Cabot met with further success in the venture capital business, which HMC entered just as the 1970s technology boom began.

Endowment returns also benefited from HMC’s entry into the business of leveraged buyouts and financing mergers.

“In going after returns, they were creating more efficient and more profitable companies in their wake,” Pease says.

In 1983, Harvard was the envy of other Universities, with an endowment return of 43.3 percent—almost double the total return for the 15 years prior to HMC’s creation.

He adroitly maneuvered Harvard through the 1987 stock market crash—saving Harvard tens of millions of dollars.

But by the end of the 1980s, Cabot’s luck seemed to have run out.

In 1988, HMC became entangled in a leveraged buyout of RJR Nabisco, prompting controversy over whether Harvard should be involved in hostile takeovers.

And Cabot’s reluctance to reinvest in the stock market caused HMC to miss the 1989 stock rebound, costing Harvard millions. By 1989, endowment returns had sunk to a quarter of 1983 rates.

Then in 1989, HMC suffered one of its most public investing debacles. HMC lost about half of a $45 million investment—then about one percent of the endowment—in risky “commercial papers” of Lomas Financial Co., sold by Merrill Lynch, a loss that was aired publicly when HMC filed a lawsuit to recover the losses.

HMC’s annual report in 1989 concluded that though substantial talent existed within the organization, “stronger management” was needed at the senior level.

Sources close to HMC say a combination of Cabot’s failing health and concerns from Harvard about declining returns led the University to begin seeking a replacement in 1990.

Pressure was also building in the early 1990s for Harvard to shift more towards the model of the Princeton Investment Company (PRINCO)—which outsources large amounts of its endowment—or to enter a Commonfund-type arraignment.

Despite Cabot’s early successes, The Commonfund had outpaced the Harvard endowment by a full percentage point during Cabot’s time as head of HMC.

“The fact is that compared with other large endowment funds, The Commonfund has generally done a little better over time,” said then-Commonfund President George F. Keene.