Harvard Appoints New Endowment President and CEO
A day after Harvard Management Company (HMC) reported endowment returns for the fiscal year ended last June 30, the appointment of its new president and CEO, Stephen Blyth, Ph.D. ’92, was announced. Blyth is managing director and head of public markets (public equities, credit, and fixed-income instruments—about 40 percent of the assets now managed) at HMC, where he has worked since 2006, and thus comes to his new responsibilities with broad familiarity with the organization and its operations. He is also among the most highly compensated investment professionals on the HMC staff (as a result of the organization’s performance-based pay formula)—and thus familiar not only with the demands of sustaining high investment returns but also with the publicity associated with general knowledge of the income he earns as a result. (The latter is an issue of unique salience for HMC employees, given the unusual nature of a university-owned investment enterprise subject to such disclosure.) Blyth has also been a professor of the practice in the department of statistics, where he teaches a course on applied quantitative finance; the Phi Beta Kappa undergraduates conferred one of their teaching prizes on him during their 2013 Literary Exercises. He assumes his new role on January 1.
In a brief conversation, Blyth pronounced himself “thrilled and excited to take on this role, as an alumnus.” Leading HMC, he continued, is “an honor and something I look forward to doing. I believe in the mission of the University and of HMC.” Acknowledging the complex, diverse portfolio constructed to support Harvard’s long-term needs, and the heightened focus on liquidity since the 2008 financial crisis, he said he had “a lot to learn” from HMC colleagues about the portfolios they manage. In doing so, he said, he could “rely on excellent colleagues,” and that the continuity represented by his appointment “is going to be beneficial” in that process. Blyth himself effected a “complete rebuild” of HMC’s fixed-income strategy and organization (following the departure of then-HMC president and CEO Jack R. Meyer, who left with many fixed-income colleagues to set up a private hedge fund), and so has a thorough command of that large part of the staff. He also has extensive experience in establishing relationships with external asset managers.
In light of his new responsibilities, Blyth will, temporarily, have to absent himself from the classroom—a condition he hopes will not be permanent. “I’ve loved the interaction with the spectacular Harvard undergraduate body,” he said. And the teaching experience “reinforces for me what the endowment is really all about”: supporting the University’s academic enterprise. No word yet on whether he will have to stop advising the campus cricket players.
Blyth succeeds Jane L. Mendillo, who became head of HMC (which invests the endowment and other University financial assets) in mid 2008, just before the financial crisis that devastated investments worldwide. She then worked strenuously to reposition the portfolios, establish new strategies, and remake much of her organization’s professional staff. Mendillo announced this past June that she would step down by the end of this calendar year.
The news comes one day after HMC reported results for fiscal year 2014, ended this past June 30: a 15.4 percent return on investments, net of expenses. Combined with distributions from the endowment and capital gifts received, that yielded an 11.3 percent gain in the value of the endowment, from $32.7 billion at the end of fiscal 2013 to $36.4 billion in the year just concluded. (After HMC reported, Stanford released its results: a 17 percent investment return, and 14.4 percent appreciation in its endowment’s value, to $21.4 billion. Yale reported this morning: a 20.2 percent return, and 14.9 percent growth in its endowment’s value, to $23.9 billion. These latest results are consistent with a trend reported previously: Harvard’s results have lagged somewhat behind those of peer institutions during recent years.)
In making the announcement, HMC board chair James F. Rothenberg (a member of the Harvard Corporation, and past University treasurer), said:
Stephen Blyth is an extraordinarily talented investment professional with admired leadership qualities, uncommon savvy about markets, and a deep dedication to the purposes of higher education.
He has excelled in his role leading the investment of HMC’s internally managed portfolio through a period of often volatile market conditions, and we are fortunate that he will be bringing his financial acumen, his executive abilities, and his passion for advancing the University’s highest purposes to HMC’s highest post.
The HMC board conducted a national search for Mendillo’s successor.
Blyth said in the statement:
It’s an honor to be asked to lead this remarkable organization. I can think of few nobler missions in investment management than leading Harvard Management Company. As an alumnus and a faculty member, I believe deeply in the mission of Harvard University and HMC, and our responsibility to support the work of current and future generations of Harvard students, faculty, and staff.
Jane Mendillo has been an outstanding leader of HMC, and I will inherit an organization that is in great shape. HMC has a long tradition of investment innovation, and has pioneered new strategies to take advantage of evolving market opportunities. I look forward to continuing that tradition as we seek to deliver superior returns.
In reporting on the transition from Mendillo to a successor, Harvard Magazine noted:
The search committee has an interesting task. Harvard’s assets are much more complex than those of, say, a comparably sized fund consisting only of stocks or bonds. HMC’s results are published and widely scrutinized, as is the compensation of its CEO and top fund managers: visibility that investment professionals at private firms can avoid. The investments themselves are subject to heightened scrutiny for environmental and social impacts—witness the continuing advocacy by some students and faculty members for divestment of fossil-energy assets. The CEO reports to a board of experts in private equity, public securities, and other parts of the financial markets—a strength, one assumes, but perhaps challenging supervisors. The expanded Harvard Corporation itself now includes private-equity, venture-capital, and other investment experts. And The Harvard Campaign is drawing large gifts from the same community, and offering supporters who make substantial endowment gifts the long-term record—and presumably the hope of future strong investment returns.
In identifying an internal candidate, HMC may have found a way to minimize these challenges. In the statement, Mendillo noted of Blyth’s experience:
I can’t imagine a better choice to lead HMC into the future than Stephen Blyth. He has proven himself a talented and successful investor, and a strong and effective leader, during his eight years at HMC and in his prior roles.
He is in a unique position to understand and undertake the complexities of this job, the responsibility to Harvard University that comes with it, and the markets in which we invest.