Why Harvard Is Smarting

WSJ.com: By CRAIG KARMIN and GREGORY ZUCKERMAN

Harvard University's endowment fund has graduated some of the most sought-after money managers in the hedge-fund world.

Now one of those stars is teaching Harvard a lesson of its own.

In the past month, the university lost about $350 million through an investment in Sowood Capital Management, a hedge-fund firm founded by Jeffrey Larson. Mr. Larson managed Harvard's foreign-stock holdings until 2004, when he left to set up Sowood, which recently lost more than 50% of its value amid bad bond investments....

While $350 million is a relatively small hit for the $29 billion Harvard endowment, the nation's largest, it highlights the risks as colleges nationwide embrace nontraditional investments such as hedge funds and private equity. Investments like these are less regulated than more traditional options, and often engage in the risky practice of investing borrowed money in hopes of amplifying their returns.

Along with Yale University -- where the roughly $18 billion endowment has achieved annual returns of about 17% in the past decade -- Harvard was among the first universities to embrace such alternative investments. The goal is to seek good returns that don't move in tandem with stock and bond markets, thereby giving diversity to the overall portfolio.

The strategy worked particularly well in the 2000-2002 period, when hedge funds generally did a much better job than other investments in protecting their clients' money from losses in the aftermath of the dot-com stock bust. ...

Harvard Management Co., which manages the endowment, has long been viewed as one of the nation's more successful and trailblazing investment-management firms. It boasts an annualized return of 15.2% in the past 10 years through June 2006. That compares with an 8.9% median return for endowments and foundations over that time period, according to Wilshire Trust Universe Comparison Service.

As Harvard's returns grew, so did its money managers' paychecks, which soared into the millions of dollars a year. That sparked controversy among alumni and others associated with the university, who argued that investment managers shouldn't be paid better than the school's Nobel Laureate professors, or its deans.

Mr. Larson's $17.3 million in payments in 2003 from Harvard were among the large salaries that drew complaints from alumni several years ago.

In 2005, Mr. Meyer and some of his top staff left the university amid complaints about their pay. ...

Nationwide, university endowments continue to show a greater risk appetite than pension funds and other large institutional investors. The top 53 university endowments, with nearly $217 billion in assets, have invested about 18% of their money in hedge funds, according to data provider HedgeFund Intelligence. The average public pension fund has only about 5% in hedge funds.

Kevin Lynch, a managing director at consulting firm RogersCasey, says there are at least two good reasons why universities have more readily welcomed hedge funds and private equity. Unlike public or corporate pension plans, which make annual payouts to beneficiaries, endowments have longer-term investment horizons, and therefore are more comfortable with the fact that alternative investments generally require investors to stay in for years.

University Endowment News

Inside Higher Ed:

Harvard University’s endowment lost about $350 million in the last month because of poor performance by a hedge fund led by a former senior endowment manager at the university, The Wall Street Journal reported. The fund, Sowood Capital Management, recently lost more than half of its value. While $350 million is more than many colleges have ever had in their endowments, there won’t be cries of financial exigency coming from Cambridge. Harvard’s endowment is worth about $29 billion.

I wonder what it looks like after last week's downturn?
I guess that takes care of my contributions for the past 35 years, and the next several thousand.

Wasn't there a ruckus about compensation to Harvard's in-house endowment managers a few years ago? Did it make cosmetic sense to move them out, and compensate at (short) arm's length?

Has anyone published a comparison of returns on endowment covering the elite private schools and the publics with significant endowments? One reads about especially handsome performance by Yale and Princeton (esp. after big market reversals). I guess with rewards come risks.

Study: Fertility clinics overuse pricey method

MSNBC.com : AP

ATLANTA - Fertility clinics are overusing a laboratory technique and costing infertile couples and some insurers hundreds of extra dollars, a new study suggests.

At issue is a procedure that injects a single sperm into an egg. The method is considered the best option for couples in which the man has defective sperm or extremely low sperm counts.

But many clinics are using it for other infertile couples, even though it often doesn’t work as well as the standard lab dish method, according to a study in Thursday’s New England Journal of Medicine. ...

“This paper is particularly troubling because we’ve got a major shift in practice that isn’t evidence driven. The paper suggests it may be driven by money,” said Arthur Caplan, director of the University of Pennsylvania’s Center for Bioethics...

The study’s lead author, Dr. Tarun Jain of the University of Illinois at Chicago, said more research is needed and he couldn’t be certain money explains the findings. But the study does indicate routine use of the technique does not benefit many couples, he added. ...

The research team reviewed a decade of results that hundreds of fertility clinics reported to the federal government. In 2004, about 58 percent of treatment attempts included sperm injection — up from 11 percent in 1995.

But the proportion of couples who have trouble conceiving because of the man’s sperm has stayed constant, at around 34 percent. This suggests that the sperm-injection technique is being urged on many couples who do not need it and might be better off with traditional lab dish, or in vitro, fertilization, Caplan said. ...

Sperm injection does not increase overall success rates for healthy births. The researchers found that among infertility treatment attempts with successful egg retrievals in 2004, about 31 percent of those involving sperm injection resulted in a live birth. The percentage was higher — 33 percent — for those that did not use the sperm injection.

Perhaps nature is better than doctors at selecting the right sperm to produce a healthy baby, Jain said. ...

They also noted that sperm-injection rates were higher in three states — Illinois, Massachusetts and Rhode Island — that mandate coverage of the technique than in states without such a requirement. ...

Art Caplan has been all over stories like this for decades, correctly pointing out that assisted reproduction is the (largely unregulated) Wild West of contemporary medical practice.

Public-Health School at Emory Receives $50-Million Pledge

The Chronicle: :

Emory University’s Rollins School of Public Health has received a $50-million pledge from a family with a long record of generosity to Emory in general and the 17-year-old school in particular. The pledge, from the O. Wayne Rollins Foundation and Grace Crum Rollins, will be used to build a public-health complex that will more than double the school’s size and enhance collaboration with academic, research, and other institutions in and around Atlanta, according to a news release issued this morning by Emory.

Money helps, and Emory seems to have lots of it, much of it (I don't know about this family*) from a local soda company done good (or, perhaps better if less idiomatically, well).

Not sure Coca-Cola is America's greatest contribution to public health--maybe one should think of this as like a high fructose carbon-credit.

[*O. Wayne Rollins was a self-made business entrepreneur and innovator. In 1964 he orchestrated the purchase of Orkin Inc., often recognized as the first leveraged buyout. With his brother, John, Mr. Rollins participated in numerous successful business ventures including radio and television stations, pest control, oil field services, truck leasing, boat manufacturing and real estate. Following his death in 1991, his sons, Randall and Gary Rollins, have continued to build the Rollins companies. Four generations of the Rollins family have been involved in philanthropy, setting a remarkable example for this generation and generations to come.]