The endowment’s performance may reflect both prudence at Harvard after it almost ran out of cash in 2008 and Mendillo’s management style. Mendillo, who took over as head of the fund a few months before the September 2008 collapse of Lehman Brothers Holdings Inc. triggered a worldwide financial crisis, helped Harvard’s endowment recover after the worst recession since World War II.
Harvard suffered severe financial losses, including a 27 percent investment decline in the year ended June 30, 2009, and a cash crisis brought on by its exposure to financial derivatives. Like the rest of the university, the endowment was forced to cut costs and staff. Harvard’s endowment is still seeking to recoup losses after the fund peaked at $36.9 billion in 2008. At the time, Mendillo said she would need at least five years to fix the portfolio, which included unwinding stakes in illiquid securities.
‘Terrific’ Structure
Mendillo, who said last week she is resigning at year’s end for personal reasons, shouldn’t be judged for the endowment’s performance in 2009, Glenn Hutchins, a member of the management company’s board, said in a telephone interview. He said her departure isn’t connected to performance and that the endowment is beating internal benchmarks, generating an additional $1.5 billion in return as she increased internal trading and cleaned up and repositioned a portfolio of outside managers.
“One of the things I think Jane has done very well is to build a terrific management structure with really good people,” said Hutchins, co-founder of Silver Lake Management LLC, a private-equity firm based in Menlo Park, California. “You don’t have a feeling that we’re vulnerable in any way.”
Improving Returns
In the announcement of Mendillo’s departure, Harvard Management estimated long-term gains through her last fiscal year at the helm, suggesting that performance may be improving. The endowment will have an average annual return of 11 percent to 12 percent for the five years ending this month. According to calculations by Charles Skorina & Co., that indicates that for the current year, the endowment will report a return in the 13 percent to 18 percent range.
Harvard hasn’t said whether it is replacing McKenna, who joined the endowment in 2009 to manage the event-driven strategy, or Koticha, a managing director in international fixed income who collected almost $3.1 million in 2011, according to regulatory filings. Koticha’s name wasn’t present in the list of best-compensated money managers at Harvard Management in 2012, the most recent calendar year for which the fund has disclosed pay.
Harvard Management’s private-equity division experienced turmoil in 2013 as Peter Dolan, the unit’s director, left after almost 20 years only to have his replacement, Lane MacDonald, depart in less than three months. The university hired Richard Hall to fill the position this year.
Blyth, Wiltshire