The Massachusetts Institute of Technology said on Wednesday that its endowment shrank 20.7 percent in its last fiscal year as its investments were badly battered by the financial crisis.

The elite school, known for its strength in the sciences, said its endowment is now worth $8 billion, down from $10.1 billion a year ago. The school's investments lost 17.1 percent during the fiscal year that ended on June 30.

MIT said its endowment paid out $518 million for operations and received $143 million in new endowment gifts and transfers.

The school's investment losses, while heavy, were far smaller than the 27.3 percent drop suffered by neighboring Harvard University.

Harvard, the wealthiest U.S. university, reported last week that its endowment contracted by $10.9 billion to $26 billion, losing more than the entire MIT endowment.

MIT, like Columbia University and the University of Pennsylvania, said it was able to insulate its endowment from more severe losses by selecting more traditional investments like bonds. Harvard and Yale, whose endowment lost 30 percent, were more aggressive investors, putting more money into alternative asset classes like hedge funds and private equity. (Reporting by Svea Herbst-Bayliss, editing by Matthew Lewis)