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Barry Ritholtz

The Day Harvard Stopped Being a Hedge Fund

The university flopped in managing its huge endowment, so it's turning over much of the work to outsiders.
This is the place to compete with Yale.

This is the place to compete with Yale.

Photographer: John Greim/lightrocket/getty images

After losing $2 billion last year while markets mostly moved higher, Harvard Management Co. announced big changes in the way it oversees the world’s largest university endowment. Kicking off the new era, it is getting rid of half of its 230 employees and farming out management of most of its money. Alumni and other interested observers should expect to see a much simpler and cheaper endowment in the near future.

Today’s missive will explore what this change foretells, but first, a brief reminder of HMC's recent history. Under the direction of Jack Meyer, president of endowment manager from 1990 to 2005, returns were stellar. After he and his management team left amid faculty and alum criticism of his pay and dissension over how much to invest in risky stocks, bonds and alternative investments, things started to go south.