In the 2008-9 fiscal year Yale University’s endowment took it on the chin, losing 29 percent of its value. But the money managers who oversaw Yale’s investments during that tumultuous year, when nearly all endowments got clobbered, were rewarded with lavish raises. According to today’s Yale Daily News, which cited Yale’s tax filings, the chief investment officer, David Swensen, who has pioneered an oft-imitated philosophy of alternative investments, received a 23-percent increase, to $5.3-million, and his deputy, Dean Takahashi, got a 35-percent raise, to $3.5-million. The numbers pale in comparison to what the men could earn on Wall Street, and since their compensation is based on the endowment’s long-term performance — not just a single-year bust — they may not see such booming raises in the coming years.
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10 Responses to Amid Endowment Bust, Yale’s Money Managers Got Booming Raises
cu_alum - September 10, 2010 at 3:14 pm
If any endowment manager anywhere is worth this kind of money, it’s David Swensen.
browneyes - September 10, 2010 at 3:28 pm
Something is wrong with this system!
optimysticynic - September 10, 2010 at 3:34 pm
Post hoc ergo propter hoc: he got the money therefore he must be worth it. The entire capitalist system is filled with folks who have received outrageous salaries and as a consequence actually believe they are worth it. And, of course, if you don’t receive such outrageous sums, you guessed it, PHEPH….
seiu615 - September 10, 2010 at 3:44 pm
hours being the latest example), in education (course cuts, departmet cuts, talk of cutting college seminars), and in staff (900 layoffs so far, perhaps more coming, according to the August YDN). It’s been hard enough to understand these cutbacks when Yale’s endowment is over $16 billion, and when the 5-year fund-raising campaign has earned over $3 billion so far (cf. the same August YDN). But now we read that THREE people at Yale have received over $10 million (YDN 9-10-10) — enough to have saved many jobs and avoided many cutbacks. Yes, these investors did well for Yale; among many wonderful benefits of increased earnings are student scholarships. But while Yale is still ahead of where it was a decade ago due to its investors’ efforts, the truth is that these investors also made mistakes, overleveraging the portfolio, investing very heavily in illiquid and hyper-risky markets, and missing the signs that many others saw regarding the coming economic collapse — causing Yale to lose 25% of that endowment., a cool $5.5 billion. (These losses did not occur merely because of the general downturn — they were due to specific investment decisions that made Yale’s portfolio very vulnerable when markets began falling.) And now they are to receive $10.1 million for a year’s work. Regardless of what one thinks about the work of these investment officers, cutting back on Yale’s educational mission, services, and staff is, in my view, unnecessary and short-sighted when Yale’s endowment is still in the multi-billions (and growing). But doing so while paying three people an amount that could have prevented some of these cuts and worlds of pain to the dedicated Yale staffers who lost their jobs is just plain wrong no matter how you parse it.
seiu615 - September 10, 2010 at 3:45 pm
As a parent of two students at Yale, I’m extremely concerned about the continuing cutbacks in services (the dining hall hours being the latest example), in education (course cuts, departmet cuts, talk of cutting college seminars), and in staff (900 layoffs so far, perhaps more coming, according to the August YDN). It’s been hard enough to understand these cutbacks when Yale’s endowment is over $16 billion, and when the 5-year fund-raising campaign has earned over $3 billion so far (cf. the same August YDN). But now we read that THREE people at Yale have received over $10 million (YDN 9-10-10) — enough to have saved many jobs and avoided many cutbacks. Yes, these investors did well for Yale; among many wonderful benefits of increased earnings are student scholarships. But while Yale is still ahead of where it was a decade ago due to its investors’ efforts, the truth is that these investors also made mistakes, overleveraging the portfolio, investing very heavily in illiquid and hyper-risky markets, and missing the signs that many others saw regarding the coming economic collapse — causing Yale to lose 25% of that endowment., a cool $5.5 billion. (These losses did not occur merely because of the general downturn — they were due to specific investment decisions that made Yale’s portfolio very vulnerable when markets began falling.) And now they are to receive $10.1 million for a year’s work. Regardless of what one thinks about the work of these investment officers, cutting back on Yale’s educational mission, services, and staff is, in my view, unnecessary and short-sighted when Yale’s endowment is still in the multi-billions (and growing). But doing so while paying three people an amount that could have prevented some of these cuts and worlds of pain to the dedicated Yale staffers who lost their jobs is just plain wrong no matter how you parse it.
slnachbar - September 10, 2010 at 4:49 pm
And to think, the football coach is the highest paid employee on most other major university campuses. But he rarely gets a 23 percent pay hike after a losing season unless past performance dictates that he’ll win again very soon. I guess it’s no different for these endowment managers. The school bets expectations on past performance. And, like the football coach, you can’t trash these investment managers in the media. They help attract new money for the school.
jesor - September 10, 2010 at 5:38 pm
What do you expect from Yale….didn’t they educate the business and political leaders that got us into this mess in the first place?While I agree that overall long-term performance should be the criteria for salary consideration, ultimately you have to ask why the salary is so high for anyone. Economically, it makes sense to have these people out being entrepreneurs, not employees if they’re worth that much. Realistically, after a person reaches a certain salary point, everything beyond that is score-keeping and ego stroking, and has very little to do with whether or not that individual can be financially secure enough to continue doing their job well. But hey, rational basis economics apparently went out the window when neo-liberalism came in so I guess I’m just an old dinosaur.
cwinton - September 10, 2010 at 9:41 pm
Having met a few of those in the million+ salary club I can’t say I’ve encountered one yet who could reasonably justify that level of compensation. Basically, we have a variation of a Ponzi scheme at work, where salaries supposedly are based on what the market will bear, but are actually based on fiction promolgated by those who figure to benefit themselves by inflating the worth of those in the game with them. This is occurring because those who control the purse strings have managed to position themselves as the fox guarding the chicken coop. Probably the only way to break this nasty cycle is to stop rewarding this group with tax cuts and instead put a confiscatory tax on incomes exceeding, say 5 times the salary of the President of the United States.
dryfly5 - September 11, 2010 at 3:06 am
A close friend is Vice-President for Operations and Investments in a foreign investment house. He tells me times have been tough and he has only been able to break even with the downturn. He didn’t go to Yale and doesn’t make that kind of money. I did and I don’t either.
_perplexed_ - September 13, 2010 at 6:00 pm
We forget that Yale is not a university with a good endowment– It is a corporate entity that owns a University.