Harvard alum blasts endowment managers
A Harvard University alumni group criticized the school's investment managers for losing 27 percent of the endowment fund in its last year and accused the university of glossing over mistakes that led to those losses.
Ten members from the class of 1969 issued their criticism in a letter sent to Harvard President Drew Faust today. The alumni said a report that investment manager Harvard Management Co.issued several weeks ago on the endowment's performance failed to ask whether last year's 27 percent loss "indicated fundamental long-term problems."
"This unprecedented loss is treated as a rather small blip on a generally upward curve, giving us little confidence that Harvard is addressing the scope and nature of the current problems," the alumni wrote.
Harvard had no immediate comment on the letter.
The letter was written before Harvard acknowledged on Friday that it had lost $1.8 billion last year from its cash accounts because it took the highly unusual step of having the endowment fund invest that money, instead of keeping the funds in more conventional bank-like accounts. 1969 alumni member David Kaiser said his group did not yet have time to address the $1.8 billion cash losses.
The 1969 group has been critical of Harvard Management since 2003 when it protested the multi-million-dollar compensation of the fund's top investment managers. The recent losses ialso caused them to question pay levels. The alumni group said none of those overseeing its funds should be paid higher than Harvard's president. Faust's total compensation in the 2007-08 academic year was $775,043.
The group urged Faust to assemble a group to more thoroughly oversee the level of financial risks the university undertakes. It also demanded that the school report the "clawbacks," or long-term pay that certain endowment managers would have to give up because they lost money in years after receiving large bonuses for good performance.
Harvard Management chief executive Jane Mendillo issued the annual report of the now $26 billion fund in September. It was a more detailed report than in years past, and in it Mendillo acknowledged the endowment had taken on too much risk and was punished for it when financial markets around the world collapsed. Mendillo has restructured the staff there and hired new people in senior positions.
On the issue of clawbacks, Mendillo said in that report that a "substantial number" of managers would have to give up payouts they would have received had their strong performance from past years continued.
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