Harvard endowment brings in PE muscle amid staff shakeup

  • Harvard bringing on three execs with private equity experience
  • PE team to roll into general investment group
  • No plans to lose PE employees

Harvard Management Co. announced an investment-staff shakeup that will see the 230-member organization cut in half.

But part of that restructuring includes hiring at least three senior executives who bring private equity experience to the endowment.

Rick Slocum, most recently chief investment officer with Johnson Co, will join the endowment in March as CIO. Slocum spent six years running the more than $2 billion illiquid portfolio, which included PE, at Robert Wood Johnson Foundation, according to his LinkedIn profile. He also was responsible for portfolio management at the foundation.

The endowment also is hiring Vir Dholabhai from APG Asset Management, the New York investment group of Dutch pension administrator APG. Dholabhai was a senior risk manager at APG AM, where he focused on alternative investments, overseeing the risk management of the hedge fund, infrastructure and private equity asset classes, Harvard said.

Another major hire is Adam Goldstein, who will join as managing director. Goldstein most recently was a managing director for Columbia Investment Management Co., where he was involved in all aspects of the investment process, the statement said. Prior to Columbia, Goldstein was an analyst for two years at secondaries intermediary Greenhill Cogent (when it was called Cogent Partners).

The impact these hires will have on the endowment’s investment strategy is unclear. There are “no plans to shift strategy for private equity at this time,” a person close to the endowment said. Harvard’s target allocation to PE was 20 percent in fiscal 2016. It’s not clear whether that will change under the new structure.

The $35.7 billion endowment recently said it planned to fundamentally shift its structure. Harvard will move from a model that places each asset class, like private equity, into its own silo, where professionals do their work in isolation from other asset classes.

The new model will be a general investment structure “in which all members of the investment team take ownership of the entire portfolio,” according to a letter from Chief Executive N.P. Narvekar, who joined the endowment in December.

“The team will have a singular focus: the performance of the overall endowment,” Narvekar wrote.

The PE team will roll into the general investment group and there are no plans as of now to lose any members of that team, the person said. Private equity has been led by Richard Hall since he joined the endowment in 2014. It’s unclear whether Hall’s title will change under the new structure.

PE beat its benchmark in fiscal 2016, returning 2.6 percent on a 2.2 percent benchmark.

The endowment, like many large institutions that invest in private equity, is shrinking its portfolio down to its top managers, according to the endowment’s fiscal 2016 annual report. Its five-year annualized return was 0.9 percent, the report said. The private equity return was dragged down by venture capital, which generated a negative 1.5 percent return in fiscal 2016, the report said.

Compare this with Yale’s $25.4 billion endowment, which produced an 11.2 percent return in its leveraged-buyout investments and a 15.9 percent return in venture capital for fiscal 2016, a September 2016 statement from the endowment said.

Internally managed hedge-fund teams will leave the endowment by the end of fiscal 2017. The direct real estate investing team, which has been a strong performer for the endowment, will spin out into a new entity that will be supported by Harvard.

Harvard endowment’s overall performance has lagged its peers over the years. Annualized returns of 5.7 percent over 10 years ended June 30, 2016, are the second-lowest in the Ivy League, the Wall Street Journal reported recently.

Action Item: Check out Harvard’s recent investment report here: http://bit.ly/2jWfTHk