Maybe the folks at Harvard (and Yale) really are smarter than everyone else. Harvard's $35 billion endowment returned 7-9% for the fiscal year ending in June, easily outperforming a down market and dozens of hedge funds.

Where was Harvard's money?

Commodities--the university began the year with 17% invested in commodities, including timber and farmland (that's a very high percentage for an endowment)

Treasuries

Hedge Funds (including some strong performers)

See Also:

Enraged Pakistanis Stone Stock Exchange, Demand Government Make Stocks Go Up

John Paulson Book: How To Make $3.7 Billion a Year