Time to make some money
People are finally done throwing money at former Harvard Management chief Jack Meyer and his investment team.
Well, nearly done. Meyer, who became famous in the investment world for stellar results managing Harvard University's $25.9 billion endowment over 15 years, is about to stop raising money and start running it at his new hedge-fund firm, Convexity Capital Management.
A client roster believed to be dominated by endowments and other institutions is throwing a record $6 billion at Convexity. (The previous mark for biggest new fund, set in 2004, was $3.5 billion.) Convexity's minimum investment is said to be $25 million.
Meyer probably could have raised even more, according to people who have followed the firm. It had capped the new fund at $6 billion, about the same amount Meyer and his colleagues have managed for Harvard on an interim basis since they resigned last year. One of the firm's big new clients: Harvard's endowment, which promised to give Meyer's firm $500 million to manage when he opened.
More than two dozen former Harvard Management people have joined Meyer at Convexity, including star bond managers David Mittelman and Maurice Samuels. They operate out of offices near the top of the Hancock Tower, in the same building or within blocks of five other firms run by former Harvard Management investment managers who once worked for Meyer.
All of them left, at one time or another, amid friction over big performance-based pay packages. Now Meyer, who declined to talk with me, joins them in an elite group of hedge-fund managers looking down on Copley Square.
Convexity's fund stands out for more than just its size. The way investors will pay the firm for investment performance is unusual among hedge funds, which usually charge clients a flat fee, typically 1 percent of assets, plus 20 percent of the profits earned.
Convexity will charge clients a similar flat fee plus 20 percent of any amount by which it outperforms a benchmark index, such as the Standard & Poor's 500 index in the case of a stock fund. That arrangement is available to clients based on at least seven stock and bond benchmarks.
But Convexity's expertise isn't spread across many different investment categories. Its managers are specialists in fixed-income arbitrage, which they used to make a fortune for Harvard in years past. They plan to apply that particular skill to other types of investment accounts, using a technique known as ''portable alpha."
Here's how that would work: A hypothetical $100 million stock account is invested in the S&P 500 using derivatives or other methods, so it goes up and down precisely with the market benchmark. Convexity uses the account as collateral to borrow money, which is then invested in bond markets where managers believe they have an edge. As long as their bond gains exceed the cost of borrowing, the profit is tacked onto money that has followed the S&P 500.
Convexity is believed to be drawing lots of money from the university endowment world, where Meyer was duly famous. So does that mean longtime Meyer rival David Swenson, the man in charge of Yale University's own stellar endowment, is on the client roster?
Unlikely. Yale has never invested in any of the Harvard Management spin-outs, probably because Harvard holds some financial interests in all of the spin-out firms. Boola boola.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com. 
