The Harvard University endowment fund lost $10 billion in 2009. Unable to dump toxic investments, the university was left with the challenge of finding new ways to recoup this 27 percent portfolio loss. Part of the solution to this challenge lies deep within Brazil in the form of pine and eucalyptus trees. Yes, trees.
The Harvard University endowment fund doesn’t just invest in timber; fund staffers actively manage the investments. Michael McDonald of Bloomberg Businessweek gives readers a glimpse of what it is like to be Jane Mendillo, Harvard Management CEO, as she boards a turboprop airplane and heads into the forest to examine Harvard’s timber holdings.
“The flight took her over dirt roads running through endless hills and valleys and unimaginably beautiful wilderness. But Mendillo, head of Harvard University’s $32 billion endowment, wasn’t there to sightsee. She was visiting tree plantations and inspecting Harvard’s holdings. The pine and eucalyptus trees planted in neat rows that stretch for miles will be used to make charcoal, feed pulp mills and, Mendillo hopes, produce an increasing supply of saw logs for furniture and other consumer goods for a burgeoning Brazilian middle class.” Source: Bloomberg Businessweek
Mendillo’s hard work is paying off; the fund experienced a 12.9 percent 20-year rate-of-return as of 2011. This includes a 19 percent increase in natural resources investments in 2011 alone. These above average rates of return have led McDonald to ask, “Can Timber Rebuild Harvard’s Endowment?” The answer, right now, is that it just might be able to do so.