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Jack Meyer and Convexity Capital Management: Largest Hedge Fund Launch Ever

Jack Meyer, the former head of Harvard University’s in-house money management arm Harvard Management Co., with a team of approximately 30 former staffers is set to start trading later this month through the new hedge fund called Convexity Capital Management LP. Meyer and his team are icons in the endowment investment management business having helped to quadruple Harvard University’s endowment to more than $22.6 billion over a fifteen year period. Bloomberg reports that the new hedge fund is set to launch with almost $6 billion under management (including $500 million from Harvard University) which would make this the largest hedge fund launch in history, far exceeding the $3.5 billion raised in 2004 by former Goldman Sachs Group Inc. partner Eric Mindich for Eton Park Capital Management LP. The biggest new fund launched in 2005 was TPG-Axon Capital Management LP, founded by ex-Goldman Sachs executive Dinakar Singh with $2.8 billion. The Bloomberg article concludes with the following information about the former Harvard investment managers:

Meyer, 60, is joined at Convexity by former Harvard bond investors David Mittelman and Maurice Samuels, emerging-markets specialist Edward DeNoble and chief risk officer Michael Pradko. ``He basically has put together an organization which has all the components of a very mature investment organization,'' said Verne Sedlacek, chief executive officer of Wilton, Connecticut-based Commonfund, which oversees $36 billion for non-profit institutions, who worked with Meyer for eight years at Harvard Management.

Meyer, who declined to comment, directed investments for Harvard's endowment, the world's biggest university fund, from 1990 until September. In the period, the fund's assets grew to $22.6 billion from $4.7 billion. He moved the endowment into hedge funds, private equity and timber to increase annual returns, which averaged 16 percent in the 10 years through June 30. That compared with the 10 percent advance of the Standard & Poor's 500 Index. Harvard's fund climbed 19.2 percent in the fiscal year ended June 30, ranking third among the 25 largest U.S. endowments behind Yale University and Stanford University, according to a survey compiled by Bloomberg. Harvard in Cambridge, Massachusetts, replaced Meyer with Mohamed El-Erian, a managing director at Pacific Investment Management Co. and a prominent emerging-markets bond investor.

Convexity will charge investors 1.25 percent of assets in an annual management fee and take 20 percent of profits as incentive fees, people familiar with the matter said. Meyer was paid $6 million as chief executive officer of Harvard Management in the fiscal year ended June 30, down from $7.2 million in 2004.