A Harvard Hero
Team Latte
Sep 19, 2005
These days when there is so much uncertainty not just in the equity markets but in the entire financial market and when the global investment community is overwhelmed with arguments for and against investing in financial derivatives and other funky structured products we thought it might be worthwhile to pause and take a look at one man’s achievement, who perhaps, like Warren Buffet, but of course on a smaller scale, has consistently achieved superior returns in the vanilla asset markets over the last fifteen years. No derivatives, no funky products, just plain vanilla with lots and lots of diversification, that has been the mantra of Jack Meyer, the man who was the head of Harvard Management Company for the last fifteen years.
In our opinion there are many hedge fund managers, (including the very well known ones like Stanley Drunckenmiller, George Soros, Julian Robertson, Nassim Taleb) who are exceptionally brilliant and a vast majority of them are above average. On the other hand if you leave out Warren Buffet it will become very difficult to find such tigers amongst the long-only fund managers, or more appropriately, the “vanilla asset managers”.
One such person is Bill Gross of PIMCO and another one is Jack Meyer of the Harvard Management Company.
Jack Meyer, a Harvard Business School graduate, is our hero and even though he may be managing the funds for a very conservative University endowment he is actually a hedge fund manager, in every sense of the word. Though he himself says there is “nothing plain vanilla” about his investments. yet that is what he is, only a very good one. His portfolio was invested in plain and pseudo-plain vanilla assets comprising global equities, bonds, emerging market bonds, inflation indexed bonds, commodities, hedge funds and other assets.
In the 15 years since Meyer has been president of Harvard Management, the university's money management arm, the endowment has grown from $4.7 billion to $22.6 billion. This kind performance is not only a rarity in the world of investment management but goes to speak volumes about a man and his investment philosophy. Harvard’s endowment earned 21.1% in the last fiscal year, a stellar achievement by any standards in the investment world. He and his team have assiduously followed a portfolio management strategy where diversification in global assets is writ large.
He has recently stirred up a lot of controversy regarding compensation to his team which was triggered when in the last fiscal year he paid two of his top fund managers US$25 million each in compensation. His argument, a valid one and one which we support wholeheartedly, is that if you want your managers to attain performance that is at par with the industry, if not better, then you need to pay them the market compensation.
Jack Meyer is finally leaving Harvard Management to set up his own firm. Actually, this announcement was already made last January, but finding a replacement for Meyer has so far proven to be a very tough job. We will have to wait and see if there is another Jack Meyer in the making in Harvard.
  
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