It seems like only yesterday that investors and investment managers were fawning over the Harvard Management Company, the folks who manage the endowments for one of America's premier universities. Businessweek magazine, among others, bragged on how the geniuses at Harvard Management spread the money among a wide range of exotic assets including hedge funds, commodities, foreign bonds, TIPS and their favorite - timber.
Articles gushed how private investors could learn a thing or three about allocating their investments like the folks at Harvard Management.
Recently financial planning magazines exhorted the lowly registered representative (meaning me and a few other people) to adopt a similar allocation policy entitled 'Tactical Asset Allocation', the new-new thing that is surely the answer to what failed us recently and similar to the Harvard model. Only Harvard got hit just like everyone else. Losses were in excess of 30% in the past 12 months and the university was forced to borrow 1.5 billion dollars because of hard to sell assets - just the kind of assets they loved to pieces a few years back.
Now Harvard and their new management team is back at the drawing board, pulling in their far-flung investment managers and thinking liquid, less expensive and liquid.
It's times like this that Jack Bogle, found of the Vanguard Funds, seems like a genius, buying bonds and domestic stocks in two mutual funds and allocating his fixed income by the same percentage as his age. Cheap. Liquid. Effective.
There will always be new fangled ways to manage money. For a time some of these methods will be able to make gains but in the end it's the basics that count. Harvard Management, with some of the smartest people in the world on their staff, is just coming to that conclusion.
Simple often works better.
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