Amidst Endowment Slump, Harvard To Lose a Top Bond Manager

Harvard Management Company, which oversees the University's multi-billion dollar endowment, will lose Marc Seidner, a top fixed-income portfolio manager, at the end of the month, according to several media reports.

The reasons behind the departures of Seidner, HMC's managing director for domestic fixed income, and Michael Llodra, a member of the fixed-income investment team, are unclear. But the news comes four months after HMC announced it would lay off roughly 50 workers, or a quarter of its staff, to "re-balance and re-engineer the organization."

University spokesman John D. Longbrake declined to comment on the departures, the investors' performance at the Company, and HMC's plans to fill the positions, citing Harvard's policy of not discussing personnel issues. Neither Seidner nor Llodra could be reached for comment Monday afternoon.

HMC chief Jane L. Mendillo has told University administrators to plan for a 30 percent decline in the endowment for the fiscal year ending June 30, although she has long stated that the decision to restructure HMC was made independently of the massive endowment losses.

The departures of Seidner and Llodra may hamper HMC's ability to take advantage of investment opportunities that arise as financial markets recover. Mendillo recently stated in an interview with The Crimson that she saw the economic crisis as an "opportunity for change" that she hoped the Company could use to its advantage, noting that she would be looking to hire some top-notch traders in the coming months as well.

According to Bloomberg, Stephen Blyth, HMC's managing director of international fixed income, will take over Seidner's duties on an interim basis.

In a year in which nearly all markets plummeted simultaneously due to unprecedented financial turmoil, domestic bonds may have been one of the few well-performing assets in Harvard's investment portfolio. Over the past year, the Dow Jones CBOT Treasury Index—a real-time, broad-based indicator of bond market performance—returned over 8 percent, while the S&P 500, which HMC often cites in comparisons with its own endowment performance, dropped over 30 percent.

According to Harvard's year-end financial report from 2008, HMC had over $7 billion invested in fixed-income assets as of June 30. Those assets included nearly $2 billion worth of domestic bonds—which had produced returns of 16.1 percent for that fiscal year, beating the HMC board-approved benchmark of 12.7 percent—as well as foreign bonds, inflation-indexed bonds, and high-yield bonds.

The financial report also noted that a combination of internal and external investment managers oversee HMC's domestic bond portfolio, focusing on arbitrage situations—or buying inexpensive securities while simultaneously selling overvalued securities of similar characteristics. While internal managers "sharply" outperformed their benchmark in 2008, the report said that external managers delivered mixed results.

Seidner, who was the company's second-highest paid official in 2008 with $6.3 million in compensation, was hired in 2006 after an exodus of investment managers left HMC with a substantial vacuum in its bond division. Former bond managers Maurice Samuels and David R. Mittelman, who earned $25.3 million and $25.4 million respectively in 2004, left the company with legendary HMC CEO Jack R. Meyer in 2005 to form a private hedge fund, Convexity Capital Management, after enduring repeated public criticism for what some considered to be exorbitant pay.

—Staff writer Peter F. Zhu can be reached at pzhu@fas.harvard.edu.