Perold - Q Group The Breakers April 3, 2006 The Best Way to...

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Q Group The Breakers April 3, 2006 The Best Way to Invest For the Long-Term? André Perold Harvard Business School and HighVista Strategies Reading: Recent news articles related to the Harvard and Yale endowments Discussion Questions With the recent departures of key investment personnel and the arrival of its new CEO, Harvard Management Company needs to rethink from scratch how the endowment should be invested and managed. Please come prepared to discuss the following issues: 1. What is the best way today to invest a long-term pool of assets? 2. What is the best approach to making asset allocation and manager selection decisions? 3. How should Harvard think about internal versus external management? About Performance measurement? About the compensation of investment professionals? 4. What strategies are likely to perform best over the next twenty years?
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Harvard portfolio managers' pay drops By Robert Weisman, The Boston Globe, 22 December 2005 Dec. 22--Harvard Management Co., which invests the university's giant $25.9 billion endowment, paid its top six investment professionals a total of $56.8 million for the year ending June 30, a 27.6 percent drop from the $78.4 million earned by the group in the prior year. The smaller payouts reflected a slightly lower endowment return in the university's fiscal year 2005, and the holding back of portions of departing executives' bonuses that were based on incentives for future performance, said James F. Rothenberg, the treasurer of Harvard University and chairman of the Harvard Manage-ment board. Harvard's top-paid money managers again were David R. Mittleman and Maurice Samuels. Mittleman pulled in salary and benefits of $18 million for fiscal 2005, down from $25.4 million a year earlier, while Samuels pocketed $16.9 million, down from $25.3 million. It was the final year at the endowment for five of the six executives who, led by former Harvard Management president Jack Meyer, left in September to form Convexity Capital, a private hedge fund that will manage up to $500 million of Harvard's assets. Meyer's paycheck was $6 million last year, down from $7.2 million a year before. Harvard's endowment earned a return of 19.2 percent for fiscal 2005, higher than the 15.8 percent median return of the nation's 25 largest university endowments, but less than the 21 percent return for Harvard's endowment in 2004. "Last year's performance was impressive, and we're pleased with it," said Al Powell, a Harvard spokesman who noted that the endowment's return fluctuates from year to year. Compensation for Harvard's endowment managers includes a base salary and performance bonuses based on measurements for the asset class they manage. The payouts have been a lightning rod for critics, including some Harvard alumni who have objected to money managers' earning more than the university's president and faculty members at a time when student tuition has been rising rapidly. "This is inappropriate, unnecessary, and contrary to the values of a great university," Virginia author and
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This note was uploaded on 04/16/2010 for the course ECO 3411 taught by Professor Tabrizi during the Spring '10 term at St.Francis College.

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Perold - Q Group The Breakers April 3, 2006 The Best Way to...

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