Across the Charles River from Harvard Yard, the stewards of the university’s vast fortune were about to embark on an ambitious plan: they wanted to recreate a Wall Street-style hedge fund to trade stocks.
After years of missteps, controversy and even crisis, Harvard Management Corp., which oversees the university’s $37.6 billion endowment, began assembling a new corps of equity traders and analysts in 2014, in hopes of recapturing a part of the investment magic that had once made the fund the envy of the world.
Only now, just two years later, that plan has collapsed. Stephen Blyth, 48, the former bond trader behind that effort, stepped down as HMC’s chief executive Wednesday for personal reasons after just 18 months on the job. His resignation follows the departure in June of Michael Ryan and Robert Howard, the two former Goldman Sachs Group Inc. partners he had brought in to guide the new equity strategy.
Pulled Plug
While Blyth’s exit was said to be unrelated to those of his star hires, the talk inside HMC’s offices at the Federal Reserve Bank of Boston centered on why management had pulled the plug on the team so quickly amid a volatile equities market.
According to people familiar with the matter, some traders in Ryan’s group posted losses in 2015 significant enough to trigger internal temporary stop-loss orders. Ryan also lost money in a portfolio he managed. The extent of the losses is unclear, however, and came at a time when most hedge funds were struggling to beat market indexes.
But now, Harvard is once again confronting the same, uncomfortable question that has dogged it for years: why can’t the world’s richest university, for all its brains, make smarter investments?
Harvard decided to dismantle the in-house equities team after concluding that it would lean more on outside money managers “who have the resources, skill and experience,” Paul Finnegan, chairman of HMC’s board, said in a statement Wednesday.
“HMC aims to be best in class in everything that we do and regularly evaluates how we can best allocate capital to achieve this objective," said Finnegan, a co-founder of the private equity firm Madison Dearborn Partners in Chicago.
Harvard declined to comment further. Ryan, an original partner at Goldman Sachs, declined to comment. He left to pursue other opportunities, according to an internal memo in June from Robert Ettl, who was named interim CEO of HMC. Howard didn’t return calls seeking comment.