...Harvard Management Company (HMC) has successfully managed Harvard University’s endowment over the last decades. The active management has added billions of dollars in value; nevertheless, CEO Jane Mendillo wants to evaluate the allocation of the portfolio before the next board meeting, looking at liquidity, risk profile, and type of management. HMC’s main objective is to preserve the real value of the endowment and its income distribution in perpetuity. In order to do this, they require annual real returns around 5.5%. The endowment has grown tremendously over the past 30 years; however at the same time, so has the endowment spending. The key question in this case is whether HMC has an appropriate method for investing and developing the endowment, considering their objectives and the University needs. Liquidity and risk is essential to HMC, and by increasing internal management of the endowment, liquidity will increase and risk might decrease. HMC should also consider reducing their dependence on U.S.-based assets. Harvard’s reliance on the endowment is increasing; between 1980 and 2009, Harvard’s endowment spending, as a percentage of the total budget, increased from 15% to 38%. Mendillo is concerned that HMC is largely exposed to illiquid assets (2009: 60% requires more than one year to liquidate), while these assets no longer offer meaningful excess returns. This might indicate that HMC should shift some investment focus, in order to include more liquid assets; also, Mendillo...
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...Case Study II Weighted Average Cost of Capital Company chosen in the S&P 500 : Name HEINZ Ticker HNZ Price 72.47 A. Estimating the proportion of debt D /D+E Market capitalization = number of shares * share price = 320,650 millions*72.47 E = 23.24 billions Working capital = Total current asset – Total current liabilities = 1234.275 millions The working capital being positive, implies that all the cash and cash equivalent is considered as excess cash and should be deducted from the debt in the risk calculation. In our case the trades payables are an integral part of doing business, and thus should be counted as a negative operating asset and not considered as debt. (Trades payables= 1,202,398) Since other accounts payable are composed of derivatives products for hedging purposes, their main purpose is financial, and thus they have to be considered as debt. The calculation we made to compute the debt is as follows: = Total current liabilities + Total long-term debt and other non-current liabilities - Cash and cash equivalents - Trades payables = 2647961 + 6410751 - 1330441 - 1202398 D = 11.5915 billions The proportion of debt is then: D/D+E = 0.3328 B. Estimation of the cost of debt rD According to the financial statement, the average interest rate for Debt and Financing Arrangements, which corresponds actually to long-term notes, was 4.28% for the fiscal year 2012. After that we wanted to estimate the cost of bonds. To do so we...
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...Summary of Harvard Management Company (2010) By: Satrio Abi and Yanuar Budi Baskoro * Harvard Management Company Introduction: Harvard Management Company is a company which built by Harvard University itself. That means HMC is a wholly owned subsidiary of Harvard University. The company built for managing the financial matter and development of the university. Because the company is wholly owned by Harvard University, the Directors of HMC is directly choosen by President and Fellow of Harvard College. The function of HMC is for managing University’s financing especially endowment. Endowment become the important income for HMC. The main job of HMC is to earn money for the endowment. The management do some investment to get the endowment funds. They have the unique ways to do the investment which is using the Hybrid Theory. This case is focusing on the endowment. * Endowment: Why endowment become so important? Because the endowment fund is used for developing the university. The fund is for establishing new research program, creating more scholarship for student and buy some new art and collection. The fund also for increasing financial aid, reducing tuition fee for students and improve facilities for learning such as hiring new profesional academic intiatives or creating new laboratorium for research. The total value of endowment for 1990 until 2009 is increased continuosly. The total value in 1990 is $4.7 billion, in 1995 is $7 billion, in 2000 is $18.3 billion...
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...Financial Markets Q1. HMC’s aims to provide relatively predictable cash flows from the endowment to the different schools within the university. As stated in the case, “the general objective was to preserve the real value (adjusted for Harvard’s expense growth) of the endowment and its income distribution in perpetuity”. In recent years, the payout ratio (Endowment spending as a % of total Endowment value) has had a target range of 4.5% to 5.0%. In the case’s example, the average growth rate of Harvard’s expenses is 3% above CPI inflation rate and annual gifts to the endowment average about 1.5%. Hence, with a payout ratio target of 4.75%, we would get an Expected Return of 6.25%: 4.75% + 3% - 1.5% = 6.25% Q2. The Policy Portfolio is the “neutral” guide of long-term asset allocation set by the HMC board and it serves as a benchmark of actual performance and as a metric against which compensation of portfolio managers is measured. The aim of the Policy Portfolio is to provide targets for different asset categories as a percentage of the total portfolio, in order to achieve a long-term expected return with the least risk possible. The policy portfolio is reviewed every year and it is modified as a result of changes in market conditions, needs for long-term expected returns, and risk aversion. Jack Meyer’s vision was to keep the actual asset mix “fairly” close to the Policy Portfolio. Fairly close means that the Policy Portfolio included a minimum and a maximum percentage...
