Stephen Blyth keeps a framed T-shirt on the wall of the downtown office where he runs Harvard University's $37.6 billion endowment. "Yale Sucks" is emblazoned in red across the front.
"Of course, this is about football, not about investing,'' Blyth said.
When it comes to managing money, Yale has been outscoring Harvard for years. It's up to Blyth, a 48-year-old statistician and former Wall Street trader, to close the gap.
It's a pivotal moment for the nation's largest educational fund. Investment returns have been lackluster since before the 2008 financial crisis, raising questions about the durability of Harvard's model, with its heavy focus on highly paid in-house managers.
Charles Skorina, a San Francisco-based executive recruiter who closely follows the top endowments, said Harvard stands alone with its large staff of 265, handling about 40 percent of assets internally. Most endowments farm out their money to other firms.
"They can't prove that that's a sound model'' any longer, Skorina said.
Blyth isn't conceding that. Nearly a year into his role as chief executive of Harvard Management Co., the group that runs the fund, he has revised the way assets are allocated to various investments, flattened the group's hierarchy near the top, and is reviewing compensation to tie managers' pay more closely to the long-term performance of the entire fund.
Almost no one thinks the endowment can reclaim its glory days of the 1990s, when the highest-paid staff in the university arena routinely batted out huge returns. But Blyth seems to think some of that ambition, and willingness to take risks, can be restored. Or the fund might as well invest in cheap index funds, he said.
"Obviously execution is very important," Blyth said in an interview. So are "developing the organization, and aligning the organization with the strategy, people and so forth. Making sure that we actually perform."
Blyth joined the endowment in 2006 and held a series of jobs, most recently head of public markets. He was promoted in January to succeed Jane Mendillo, a veteran investor who had to steer the fund through the crisis and an unprecedented cash crunch at Harvard.
A period of caution ensued that has been blamed for several years of mediocre results: 10.5 percent annualized gains over the past five years, compared with 14 percent for Yale and 11.7 percent for a hypothetical portfolio of 60 percent stocks and 40 percent bonds. But the 10-year results have prompted deeper questions across the Harvard community, unaccustomed to second-tier status in any forum.
For the decade ended in June, Harvard's annualized return was 7.6 percent, compared with Yale's 10 percent . That's real money over time, as the 27 percent loss the endowment suffered in fiscal 2009 looms large in the long-term numbers.
Paul Finnegan, a private equity executive and Harvard's treasurer, who also serves as chairman of Harvard Management, acknowledged the endowment's 10-year performance is "not where it should be."
Heavy turnover in the years leading up to Mendillo's tenure didn't help, he said. Other current and former executives point to risks added to the portfolio under former endowment chiefs and university leaders. And some of the hedge funds spawned, and funded by Harvard, in the departure of famous endowment chief Jack Meyer have stumbled.
Now, the investment approach, culture, and the group's pay are all on the table. Blyth said the organization "needs a lot of change." There has been a string of recent departures; some people were shown the door, while others have left on their own, deciding not to be part of the new regime.
The new boss is a voluble Londoner with a big personality. His office wall was replaced with glass, "so I could see people and people could see me." And he has put himself closer to the investment action by removing a layer of management.
He is not filling his former job; nor is he replacing Andrew Wiltshire, his mountain-climbing comrade and the endowment's respected head of alternative investments, who recently retired at age 58.
Critics say the endowment's natural resources expertise, in timber and other areas, has been gutted in the wake of Wiltshire's departure. Blyth said he is working to add talent to the group.
Marco Barrozo,a fixed-income manager, and Satu Parikh,interim head of natural resources, both left the endowment in October. Last month, Jameela Pedicini, head of the growing area of sustainable investing, left for a post in New York.
Stanley Eleff, a lawyer in Tampa who is part of a Harvard alumni group that's been critical of the endowment pay structure, said it's difficult to know whether people are leaving simply because of a change of the guard, or for other reasons.
"If enough people leave for seemingly idiosyncratic reasons, you need to see if there's a pattern," he said, "and if there's a pattern, if it's a good thing or a bad thing."
Skorina, the recruiter, said it's common for people to leave when bonus structures are revised.
Blyth, a quantitative finance specialist who used to teach statistics at Harvard, where he earned his PhD in 1992, has spent the past several weeks trotting out his new strategy to alumni, Harvard Business School students and investment industry professionals. It's got a long name and a wonky white paper attached to it, but it essentially aims to make the asset allocation policy more flexible, with ranges for each class, instead of a fixed number.
For instance, in the current fiscal year, the fund can invest between 6 percent and 16 percent of its assets in US stocks, vs. an 11 percent target last year. He also has grouped all the assets into five buckets, as a way to map out risks and their relationships to one another.
Blyth has set a high bar for performance, shooting for the top quartile of a dozen elite schools, or the top three. That's despite evidence it's hard to beat the market with a giant portfolio, which can't get as much exposure as smaller endowments to a category like venture capital.
Blyth also wants to foster more collaboration among his staff.
"To get that working well, you need the right structure. And also the right people who buy into it,'' he said.
Finnegan, the HMC chairman, said the board has bought in. He called Blyth "very hands-on," encouraging employees to discuss investment ideas, rather than focus narrowly on their own specialties. He sees the recent changes as a way for Blyth to create "an investment firm where ideas are shared, debated — a very different investment environment than HMC in the past."
Finnegan also said the board is not wedded to managing a significant portion of Harvard's money internally.
Yale, for instance, has a staff of about 25 overseeing outside managers for its $25.6 billion endowment.
"We should be agnostic whether we manage money internally or externally,'' Finnegan said.
Blyth's new target is a return of at least 5 percent after inflation, plus 1 percentage point better than benchmarks. But for bragging rights, it means beating Yale.
Blyth said he and Wiltshire plan to climb Colorado's Mount Lincoln next summer, and at some point, Mount Yale. But only, he said, "when our performance warrants it."
"Hopefully that'll happen before I'm too old to climb it."
Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.