Harvard Under Fire for High Salaries (Again)

Harvard University’s endowment fund has come under attack from a group of alumni for paying its investment managers too much.

Harvard Management Company (HMC), which runs the $32.7 billion fund, paid $132.8 million in salaries, bonuses, and benefits in the 12 months to June 30, 2013. This was more than double the $63.5 million it paid in 2010, according to Bloomberg.

Nine members of the class of 1969 wrote to Drew Faust, president of Harvard University, claiming to be “astonished” by the rise in compensation. They criticised the pay hikes, which had come despite the endowment underperforming many of its peers. It has still to reach its pre-financial crisis peak of $36.9 billion in assets after losing 27% in the 12 months to June 30, 2009—although its 11.3% return for the fiscal year ending June 30, 2013 marked an outperformance of its benchmark.

HMC staff salaries and benefits were “increasing at a much faster rate than the endowment, which still has a long way to go before it reaches its pre-crisis peak”, they said in the letter.

A spokesperson for the Ivy League university told Bloomberg: “HMC’s unique hybrid model has saved the university more than $1.5 billion in management costs compared to what an equivalent external management strategy would have cost over the past decade.”

It is not the first time the 1969 alumni have hit out at salary levels at Boston, Massachusetts-based HMC. In 2003, the group criticised a $100 million combined pay package for just five senior staff.

Since 2010, 90% of managers’ pay has been tied to the performance of the fund, and the endowment has vowed to reduce bonuses if it lost money in a financial year.

Harvard’s endowment fund has been dogged by problems since the onset of the financial crisis in 2008. It has spent more than $1.25 billion unwinding debt derivatives which lost money as interest rates were slashed, while real estate investments also hit the portfolio hard during the 2008-09 market crash.

In June this year, HMC president and CEO Jane Mendillo announced her resignation. She will step down at the end of 2014.

Harvard was not the only endowment to give its senior staff a pay boost in 2013: Princeton University gave its top three endowment managers a total of $8.3 million, 39% more than in 2012.