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...1.¿En qué se diferencian los bonos nominales del tesoro americano de los bonos TIPS? En general la diferencia es que los TIPS es un instrumento cuyos flujos están indexados a la tasa de inflación, mientras que los nominales no lo están. 2. ¿Cómo afecta la inflación a los pagos de cupón y principal de un bono nominal? Los bonos nominales son bonos cuyos pagos no están ajustados por inflación por lo que frente a aumento de la inflación, los pagos tanto del cupón como el principal tendrán un menor poder adquisitivo. En caso de deflación, por el contrario, aumenta el poder adquisitivo de los pagos de cupón y principal. 3. ¿Cuándo tienen los Tips mejor performance que los bonos nominales? Los Tips tienen mejor performance que los bonos nominales cuando la inflación es superior a las expectativas de mercado (tasa de punto de equilibrio, punto en el que el emisor y los inversionistas son indiferentes entre un bono nominal y un bono real debido a que su rendimiento monetario es el mismo). 4.Cómo afectan a los Tips los siguientes factores y en que se diferencias estos efectos en un bono nominal a) Aumento en yields (Tirs) reales El aumento de la tasa yields genera un menor precio de los bonos Tips. El precio de los bonos nominales están afectos a la tasa nominal la cual tiene una relación de dependencia con la tasa real y la inflación, al considerar la expectativa inflacionaria del mercado constante, el aumento de la yield real generará un aumento de la tasa nominal disminuyendo...
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...Financial Markets Q1. HMC’s aims to provide relatively predictable cash flows from the endowment to the different schools within the university. As stated in the case, “the general objective was to preserve the real value (adjusted for Harvard’s expense growth) of the endowment and its income distribution in perpetuity”. In recent years, the payout ratio (Endowment spending as a % of total Endowment value) has had a target range of 4.5% to 5.0%. In the case’s example, the average growth rate of Harvard’s expenses is 3% above CPI inflation rate and annual gifts to the endowment average about 1.5%. Hence, with a payout ratio target of 4.75%, we would get an Expected Return of 6.25%: 4.75% + 3% - 1.5% = 6.25% Q2. The Policy Portfolio is the “neutral” guide of long-term asset allocation set by the HMC board and it serves as a benchmark of actual performance and as a metric against which compensation of portfolio managers is measured. The aim of the Policy Portfolio is to provide targets for different asset categories as a percentage of the total portfolio, in order to achieve a long-term expected return with the least risk possible. The policy portfolio is reviewed every year and it is modified as a result of changes in market conditions, needs for long-term expected returns, and risk aversion. Jack Meyer’s vision was to keep the actual asset mix “fairly” close to the Policy Portfolio. Fairly close means that the Policy Portfolio included a minimum and a maximum percentage...
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...9 -2 1 1 -0 0 4 REV: MAY 30, 2012 ANDRÉ PEROLD ERIK STAFFORD Harvard Management Company (2010) In February 2010, Jane Mendillo gazed out of her 16th-floor office window at a cold Boston Harbor and reflected on the set of issues facing Harvard Management Company (HMC). Since her return to HMC as CEO in July 2008, Mendillo had successfully managed the endowment through the worst financial markets crisis in a generation. But that period had brought to the fore multiple issues facing Harvard’s endowment, and she wanted the lessons from the crisis to inform the decisions at the HMC board’s next meeting. The board members would soon be reviewing its policy portfolio along with the current positioning of the endowment. They were eager for an update on a variety of related issues, highlighted during the crisis, such as the allocation of the endowment between internal and external managers, the illiquidity of much of the endowment, the effectiveness of HMC’s risk controls, and coordination with the university regarding its liquidity needs and risk tolerance. The Role of the Endowment Harvard University had been founded in 1636, and from the beginning its endowment played an important role in the financial structure of the institution. As of June 2009, the endowment totaled $25 billion. Each school within the university owned units in the endowment, much like an individual would own shares in a mutual fund, and received distributions from the endowment (“spending”)...
