Harvard endowment swells to nearly $30 bn

BOSTON, Sep 20: Harvard University, already America's richest university, on Tuesday said its endowment swelled to nearly billion as a new investment chief extended a long run of beating its benchmark.

Returns for fiscal 2006, which ended June 30, grew 16.7 percent, slightly below the 19.2 percent gain posted the year before.

Successful investments in emerging markets and commodities boosted the endowment's total value to .2 billion from .9 billion a year ago, Harvard said, more than double the 2005 estimated gross domestic product of Iceland.

Harvard, like many U.S. universities, relies heavily on its endowment to cover annual expenses, spending about 5 percent of the endowment every year university programs.

In fiscal 2006, the university spent 3 million from the endowment.

Harvard is one of the most expensive universities in the country, with tuition, room and board totaling about ,000 a year.

The school allows students whose families earn ,000 or less a year to attend for free.

The returns were the first reported since Harvard named Mohamed El-Erian, an influential emerging markets bond specialist, to replace Jack Meyer as its top portfolio manager late last year.

Meyer left the university in 2005 to start a hedge fund after quadrupling the endowment's size over 15 years.

''Increased internationalization in the context of a broadly diversified asset allocation was a decided positive,'' El-Erian said in a statement, explaining how returns increased.

The size of Harvard's endowment and its annual returns are closely watched in the investment industry as others often try to take cues from its successful investment recipes.

Unlike most other universities, Harvard, located across the Charles River from Boston in Cambridge, still manages a large portion of its money in-house. Harvard Management Corp. (HMC), the endowment arm, still gives some money to Meyer and other former managers to invest.

''Notwithstanding some of the challenges associated with its current transition phase, HMC's efforts at adding value continued to draw successfully on both internal and external expertise,'' El-Erian said.

Investments in emerging markets posted the year's highest total return, Harvard said, adding that commodities achieved the best performance relative to its benchmark.

Harvard said its managers beat their benchmarks in nine of 11 different investment classes.

Over the longer term, the university's annualized 10-year performance is 15.2 percent, topping the 8.7 percent returned by the TUCS median large fund.

The endowment's investment acumen has stirred controversy in the past because returns were tied to the big paychecks that Meyer and his most successful managers collected. The university will release that information later in the year.

The Ivy League school handily beat the Trust Universe Comparison Service benchmark by 5.9 percentage points and also topped the median return of the 25 largest university endowments, initial figures showed.

REUTERS