions of dollars in lost revenue. Its 5.8% one-year gain through June even lagged the Ivy League average, by 2 percentage points.

Blyth, a trader at Deutsche Bank AG before joining the fund in 2006, has vowed to produce better returns by revamping the investment decision-making process while leaning on Harvard’s rich alumni network for opportunities, particularly in alternative assets such as private equity and venture capital. The university was among the first to diversify into those riskier assets when they were much cheaper, pioneering a model of endowment management under former chief Jack Meyer.

“He’s got a tough job,” says Meyer, who left in 2005 after producing annual returns of around 15% in his final decade. “He’s going to be good for Harvard, but I was very fortunate—it was the right time, the right place and the right people.”

Blyth was circumspect about the alumni advice, yet has already begun overhauling the endowment. He’s setting more stringent targets, with a goal of landing in the top quartile of returns over five years against the university’s 10 wealthiest peers. The endowment previously compared itself against other schools as well as larger institutional investors, such as pension funds.

‘Clear Vision’

Backed by a revamped board of directors, he’s also cut a layer of top management and begun restructuring compensation and how the portfolio is allocated, with potentially even bigger bets on private equity and hedge funds.

“Stephen seems to have a very clear vision of the model he wants to pursue,” says Amy Falls, chief investment officer at Rockefeller University in New York, the third new outsider to join Harvard Management’s board this year.

Blyth’s challenge comes as wealthy colleges face greater scrutiny. Some in Congress are questioning the endowments’ tax-exempt status and demanding they spend more on financial aid now that they have recovered from steep losses in 2009.

The event in October followed a series of meetings Blyth has arranged with investment-manager alumni to get hot ideas. While endowments routinely rely on such networks, Blyth says he’s renewing relationships frayed as his predecessor Jane Mendillo repaired damage from the credit crisis.

“A lot of the heavy lifting that Jane did is behind us,” Blyth says. “We want to re-engage: We’re opening up, we’re back involved and people are responding positively to that.”

Ackman said in an e-mail he didn’t recall his comments at the private Harvard Business School event, and he didn’t respond to a subsequent message seeking further details.