David Swensen, the investment brains behind the Yale endowment’s annualized 16% returns over the past year, had a few things to say about the supersized pay packages of his peers over at the Harvard Management Company:
Swenson is right about the politics of HMC. However, on the economics you could make the case that Samuels, Mittelman, and especially Meyer were seriously *underpaid*. Harvard has now lost them and the last that I heard they refused to take any of Harvard’s money into Convexity (their new fund). Even if Harvard had managed to make use of Convexity of an outside manager, it would not wind up paying any less than it would have to employ them internally. Plus, harvard will not benefit from the multiyear clawback it had as part of the HMC comp system. Harvard will pay straight 2/20. A complete loser for the Big H.
Luckily for Harvard, they found a great replacement for Meyer in Mohamed El-Erian. He is a great investor and also cuts a figure that I suspect will be more congenial to a cranky academic community than Meyer’s.
I suspect that Yale probably pays as much as Harvard for investment management. It’s just that since Yale outsources its active management, that expense is hidden. Yale only reports management fees, not promotes.
