Facing its lowest investment returns in three years with a 16.7% gain, Harvard's endowment, at $29.2 billion -- the worlds largest -- has trimmed its target allocation to bonds to 13%, and cut index-tracking investments to 30% according to its manager, Mohamed El-Erian. In addition, he plans to increase investments overseas in private equity, real estate and commodities. And if you need a job, he'll be hiring. He's already hired Karen Parker Feld of Wellington Management to head a new foreign exchange unit, Marc Seidner of Standish Mellon Asset Management to head U.S. bond investing, and Kathryn Murtagh of Goodwin Proctor LLP as chief compliance officer. He plans to hire an additional 15 to 25 people:
El-Erian, 48, says he's not going to let Harvard become overly reliant on a single team or strategy again. He has cut the fund's traditional dependence on bonds, shifting more assets to buyout funds and non-U.S. markets. He also hired five senior managers from Stanford, Deutsche Bank AG and elsewhere to replenish Harvard's in-house talent.
``We needed to be retooling, irrespective of whether we had gone through a transition,'' El-Erian said in an interview in his office in the Boston Federal Reserve Building, overlooking the harbor. Building management depth means Harvard should ``not have to go through such a transition again,'' he said.
Last fiscal year, Harvard finished well behind its Cambridge neighbor, the Massachusetts Institute of Technology, which earned 23 percent, tops among the biggest endowments. Stanford gained 19.4 percent.
El-Erian also will be measured against David Swensen, chief investment officer at Yale, Harvard's Ivy League rival. The 52- year-old Swensen produced a 22.9 percent return last year, second only to MIT, and has guided Yale to an average annual return of 17.2 percent in the past decade. The fund has more than tripled in size to $18 billion in that time.
Remaking Harvard Management is a ``marathon,'' said El- Erian, a former International Monetary Fund official and emerging-markets fund manager at Pacific Investment Management Co. He said he won't take unnecessary risks in search of a quick boost to returns, ``The Harvard community as a whole understands that,'' he said. Derek Bok, interim Harvard University president, declined to comment for this story, spokesman John Longbrake said.
Harvard's El-Erian Trims Bonds, Adds Staff to Revive Endowment - Bloomberg
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