{shortcode-d80ba74937fa0737a1aa059a47f82036f8a24a49}UPDATED: October 29, 2017 at 8:43 p.m.

Harvard marked down nearly $10 billion in domestic fixed income assets and nearly $1 billion in natural resource assets during fiscal year 2017, according to the University’s annual financial report, which was released Thursday.

The report contained the first indication of Harvard’s investment portfolio at year’s end. It depicts a University investment strategy in flux and an administration that is cautiously eyeing future financial uncertainties. The endowment returned 8.1 percent on its investments overall in fiscal year 2017, a “disappointing” result that trails the returns of every other Ivy League school.

“The new CEO at Harvard Management Company, Narv Narvekar, is implementing an ambitious and far-reaching plan to improve endowment returns, and prudent financial management has the University positioned to weather future uncertainties,” University President Drew G. Faust wrote in a statement accompanying the report.

In a year when poor endowment returns and “ongoing financial challenges across higher education” pressured budgets at Harvard, the University reported Thursday that, for fiscal year 2017, it had a surplus of $114 million. That’s about $37 million more than Harvard’s surplus the year prior and continues a now-four-year trend of netting an operating surplus.

But University administrators cautioned in the report not to expect as high a number in future years.

“This year’s operating surplus of $114 million may represent a high water mark for the foreseeable future, however, due to the broad and ongoing revenue pressures in higher education,” the report, authored by Harvard’s vice president for finance Thomas J. Hollister and its treasurer Paul J. Finnegan ’75, reads.

Its investments, however, are far from a high water mark. In a letter earlier this fall, Narvekar, the CEO of Harvard’s investment arm, attributed Harvard’s lagging performance for the fiscal year to a combination of “deep structural problems at HMC” and markdowns on natural resource assets the firm took during the year. Narvekar has launched an ambitious restructuring of Harvard’s strategy since taking over the firm in December.

Nevertheless, the University showed growth in some areas. According to the report, its net assets increased by $1.7 billion, buoyed by Harvard Management Company’s 8.1 percent investment returns “as well as new gifts to the endowment and to capital projects.” Harvard’s interest expense—the percentage it pays on any borrowings—also slightly decreased this year, contributing to the surplus.

For the second year since 2011, the University saw a slight increase in the amount of federal research funding it received. For fiscal year 2017, it received $618 million from the federal government, with the Department of Health and Human Services remaining “the most significant contributor of the University’s federal funding.”

But in several places in the report, Harvard’s financial officers warned that growth in federal funding is not expected to continue. In its place, Harvard faculty have sought relationships with non-federal sponsors like corporations and foundations. In the past year, funding from those sources increased by 8 percent to $267 million.

In a trend that some experts say portends problems, Harvard again saw an increase in its annual endowment payout rate, which was up to 5.4 percent compared to 5.1 the year prior. Similarly, its endowment distribution rate increased 5 percent to $1.8 billion, the result of new gifts and a “collar” for endowment distribution the Corporation recently set.

Expenses across the University increased 4 percent to $4.9 billion, again driven primarily by increases to employee salaries and benefits. Harvard also significantly increased its investments in “capital projects and acquisitions,” boosting the number to $906 million from $597 million the year prior. That money supported construction projects like Winthrop and Lowell House renewal and ongoing efforts to revitalize the Smith Campus Center.