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Harvard endowment CEO resigns amid ongoing turnaround

Stephen Blyth, who resigned after 17 months as CEO of the company managing Harvard University’s $37.6 bn endowment, had sought to improve returns at the fund, which invested about a quarter of its portfolio in real assets as of September 2015.

Stephen Blyth (pictured), president and chief executive of Harvard Management, the company managing Harvard University’s $37.6 billion endowment, has resigned for personal reasons effective immediately, PERE's sister publication, Private Equity International, reported Thursday.

Blyth had been on a temporary medical leave of absence since May 23, the university said at the time. Following Blyth’s resignation, HMC has lost four chief executives in the past ten years.

Harvard University has the biggest endowment in higher education, according to data from PEI; fellow Ivy League school and arch-rival Yale is third-largest, at $25.6 billion. During his brief tenure as CEO, Blyth worked to improve the fund’s investment performance. Harvard’s returns have lagged behind its peers: in 2015 it announced a return of 5.8 percent, about half Yale’s return of 11.5 percent, while Harvard’s local rival MIT surpassed both schools with a return of 13.2 percent for its $13.5 billion endowment, Harvard Magazine reported in September 2015.

As part of his turnaround efforts, Blyth adjusted HMC’s asset allocation approach to make it more flexible. HMC established wide ranges for the amount of investment allocated to each type of asset class, for example, setting the range for real estate at between 10 percent and 17 percent.

In 2015, about 25 percent of Harvard’s endowment was allocated to real assets, according to Harvard Magazine. Real estate returned 19.4 percent in the 2015 fiscal year while the overall portfolio returned 5.8 percent, the magazine said. The endowment's direct real estate program returned 35 percent in the same year.

The firm's fund investments include allocations to Gaw Capital Partners' fourth Asian opportunistic vehicle; a co-investment and investment in Iron Point Real Estate's second North American opportunistic fund; and a $200 million earmark to Westbrook Partners' fourth value-added global fund, according to PERE research.

The most recently publicly available direct investment was an affordable housing joint venture in New York, PERE reported in January. HMC teamed up with A&E Real Estate Holdings, a New York City real estate investment firm, to purchase a seven-building multifamily property in Harlem, one of Manhattan’s poorest neighborhoods. The groups bought the 1,129-unit Riverton Houses for $201 million. In a deal similar to Blackstone and Ivanhoé Cambridge’s purchase of Stuyvesant Town-Peter Cooper Village in October, HMC and A&E agreed to affordable housing stipulations in exchange for tax breaks. By agreeing to make $40 million of improvements and keep 975 units affordable for 30 years through a tiered system of rent, the city granted the buyers a tax break of just over $100 million.

HMC said in its statement that Robert Ettl, HMC’s chief operating officer, will continue to serve as interim CEO. Ettl assumed the interim position at the time when Blyth went on medical leave.

The search for Blyth’s replacement is proceeding with help from David Barrett Partners, HMC said. During this interim period, HMC head of public markets and natural resources René Canezin and head of private equity Richard Hall will continue to co-chair the endowment’s investment committee.

Blyth joined HMC in 2006 and held roles as head of internal management and head of public markets before becoming president and CEO on 1 January 2015, according to the HMC website. He is also a professor of the practice of statistics at Harvard.

In a statement, Blyth said he would return to teaching as he looks forward to his “next chapter.”

Before joining HMC, Blyth had been managing director and head of the global rates proprietary trading group at Deutsche Bank in London, and managing director in the derivative products group at Morgan Stanley in New York, the HMC website said.