Endowment fund overhauled at Harvard

About half of 230 employees will be axed

BOSTON • Harvard University said it plans to outsource most of the investment management of the university’s US$35.7 billion endowment and cut about half of its staff in a sweeping overhaul of the world’s wealthiest university fund.

Harvard Management Co. announced the changes in a letter Wednesday from Nirmal “Narv” Narvekar, the chief executive officer who joined in December from Columbia University’s endowment, charged with improving performance and reviewing strategy.

Harvard Management will shut down its internal hedge funds by June 30, the end of the fiscal year, and about half of the 230 employees will depart by yearend, Narvekar, 54, said in the letter.

Harvard traditionally has employed more people than other endowments because it has traders on staff investing directly in stock and bond markets, as well as teams making direct investments in other assets such as natural resources. Columbia and other universities parcel out their money to different managers specializing in stocks, bonds, hedge funds, private equity or other asset classes.

“We can no longer justify the organizational complexity and resources necessary to support the investing activities of these portfolios,” Narvekar wrote. “Therefore, we have made some important but very difficult decisions.”

Harvard Management said its direct real estate investments are expected to be spun out to become an external manager by the end of the year, while the natural resources portfolio, focused on timber and agriculture investing, will continue to be managed internally.

At Columbia, Narvekar was chief executive officer of a US$9 billion portfolio with annualized returns of 10 per cent in the past decade, among the best in higher education.

Harvard lost 2 per cent on its investments in the year ended June 30 as most schools struggled with small losses. It’s generated an annual average return of 5.9 per cent during the last five years, among the worst in the Ivy League and trailing peers such as Yale, which had a 10.3 per cent gain.

Narvekar said he expects the transformation process to take five years to “position both the organization and portfolio.”

Harvard Management also said it named Rick Slocum as chief investment officer, starting in March. Slocum was most recently CIO of The Johnson Co., a single-family office based in New York. Slocum didn’t immediately return a phone call seeking comment.

Three managing directors also will join the investment team, all of whom have worked at Columbia’s endowment. Vir Dholabhai was most recently the senior risk manager for APG Asset Management U.S., Inc., a Dutch pension services provider. Dholabhai spent nine years at Columbia’s endowment. Adam Goldstein was most recently a managing director of investments at the Columbia fund. Charlie Saravia most recently comanaged P1 Capital, a research firm for family offices in Latin America. He previously spent nine years at Columbia’s endowment.

“I have known these individuals personally and professionally for the majority of my career and they have extensive experience building and working within a generalist model and partnership culture,” Narvekar said in the three-page letter. The Harvard transformation process will take five years to “position both the organization and portfolio.”