Word: hmc
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According to Meyer, hedge funds, a common form of external management, charge an average of 1.5 percent in annual management fees plus 20 percent of profits. HMC, on the other hand, gets the job done while charging a base fee of 0.26 percent plus incentives—which can be positive or negative. Thus, Meyer estimates that Harvard would have paid roughly twice as much over the past 10 years to achieve the same returns on the endowment using external management...
...July 2004, five fund managers had left HMC in six years to strike out on their...
Another factor that may have drawn away managers from HMC is the visibility of Harvard’s endowment. Because it is owned by a nonprofit, HMC must report the salaries of its highest-paid employees, so the details of top managers’ compensation are openly available...
Public knowledge of compensation has bothered many top managers at HMC, according to Meyer. This stands in stark contrast to private investment firms, where compensation is not disclosed...
...financial environment of the early 1990s provided HMC with a natural advantage in attracting managers. At the time, it was difficult to raise money and get the structure in place to start a hedge fund, so managers leapt at the opportunity to develop a track record at HMC, Meyer says...