University Chief Investment Officer David Swensen earned $4.2 million in 2015, marking yet another year in which the man leading the management of Yale’s multibillion-dollar endowment remained the school’s highest paid employee.
Swensen’s compensation consisted of a salary and bonus as well as benefits and deferred compensation. Bloomberg first reported Swensen’s 2015 pay package earlier this week, citing tax filings provided to the financial news service by Yale. University President Peter Salovey, by comparison, was paid about $1.4 million in the same year.
Like other tax-exempt organizations, Yale is required by the IRS to annually file – and make publicly available – a document that details financial information including annual expenditure, revenues and information about its highest paid employees. A Yale spokesperson did not respond to a request for clarification regarding the compensation structure of university employees.
Four of the 22 employees whose compensations were disclosed by Yale work for the investments office. Senior director of investments Dean Takahashi, who earned about $3.2 million, was the second-highest paid employee in 2015.
According to tax filings from 2016, Swensen received about $930,000 more in compensation in the 2014 calendar year than in 2015. About $860,000 of Swensen’s 2014 compensation had been reported as deferred compensation in filings from previous years.
The decline in Swensen’s pay from 2014 to 2015 also coincided with a decline in the performance of Yale’s endowment, though returns consistently remained among the highest for universities. As Yale’s fiscal year ends on June 30, Swensen’s compensation for 2015 overlapped with both fiscal 2016 and fiscal 2015, when the University reported endowment returns of 3.4 percent and 11.5 percent, respectively. The two fiscal years occurring in 2014 saw the endowment return 11.5 percent and 20.2 percent.
Though Swensen may earn more than his colleagues in New Haven, his compensation pales in comparison to his counterparts at the helm of at least one other Ivy League endowment – despite Yale’s superior performance.
When accounting for the performance of Yale’s investments office over the past three decades, several finance experts contend that Swensen and his colleagues more than earn their keep. The office is widely recognized as the best endowment manager in higher education, generating a 13.9 percent annualized return between fiscal 1985 and fiscal 2015 that outperformed the average return of colleges and universities measured by the National Association of College and University Business Officers by 5.0 percent per annum for the same period.
In a foreword to a 2009 book authored by Swensen, former Yale Corporation Investment Committee Chairman Charles Ellis ’59 wrote that the investments office has contributed “multiples more than any of Yale’s most generous benefactors” to the University.
“Only King Abdullah of Saudi Arabia who recently funded the new King Abdullah University of Science and Technology with $20 billion has done more for a university anywhere in the world,” he added.
In an interview with the News in April, Massachusetts Institute of Technology finance professor Andrew Lo ’80 said the constraints on university salaries prevent many institutions from hiring someone of Swensen’s caliber.
Swensen has led the investments office Yale since 1985, and is credited for devising the “Yale Model” of asset allocation that has produced about $35 billion in investment gains since he assumed his role.
“Yale is very fortunate because David Swensen can easily multiply his annual compensation several-fold by simply leaving and creating his own investment fund,” Lo said. “He chooses to be at Yale because he loves the institution, and that’s a very special relationship.
Earlier this month, the Harvard Crimson reported that the school’s then-chief investment officer Stephen Blyth earned about $14.8 million in 2015. Harvard’s 5.8 percent endowment return in fiscal 2015 was almost 6 percentage points lower than Yale, and the Cambridge-based school posted a 2 percent loss in fiscal 2016.
Blyth has since been replaced in his role at Harvard by Nirmal Narvekar, who earned $6 million in 2015 while leading Columbia University’s investments office. The fourth individual to lead Harvard’s investments office in the past decade, Narvekar will earn at least $6 million this year, according to the Wall Street Journal.
As of the end of fiscal 2016, Yale’s endowment had a total market value of $25.4 billion.