WEST PALM BEACH, FL (HEDGECO.NET) – The Harvard University authorities have made a decision to reduce the compensation of its fund managers, according to a new released statement. Several members ofthe University Alumni have recently criticized what they characterized as �extravagant bonuses� being handed out to its fund managers.
In 2003, according to published reports, two portfolio managers received over $34 million in pay and bonuses. Such compensation includes performance bonuses resulting from growth in their investment management portfolios. Four other portfolio managers received about $6.9 million in pay and performance bonuses.
The Harvard Endowment fund manages about $19.3 billion in assets, and over the years, the fund has consistently done well, and has easily beaten the benchmarks during those years. During 2003, the endowment fund grew by 12%; such growth undoubtedly is a reflection of the potential of the fund managers. A typical endowment fund returns about 3-4% annually, particularly those funds, which do not invest in hedge fund strategies.
One of the star fund managers at the Harvard endowment is leaving to start his hedge fund company [HedgeCo.Net previous story]. Jeff Larson�s new firm, Sowood Capital Management will be dedicated to hedge fund management as well as commodity futures management; Mr. Larson however will be managing some assets for Harvard endowment fund. He will be managing a $700 million portfolio for Harvard according to the report.
While some university alumni were not happy with the high compensation package for the fund managers, the Harvard Management Company however defended such compensation packages. They argued �if managers had simply recorded average returns over the last 10 years, the endowment would be $9.6 billion smaller than it is today.� Ronald Daniel, Harvard treasurer and chairman of the Harvard Management Company board, said in a statement “The Board continues to believe the compensation system is fundamentally sound and a good economic deal for Harvard.” Details about the new Harvard salary cap for its fund managers were not immediately provided, and it is unclear when implementation of such system would start.
Paul Oranika
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