If you pay attention to leadership at our nation's most prestigious schools, you probably noticed that Harvard University recently named its first female president, historian Drew Gilpin Faust. That drew a lot of attention in the press.

Drawing less attention was another announcement: The university's endowment fund, the largest in the country, at $35 billion, has a new manager. It's a woman named Jane Mendillo, hailing most recently from Wellesley, where she grew its endowment to $1.7 billion over five years, with an average annual return of about 13.5%. In the last fiscal year, the endowment gained nearly 23%.

What's her secret? Well, like Yale University's endowment manager David Swensen, Mendillo looks beyond traditional stocks and bonds, employing such strategies as hedge funds and private equity. It will be interesting to see how she handles Harvard's billions.

Shipping it out
One recent trend that may or may not continue is outsourcing money management. According to a New York Times article, some 70% of Harvard's endowment is currently managed by outside firms.

Mendillo's responsibility is not too unlike that of a manager of a massive mutual fund -- and that means she faces some tough challenges. When a fund grows enormous, it can be hard to find enough compelling investments for it. If a fund has $35 billion, it can make 350 $100 million investments, or 35 billion-dollar ones. If it wanted to just focus on 10 to 20 investments, it would have to invest $1.75 to $3.5 billion in each one, which is not always practical.

Being able to focus on relatively few investments has been effective for many money managers. Consider the CGM Focus (FUND: CGMFX) fund, with its five-year annual average return of 40%. It sports only around 25 stock holdings, but strong performances from many of them have added up to nice results. Here are a few:


5-Year Average Annual Return

Deere (NYSE: DE)


U.S. Steel (NYSE: X)


Nucor (NYSE: NUE)


Schlumberger (NYSE: SLB)


Mosaic (NYSE: MOS)


Compared to Harvard's endowment, CGM Focus fund's total assets are tiny -- "just" $6 billion.

Massive endowments such as Harvard's and Yale's have very impressive recent track records, despite their size. Learn more about them in these articles: