How To Invest Like Harvard

Just as most colleges look up to Harvard University, most investment managers look up to Harvard Management Co., the in-house firm that manages $27 billion for the university. Over the past decade, Harvard has posted a 15.9% annual return, vs. just 10.1% for the median large institutional fund. That feat has generated an extra $12.2 billion -- nearly as much as the entire endowment at Yale University, the second-wealthiest. Says James Swanson, chief investment strategist at MFS Investment Management: "They are the Mickey Mantles of the investing world."

Harvard Management has achieved this with a formula that bears little resemblance to that of the average investor. "There's not much plain vanilla in our portfolio," says Chief Executive Jack R. Meyer, who got the university to adopt a model portfolio soon after he arrived from the Rockefeller Foundation in 1990. Today it calls for investing just 15% of the fund into U.S. stocks, and 11% into conventional U.S. bonds, far less than is usual for individuals or most institutions.