"Active management goes for 40 to 50 basispoints," the source continued. "I don't think $24million is out of line...[Calling it] a bargain ismaybe going too far."
"[HMC is] very tilted towardexpensive-to-manage investments," said Harvey M.Young, a senior vice president at the MetropolitanLife Insurance Company in New York. "They could dobetter [in terms of management fees] if they said,'Let's go to passive rather than activemanagement.'"
Still,. other investment experts have suggestedthat even if Harvard were to pay higher fees tooutside managers, the net gain might outweigh anylower costs incurred by HMC.
"The real question is, does the opportunitycost [of maintaining HMC] outweigh the hard dollarmanagement cost," asked one alumnus. "Five billionis certainly a critical mass to merit having acaptive unit...but if you don't have able andexperienced people, you're not going tooutperform."
Meyer said Harvard has no intention of alteringits current system in the near future.
"I know that we can go back historically andfind funds and managers that have performed betterthan HMC," Meyer said. "My job is not to find theones that have performed better historically, butto go forward...We think that we are set upproperly for the future."
According to one source close to Meyer,however, the HMC president has given thealternative options--including further investmentwith outside managers--serious thought.
"I'd let Jack Meyer make that choice," thesource said. "He's spent hours worrying aboutthis."
Scott said that Harvard is committed tomaintaining its internal management organization.But he added that the University will neverentirely rule out the option of externalmanagement.
"I have great faith in the structure Harvardhas established to manage its investments," Scottsaid. "I'm not saying that we always will dothings internally...but I don't think there is aplan to do things differently."
And Rudenstine agrees.
"I think that our system is working well and Idon't have any serious doubts about it," he said."In fact, I think it's doing extremely well, butit's not as if it's the only way to do things."
"I don't think anybody I know would claimthat," Rudenstine added. "And if anybody knewexactly the way to do it, then everybody would doit."