Harvard vs. Yale in the Endowment Wars

A snippet from today’s FT on the escalating war of words between Yale’s David Swensen and Harvard endowment. It shows the essential dilemma facing universities with billion-dollar funds, Swensen’s solution to which (accepting dramatically non-market compensation) won’t be everyone’s cup o’ financial tea:

Jack Meyer, who managed the Harvard money, famously left in something of a huff last year after some alumni took exception to his outsize pay packet (he’s running his own hedge fund now, with Harvard as a big client).

Meanwhile, David Swensen, who heads the Yale fund, continued to toil away in relative penury and a few weeks ago took a swipe at Harvard’s largesse. According to Foundation and Endowment Money Management, he recently told a forum: “You can’t pay managers astronomical amounts of money because it tears at the fabric of the university.”

“I have long said that the structure of Harvard Management is inherently unstable,” said Swensen, who is paid about $1m a year, compared with the $60m to $100m that Harvard’s six best-paid managers collectively earned each year for the past few years.

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Comments

  1. Franklin Stubbs says:

    That’s amusing. What’s “inherently unstable” is the expectation that a superstar fund manager would offer his services at a dramatic discount to free market rates simply to placate cranky alumni.
    The only logical explanation for Swensen’s willingness to take such a pay cut himself is that he receives some sort of feel-good, non-financial compensation from Yale to make up the difference for the many millions a year foregone. Why he would expect or even demand others to embrace such a choice is beyond me.
    Such fuzzyheaded logic. I should be running a few billion.

  2. Brent Buckner says:

    Whether or not the structure of Harvard Management was “inherently unstable”, it made billions from a high alpha while it lasted. Mr. Swenson in his own comment points out how long the party lasted by saying “I have long said”.
    The rhetorical question for Mr. Swenson is: why be pre-occupied with stasis when managing turmoil can be so rewarding?