Running All The Way to the Bank

With the predictability of a metronome, Harvard’s former endowment manager has raised $6 billion for his new hedge fund. The figure is the largest startup amount ever for any hedge fund, exhibiting the confidence the market has in him—a confidence that Harvard did not.

Five months ago, Jack R. Meyer resigned. He resigned partly due to financial reasons but also because he was forced out by relentless criticism and scrutiny from students and alumni. The point of contention was his salary. Meyer made $6 million in 2005 and his top bond managers were paid $18 million and $16.9 million, respectively.

These are large figures to be sure, but these must be put in perspective. The money managers’ salaries were approximately less than 10 percent of what the market deemed his services to be worth. They were also outweighed by larger accomplishments. Over his 14 years in Cambridge, Meyer grew a $4.7 billion fund into a $22.6 billion juggernaut, the largest endowment of all U.S. universities. That he was loyal and well-liked at the same time is a huge achievement.

And Harvard, indeed, is still showing confidence in Meyer’s abilities by promising to invest $500 million in his hedge fund. But because Meyer is no longer an in-house employee, the University will pay him substantially more, in the form of performance fees, for his services.

His critics should learn their lesson: if it ain’t broke, don’t fix it. The system was doing very well by any standards; there was no need to protest in the way that they did.

We are confident that Mohamed A. El-Erian, the new manager of the endowment, will do a fantastic job in his new post. We hope the Harvard community will be more appreciative of the work that he does and not criticize the salary he draws. At the end of the day, the University benefits more from the endowment manager than it does from the critics.