The Harvard Management Company and Inflation Protected Bonds Essay

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The Harvard Management Company and Inflation Protected Bonds Executive Summary The Harvard Management Company (HMC) was established in 1974 with the goals providing world-class investment management focused solely on generating strong results to support the educational and research objectives of Harvard University. The company’s goals are to correctly measure Harvard University’s financial requirements and to provide investment opportunities that will accurately meet or exceed them with the lowest amount of risk assumed by the institution. In order to best meet these investment needs the Harvard Management Company must continually revise the Harvard Policy Portfolio, which denotes how assets will be allocated across all…show more content…
Instead of relying solely on external management, they allocate 68% of their endowment to internal management and the remaining 32% to outside asset managers. In order to do this, HMC employed 38 investment professionals and 148 other employees whose jobs were solely to manage the $19 billion dollars in total assets, of which $15.1 billion were endowment funds. This management strategy generated expenses of around $93 million dollars per year (49 basis points), and produced a real return of 11.3%, after expenses. This method of investment costs about 19 more basis points than a passive strategy and about 51 basis points cheaper than a typical active investment strategy using 100% outside managers. Harvard University opted for this strategy because it is cheaper than a traditional active management strategy while still allowing them the ability to adjust their risks taken and expected returns in order to remain on the “efficient frontier” of what return was required to meet their internal institutional goals. Portfolio Examples with Exemptions HMC’s portfolio managers have listed in,
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