Your 401(k) and ROTH IRA might be down, and shares of student lender Sallie Mae (NYSE: SLM) have gone from $50 to $15 since October, over concerns about the student loan market.

But you'll be happy to know that the endowment for Harvard is chugging right along, up in the 7-9% range for its fiscal year ended in June, according to The Wall Street Journal (subscription required).

In the current market malaise, that's enough to make it the best-performing major endowment, according to experts. That's especially impressive given the fund's massive size: $35 billion.

The Journal reports that "The endowment's staff pursued a strategy of shielding the fund from market downturns by purchasing credit-default swaps that helped protect it from wild market swings. Harvard also had a larger position than many endowments in plain-vanilla Treasury debt, which outperformed the stock market."

I have just one question: With a $35 billion endowment growing at 7% per year, why do they need to charge $45 thousand per yeah? To its credit, the school announced late last year that it would extend much more generous financial aid to middle-class families.

From June 30, 2006 to June 30, 2007, Harvard's endowment returned 23%. With the market up less than 20% and the median institutional fund up 17.7%, these returns would be impressive for any hedge fund. But Harvard's endowment isn't a hedge fund. It's a diversified pool of investments totaling nearly $35 billion. This type of outperformance on $35 billion is unbelievable.

Huge outperformance at Harvard's endowment has allowed its size to surge above Yale's endowment, which amounts to just $18 billion. Harvard has become increasingly reliant on its endowment to cover costs related to running the school, according to the AP.

Interestingly, Yale's endowment manager David Swenson recently wrote a book, Unconventional Success: A Fundamental Approach to Personal Investment, in which he essentially advocated a diversified portfolio of index funds for the average investor.

The Boston Globe reports on how Sowood Capital, a $3 billion hedge fund founded by a former manager of Harvard's endowment, collapsed this week -- costing Harvard $350 million.

Sowood, which has lost $1.6 billion dollars over the last several weeks, borrowed lots of money to bet on what it believed were low risk investments and backed them up with a hedging strategy intended to act as insurance in case anything went wrong. But markets reacted much differently than Sowood expected, driving down the price of its securities and rendering its hedges ineffective.

When Sowood went to sell its assets, it found no buyers. So it arranged for a Chicago-based hedge fund, Citadel Investments, to bail it out -- selling its securities at a deep discount. According to its founder Jeff Larson, Sowood did this "in order to avoid what we believed was the very real possibility of counterparties -- [e.g., lenders] -- seizing our collateral and liquidating or auctioning our positions. In such an uncontrolled process, we believe there was a high likelihood that little to no net asset value would remain for our investors."