Endowment Struggles in Recession

Harvard Management Company has seen better days.

When Jack R. Meyer took the helm from Walter M. Cabot '55 last July, he inherited a fast-growing endowment and a skyrocketing venture capital portfolio that had flourished in the 1980s.

But recently, the national and local economies have not been so friendly, stifling the growth of Harvard's endowment and stocks for most of last year. The University had a $4.8 billion endowment when Meyer first stepped in, and he has been hard-pressed to maintain that figure in the last fiscal year.

In fact, as of December 30, the endowment actually dipped more than $100 million. However, Meyer says that Harvard's investments have recovered some, and he estimates the University's current net assets at about $5.9 billion, close to their value at the end of the last fiscal year.

"The first quarter of fiscal 1991 was a very difficult quarter for any institutional fund, and the stock market as I recall was off 14 percent," Meyer says. "It has been a tough period."

The faces at the top of Harvard Management Company (HMC) have also changed somewhat in the last year. Several top employees have left, including Donald D. Beane, Nils P. Peterson and Barbara Friedman.

To fill these vacancies, Meyer has hired Maurice R. Samuels as a vice president who will manage foreign bonds for HMC, and he is looking to bring in three more employees--for a total of 14 vice presidents at HMC.

"We have three on the very front burner," Meyer says. "One in our private placement area and two in the public area that we're pursuing with vigor."

Harvard Management did come under fire for its conflict-of-interest policy, after it was reported that Eisenson and recently-departed Beane each hold 10,000 shares in Harken Energy Corporation, a Texas oil firm in which Harvard owns more than $28 million in stock.

Some local investors have expressed concern about this situation, but Meyer says his policy is strict enough.

"I will posit straight out that our conflict policy is stronger than any other buy-side institution that I know, or sell-side," Meyer says. "It does not absolutely prevent side-by-side investments, which is what Harken was."

HMC has a committee to enforce its conflict-of-interest policy, Meyer says, made up of three HMC executives, including Meyer, and an external attorney.

"We pay very close attention to people who end up--and sometimes it's purely by accident you have to understand--who end up owning securities side by side with Harvard and have some authority over the decision-making process for that security," Meyer says. "And the compliance committee is perfectly aware of all those instances."

In any case, the HMC chief executive adds, there is no way to prevent all conflict-of-interest situations.

Says Meyer, "If we absolutely prevented any HMC employee from ever purchasing any security that might have been, is, or might be purchased by Harvard Management Company, there is nothing for them to buy. Zero.