(The Wall Street Journal) -- Harvard University's endowment fund has graduated some of the most sought-after money managers in the hedge-fund world. Now one of those stars is teaching Harvard a lesson of its own.

In the past month, the university lost about $350m (€256m) through an investment in Sowood Capital Management, a hedge-fund firm founded by Jeffrey Larson. Mr. Larson managed Harvard's foreign-stock holdings until 2004, when he left to set up Sowood, which recently lost more than 50% of its value amid bad bond investments.