Chief
Manager of Harvard's Endowment Will Depart With 4 Top Lieutenants to Start
New Venture
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The Harvard Management Company's president and
chief executive officer, Jack R. Meyer, announced on Tuesday that he would
leave the university's $22-billion endowment -- the largest educational
endowment in the world -- to establish a private investment firm. Four top
employees of the management company will join Mr. Meyer in the new venture.
Mr. Meyer and the other departing employees will remain in their posts
through at least June 30, the end of the fiscal year, while a search
committee looks to replace them.
"I don't think this guts HMC's management team," James F. Rothenberg, the
university's treasurer, said in an interview. "There's talent out there, and
we're going to find it."
When Mr. Meyer arrived at Harvard, in 1990, the endowment had a value of
about $4.7-billion. Under his leadership, the separately incorporated
management company has been a standard bearer of institutional investing,
earning average annual returns of 15.9 percent during the past 10 years and
adding billions of dollars of value. In the 2004 fiscal year, the endowment
posted a 21.1-percent return.
Success drew scrutiny and, on occasion, criticism, particularly of the high
fees paid to Harvard's money managers. In 2003 six of the management
company's portfolio managers earned total bonuses of more than $100-million.
A group of alumni pilloried the payouts, and Mr. Meyer promised to
recalibrate the formulas used to determine the bonuses. He declined to
provide details, however, and last year the top six managers earned total
bonuses of $78-million.
Among the top earners were two bond managers, David R. Mittelman and Maurice
Samuels, who earned about $60-million each in total bonuses over the past
two years. The pair will join Mr. Meyer at the new investment firm. Also
leaving Harvard for the new venture are Edward DeNoble, who supervises
investments in emerging-market funds, and Mike Pradko, Harvard Management
Company's chief risk officer.
The departures are the latest in an exodus of talented money managers who
have left the Harvard Management Company to establish their own shops. In
the past Harvard has invested billions of dollars in the new firms, which
operate with far less oversight than do the university's internal money
managers.
No such deals have been struck with Mr. Meyer's group, Mr. Rothenberg said,
but negotiations are expected to take place in coming weeks.
Critics assailed that prospect. "We don't think it would be appropriate,"
said William Strauss, a Harvard alumnus and frequent critic of how the
endowment is managed. "This should not be a way in which they can take what
they are doing into a realm in which they will not have to disclose their
earnings."
Mr. Meyer, for one, is looking forward to less scrutiny.
"It will be nice," he said, "to retreat from that a little bit."