But Harvard’s endowment returns still lag behind its peer institutions. Princeton boasted a 15 percent investment return while Columbia topped the Ivies with a 17 percent yield last fiscal year.

These changing investment strategies mark a dramatic departure from Meyer’s profit-maximizing approach and a shift in philosophy toward focusing on best serving the University’s needs­—even if it means lower but more reliable annualized returns.

“What is more important—beating our peers’ annual returns, or generating long-term growth with manageable volatility?” Mendillo asked in 2010, capturing the friction in evolution of HMC’s identity.

NEW DRIVETRAIN

The exodus of traders that followed Meyer out of HMC left the company’s investment team in limbo. Since Mendillo arrived she has made retooling the company’s administrative structure a priority alongside realigning its investments.

Steady attrition among its portfolio managers, who left one by one to start their own hedge funds, was a major source of concern within the company but began to subside when Blyth, the top internal investor, stayed on.

With Blyth serving as the investment team’s core member, Mendillo recruited new talent to HMC and built up an experienced equity team. Neil Mason, for example, was appointed to the position of chief risk officer.

According to Blyth, Mendillo may be moving away from relying on external money managers, choosing to bolster the internal team to incrementally take responsibility for a greater portion of the endowment going forward.

But Mendillo was not afraid to make necessary cuts, letting go a number of HMC employees to rein in operating costs.

Mendillo’s end goal was to better align HMC to future investment opportunities across the entire market and to bring each of the portfolio management teams into sync, according to a speech she gave in 2010.

In response to its catastrophic year, HMC said it would consider shifting its focus to areas in which it had a competitive advantage, such as fixed income, a field that focuses mainly on periodic real returns like bond markets. Another area that it is focusing more heavily on is real assets, an area that includes investments like gold, land, and other commodities.

As Mendillo now mobilizes to the future—what Meyer called “Phase 2” of Mendillo’s tenure as the head of HMC—she will now mold the portfolio into her own.

Beyond investing more heavily in these two areas, Mendillo hopes to increase expertise in emerging markets.

Apparently overcoming one of the most severe downturns in Harvard’s financial history, Mendillo is optimistic about the future.

“It was a very rocky period for the portfolio, and it was a lot of hard work,” she said. “But we are focused on drawing strong long-term returns where you think that the opportunities lie in the future.”