Saturday, 26 July 2014
Last updated 20 hours ago
Mar 7 2011 | 9:29am ET
Harvard University has by far the largest college endowment in the country, with assets topping $27.5 billion. But the school's best money managers of the last two decades have garnered much, much more to manage on their own.
Five alternative investments firms founded by Harvard Management Co. alums over the past 13 years now manage more than $43 billion, all of them operating just a stone's throw from Harvard's ivy-covered campus in Cambridge, Mass.
Adage Capital Management has $13.5 billion in assets, Convexity Capital Management $12.3 billion and Highfields Capital Management $11.7 billion. Two others, private equity firm Charlesbank Capital Partners and hedge fund Regiment Capital Advisors, also manage billions.
"Spinouts from Harvard Management like Charlesbank have become some of the highest-performing investment managers in the market," Golub Capital's Lawrence Golub told Bloomberg News. "It's an economic loss for Harvard but a windfall for all the partners who are building these great businesses and making way more than they would have within the four walls of Harvard Management."
Making money was certainly a big issue. The first of the managers to leave, Charlesbank's Michael Eisenson and Highfields' Jonathan Jacobson, did so in 1997 and 1998. But the most recent exits, including that of Jack Meyer, who ran the endowment for 15 years, came after a group of Harvard alumni from the class of 1969 made known their unhappiness with the $107.5 million earned by Harvard's top managers.
"The class of '69 spent a lot of time arguing over tens of millions in compensation and ended by losing $10 billion," Steven Drobny, the author of The Invisible Hands: Hedge Funds Off the Record—Rethinking Real Money, told Bloomberg.
Of course, not all of what Bloomberg has dubbed the "Crimson Cubs" have been so lucky: Sowood Capital Management, founded by former Harvard money manager Jeffrey Larson, was one of the earliest and biggest victims of the credit crisis, losing more than half of its $3 billion in the summer of 2007. Harvard has seeded Sowood with $500 million.
Not all of Harvard's seed investments have ended badly. Convexity and Highfields both got $500 million at launch, and Regiment got $300 million. Regiment and Adage are now Harvard's biggest external money managers. Harvard has since redeemed its investment with Highfields and is no longer and investor in the hedge fund.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…