For example, when Larson left with 14 members of his team in July 2004, the University invested $500 million on the launch of his newly-formed fund.

But despite the potential rewards of leaving HMC, Meyer says that in 1990, when he began work, he could not have predicted the staff departures.

“We didn’t hire these people with the intent that they would leave,” he says. “I wish they were all here today.”

He says he also failed to anticipate that managers would leave with their entire teams when they founded new firms—something he says “makes perfect sense” to him today.

“On the other hand I’m not sure there’s much we could have done about it,” he says. “The environment’s changed, and it’s just harder to attract people and retain them here now than it used to be.”

COMPENSATION UNDER FIRE

The University’s consideration of external management comes on the heels of a year in which the University found itself under attack for the salaries it paid its top managers, even though other universities likely pay similar—but largely undisclosed—fees.

The original Class of 1969 letter and subsequent follow-up spawned a flurry of media attention, including articles in national newspapers like the New York Times and the Wall Street Journal.

“It’s not a fun thing to have compensation listed publicly,” Meyer says. “Nobody here at HMC likes to have their compensation in the paper.”

The debate has focused attention on the bonuses earned by HMC’s fund managers, who have seen their compensation rise as the endowment continues to yield staggering returns.

Meyer, who designed HMC’s compensation system, believes it is sound. On top of a base salary around $400,000, the incentive-based system provides managers with bonuses when they outperform their benchmarks.

But the criticism became a thorn in the side of University President Lawrence H. Summers and other top Harvard administrators. D. Ronald Daniel, then Harvard’s treasurer, and Donella M. Rapier, vice president for alumni affairs and development, both wrote letters defending the University’s compensation policies.

Nonetheless, after public pressure and the announcement of annual salaries that soared to record highs after a successful year, Harvard capped maximum compensation for fund managers in March 2004.

William A. Strauss ’69, an alumni who signed the letter, dismisses the assertion that Harvard is cutting costs by managing its endowment internally.

“We don’t know that,” Strauss says. “It’s not cast out for competitive bid.”