Word: putnam
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...Street Research and Management did Harvard's investing. The University treasurer at the time, George F. Bennett '33, was also president of State Street. "With the uprisings of the '60s, some felt there was something incestuous about the Harvard treasurer using his own firm to manage Harvard's endowment," Putnam says. Furthermore, since the treasurer both managed Harvard's investments and reported to the Corporation on how those investments were faring, he couldn't distance himself enough to judge the quality of the management. "The treasurer was in the situation of defending his own performance to the Corporation," Putnam says...
...Putnam and the Corporation investigated different techniques of managing investments, and decided on an independent, private management company devoting its entire attention to Harvard--if they could attract the investment talent they wanted. They could, partly because 1974 was not a banner year for the financial community, "partly because Harvard is Harvard, and partly because managers could get out of the cut-throat Wall Street world and work for an institution that they find morally and socially uplifting," Putnam says...
...University has also found it cheaper to run Harvard Management than to pay outside managers, Putnam adds. This year's HMC annual report says its salaries are "comparable with other first-line institutions," but goes on to say the cost of running the company is one-third of the average in the field...
...much time on internal administration because the company is so small, and they don't spend any time on attracting more business or customers because the Corporation won't permit it. "They get to spend 90 or more per cent of their time on the fun part of it," Putnam says. In other investment firms, "as you move up in this field, you normally end up doing more administration and marketing and less day-to-day investing," he adds...
...give the Corporation a means to judge HMC's performance, and so HMC itself could take advantage of the know-how of larger outside firms. Only three of those five firms still handle any Harvard money, though; one merged, and another wasn't doing the job right, according to Putnam. Today HMC uses outside talent mostly in specialized areas--for example, in its decision to commit money in venture capital (loans from an investor to a new business in hopes of a high return). "We didn't want to do it in-house, so we went out and gave...