Key Takeaways
- • Harvard Management Company is cutting approximately 50% of its ~230-person staff (roughly 100-115 positions), primarily eliminating internal hedge fund management teams by the end of fiscal year 2017.
- • The $35.7 billion endowment is shifting to an outsourced asset management model, outsourcing most investment management to external managers rather than maintaining in-house teams.
- • CEO N.P. Narvekar, who took the helm in September 2016, cited intense competition for investment talent and capital flows to external managers as the primary driver of the restructuring.
- • Harvard's endowment declined from $37 billion (end of 2015) to $35.7 billion (July 2016), with natural resources and stock holdings each declining 10.2% during the reporting period.
- • Real estate remains the endowment's strongest-performing asset class, according to management, positioning it as a key focus area under the new strategy.
Summary
Harvard University is undertaking a fundamental restructuring of its endowment management operations, marking a significant strategic shift for the world's largest university endowment. Harvard Management Company announced it will reduce its workforce by approximately 50%, cutting roughly 100–115 positions from its current staff of approximately 230 employees. The majority of these reductions will eliminate internal hedge fund management teams, with cuts to be completed by the end of Harvard's 2017 fiscal year.
The overhaul reflects a decisive pivot toward outsourcing asset management rather than maintaining an in-house investment operation. According to N.P. Narvekar, CEO of Harvard Management Company since September 2016, the restructuring addresses fundamental challenges in talent retention and acquisition. "The tremendous flow of capital to external managers has created a great deal of competition for both talent and ideas, therefore making it more difficult to attract and retain the necessary investment expertise," Narvekar stated in a letter to employees obtained by CNNMoney.
The endowment's recent performance challenges provide additional context for the strategic shift. The fund declined in value from more than $37 billion at the end of 2015 to $35.7 billion by July 2016, according to a Harvard Management Company report released in September 2016. The portfolio experienced notable weakness in natural resources and equities, both declining 10.2% during the period. Conversely, real estate investments have performed consistently well, suggesting the endowment will concentrate resources on this stronger-performing asset class moving forward.
Narvekar's restructuring signals a departure from Harvard's traditional model of maintaining substantial in-house investment capability. The shift acknowledges market realities: elite investment talent increasingly gravitates toward external hedge funds and asset managers where compensation structures and career advancement opportunities often exceed those available in university endowment roles. This restructuring reflects a broader industry trend in which large institutional investors are reassessing the cost-benefit analysis of maintaining expansive internal investment teams relative to deploying capital through external managers.
The overhaul reflects a decisive pivot toward outsourcing asset management rather than maintaining an in-house investment operation. According to N.P. Narvekar, CEO of Harvard Management Company since September 2016, the restructuring addresses fundamental challenges in talent retention and acquisition. "The tremendous flow of capital to external managers has created a great deal of competition for both talent and ideas, therefore making it more difficult to attract and retain the necessary investment expertise," Narvekar stated in a letter to employees obtained by CNNMoney.
The endowment's recent performance challenges provide additional context for the strategic shift. The fund declined in value from more than $37 billion at the end of 2015 to $35.7 billion by July 2016, according to a Harvard Management Company report released in September 2016. The portfolio experienced notable weakness in natural resources and equities, both declining 10.2% during the period. Conversely, real estate investments have performed consistently well, suggesting the endowment will concentrate resources on this stronger-performing asset class moving forward.
Narvekar's restructuring signals a departure from Harvard's traditional model of maintaining substantial in-house investment capability. The shift acknowledges market realities: elite investment talent increasingly gravitates toward external hedge funds and asset managers where compensation structures and career advancement opportunities often exceed those available in university endowment roles. This restructuring reflects a broader industry trend in which large institutional investors are reassessing the cost-benefit analysis of maintaining expansive internal investment teams relative to deploying capital through external managers.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.