CORRECTION APPENDED

Harvard’s former endowment manager, Jack R. Meyer, has raised $6 billion for his new hedge fund, an amount unprecedented for startup hedge funds, AFX News reported Sunday. However, Convexity Capital Management, Meyer’s new fund, will start without money from Harvard.

University treasurer James F. Rothenberg ’68 announced in early October that Harvard would commit $500 million to Meyer’s new fund. But Harvard spokesman John Longbrake confirmed yesterday that the University had not yet given money to the new fund.

“Having done our due diligence, Harvard, as we stated last year, will invest $500 million with Convexity, but we...have not done so yet,” Longbrake wrote in an e-mail.

Harvard will wait for Meyer’s replacement, Pacific Investment Management Company Chief of Emerging Markets Debt Mohamed A. El-Erian, to commit money.* [SEE CORRECTION BELOW.] El-Erian will begin work at Harvard Management Company (HMC) in the middle of this month.

["There is no connection between the investment in Convexity and Mr. El-Erian's arrival," Longbrake wrote in an e-mail Tuesday, the day that this article was published. He added that "the commitment is made," and that "we are not waiting for his arrival."]

“When Mr. El-Erian arrives he will assess the current portfolio and in consultation with the HMC Board make any adjustments he deems necessary,” Longbrake wrote.

Meyer declined to comment yesterday, citing legal reasons that prevented him from doing so.

Convexity achieved the record fund-raising total for a new hedge fund in an environment that has not been friendly to hedge funds recently. According to an industry report from Hedge Fund Research, the flow of cash into hedge funds was down 36 percent in 2005.

Convexity raised its funds by marketing itself to endowment and foundation fund managers, according to the newspaper Pensions and Investments on Friday. The publication also reported that Convexity told prospective investors that it will not accept more than $1 billion per year during the upcoming three years in order to avoid becoming too large, which can be cumbersome for fund managers.

Convexity will use a nontraditional compensation structure in which Meyer and his colleagues will only receive their 20 percent performance fee if they surpass one of seven benchmarks chosen by an investor, AFX News reported.

Meyer oversaw Harvard’s endowment through a period of growth from 1992 to 2005, during which endowment growth averaged more than 15% per year and total endowment assets multiplied from $4.7 billion to $25.9 billion.

Meyer left with 30 of HMC’s 175 employees, including top bond managers David Mittelman and Maurice Samuels, former HMC vice president for emerging markets Edward DeNoble, and former HMC chief risk officer Michael Pradko. After weathering criticism, primarily sparked by the Class of 1969, over the compensation of HMC’s top managers, they departed late September to establish Convexity.

Meyer still served as a paid advisor to HMC after his departure. The University did not comment on whether or not Meyer remains in this position and has divulged few details about Meyer’s involvement.

—Staff writer Alexander H. Greeley can be reached at agreeley@fas.harvard.edu.

CORRECTION

"There is no connection" between Harvard's investment in Convexity Capital Management and the arrival of the University's new endowment manager, according to Harvard spokesman John Longbrake. The print and original online versions of the Feb. 7 news article, "Ex-HMC Chief Opens $6B Fund," incorrectly reported that Harvard would wait until the arrival of endowment manager Mohamed A. El-Erian in mid-February before it commits money to Convexity. According to Longbrake, "the commitment is made" to invest $500 million in Convexity, which is led by El-Erian's predecessor, Jack R. Meyer.