The rate of return on Harvard's $5.1 billion endowment was lower than that of 71 percent of the nation's colleges and universities in fiscal 1992.

Since 1989 Harvard has performed below the national average for university endowments, according to the National Association of College and University Business Officers.

And as far back as 1987--the last date for which records are kept--Harvard's annual rate of return was consistently outperformed by at least 30 percent of universities nationwide, according to figures compiled by Wurts, Johnson and Associates, a Seattle-based investment performance consulting firm.

Had Harvard performed as well as the average school in the top quartile over the last five years, the University would have earned an additional $1 billion, more than half of the estimated target of the University's upcoming capital campaign.

The endowment's lackluster performance record has many Harvard graduates, themselves experts in the investment field, seriously concerned.

The alumni are directing increasingly sharp criticism at both the leadership and the investment techniques of the Harvard Management Corporation (HMC), which administers the endowment.

"Just as the taxpayer in the United States has been asked to pay for the savings and loan fiasco, so too are Harvard alumni being asked to bail out the President and Fellows for their egregious lack of oversight in the management of Harvard's money," said one Harvard graduate who is a major contributor to the University. "This is a bailout. It's nothing more complicated than that."

Resurrecting a Giant

When New York financial wizard Jack R. Meyer took over as head of HMC in the autumn of 1990, his mission was to resurrect a bleeding giant.

Following more than a decade of explosive growth and nationally recognized leadership in the endowment management industry, HMC was in serious trouble.

Returns on Harvard's endowment were falling, from an impressive rate were falling, from an impressive rate of 43.3percent in fiscal 1983, to half that in 1985, toless than half again four years later.

The company's reputation was flagging as well.

Some alumni had begun to wonder whether WalterM. Cabot '54--Meyer's venerable predecessor andHMC's president since its creation in 1974--hadlost control after years of decentralizedleadership.

Two of Cabot's top money managers, Scott M.Sperling and Michael Eisenson, were widelyregarded on Wall Street as inexperienced andreckless. Both were formerly employed by theBoston Consulting Group.

In addition, HMC was dogged by criticisms thatits employees--whose salaries far exceeded thoseof any other University official, includingthen-President Derek C. Bok--were overpaid.

In 1989, Sperling and Eisenson earned over $1million each. Cabot took home more than $1.4million in salary and bonuses the year he steppeddown.