Veritas Humiliat

School’s back in session.

Across the country college students are picking up books and trying out new classes. But school is back in session for portfolio managers, too. Harvard Management Company just released the performance of its $27 billion portfolio.

In the past year the portfolio rose 11%. This lags both the S&P 500 at 14% and a blended mix of stocks and bonds which returned 12%. But it does beat the school’s internal benchmark, which was up 9%.

The last couple years have given the managers of Harvard’s endowment an education in risk management. After years of some gravity-defying returns, the portfolio stumbled badly in 2009, losing over a quarter of its value. At one point the endowment had to sell some illiquid private investments to meet cash needs.

Over the past decade, though, the fund has had an enviable record, earning an average annual return of 7% when the S&P lost 1.5% per year and a blended index gained 1.5% per year. Even the risky small-cap index only gained 5% during the period.

But the last couple years have proven difficult as investment losses have led to layoffs and stalled building projects. As all portfolio managers eventually learn, markets keep you humble, no matter how smart you–or your bosses–are.

Douglas R. Tengdin, CFA
Chief Investment Officer
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