SMU should have such problems

[No Cal Pony]

Wouldn't it be nice if SMU had this sort of dilemma?

Go Ponies!


Harvard's growing endowment feud
By John Hechinger

The Wall Street Journal - December 22, 2005
(Copyright (c) 2005, Dow Jones & Company, Inc.)


Six Harvard University investment managers received $56.8 million in annual pay, provoking renewed criticism of the Wall Street-style compensation of those overseeing the school's huge endowment fund. The fund's former U.S. bond manager David R. Mittelman received $18 million and Maurice Samuels, who handled foreign bonds, got $16.9 million. Jack Meyer, who until recently was chief of Harvard Management Co., which manages the endowment, received $6 million. They received the money during Harvard's 2005 fiscal year, which ended in June.

Amid the controversy over pay at the endowment, Messrs. Meyer, Mittelman and Samuels -- along with two other managers who received $5.4 million and $4.6 million -- recently left Harvard to start their own firm, Convexity Capital, which will manage $500 million for Harvard.

Another manager, Andy Wiltshire, received $5.9 million. He is the only one of the six top-paid managers of the 2005 fiscal year that remain at Harvard, where he oversees the endowment's huge timber portfolio.

The payments, which Harvard disclosed yesterday, are less than in recent years. In the 2004 fiscal year, the two highest-paid Harvard managers received about $25 million apiece. The top six managers as a group pulled down $78.4 million. And, in 2003, the top two received roughly $35 million apiece with the entire group getting $107.5 million.

Harvard, with its $25.9 billion endowment, the biggest of any U.S. university, has supported its money-manager pay by citing the fund's superior investment returns, adding that the university must pay top dollar to retain the best talent in a competitive market. Other schools tend to farm out their money to outside managers, whose pay isn't disclosed. Harvard manages about half its endowment in-house.

In the year ended June 30, Harvard reported a 19.2% investment return. Over the last decade, it has had an annualized return of 16.1%. Al Powell, a Harvard spokesman, called the endowment "critical to our academic programs" and said the school "must get the right people to invest it."

But William Strauss, an author and theater director from the Harvard class of 1969 who has been a leading critic of pay at the endowment, said Harvard should have used the money to improve financial aid for students. He called the latest compensation "inappropriate and contrary to the values of a great university."

To compensate investment managers, the school uses a formula tied to investment performance. Mr. Powell said the most recent pay also reflected a "negotiated agreement" with the departing managers. He declined to be more specific. The school also declined to specify to the compensation of Mr. Meyer's successor overseeing the endowment, Mohamed A. El-Erian, a star fund manager for Pimco funds. He is expected to start work at Harvard in February.

The payouts come as Harvard and other universities with big endowments have also been criticized because they are spending relatively modest fractions of their endowments for operations. Harvard, for example, distributed 4.3% of the endowment in its most recent fiscal year, while some experts say 5% would still be considered conservative.

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