Harvard increases target to private equity

The $35.6bn endowment has hiked its allocation target to private equity to 16% even as the asset class underperformed its benchmark for fiscal 2012.

Harvard Management Company has increased its target allocation to private equity to 16 percent from the 13 percent goal it has followed since 2005, a university spokesperson confirmed.

The endowment, with about $35.6 billion of net assets as of September 2012, has long been an investor in private equity. The endowment’s target allocation to the asset class in 1995 was 12 percent, according to a policy mix outline available on Harvard’s web site.

While continuing to support private equity as a significant limited partner, Harvard’s own portfolio had muted performance in fiscal 2012, according to the Harvard Management Company endowment report published in September 2012.

Private equity returned 1.99 percent for fiscal 2012, under its 4.04 percent benchmark. That’s a reversal from fiscal 2011, when Harvard’s private equity portfolio returned 26.2 percent. In fiscal 2010, the endowment recorded a private equity return of 16.2 percent, a reversal from the disaster of 2009, when Harvard experienced a 31.6 percent loss in private equity, part of a total $10 billion loss across the portfolio.

A Harvard spokesperson declined to comment about the endowment’s investments.

The endowment’s private equity programme, which is headed by Andrew Wiltshire, managing director and head of alternative investments, was valued just over $7 billion as of 30 June, 2012, with about $2.3 billion of unfunded commitments, according to Harvard’s annual financial report for fiscal 2012.

Harvard Management Company announced in 2010 it would be culling its private equity portfolio of managers, concentrating commitments on the highest performing managers in the portfolio. At the time, the endowment's chief executive officer Jane Mendillo said Harvard would consider selling fund interests that were no longer core, and also could be a buyer on the secondary market for managers to which the endowment wanted more exposure.