Harvard Management Company is in the process of outsourcing the management of its real estate assets to Bain Capital, the largest Boston-based private equity firm, according to a Bloomberg News report released last week.
HMC, which manages Harvard’s $ 37.1 billion endowment, has been planning to part ways with its real estate team since January. In early 2017, NP Narvekar, CEO of the company, wrote in a letter to Harvard subsidiaries that “the team responsible for managing HMC’s direct real estate investments should separate and become an external manager by the end of the year. calendar year 2017.. “
Harvard’s endowment grew 8.1% in fiscal 2017, the lowest among Ivy League endowments. Since Narvekar’s appointment as CEO in late 2016, HMC has decided to phase out internally managed investments, seeking to lay off nearly half of its staff by the end of fiscal 2017.
According to the Bloomberg report, Bain would hire around 20 people from HMC and become the financial manager of Harvard’s real estate investments.
Harvard’s real estate portfolio has always been one of its strongest asset classes. In fiscal 2016, real estate assets represented 14.5% of Harvard’s $ 35.7 billion endowment and generated returns of 13.8%, higher than the University’s 2016 returns in d ‘other asset classes such as private equity, national bonds or foreign equities.
In the University’s financial report for fiscal 2017, Narvekar cited strong real estate yields as one of the reasons for the growth in endowment size. But Narvekar also wrote in the report that the university has made real estate sales, generating “significant endowment cash.” He reiterated HMC’s expectation to split up the real estate platform.
“We are working closely with the team to support this effort and implement a mutually beneficial arrangement as an external manager,” he wrote in the report.
Bain Capital and Harvard Management Company both declined to comment for this story.
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