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...Simulations | Video Harvard Business Publishing serves the finest learning institutions worldwide with a comprehensive catalog of case studies, journal articles, books, and elearning programs, including online courses and simulations. In addition to material from Harvard Business School and Harvard Business Review, we also offer course material from these renowned institutions and publications: ABCC at Nanyang Tech University Babson College Berrett-Koehler Publishers Business Enterprise Trust Business Expert Press Business Horizons California Management Review Crimson Group USA Darden School of Business Design Management Institute European School of Management and Technology (ESMT) Haas School of Business Harvard Kennedy School of Government Harvard Medical School/Global Health Delivery HEC Montréal Centre for Case Studies IESE Business School Indian Institute of Management Bangalore Indian School of Business INSEAD International Institute for Management Development (IMD) Ivey Publishing Journal of Information Technology Kellogg School of Management McGraw-Hill MIT Sloan Management Review North American Case Research Association (NACRA) Perseus Books Princeton University Press Rotman Magazine Social Enterprise Knowledge Network Stanford Graduate School of Business Thunderbird School of Global Management Tsinghua University ...
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...MARKETING COURSE Articles Books & Chapters Cases Course Modules Online Courses Simulations 2012 MATERIALS Harvard Business Publishing serves the finest learning institutions worldwide with a comprehensive catalog of case studies, journal articles, books, and eLearning programs, including online courses and simulations. In addition to material from Harvard Business School and Harvard Business Review, we also offer course material from these renowned institutions and publications: Babson College Business Enterprise Trust Business Expert Press Business Horizons Magazine California Management Review Darden School of Business Design Management Institute HEC Montréal Centre for Case Studies Ivey School of Business International Institute for Management Development (IMD) IESE Business School INSEAD John F. Kennedy School of Government Kellogg School of Management Perseus Books Princeton University Press Rotman Magazine Stanford Graduate School of Business Sloan Management Review Social Enterprise Knowledge Network Thunderbird School of Global Management Tsinghua University University of Hong Kong Customer service is available 8 am to 6 pm ET, Monday through Friday. Phone: 1-800-545-7685 (1-617-783-7600 outside the U.S. and Canada) Tech support is available 8 am to 8 pm ET, Monday through Thursday, 8 am to 7 pm ET Friday. Phone: 1-800-810-8858 (1-617-783-7700 outside the U.S...
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...include Competing for the Future, Leading the Revolution and The Future of Management (selected by Amazon.com as the best business book of the year). His latest book, What Matters Now, was published in 2012. Over the past twenty years, Hamel has authored 17 articles for the Harvard Business Review and is the most reprinted author in the Review’s history. He has also written for the Wall Street Journal, Fortune, The Financial Times and many other leading publications around the world. He writes an occasional blog for the Wall Street Journal. Since 1983, Hamel has been on the faculty of the London Business School, where he is currently Visiting Professor of Strategic and International Management. As a consultant and management educator, Hamel has worked for companies as diverse as General Electric, Time Warner, Nestle, Shell, Best Buy, Procter & Gamble, 3M, IBM, and Microsoft. His pioneering concepts such as “strategic intent,” “core competence,” “industry revolution,” and “management innovation” have changed the practice of management in companies around the world. Hamel speaks frequently at the world’s most prestigious management conferences, and is a regular contributor to CNBC, CNN, and other major media outlets. He has also advised government leaders on matters of innovation policy, entrepreneurship and industrial competitiveness. Currently, Hamel is leading a pioneering effort to reinvent management by...
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... 4. Implication of Harvard model in UnitelHRM systems 3 4.1. Harvard model philosophy 3 4.2. Implication of Harvard model 3 4.2.1. Strengthening the role of employees in the decision-making process 3 4.2.2. Encourage quality initiatives and corresponding enhanced reward systems 5 5. Conclusion 6 6. Reference 6 7. Appendix 8 7.1. Five-stage model 8 7.2. Harvard model 9 1. Introduction 2. Background information 3.1. Unitel 3.2. Vision 2020 3.3. HRM model Bottom-up 3. Problem identification and solution 4.4. Teamworking A senior maintenance officer of Unitel claimed that the Vision 2020 created a discrimination among employees that decrease the effect of team spirit. Consequently, employees are blamed for all problems as “self-conflicts” According to Katzenbach and Smith (1993), a high performance team can create beyond performance expectations. Moreover, working as a team ca influent on individual behaviour and attitudes towards work (Roethlisberger and Dickson, 1964). Hence managers should pay more attention on forming team for employees following Tuckman and Jensen (1977) five-stage model (stated in the appendix). 4.5. Employee empowerment and engagement 4.6. “Work smarter” 4.7. War with the Union 4. Implication of Harvard model in UnitelHRM systems 5.8. Harvard model philosophy The Harvard framework was introduced by Michael Beer and his counterparts in 1984 at the Harvard school. The model provides...
