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.

Our approach can be summed up with one word: consistency. Whether we are considering individual stocks, mutual funds, hedge funds or closed end funds, our investment process focuses on investments that are likely to deliver consistent and reliable results. We look for opportunities that may be either overlooked or under-researched and that may provide solid returns for clients over long periods of time.

For each area of investing – stocks, mutual funds, hedge funds and closed end funds – we have a well-defined discipline that describes our research process. (Each of these disciplines is defined in a separate document.) While each investment vehicle is distinct, they share a common underlying philosophy of searching for consistent results and understanding how we might lose money as much as how we might make money.

All of our investment processes are supervised by the Investment Committee, chaired by Jerry Paul. The Committee meets at least weekly to discuss the current investment and economic climate, existing client investments, new opportunities and potential changes to portfolio positioning. This process ensures that we are consistent in our approach to investing. For example, if there are new developments in the fixed income markets, we consider the impact of those developments when evaluating individual stocks.