HMC Returns Slow This Year

Harvard's approximately $6 billion endowment grew little during the second half of fiscal 1994, marking a dramatic decrease from last year's banner performance.

For the year ending June 30, the University endowment grew by just 9.8 percent, in contrast to 16.7 percent for fiscal year 1993, according to a letter addressed to major University donors by Harvard Management Company (HMC) President Jack R. Meyer.

But the Harvard numbers were well above industry indicators in a tumultuous year for markets, during which both national and HMC internal benchmarks had down years.

During the first half of fiscal year 1994, the endowment was on pace to eclipse the 1993 returns, with a nine percent increase.

In January, however, a downturn began. The return fell to 1 percent in the third quarter of fiscal 1994, and in the last quarter it rebounded only slightly for a .8 percent gain.

Reached at home last night, Meyer said he had no comment on the fund's performance.

Benchmarks Down

Compared to major industry-wide benchmarks, though, the endowment performed well.

During fiscal 1994 the Standard and Poor's 500, an index of domestic stocks, returned only 1.4 percent and the Salomon Broad Investment Grade Bond Index, an index of domestic bonds, declined 1.2 percent.

Head to head, in those specific areas, the endowment significantly beat these indicators, with a 5.2 percent return on domestic stocks and a 10.8 percent gain on domestic bonds.

The endowment also beat the median of Wilshire Associates' TUCS large, a measure of 53 institutional funds holding between $1 billion and $10 billion. Harvard outperformed that indicator by 6.7 percent, meaning the University outstripped most of its peers.

HMC exceeded its own internal benchmark, the Policy Portfolio, which returned 6.8 percent during the past year.

The Policy Portfolio indicates what the endowment would earn if Harvard invested its money according to a certain allocation guidelines. And since the endowment beat the index, HMC will call fiscal year 1994 a success.

In his letter, Meyer also gave HMC's results since his arrival three years ago, when the company restructured its management and investment strategy.

According to the internal benchmark, Meyer's term has been a successful one. Over the last three years, HMC's net gain has been 12.7 percent, which outperformed the Policy Portfolio's 9.9 percent return over the same period.

The endowment also beat the median institution fund over the three years, which matched the internal benchmark's return.

Meyer, though, emphasized in the letter that he did not expect the endowment to keep up such a high rate of return.

"While we are pleased with the 2.8 percent margin, we don't believe it is sustainable over time," he wrote. "A more realistic long-term aspiration relative to the Policy Portfolio would be an increment of about 1 percent per year."

The University's endowment also beat the three-year consumer price index inflation rate by 9.6 percent over the last three years

HMC exceeded its own internal benchmark, the Policy Portfolio, which returned 6.8 percent during the past year.

The Policy Portfolio indicates what the endowment would earn if Harvard invested its money according to a certain allocation guidelines. And since the endowment beat the index, HMC will call fiscal year 1994 a success.

In his letter, Meyer also gave HMC's results since his arrival three years ago, when the company restructured its management and investment strategy.

According to the internal benchmark, Meyer's term has been a successful one. Over the last three years, HMC's net gain has been 12.7 percent, which outperformed the Policy Portfolio's 9.9 percent return over the same period.

The endowment also beat the median institution fund over the three years, which matched the internal benchmark's return.

Meyer, though, emphasized in the letter that he did not expect the endowment to keep up such a high rate of return.

"While we are pleased with the 2.8 percent margin, we don't believe it is sustainable over time," he wrote. "A more realistic long-term aspiration relative to the Policy Portfolio would be an increment of about 1 percent per year."

The University's endowment also beat the three-year consumer price index inflation rate by 9.6 percent over the last three years