Fiscal 2007 was also a strong year for the University endowment in terms of relative performance, which is measured against other institutional funds and benchmarks in 11 relevant non-cash asset classes. As compared with the average institutional fund, the Harvard endowment outperformed by 5.3 percentage points the total return achieved by the median of 151 institutional funds with assets of more than $1 billion tracked by the Trust Universe Comparison Service (TUCS). The University endowment's fiscal 2007 investment return also exceeded the 20.9 percent that marked the top-five percentile for this sample.

HMC maintained its record of delivering long-term value added across the asset classes in which the University invests. Consistent with global economic developments, the main drivers of absolute return in fiscal 2007 included the endowment's exposures in the emerging market, international, and domestic equity classes. Emerging market bonds also performed well, as did the absolute return/special opportunities and real estate classes, which provided diversification during a period of market volatility.

The total investment return on the University endowment outperformed HMC's policy portfolio aggregate benchmark by 580 basis points. This translates into more than $1.7 billion of additional value for the endowment.

The absolute return earned in fiscal 2007 was greater than 2.5 times the long-term expected return set by the University for HMC. This expected return is determined in order to maintain the long-term purchasing power of the endowment after distribution and the impact of inflation. As a result, in fiscal 2008, the University's schools, including HBS, will see endowment distributions rising from approximately $930 million this past year to $1.1 billion, or more than three times the level of 10 years ago.