Harvard Endowment Expands Commodities Team

(April 14, 2011) — In an effort to expand its staff of internal managers, Harvard University has hired Satu Parikh to head its investment management team as managing director and head of commodities.

Parikh’s move to Harvard Management signals efforts by institutional investors to increase their commodities exposure in an effort to achieve further diversification and hedge against inflation, as well as a reaffirmation of the internal investment structures of endowments, such as Harvard’s.

Parikh will join Harvard Management Company (HMC) in June from RBS Sempra Commodities, a commodities trading firm owned by Royal Bank of Scotland. At the Boston-based endowment, Parikh will head the portfolio management team focused on commodities, reporting to Stephen Blyth, head of internal management.

“I am delighted to have Satu as part of the internal investment team,” Blyth said in a statement. “HMC has long had broad exposure to commodities and commodity-related investments, and adding Satu’s leadership and extensive experience will provide extra dimensions to our market perspectives.”

Commodities have gained ground among institutional investors as of late. According to a recent report by Barclays Capital, net inflows to commodity-related investment are expected to remain strong in 2011, driven largely by institutional investor demand. “The return of the institutional investor, massive inflows into precious metals led by the desire to hedge against financial market risk, and the gradual shift towards active management of commodity strategies were among the key stories of the year,” the Barclays report said.

The report showed that commodity investments stood at $376 billion as of December 31, 2010, up from $270 billion the previous year. Institutional investors accounted for a large percentage of the total, with a record $8 billion of inflows in December. Barclays’ estimated that for the year, net institutional inflows accounted for almost 75% of the total inflows of $46 billion.

Harvard’s endowment suffered a 27.3% decline in 2009 which led to layoffs, salary freezes and a delay in construction projects. However, in September, the world’s wealthiest school — with a $27.4 billion endowment portfolio, revealed that its investments rose 11% for its fiscal year ended June 30, outpacing its own benchmark. According to the report released last year by HMC, the university’s endowment increased $1.4 billion to $27.4 billion as of June 30. The 11% return exceeded the returns of the endowment’s policy portfolio benchmark by 160 basis points, the report said.