Skip to content
Subscriber Only
Matthew C Klein

Do Harvard, Yale Overpay Their Money Managers?

University endowments are a crucial source of income. Too bad they underperform simple stock indices while providing hundreds of millions of dollars in annual fees to hedge funds and private equity managers.

Money managers who handle university endowments tend to be the highest-paid employees on campus. (Executives at Harvard Management Co. earn multiples of what Harvard University's president takes home, for example.) Now a new report from the National Association of College and University Business Officers and the Commonfund Institute reinforces what has been pretty clear for some time: Rather than earning their pay and delivering the superior returns universities are seeking, many of these golden boys (and girls) are underperforming simple index funds.

When it comes to investing, the general rule is that you get what you don't pay for. It's hard to make money by actively betting on the direction of stock prices, interest rates, exchange rates and commodity values, so most investors are better served by holding a diversified basket of assets and minimizing fees, taxes and transaction costs.