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Harvard endowment to invest in hedge fund launch by former managers

Harvard Management Co. is expected to invest $400 million from its endowment in TPRV Capital, a hedge fund formed by two departing HMC managers, according to two people familiar with the matter.

TPRV plans to raise about $700 million and launch in the third quarter.

The relative value fund run by Graig Fantuzzi and Michele Toscani in Boston is hiring a team of 15, according to the two people.

The seed capital is significant for the $35.7 billion endowment, which is shuttering its internal hedge funds and eliminating about half of the 230 staffers by year-end in a bid to improve performance. Harvard Management, which oversees the endowment, said in January it would “explore investing relationships” with hedge funds created by departing staffers — a practice the fund has used in the past.

Mr. Fantuzzi didn't respond to requests for comment. Mr. Toscani and a spokeswoman for Harvard Management declined to comment.

Relative value funds seek to profit from price differences between related securities. TPRV is short for Tufnell Park Relative Value, the strategy managed by Messrs. Toscani and Fantuzzi at Harvard Management. The fund was one of at least nine internal strategies and the best-performing in fiscal year 2014, according to a 2015 internal McKinsey report. It was also among the largest in terms of assets.

In 2014, Mr. Toscani made $4 million, including a $3.6 million bonus, according to Harvard Management's most recent tax return. Mr. Fantuzzi made $3.6 million, including a $3.2 million bonus.

The endowment had two other strategies that used the Tufnell Park name, according to a third person familiar with the matter. Tufnell Park Global Rates was run by Marco Barrozo, who left in 2015 and started Cambridge Square Capital. Tufnell Park Cross Asset was the other strategy.

The Tufnell Park strategies were created by Harvard's former CEO Stephen Blyth, who chose the name based on an area in North London where he grew up, according to this person. Mr. Blyth hired Messrs. Barrozo, Fantuzzi and Toscani.