Rudenstine Defends HMC

Urging his colleagues to be patient, President Neil L. Rudenstine yesterday defended Harvard Management Company's (HMC) recent poor performance in front of the full Faculty of Arts and Sciences.

Rudenstine's remarks come in the wake of recent criticism of HMC from alumni, some suggesting that the University should evaluate the record of HMC President Jack R. Meyer.

The management company earned an 11.8 percent rate of return on Harvard's $5.1 billion endowment in fiscal 1992. That performance was matched or surpassed by 71 percent of the nation's colleges and universities, according to figures compiled by Wurts, Johnson and Associates, a Seattle-based investment consulting firm.

Several alumni have said that the University should hold its money managersaccountable for their poor performance in the lastthree to five years. But Rudenstine cautioned hiscolleagues to refrain from rash judgments based onHMC's recent disappointing showing.

"This is not the place where you roll headsrandomly or quickly," Rudenstine said.

The president also defended HMC's policy ofweighing its portfolio more heavily toward foreignequities than most other universities andfoundations, even though Harvard would haveperformed better in the last several years with amore traditional portfolio.

"It wasn't blind stupidity," he said ofHarvard's recent investment decisions. "It mighthave been enlightened stupidity. It wasn't blindstupidity."

Rudenstine explained that HMC's governance hasbeen restructured under Meyer's leadership. Aboard of directors composed of outside investmentexperts now oversees HMC's activities, with aseparate board for its more volatile privateplacement investments.

"It's early in the game for this group," hesaid.

And Rudenstine expressed confidence in the HMCboard members, calling them "exceptionalprofessionals."

Rudenstine said that while Harvard's portfoliois unusual among the nation's universities, manyschools are beginning to assemble similarcollections of assets.

In an interview after the meeting, Rudenstinesaid he commented on the management companybecause the timing seemed right. The Facultyyesterday discussed its own budget, and thepresident said recent newspaper reports havebrought HMC's performance to the forefront.

"It's the backdrop issue," he said.

Rudenstine has said in previous interviews thathe is satisfied with the 11.8 percent return onthe endowment. No faculty member has voiced aformal complaint about HMC, Rudenstine said.

Dean of the Faculty Jeremy R. Knowles saidRudenstine's comments were "not special."

The Faculty tries to keep abreast of theUniversity financial situation, Knowles said. Lastyear, Treasurer L. Ronald Daniel and VicePresident for Finance Robert H. Scott visited theFaculty Council to discuss University finances.

This year, Knowles said he hopes to inviteMeyer and Daniel to speak to the council.

Stephen E. Frank contributed to thereporting of this article.

"This is not the place where you roll headsrandomly or quickly," Rudenstine said.

The president also defended HMC's policy ofweighing its portfolio more heavily toward foreignequities than most other universities andfoundations, even though Harvard would haveperformed better in the last several years with amore traditional portfolio.

"It wasn't blind stupidity," he said ofHarvard's recent investment decisions. "It mighthave been enlightened stupidity. It wasn't blindstupidity."

Rudenstine explained that HMC's governance hasbeen restructured under Meyer's leadership. Aboard of directors composed of outside investmentexperts now oversees HMC's activities, with aseparate board for its more volatile privateplacement investments.

"It's early in the game for this group," hesaid.

And Rudenstine expressed confidence in the HMCboard members, calling them "exceptionalprofessionals."

Rudenstine said that while Harvard's portfoliois unusual among the nation's universities, manyschools are beginning to assemble similarcollections of assets.

In an interview after the meeting, Rudenstinesaid he commented on the management companybecause the timing seemed right. The Facultyyesterday discussed its own budget, and thepresident said recent newspaper reports havebrought HMC's performance to the forefront.

"It's the backdrop issue," he said.

Rudenstine has said in previous interviews thathe is satisfied with the 11.8 percent return onthe endowment. No faculty member has voiced aformal complaint about HMC, Rudenstine said.

Dean of the Faculty Jeremy R. Knowles saidRudenstine's comments were "not special."

The Faculty tries to keep abreast of theUniversity financial situation, Knowles said. Lastyear, Treasurer L. Ronald Daniel and VicePresident for Finance Robert H. Scott visited theFaculty Council to discuss University finances.

This year, Knowles said he hopes to inviteMeyer and Daniel to speak to the council.

Stephen E. Frank contributed to thereporting of this article.