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From the outside, it does not look like much changed at the Harvard Management Company this summer.
The same receptionist still greets visitors as they come through the heavy glass doors outside the elevator. The same heavy portrait of some decades-old member of the Cabot family still hangs in the lobby.
Even the president's office, looking out of the Federal Reserve Building into the heart of Boston, doesn't appear to have changed very much.
The room has spartan furnishings: a round table, a few chairs, a mostly-cleared desk--all still arranged just as they were last spring. There are still eclectic paintings decorating the bland earthy interior walls of the spacious office.
But all this sameness belies the massive changes which have swept through the Harvard Management Company (HMC) over the past year. After nearly two decades at the top, Walter M. Cabot '51 is no longer the chief executive officer of the company he founded for the University.
Now, the $5.5 billion Harvard endowment is in the hands of Jack Meyer, a young money manager who has spent the last seven years as chief investment officer of the Rockefeller Foundation.
And, while praising his predecessor's accomplishments, Meyer plans to change things at HMC now that he is in charge.
"I'm not certain that my vision would be much different than Walter's," says Meyer, who inherits a 120-person money-management team. "I hope to build on what Walter has built and take it to the next step. With certainty, I have a few things in mind that haven't been done in the past."
Meyer, 45, will be only the second president of HMC. When Cabot suffered a severe heart attack in the summer of 1989, the company which manages Harvard's endowment faced the first leadership crisis in its history.
Although he returned to the company after several months of recovery, Cabot said then he realized he could not handle the strain of managing the vital University endowment. And, at the time, other observers were hinting that the company needed new blood in the top position.
"I can't compare myself to the man," says Meyer, who graduated from Denison in 1967 and went straight to Harvard Business School. "I know Walter intimately, we have spent a great deal of time together. One thing for sure I bring that Walter can't anymore is a commitment of time and effort.
"That doesn't take away from anything he's done in the past. The reason he is stepping aside is that he had a serious [heart attack]," Meyer adds.
`The Ty Cobbs of Funds Management'
Although not many people at the University have tried to compare the new HMC president with his predecessor, everyone seems anxious to sing Meyer's praises.
"Jack is an extremely intelligent, thoughtful person," says Robert H. Scott, Harvard's vice president for finance, who has known Meyer for years. "He'll be an ideal colleague for me as we work together to determine the needs [of Harvard]."
Scott added that working with the new manager will be "a pleasure" because Meyer has a clear understanding of the University's spending needs.
"What Jack will do is add more rigor and systematic thought to a process that has been thought out over many years," says Treasurer D. Ronald Daniel. "The investment objectives for the endowment have not been pulled out of the air. All Jack is saying is that he will debate them some more."
During the search, University insiders said that the Corporation wanted the new president to be "independent" and observers now note that with Meyer at the helm, there will likely be significant changes in the management of the company.
Peter C. Goldmark '62, president of the Rockefeller Foundation, remarks that Meyer is "the Ty Cobbs of funds management, and he plays hard every day."
Only a few weeks after his permanent arrival, Meyer is talking about completely restructuring the endowment portfolio and creating a more effective measure of its growth.
The University must become more involved, Meyer says, in directing HMC towards the goals that are important for the institution.
And although Meyer and Cabot both use the same vocabulary of "diversification" and "balancing risk," Meyer brings a new philosophy about his own role in the University community.
Where Cabot last year spoke agressively about achieving "total returns that are equal to or greater than the rate on inflation" and was interested primarily with investment, Meyer seems to have greater concern for the University's specific needs in terms of spending and risk tolerance.
"I've already met with the Corporation, and I hope to meet a number of the deans over the next few months," Meyer says. "I look at all of this as absolutely critical input. And that will get me involved in the University life to some extent."
Meyer's desire to "get involved" in the University sets him apart from the traditions at HMC, whose Boston financial district offices have always been removed from the academic life in Cambridge.
But Meyer has a reputation for crossing traditional barriers between non-profit organizations and their money managers. At Rockefeller, the young money manager surprised his colleagues by showing a keen interest in the prestigious Foundation programs.
