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Harvard to sell illiquid holdings

The $36.9bn endowment is reportedly planning to sell some of its holdings in private equity, hedge funds and other money managers to bring more capital in-house and be more ‘nimble’.

Harvard University endowment is planning to sell off some of its illiquid holdings in private equity, hedge funds and other money managers in a bid to improve its liquidity.

President and chief executive officer of the $36.9 billion endowment, Jane Mendillo, told the Wall Street Journal, the fund wanted to have a greater “portion of [its] assets managed internally over the next few years”. She added: “That will allow us to be more nimble, have better transparency into the portfolio and have more liquidity.”

Mendillo declined to provide further details of the sell-off, other than to say Harvard planned to increase internal management of its assets from its current position of roughly one-third.

The chief executive said the move would help the university save money, with internal management costing about a quarter or one fifth of fees paid to an external manager, such as a private equity or private equity real estate fund. Harvard has projected a negative return of as much as 30 percent for the fiscal year that ended in June,

The report revealed that Harvard Management Company, the organisation that manages the endowment, is planning to cut the number of fund manager relationships. Mendillo has told staff to “identify the top five to 10 managers in each asset class”, the report said.

Harvard is also currently pressing for fee breaks with existing fund managers, and could move cash from commingled funds to separate accounts.

The Wall Street Journal cited sources as saying that Harvard had recently sold about $150 million of its shares in Denham Capital Management LP's Denham Commodity Partners Fund V LP in the secondary market. Mendillo told the newspaper Harvard aimed to be an “active buyer and seller” in the secondaries market.

Harvard had 13 percent of its portfolio allocated to private equity and 9 percent to real estate as of 2009, according to the fund’s 2008 annual report. Harvard invested in 210 private equity funds with 80 different managers as of the end of the fiscal year 2008, and primarily with private equity real estate opportunity fund managers.