Departing HMC VP To Start Own Firm

A Harvard Management Company (HMC) executive will leave this summer to start his own investment firm, marking the latest in a series of high-profile departures from the outfit to the private sector in recent years.

As vice president of trusts, David W. Scudder ’57 handles donors’ charitable trusts at the management company, which invests the University’s $22.6 billion endowment. He also helped the University get clearance from the Internal Revenue Service (IRS) to allow donors to invest those trusts in the Harvard endowment.

Scudder will leave July 1 to start a Boston investment management firm with three other money managers, he said in a statement to The Crimson this week.

In his statement, Scudder called his six-year work with Harvard’s trust donors “exceptionally rewarding.”

HMC President Jack R. Meyer and Sarah Friedell, director of media relations for Harvard’s Office of Alumni Affairs and Development, both said Scudder’s decision to leave was announced over a month ago. But the Boston Herald reported this week that his new firm will be called Aria Asset Management and will include fund managers Karen Firestone from Fidelity Investments and Nathaniel Jeppson from Lyceum Capital.

Scudder referred requests to comment to the news office, which released a statement from him. Friedell declined to comment on the reported details of the firm.

In recent years, a number of managers have left Harvard to form new investment firms—and frequently the University has invested in their new funds.

Jeffrey B. Larson managed foreign equity for Harvard before leaving with 14 members of his team in July 2004 to start a hedge fund, Sowood Capital Management; Harvard invested $500 million in Sowood on its launch.

When Larson announced his departure in March 2004, Meyer said he was the fifth fund manager in six years to strike out on their own.

And in January, Meyer himself announced that he will leave at the end of June with four of his associates—David R. Mittelman, Maurice Samuels, Edward DeNoble and Michael Pradko—to form a new investment firm. Harvard officials have not publicly commented on whether they will investing in Meyer’s firm and are searching for a new management company president.

But Meyer said that Scudder’s new firm will cater to “families and high net-worth individuals,” so it will not invest money for the University.

“It would not be suitable for Harvard,” Meyer said.

In addition, Scudder is not bringing other associates from the management company with him to the new firm, Friedell said.

Meyer expects that Harvard will name a new vice president of trusts within the next two weeks.

IN SCUDDER WE TRUST

There are a wide variety of gifts donors can make to Harvard while still providing themselves benefits ranging from annuities to tax deductions. These “planned giving” options include charitable trusts, gift annuities, and pooled income funds, all of which provide donors with a stream of income in exchange for their gift, which is invested by Harvard and reverts to Harvard upon the donor’s death.

At the management company, Scudder’s department invests and manages these, working with Harvard’s Planned Giving offices, Friedell said.

While charitable trusts are usually invested in stocks and bonds, in September 2003 the IRS gave Harvard special approval for a new arrangement that has been more attractive to many donors: the opportunity to instead invest their trusts in the University’s endowment, potentially offering them far higher annual returns. In less than six months, 70 percent of eligible trust holders switched over to the endowment trusts.

Meyer said Scudder was “instrumental” in securing the ruling from the IRS—which applies specifically to Harvard.

—Staff writer Nicholas M. Ciarelli can be reached at ciarelli@fas.harvard.edu.