"There is almost no process which he does not enrich," says Goldmark, adding that Meyer was a senior programs officer at Rockefeller. "He can bring something to any sort of a team."
Meyer says he wants his contribution to go beyond watching Harvard football--which he has not yet seen since his summer arrival--but does not know what kind of role he could play.
"We've encouraged him to be a part of the fabric of the University, as well as the endowment manager," Daniel says. "We want him to be both. That was one of the reasons he came to Harvard."
But Meyer says he cannot let his enthusiasm for getting involved with the University take time away from the serious work he has to accomplish at HMC.
After nearly a year without a stable sense of direction, administrators say, HMC needs to be put back on track. The investment returns during the past year have been inconsistent and increasing national concern about the economy has created some anxiety.
"There has been a lot of uncertainty and a lot of tension at Harvard Management over the past year," Meyer says. "One year is a long period to go without having the [leadership] issue clarified.
"Some of that uncertainty and tension still remains--it's going to take a number of months before it dissipates. Again, something for me to work on," Meyer says.
Other University administrators say they have no doubt that Meyer can ease the tensions within HMC ranks.
"The uncertainty is related to facing a year without a new president," Scott says. "Uncertainty goes away the day Jack arrives on the job."
But Meyer's arrival has, in some ways, brought a new kind of uncertainty to HMC. All negative economic trends aside, some of Meyer's employees are worried about what the future will hold for the company.
As the largest institution of its kind in the country, HMC has traditionally had a high level of direct control over Harvard's endowment. With a huge staff of money managers, the company has functioned very much like a Wall Street firm and has not often turned to outside sources for investment help.
But in several interviews since his appointment, Meyer has hinted that he may rely on increased outside management to run the endowment more efficiently.
"People know that when I was at Rockefeller, we had a very small staff of seven," Meyer says. "So I come here and they say `AHA! It's going from 120 down to seven.' That is not so at all. People are constantly putting words in my mouth about external management."
But, the new manager adds: "There may or not be more external management a year from now. I'm not making that forecast."
Meyer does acknowledge that he is actively investigating the possibility of outside help, and there could be "a decline in staff," even at senior levels. The only asset class Meyer says he will not consider moving outside HMC is the complex, and very risky, trading strategy portfolio--an area requiring hands-on management.
"I suspect, to the extent that we do trading strategies, it will remain internal," Meyer says. "But everything else, we're looking at with fresh eyes."
In the meantime, Meyer seems to be enjoying the authority of his new position--with more funds and more money managers at his disposal than ever before. For now, he even talks of increasing the number of senior HMC "partners" from 12 to 14.
"It's much what I expected," Meyer says. "It's a complicated place with lots of talented people, and lots of interesting things to work with."
Unstable Economic Period
Meyer has the misfortune of beginning his campaign to stabilize HMC during a very weak period for both domestic and international markets.
One observer had it right when he said a young manager would have been better off coming a decade earlier, says Meyer. Nevertheless, he has resigned himself to the current poor economic reality and looks towards achieving the "much more important" long term goals.
"I'm certainly not so superstitious as to think that my arrival at Harvard was the beginning of the bear market. Actually it started before I came here," Meyer says. "But the key goal here is just to add value on a consistent basis."
If HMC can accomplish its goal of adding value to the endowment over the longer term, Meyer says, it will have been successful in serving the University needs.
"If we've done our job properly," Meyer says, "then that's money in the bank for Harvard. Markets are going to go up and come down, we've just got to add value and we'll come out ahead."
According to many University administrators, Meyer's conservative investment attitudes and his ability to maintain a long-term view even during economic downturns may be his most valuable contributions to the management of Harvard's money during the current economic instability.
Meyer is credited with shielding the Rockefeller Foundation's funds from the huge market losses of the October 1987 "Black Monday" market crash.
While he admits that event was one of his brightest moments, he argues that no one can expect a repeat performance based on his past success.
"[Cabot and I] both did a pretty good job in the October 1987 crash. That doesn't give you much information as to how either of us would do in the next big trouble area," says Meyer. "I wish it did, it would probably make things a lot easier."
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