Harvard endowment arm to overhaul investment process, cut staff by half

[January 26, 2017]  By Svea Herbst-Bayliss

BOSTON (Reuters) - Harvard University plans to outsource most of its investment management activities and cut its staff by roughly half, in a dramatic overhaul in how the Ivy League school's $35.7 billion endowment is managed.

The new chief executive of Harvard Management Co, which manages the university's endowment, announced the plans in a letter on Wednesday. N.P. Narvekar, the chief executive, said the investment arm will shut down its internal hedge funds and let traders go by the middle of 2017, essentially abandoning a so-called hybrid model that was unique among big endowments.

The internal team that oversees real-estate investments will spin out into an independent group that is expected to keep managing money for Harvard.

HMC will lay off roughly half of its 230-person staff, by the end of the year.

"The investment landscape has evolved significantly, requiring us to adapt two aspects of HMC's organizational and investment models in order to maximize performance over the long term," Narvekar wrote in the letter.

For decades, Harvard's investment performance was the envy of the financial world, but it has lagged rivals for some years now and posted its worst performance since the financial crisis in fiscal 2016 when the portfolio lost 2 percent.

Harvard has long operated differently from most other schools, including fellow Ivy Leaguer Yale, managing some of its money internally and farming out only a portion to external managers.

Harvard first hinted at upcoming changes in June as performance continued to lag.

While Narvekar is preparing to lay off dozens of employees, he is also hiring a team of four investors who he said will be instrumental in moving Harvard away from its specialized asset class investing approach to a more generalist model.

A seal hangs over a building at Harvard University in Cambridge, Massachusetts November 16, 2012. REUTERS/Jessica Rinaldi

The four are Rick Slocum, who will join in March as chief investment officer, and Vir Dholabhai, Adam Goldstein and Charlie Saravia, who will be managing directors. Goldstein and Saravia worked with Narvekar previously when he ran Columbia University's $9.6 billion endowment.

Narvekar is Harvard's fourth investment chief since 2005, succeeding Stephen Blyth, who held the position for only 18 months before resigning unexpectedly in July.

The story was first reported by The Wall Street Journal.

(Reporting by Svea Herbst-Bayliss; Editing by G Crosse and Leslie Adler)

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