Harvard Shakes Up Endowment Management

January 26, 2017

Harvard University's investment branch plans to cut half of its 230 employees as it puts in place a new strategy and seeks to change following recent poor investment performance.

The Harvard Management Co. will move away from its unusual strategy of using a combination of in-house and external fund managers, according to the Harvard Gazette. The moves are an effort to cut costs and improve performance, The Boston Globe reported in a story first covered by The Wall Street Journal. Different investment teams will lose their jobs at various times in the upcoming year.

Harvard's direct real estate investing group will begin managing for Harvard as an outside firm. Timber and natural resources portfolios will continue to be managed internally.

The investment arm's compensation structure is also slated to change from one in which managers are compensated based on the performance of their own investments to one where they are compensated based on the endowment's overall performance.

Harvard owns the largest endowment in the country, with funds worth $35.7 billion. But it posted a 2 percent annual investment loss last year. Poor returns in recent years, combined with Harvard Management Co. bringing in former Columbia University Investment Management Co. CEO N. P. Narvekar as its new CEO in September, prompted speculation that major changes were in store.

Endowed funds provided more than a third of Harvard's $4.8 billion budget last year, contributing $1.7 billion.

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