Jane Mendillo, head of Harvard University’s $33 billion endowment, is leaving after a six-year tenure that started with the financial crisis and more recently saw investment performance that lagged behind some peers

Harvard Management Head Mendillo to Step Down

Search for Mendillo’s Replacement is Under Way

ROB COPELAND

Updated June 10, 2014 8:57 p.m. ET

Jane Mendillo, head of Harvard University’s $33 billion endowment, is leaving after a six-year tenure that started with the financial crisis and more recently saw investment performance that lagged behind some peers.

Ms. Mendillo will resign at the end of the year as president and chief executive of Harvard Management Co., which invests the school’s money, Harvard announced Tuesday. A search is under way for Ms. Mendillo’s successor as head of the world’s largest university endowment.

Ms. Mendillo, 55 years old, assumed the top spot at the management company in July 2008, months before the Lehman Brothers Holdings Inc. bankruptcy helped set into motion an economic downturn that cut deeply into the financial holdings of Harvard and others. Before the crisis, Harvard’s performance often ranked at, or near, the top of university endowments.

Within months of her appointment, the endowment was suffering billions of dollars of losses. Ms. Mendillo said the investment positions that she inherited had been made vulnerable by the use of borrowed money, or leverage, and the holding of illiquid assets that were harder to sell.

“When I first got here, I would say the portfolio was not well-positioned for the financial crisis,” Ms. Mendillo said in an interview with The Wall Street Journal on Tuesday. “The first couple of years here, we were not able to put money to work in the way we would have liked.”

Her predecessor, Mohamed El-Erian, declined to comment.

Ms. Mendillo moved to manage more of the endowment’s money internally rather than with external managers. “I think we’re in great shape,” she said.

The return on Harvard’s endowment was 11.3% for the year ending June 30, 2013, according to a September report from the management company. That is below the 11.7% average posted by 835 U.S. colleges and universities in the same period, according to the Nacubo-Commonfund Study of Endowments.

In the fiscal year ended June 30, 2012, Harvard’s endowment portfolio fell 0.05%, also lagging behind its peers. It has averaged a 12% annual investment return over the past 20 years. The endowment now manages about $2 billion less than when Ms. Mendillo took over.

“The path to higher returns over the last five years has been a very concentrated approach,” said Andrew Junkin, managing director at Wilshire Associates. “Harvard is known as very diversified with not a lot of exposure to the public equity markets, and I’m sure that’s a big factor in the underperformance.”

Harvard has long pursued a model, similar to Yale’s, that emphasized investments in hedge funds, private equity and assets such as commodities and real estate. Harvard relies on the earnings of its endowment for more than one-third of the university’s operating budget. Harvard President Drew Faust said in the announcement that Ms. Mendillo had been “an excellent leader.”

“She has repositioned the endowment and re-established a world-class investment platform to support Harvard and all of its activities for many years to come,” Ms. Faust said.

All told, Ms. Mendillo spent the better part of two decades working for the Harvard endowment. She left between 2002 and 2008 to build to the investment office at Wellesley College.

Her immediate predecessor, Mr. El-Erian, left to become chief executive of Pacific Investment Management Co., the $2 trillion asset manager.

His predecessor, Jack Meyer, started his own multibillion dollar hedge fund, Convexity Capital Management, and took much of Harvard’s investment staff, and reputation, with him. Convexity started trading with a whopping $6 billion on its first day.

In the interview, Ms. Mendillo said she wouldn’t start her own hedge fund and listed her interests in music, education and nonprofits as areas she would explore more starting next year. In 2012, Ms. Mendillo earned $4.8 million, a Harvard spokesman said.

“Being the head of HMC is the best job in the world, and it is a capstone to my career in endowment management,” she said.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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