Harvard's Money Management Dream Team to Resign

January 13, 2005 (PLANSPONSOR.com) - The famed triumvirate of Harvard's endowment management team - Jack Meyer, Maurice Samuels, and David Mittelman - have said that they will leave the university at the end of June to start their own money management company.

Meyer, the head of the Harvard Management Company (HMC) since 1990, announced that he will be leaving as of June 30 to start his own private investment firm alongside Samuels, Mittelman and other HMC employees. During Meyer’s tenure, the university’s endowment has grown from $4.9 billion to $22.6 billion, making it easily the largest university endowment in the world. Last year, returns of over 20% were seen, with both Samuels and Mittelman’s bond units posting exceptional returns (See Harvard Endowment Releases Manager Bonuses, with Controversy Sure to Follow ).

As one of the last internally run and most successful university endowments, Harvard is watched closely for investment trends by many other institutional investors. The trend, as of late, is to outsource money management to hedge funds, with Harvard recently plowing $500 million into Goldman Sachs wonder-boy Eric Mindich’s Eton Park Capital – considered by many to be the largest hedge fund start-up ever.

Not a Surprise

The departure of Harvard’s top money managers will not come as a surprise to many. HMC is unique in its configuration, with the unit managing almost half of Harvard’s endowment internally, an outlier in the world of university endowments. Yale, second in America with a $13 billion endowment, fully outsources its money management.

A requirement of internally managing the money is that manager bonuses must be released. Samuels and Mittelman, among others, have come under severe scrutiny for the bonuses they have made over the last couple of years. In fiscal 2004, the two managers each garnered bonuses in the range of $25 million. Meyer made considerably less, but still pulled in around $7 million on the year.

Almost as sure as spring, the bonus figures spark controversy at America’s oldest university. Students, faculty and alumni alike rail annually against the large bonuses, citing HMCs non-profit status, high tuition, and “social justice” as reasons for smaller bonus payments (See Running the Fund: Crimson Blues ). To counter this annual protest, Harvard has, over the past decade, continually outsourced an increasingly large amount of its endowment to hedge funds – and often former Harvard managers, such as Jonathon Jacobson of Highfields and Timothy Peterson of Regiment. This is a trend that is not only seen here, but across the institutional investment spectrum.

Out of the Limelight

Meyer acknowledged that this constant scrutiny was part of the reason that he and his team are leaving. “It would be nice to drop out of the public spotlight a little bit,” Meyer told the Harvard student daily, The Crimson. “Everything Harvard does is closely scrutinized.”

Meyer also cited the possibility of making more money, as well as simply trying something new, as reasons for leaving, according to The Crimson.

Meyer would not comment yesterday on the details of his plans in the private sector. “I’m not going to go there,” he told The Crimson. “I’m totally focused on HMC.”

Meyer’s departure calls into question the sustainability of the unique Harvard management system. Many people within and without the university are suggesting that this spells the end for a system that produced impressive returns for Harvard over the past 15 years. “At some point, it simply won’t make sense to maintain the existing format,” Meyer told The Crimson last June. “There is a point where we would simply move to an external model.”