Harvard changes money management strategy, cuts staff in major shakeup

The Harvard Management Company, which oversees the college's $35 billion endowment fund, announced changes in strategy and staff on Wednesday -- an effort by the fund's new director to modernize investments of vast private donations and property. File Photo courtesy Harvard Public Affairs & Communications

Jan. 25 (UPI) — The new boss of the endowment at Harvard University started a major shakeup Wednesday — announcing plans to shift management of the college’s vast donations and investments off campus and reduce staff.

Nirmal Narvekar said Wednesday he is remodeling the $35 billion fund in hopes it will improve its fiscal performance and streamline the way private donations are handled.

The move might soon resemble the model employed at other prestigious universities, like Yale.

“Major change is never easy and will require an extended period of time to bear fruit,” Narvekar said in a statement. “Transitioning away from practices that have been ingrained in HMC’s culture for decades will no doubt be challenging at times. But we must evolve to be successful, and we must withstand the associated growing pains to achieve our goals.

“We have made some important but very difficult decisions.”

Narvekar, 54, who was hired as president and CEO of the Harvard Management Company last month, achieved significant results by outsourcing some of the financial management during eight years at Columbia University. There, his efforts outperformed those at several institutions, including Harvard.

Last year, the Cambridge, Mass., school lost 2 percent on its investments and has generated an average annual return of just under 6 percent over the last five years — one of the worst rates among Ivy League colleges. The return rate at Yale has been more than 10 percent during the same period.

Narvekar’s changes will also reduce staff by about half, he said, and alter the compensation system to pay out on a performance-based scale. Four new senior members of the company were also named Wednesday.

Endowments at schools nationwide have been up and down since the financial crisis of 2008-09. For years, Harvard has succeeded with a mix of in-house and external money managers — but new market conditions have led that model to underperform recently.

Under Narvekar’s new direction, most of the money management will be outsourced. The in-house hedge fund managers will be phased out by July and real estate managers by the end of 2017, Narvekar said.

Though the changes are necessary, Narvekar said it is difficult to open the door and let many of Harvard’s experts leave.

“It is exceptionally difficult to see such a large number of our colleagues leave the firm, and we will be very supportive of these individuals in their transition,” Narvekar said. “We are grateful for their committed service to Harvard and wish them the very best in their future endeavors.”


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