Harvard Describes Benefits of “Hybrid Model”

If you have taken a look at our website, you will see that our investment processes are a hybrid of internally managed investments and a selection of external managers.  We strongly believe in this model as the most effective way to manage our clients’ investments. 

In the September 2009 Harvard Management Company Endowment Report Message from the CEO, President and CEO Jane L. Mendillo describes the benefits of the hybrid model as Harvard sees them.  We couldn’t agree more so we’d like to share her eloquent description:

“While we have made many changes in recent times, we continue to emply a ‘hybrid model’ – a unique approach to endowment management.  We use a mix of internal and external management teams that focus on specific investment areas.  We believe this gives us the best of both worlds – top-quality investment management by our internal team and access to cutting edge capability from specialized teams around the world…we will use the mix of internal and external managers that best represents our conviction regarding opportunities and gives us access to the best possible strategies.

The benefits of the hybrid model and both broad and deep:

  • Harvard’s partnerships with investment management teams around the world provide diversification, insight, and perspective that goes beyond what could possibly be achieved through our relatively small team in Boston;
  • Our internal investment management team…is our eyes and ears on the markets – constantly attuned and responsive to changing conditions, and frequently ahead of the curve in recognizing market inefficiencies and ways we might profit from them;
  • In addition to this close feel for the markets, our internal management approach gives us increased control, total transparency and greater nimbleness in the face of changing market conditions…Finally, our internal team in extraordinarily cost effective – with total expenses equal to a fraction of the costs of employing outside managers for similar asset pools with similar results.”

While the scope, scale and range of the Harvard Endowment investments far exceeds those available to Essential Investment Partners and our clients, the shared philosophy of combining internal and external management to greatest effect is an important tenet in successful investment management.