ON THE TABLE

A several-year exodus of fund managers, culminating in the impending departure of Meyer and his partners, has raised questions about the sustainability of Harvard’s in-house management structure—an issue Meyer says is often discussed by HMC’s board.

While HMC handles its investments with an internal, 175-person staff, most universities and colleges—including Yale, Princeton, and Stanford—largely rely on outside managers to invest their endowments.

When Meyer took the helm of HMC in 1990, about 80 percent of Harvard’s investments were managed in-house. Today, that figure is closer to 50 percent.

The subject of HMC’s management strategy has come to a head in the past. The ballooning growth of Harvard’s endowment to surpass $10 billion in 1997, Meyer says, prompted the board to review HMC’s structure to determine whether a restructuring or outsourcing was needed. In the end, Harvard elected to maintain its in-house investment outfit because the board determined that, even with its problems, HMC was still the most practical group to manage the endowment.

But the transition to a new investment chief has once again highlighted the longstanding debate over what structure best advances the University’s endowment management goals.

In a January letter to alumni, Rothenberg, the steering committee’s chair, called the transition a time to “reflect on aspects of the distinctive investment model” that HMC has put to work for Harvard.

And in an interview with The Crimson at the time, Rothenberg would not rule out a move to completely external management, calling it “another possibility for the steering committee to look at.”

“Harvard certainly should retain, at a minimum, many elements of the system Jack has created,” says Jeffrey B. Larson, a former HMC manager who left to start his own hedge fund.

For now, members of the selection committee say that final decisions on the structure of HMC will be left for the new management company chief.

“Although we continue to discuss these questions, as does the Harvard Management Company Board, we have made a deliberate choice not to make decisions, but to leave them for the new CEO,” Vice President for Finance Ann E. Berman writes in an e-mail.

But the selection committee, tasked at least initially with a more fundamental examination of Harvard’s investment structure, may wield great influence over the future of HMC by its choice of a new leader.

Meyer says that his successor will have a number of options for the direction to take Harvard’s endowment. One possibility, he says, is that the new CEO could choose to maintain internal management for some assets, but increase the use of outside managers, changing the mix from 50 percent invested externally to, say, 65 percent. Another potential choice facing the CEO is for Harvard to invest securities through hedge funds via external managers but focus its in-house efforts on asset classes like timber.

“The mix could change a little bit,” Meyer says.

HMC’s new chief could also select the opposite route, driving up the proportion of funds managed in-house.