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A top Harvard fund manager is leaving—along with 14 members of his staff—to form a $2 billion hedge fund backed by Harvard money.
Jeff Larson, who oversees foreign equities at the Harvard Management Company (HMC), will establish the hedge fund with an investment of $500 million from the University, representing one-fourth of the fund’s total value.
Harvard will also invest $200 million in an exclusive commodities fund that is managed by Larson’s new company, Sowood Capital Management.
Larson, the third highest-paid manager at HMC during the last fiscal year, said he will depart on July 1, the start of fiscal year 2005.
HMC President Jack Meyer praised Larson, whose 12-and-a-half years at HMC have spanned one of the most successful periods for the Harvard endowment.
“He’s consistently outperformed his benchmark, and he will be missed,” Meyer said.
Larson is the fifth Harvard fund manager in six years to leave HMC to form a fund, according to Meyer.
The multi-million dollar salaries paid to the HMC’s top managers have drawn considerable criticism in recent months, and the University recently moved to lower the cap on the managers’ compensation.
Meyer said departing managers, including Larson, have been partly motivated by the possibility of more cash elsewhere.
“I wouldn’t say that compensation issues are at the top of their list, but there’s no doubt that if they do spin out and are successful, they will make more money than they did at HMC,” Meyer said.
Larson, 46, said forming his own hedge fund has been a goal of his since arriving at HMC.
“If I didn’t do it now, I might never do it,” Larson said.
Meyer said Larson and his staff would not be immediately replaced and foreign equities will not be actively managed after Larson leaves.
“Hopefully, the investment Harvard makes with me will help performance and make up for a lack of active management in foreign equities,” Larson said.
—Staff writer Zachary M. Seward can be reached at email@example.com.
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