Meyer said that this demeanor is characteristic of Mendillo, calling her “deceptively tough.”

“She is soft spoken and you think, ‘what a nice person.’ But she is very firm in her decision-making and a very good negotiator,” Meyer said.

HMC—which previously had beat out its benchmarks consistently—fell behind those standards by 2.1 percent, and the annual report noted that “with a few notable exceptions, nearly every asset class did poorly.”

Roughly five miles away from the HMC offices, in a packed Faculty Room in University Hall, Faculty of Arts and Sciences Dean Michael D. Smith asked departments and centers to cut their respective budgets by 10 to 15 percent.

Harvard cut budgets severely, laid off 275 employees, and eliminated hot breakfast for undergraduates.

Realizing the extent of its crunch in income, Harvard said that it would “assess its alternatives” with regard to the Allston Science Complex. Finally in December 2009, University President Drew G. Faust announced the University would halt its construction in Allston, and it soon after paved over the site with concrete.

SHIFTING GEARS

To many observers it came as a surprise that the world’s richest university would have to make budgetary cuts in the wake of the financial crisis. The reality of budget cuts brought home the very real impacts of risky investment strategies as it became clear in 2009 that a large part of the budget cuts were required because the endowment returns yielded barely enough cash to meet the university’s short term financial obligations.

With the advent of the crisis, HMC retooled its investment strategy to increase liquidity while still maintaining a similar portfolio of holdings, which translated to a similar market risk.

Higher liquidity results in greater flexibility in serious downturns, granting the University easier access cash in a tight spot. Mendillo said in early 2010 that HMC’s need to know about the short-term resources of the University was “lit up in bright lights” during the financial crisis.

The more conservative strategies were a far-cry from some of the aggressive investment approaches of Meyer’s days.

“Historically, we took the view that endowments could simply focus on long-term financial results, and the University would take care of short-term business,” Mendillo said in 2010. “We know now that it is all shared business.”

That year, Faust formed a new committee to oversee and reevaluate the University’s risk return profile in terms of the University’s changing goals and needs in an effort to tie HMC more closely to the rest of the University.

Partly as a result of more cautious investing, HMC posted an overall 11 percent investment return and the endowment edged upwards from $26.1 billion to $27.6 billion.

According to Meyer, Mendillo gets “high marks” in handling the crisis and personnel difficulties. “No one can dispute that,” he said. “Now she is in phase two, making this portfolio her own. My bet is that she will get good marks in phase two.”