Monday, October 03, 2005

The rich get richer

Harvard and Yale announce another stellar year of endowment returns. Harvard, though, is losing its star manager to a hedge fund -- perhaps due to alumni protests over what some deemed to be exorbitant compensation. In fact, Harvard was getting a great deal. Those guys would have made much more at hedge funds, and probably will ;-)

WSJ: Harvard University, capping a year of controversy over the pay of its investment managers, said its endowment achieved a stellar 19.2% return in the year ended June 30, bringing its value to $25.9 billion.

The report comes as Harvard, by far the richest school in higher education, is looking for a permanent replacement for endowment manager Jack Meyer, who announced in January that he was leaving to start his own firm, taking some of the school's best money managers with him. The results, announced Friday, represent the last of his 15 years at Harvard.

Mr. Meyer, chief executive of Harvard Management Co., the university's in-house money manager, had come under criticism, especially from within the Harvard academic community. Critics questioned the Wall Street-style compensation that he and his lieutenants earned while managing money for the nonprofit university.

In the fiscal year ended June 2004, the two top-paid managers at Harvard Management, David Mittelman and Maurice Samuel, each received about $25 million. Mr. Meyer made $7.2 million. Mr. Meyer had long defended the management company's pay, saying it was necessary to attract top talent.

Harvard has been unusual in managing its money in-house, rather than farming the money out to managers, whose pay would remain undisclosed.

Friday, Harvard said it had named Peter Nadosy, former president of Morgan Stanley Asset Management and a Harvard Management board member, as the endowment's interim chief investment officer, while the school looks for a permanent successor to Mr. Meyer.

Harvard said it plans to commit endowment money to Mr. Meyer's new investment firm, Convexity Capital Management LP, despite calls from critics to sever ties. Mr. Meyer and his assistant didn't return phone calls Friday.

Mr. Meyer and David Swensen, chief investment officer of Yale University, have led the way in moving college endowments away from U.S. stock and bond markets and into more exotic and illiquid investments, such as timber and private ventures that they believe will offer superior returns over time. Harvard said the endowment's strongest results in the most recent year came from private-equity investments.

Harvard Treasurer Jim Rothenberg said the school's investment return beat the 15.8% median return of the 25 largest university endowments, according to preliminary results.

Last year's results bring Harvard endowment's annualized 10-year return to 16.1%, beating the 9.4% return of the median large institutional fund, as measured by the Trust Universe Comparison Service. Had Harvard merely met that return over the past 10 years, Harvard said, the endowment would be $14.4 billion smaller.

But Yale's results have been even stronger. Recently, Yale said its endowment earned a 22.3% return for the year ended June 30, bringing its assets to $15.2 billion.

1 comment:

Anonymous said...

What's that famous descripton of Harvard? Something like "One of the country's largest holding corporations, which happens to be affiliated with a small educational institution?"

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