Harvard alumni blast endowment managers’ pay
A group of Harvard University alumni wrote a letter Monday blasting the school’s overseers for allowing pay for Harvard’s endowment managers to continue to rise, even as investment performance has faltered.
The group, from the class of 1969, has long been critical of the multi-million-dollar pay packages at Harvard Management Co. In its letter, the group demands “a full accounting of how the endowment has been managed for the last 10-15 years,’’ including the sums invested internally and by outside firms.
The writers, among whom are professors, lawyers, and a clergyman, further say that the endowment should provide greater disclosure of its investment contracts and fees.
“The university community, which has suffered in many ways from the financial crisis and may now suffer again from flat returns, deserves to know exactly who is managing the money, how well they have performed, and how much money they have received,’’ the letter said.
The group’s letter was in reaction, in part, to a 2015 consultant’s report, recently reported on by Bloomberg News, that cited employees and others complaining of lax investment benchmarks, “an inattentive board and complacent culture,” also dubbed by some “lazy, fat and stupid.”
The controversial McKinsey & Co. consulting report apparently was commissioned by Harvard after it promoted Stephen Blyth to run the $35.7 billion fund at the end of 2014. Blyth resigned in July, after just a year-and-a-half running the nation’s largest educational endowment, after an unspecified medical leave.
Harvard has hired Columbia University’s endowment chief, N.P. “Narv” Narvekar, to take over the fund next month.
Emily Guadagnoli, a spokeswoman for Harvard Management, said the endowment manager has taken steps to “further align the interests of investment professionals with those of the University.”
Starting this fiscal year, in-house money managers will have a portion of their bonuses tied to overall performance of the fund.
Other policies adopted after the financial crisis still apply, such as tying the majority of managers’ pay to industry benchmarks. And bonuses are paid over a number of years, with portions withheld if performance later declines.
The endowment has come under intense scrutiny over the past few years as its performance has lagged numerous rivals, including Yale University, Stanford University, and MIT. Harvard suffered a 2 percent loss on its investments in fiscal 2016, pushing its 10-year annual return to 5.7 percent. Yale and MIT both posted gains, while Stanford posted a small loss of 0.4 percent.
Harvard’s underperformance has cost the university billions of dollars in potential returns. Yale’s endowment, a perennial top performer, posted a 3.4 percent gain for the latest year; its annualized return over a decade was 8.1 percent.
From 2009 through 2015, the alumni said in their letter, total compensation at the Harvard endowment has soared to $175.3 million from $68.2 million, amid lagging results. Pay for the top five highest-compensated managers continued to rise in every year but 2011, when they faced clawbacks for the steep losses of the financial crisis.
“Harvard has brushed off our concerns for years,’’ the alumni said in their letter, complaining that neither president Drew Faust nor former president Lawrence Summers has ever responded personally to their letters.
This time, the group addressed their letter instead to the members of the Harvard corporation, its highest board of directors.