Last year Jonathon S. Jacobson earned a princely sum, $7.6 million in performance based pay, for investing Harvard's endowment. But University officials worried--not whether this was too much--but if it was enough to keep Harvard's king investor.

Yesterday it seems the University got its answer. After eight years of investing for Harvard, Jacobson resigned from Harvard Management Company (HMC). But stuffed into his pockets as he leaves is $500 million in Harvard funds, the beginning of his next adventure.

With this money, Harvard becomes the largest client of Jacobson and his partner's new investment firm, High-fields Capital, which will specialize in hedge funds.

Harvard's aim: to keep the man whose investments earned a 42.4 percent return last year near to Harvard's coffers.

"He's still very much tied to Harvard," said Elizabeth C. `Beppie' Huidekoper, vice president for finance.

The top stock picker at HMC, Jacobson personally manages $1.6 billion in equities and co-manages a $450 million emerging markets fund. He will leave July 1, having topped HMC's compensation charts in five of the last seven fiscal years.

Though Jacobson could not be reached for comment, HMC observers speculated that the new arrangement will serve Jacobson well.

"It sounds like a sweetheart deal for Jacobson so Jacobson can increase what he gets paid," said Albert F. Gordon '59, a retired investment banker and securities analyst for Kidder Peabody and Marcus Schloss, donor and long-time critic of HMC.

And Jacobson's colleagues said it is a clear set-back for Harvard.

"[Jacobson]'s leaving is a major disappointment," said Jack R. Meyer, HMC president, in a press release. "His record places him in the highest ranks of investment managers throughout the world."

But Harvard officials will cut their losses.

"We wish he would stay, but he's going toleave. The question becomes, `Is Harvard going toinvest in him?' The answer is, `Yes,'" Meyer said."He's made an extraordinary amount of money forHarvard."

HMC is charged with managing Harvard's $14billion in investable assets, the largest of anyuniversity.

Over the last five years, HMC has had anaverage annual return of 18.9 percent, ranking itnumber one among similar funds.

Last year HMC reported record returns, 25.8percent versus an average of 20.3 percent forother large institutional funds--a performance duein large part to Jacobson's work.

Managing HMC's domestic arbitrage and emergingmarkets portfolios, Jacobson often beat industrybenchmarks such as the Standard and Poors500--some years by more than 10 percentage points.