Women Chairs, CEOs, and Latinas

Wed, 2017/10/25 - 3:37pm | Your editor
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The latest report on Harvard's endowment's stock performance labels the level of returns as “disappointing””. But in contrast to prior years, the latest figures omit details on where the gaps were. In its last fiscal year, the endowment only gained 3.9%, although admittedly from a huge base of $35.7 bn at the close of fiscal year 2015-6.

In contrast to previous years, the new Harvard Management CEO, N.V. Narvekar who was appointed in Sept. 2016 refused to give the Harvard Magazine details about the investment sectors where Harvard's results fell short, although at least Harvard was in the black in the last fiscal year.

All he said was that “natural resources experienced a challenging year” while citing “strong returns” from public and private equity and the endowment's ”direct real estate platform”. However apart from that hint we have no information on where the Harvard Management shortfall came from.

Mr Narvekar also wrote that “the time had come for an aggressive plan to restructure the HMC and create the necessary organizational and investment culture.”

In prior years, the HMC detailed how the endowment was invested, return by asset class, and how it stacked up against benchmarks or HMC's prior 5- or 10-year return from that class. Now analysts, and alumni, are unable to figure out how the current return compares to prior years by category.

In theory the write-down of its forestry holdings by about $1bn cut the investment return by about 3%. However other costs probably include severance payments to former fund managers or costs for recruiting new team members and improving analytics and processes. The endowment is also “designing a new compensation framework,” Mr Narvekar wrote.

I am assuming that the endowment was not tapped to pay fines for a fellow economics faculty member who defrauded the US government, Andrei Shleifer, as occurred in 2005 under the Harvard presidency of Larry Summers, his friend, and which cost Harvard $40 mn or more. In the 1990s, Prof. Shleifer had led a Harvard advisory program to help Russia replace communism with capitalism. Shleifer was under contract from the Harvard Institute for International Development to create a mutual fund for Russia. Instead he and his wife engaged in criminal behavior, using the IID money for personal spending and engaging insider trading, self-dealing, violations of conflict of interest, tax evasion, money laundering, and conspiracy to use false claims to defraud the US government.

The university was deemed to have breached its contract with the US government by a Boston court in 2004 and fined. Summers chose to use endowment money to pay for Shleifer's misdeeds and those of his wife, in direct violation of their contract with Harvard. However, only civil charges were brought, not criminal ones. The couple had invested in a group of Russian companies due to be privatized by Russia based on insider knowledge in direct violation of their contract using a Channel Islands bank account in the name of Mrs Shleifer's father, Howard Zimmerman, and other Americans, and even borrowed money in this country for their stock purchases. Summers kept in touch while he was US Secretary of the Treasury. Harvard's Pres. Neil Rudenstein, who was ill during this period, was out of the loop.

Their doings were investigated by Institutional Investor, a financial magazine which also revealed how Larry Summers protected Shleifer, his former Harvard student. This was why the Harvard faculty ousted Pres. Summers, replacing him with Drew Faust. It also led to the departure of Jack Meyer as head of HMC. Prof Shleifer however remains on the faculty with tenure. I no longer donate to my alma mater'

Health Care

Today we have a key stock reporting on its Q3 and lots of news so I will stop reporting on the scandal which most recently affected on of the shares the Shleifers were linked to in our portfolio, Stada Artzneimittel, which has been taken over. More about drug stocks follows with news also for our tech and telcos, and las latinas, the shares of companies we own from Latin America. And a special note on women heading companies or their boards.

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