“You have to remember that if Jon [Jacobson] makes $5 million in a year, that means he’s added something like $500 million to the endowment,” Daniel says.

Looking Outward

But for some of HMC’s investors, the millions are not enough. It was “almost by accident,” Meyer says, that the University began outsourcing some of its investment portfolios in the mid-1990s.

“As people leave, if we think they’re good, we try to continue our relationship,” Daniel says.

HMC officials say Jon Jacobson, one of HMC’s top investors, was just too good to lose. In his final year at HMC, Jacobson’s fund saw a return of 42.4 percent—solidly outperforming the S&P 500 benchmark rise of 34.7 percent.

So when he left in 1998 to help found a new hedge fund, Highfields Capital Management, he took with him $500 million from HMC and raised $1 billion in outside money.

“To have Jon surpass the benchmarks by [8 percent] each year that he’s at Harvard is truly unusual performance,” Daniel says.

Later in 1998, the Harvard Private Capital Group, which had been overseen by Eisenson—spun off as Charlesbank Capital Partners, and took with it $1.4 billion from HMC.

At HMC’s inception, the company oversaw 90 percent of the endowment internally. Currently, that number stands at about 65 percent, and Meyer and Daniel speculate that it could drop as low as 50 percent within the next 20 years.

“We’re pretty happy where we are right now,” Meyer says.