The University’s endowment management arm reached a settlement on March 20 with the manager of two of its largest investments in an historically public and bitter corporate feud over mutual fund share prices.

The Harvard Management Company (HMC) agreed to divest itself of shares in Templeton Asset Management’s China World and Dragon funds, in which it had invested a combined $115 million of the University’s $18 Billion endowment. In return, HMC will be permitted to sell those shares at a price above the shares’ market value.

Both sides will dismiss the federal lawsuits they had filed in the dispute. Templeton had alleged that HMC made false statements in a letter it sent to shareholders, and HMC had said Templeton failed its duty to shareholders.

HMC has participated in such hostile lobbying in the past. But playing a leading role in a brutal public battle is new ground for HMC, according to Don Cassidy, a senior research analyst at Lipper, a fund-tracking outfit.

“This is really the first time that they had gotten out on the front edge on one of these situations with a closed-end fund and become the leader of the outsiders trying to encourage change,” he said. “That was probably an uncomfortable position for them.”

The dispute arose over the price at which shares of the two funds traded. HMC said Templeton had failed to adequately represent shareholder interests, allowing prices to slip too far below the full value of the investment.

But Templeton pointed to the performance of the China and Dragon funds as evidence that the company is protecting shareholder interests. The funds gained 34 and 21 percent respectively last year, according to investment research firm Morningstar.

HMC waged a long public relations war in trying to pressure Templeton to increase prices, culminating in a Jan. 16 letter to shareholders urging the “extraordinary action” of voting out Templeton fund manager J. Mark Mobius. Templeton responded with a Jan. 29 lawsuit accusing HMC of making “knowingly and materially false and misleading statements” in the letter. HMC fired back with a countersuit one week later, alleging that Templeton had breached its “fiduciary duty” to shareholders.

The settlement benefits both sides in that HMC will be able to sell their shares at a higher price and Templeton frees itself of an annoying shareholder, Cassidy said. He added that by settling they also avoid legal fees and a nasty public conflict.

“I think both parties had a lot to lose by continuing the fight and a good deal to gain if they found a reasonable settlement,” he said. “Both parties were in a position where they didn’t want the acrimony and public discussion.”

For HMC, a favorable outcome was critical due to the size of its investment, he said.

“They had such a large position that they couldn’t afford to lose—they really had no way to get out other than to fight or settle,” Cassidy said. “They had such a big investment that it became a problem.”

No investor has ever been able to win such a fight against hostile management, and HMC’s failure to do so by settling its claim is a relief to Templeton, according to Cassidy.

“They did not want to become the first fund company to lose one of these fights,” he said.

According to the terms of the settlement, both parties and their lawyers declined to comment and have avoided making public statements aside from the actual settlement and the accompanying joint press release.