Institutional Investor's Alpha Magazine - October 2008 - (Page 25)

Interview André Perold Fast Lessons for Hard Times AS THE GLOBAL MARKETS GO HAYWIRE, ANDRE PEROLD SEES A TEACHABLE MOMENT IN RISK MANAGEMENT. By Frances Denmark E ven the serene towers of academia, it seems, have been rattled by the shifting landscape of global markets, and André Perold, the George Gund Professor of Finance and Banking at Harvard Business School, is as taken aback as anybody. This may be because Perold is no mere professor but an investor of some stature as well. He is chief investment ofﬁcer at $1.8 billion Boston-based HighVista Strategies, an endowment-style fund he helped launch in 2005 with $630 million in assets under management and whose holdings include hedge funds. Perold, 56, has long been an ardent student of the markets and a proliﬁc researcher. In his 29-year tenure at Harvard, he has published scores of papers and case studies on topics as varied as derivative instruments, currency hedging, quantitative investment modeling and portfolio asset allocation. Never has he seen anything quite like this year’s credit meltdown, the collapse of U.S. investment banks and the extent of massive government intervention. “The world is a scary place,” Perold says in discussing the turmoil. However, the professor is not one to let a teachable moment go by. “We learn a lot, fast, when things are volatile. There will always be cycles of fear and greed — human behavior never changes — but who would have thought after the tech bubble collapsed that we would get another bubble in only ﬁve years?” Certainly not Perold, who three years ago co-founded HighVista, which seeks to emulate the multistrategy, global investment approach ﬁrst used by pioneering college endowment funds like those of Harvard University and Yale University. The success of those endowments has been widely attributed to their decision early on to invest in al- ternatives, particularly hedge funds and private equity. To some of his associates, Perold seemed like an obvious choice to help start an investment ﬁrm. “We called André and asked why this hadn’t been done: a simple fund that delivered an endowment strategy,” explains Daniel Jick, one of Perold’s two partners at HighVista. Jick, a Harvard Business School alum, ran Goldman, Sachs & Co.’s Boston ofﬁce for 11 years. The other partner is Brian Chu, a former managing director at Vulcan Capital, the investment ofﬁce of Microsoft Corp. co-founder Paul Allen. The concept of an endowment-style fund was largely but not completely untried at the time. Mark Yusko in 2004 became the ﬁrst CIO to leave a university endowment, the University of North Carolina’s, to start such a fund, Chapel Hill, North Carolina–based Morgan Creek Capital Management, which has $12 billion in assets. From the outset Jick believed the HighVista partners’ combined investment skills and their network of relationships with Boston-based investment stars like hedge fund managers Seth Klarman of Baupost Group and Jonathon Jacobson of Highﬁelds Capital Management would make such a fund a success. When he isn’t doing research or working at HighVista, Perold teaches ﬁ nance to ﬁ rst- and second-year MBA students as well as to the businesspeople who attend Harvard’s executive education programs. Teaching material abounds these days. “When you have capital to invest, you experience market phenomena in ways that would not be possible otherwise,” Perold says. “It’s exciting to examine those experiences through bigger-picture conceptual lenses and bring them into the classroom.” OCTOBER 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 25

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2008

Institutional Investor's Alpha Magazine - October 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Process of Evolution The Good Guys: Israel's Champion Interview: Fast Lessons for Hard Times Cover Story: Industry Under Siege The New Hedge Fund Economics Good-Bye, Easy Money Caging the Shorts Strategies: Bottom Fishing Profile: Cult of Personalities Research Center: Alpha Awards: Eye of the Storm Alpha Bytes: Funneling the Chatter Unhedged: Commentary: Attention, Hedge Fund Shoppers

Institutional Investor's Alpha Magazine - October 2008

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