In Shanghai, Faust Expresses Optimism That Endowment Will Improve With Financial Markets

A year after Harvard’s endowment plummeted 27 percent—losing almost $11 billion—University President Drew G. Faust told reporters in Shanghai last week that she expects a better year for the University’s coffers.

Speaking at the newly opened Harvard Center Shanghai, Faust hinted that as the world’s financial markets begin to recover from last year’s deep recession, the University’s endowment will begin to show gains as well.

“We have been very pleased to see the general rise in the markets and to feel that there has been a far better year in fiscal ’10 than there was in fiscal ’09 for all investors across the United States,” Faust said.

She also expressed confidence in Harvard Management Company chief Jane L. Mendillo, who leads the University’s endowment managers. Mendillo, who stepped into her position in July 2008, has taken steps to place Harvard on stronger financial footing, such as increasing cash holdings to deleverage the endowment.

According to its most recent report, HMC decreased capital commitments by $3 billion and restructured the policy portfolio to include a positive cash position starting in fiscal year 2009.

“We have great confidence in Jane,” Faust said. “We think she has made important adjustments to many of the approaches that she takes to investment.”

In October 2009, the University paid $500 million to exit interest-rate swaps which were intended to reduce risk in the financing of the University’s expansion into Allston, which is now on hold. The swaps failed after interest rates dropped to unprecedented lows during the recession.