Harvard can keep its above-average returns with its strategy of investing into hedge funds, private equity and real assets, according to the head of its investment arm.

According to Jane Mendillo, chief executive of Harvard Management Co, while others have move into index funds, Harvard is sticking to its actively managed investments, which has delivered annualized returns of 12.5 percent over the last two decades.

Her  investment team is seeing promising private equity investments even in slow-growing Europe. Mendillo also finds potential in the United States' housing market, an improving employment scenario and lower borrowing costs.

The investment chief, however, admitted that it will be tougher and more challenging this time.