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...www.hbrreprints.org Successful strategy execution has two basic rules: understand the management cycle that links strategy and operations, and know what tools to apply at each stage of the cycle. Mastering the Management System by Robert S. Kaplan and David P Norton . Reprint R0801D This article is made available to you with compliments of SAP. Further posting, copying or distributing is copyright infringement. To order more copies go to www.hbr.org or call 800-988-0886. Successful strategy execution has two basic rules: understand the management cycle that links strategy and operations, and know what tools to apply at each stage of the cycle. Mastering the Management System by Robert S. Kaplan and David P Norton . COPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. Not long after its successful IPO, the Conner Corporation (not its real name) began to lose its way. The company’s senior executives continued their practice of holding monthly one-day management meetings, but their focus drifted. The meetings’ agenda called for a discussion of operational issues in the morning and strategic issues in the afternoon. But with the company under pressure to meet quarterly targets, operational items had started to crowd strategy out of the agenda. Inevitably, the review of actual monthly and forecast quarterly financial performance revealed revenues to be lower, and expenses to be higher, than targeted. The worried managers spent...
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...STRATEGIC MANAGEMENT TEXAS EXECUTIVE MBA PROGRAM FALL 2011 Professor David B. Jemison CBA 3.232 Telephone 471-8757 David.Jemison@mccombs.utexas.edu Texts: Porter, Michael E. Competitive Strategy. (New York: Free Press, l998). Course Description Perspective and Themes This course is about the creation and maintenance of a long-term vision for the organization. This means that it is concerned with both the determination of strategic direction and the management of the strategic process. As such, it deals with the analytical, behavioral, and creative aspects of business simultaneously. The course is organized around six themes in strategic management: the role of the general manager, the components of business strategy, corporate strategy development, divisional-level strategy development, managing strategic change, and the development of general managers. Our perspective in this course is that of the leader whose responsibility is the long-term health of the entire firm or a major division. The key tasks involved in general management include the detection of and adaptation to environmental change; the procurement and allocation of resources; the integration of activities across subparts of the organizations; and, at the most senior levels, the determination of purpose and the setting of corporate direction. General managers, from our perspective, are managers who are in the position to make strategic decisions for the firm. Note that such...
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...basic rules: understand the management cycle that links strategy and operations, and know what tools to apply at each stage of the cycle. the Management System by Robert S. Kaplan and David P. Norton NOT LONG AFTER ITS SUCCESSFUL IPO, the Conner Corporation (not its real name) began to lose its way. The company’s senior executives continued their practice of holding monthly one-day management meetings, but their focus drifted. The meetings’ agenda called for a discussion of operational issues in the morning and strategic issues in the afternoon. But with the company under pressure to meet quarterly targets, operational items had started to crowd strategy out of the agenda. Inevitably, the review of actual monthly and forecast quarterly financial performance revealed revenues to be lower, and expenses to be higher, than targeted. The worried managers spent hours discussing how to close the gap through pricing initiatives, capacity downsizing, SG&A staff cuts, and sales hbr.org 1808 Kaplan.indd 63 | January 2008 | Harvard Business Review 6 3 12/5/07 5:32:05 PM | Mastering the Management System campaigns. One executive noted, “We have no time for strategy. If we miss our quarterly numbers, we might cease to exist. For us, the long term is the short term.” Like Conner, all too many companies – including some well-established public corporations – have learned how Gresham’s Law applies to their management meetings: Discussions about...
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...MANAGEMENT INFORMATION SYSTEMS (MIS) Term 1; ECTS: 10 (July 2-22, 2015) Prof. D P Goyal, Ph.D. Management Development Institute Gurgaon-122001, New Delhi, INDIA dpgoyal@mdi.ac.in;dpgoyal23@gmail.com 1 INFORMATION ABOUT THE PROFESSOR Dr. D P Goyal is Professor at Management Development Institute, Gurgaon, New Delhi, India (www.mdi.ac.in/faculty/detail/28-d-p-goyal/). • • • • • • • • Post Graduate in Business Management; Doctorate in MIS Over 29 years of experience in teaching, research, consulting & executive training Published more than hundred research papers in national / international journals of repute Published 18 books including three well acclaimed text books one each on MIS from Macmillan; ERP from McGraw-Hill; and IT project Management from Macmillan Have supervised 13 Ph.D. research scholars Completed many sponsored research projects On the Board of Governors; Advisory Board; Academic Council; Board of Studies of many business Schools/Universities Member of editorial board and review panel of several referred journals OBJECTIVES OF THE COURSE The main objectives of the course are to provide the management student a broad understanding of: • • • • • Information Systems (such as Transaction Processing Systems, Management Information Systems, Decision Support systems, etc) from a Business Perspective Information Systems Planning Key IT Technologies, and the implications of these technologies for managers Identifying...
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