The University’s top investments officers are some of the best-paid among their peers at other schools, according to tax filings, despite a perennial debate over whether nonprofit investment officers should receive multimillion dollar salaries.
Among the 15 universities with the largest endowments in the country, Chief Investment Officer David Swensen appears to have earned more than investment officials at any school other than Harvard in 2003 and 2004. His deputy, Senior Director of Investments Dean Takahashi, earned more than nearly every chief investment officer. Experts in the endowment industry said Yale’s high salaries are the result of factors including the structure, large size and exceptional performance of the University’s endowment.
Swensen and Takahashi were the two highest-paid Yale employees in 2004, earning $1.64 million and $1.04 million respectively for managing the second-largest university endowment in the country, which now stands at $18 billion. Most of their compensation comes from incentives for strong performance, University President Richard Levin said. In recent years, Yale’s endowment returns have been among the highest of any university.
But Yale’s investment officers are not the highest paid in the industry. Harvard’s have earned as much as $35 million in recent years. In 2004, at least six members of the Harvard Management Company brought in at least $5 million, with two senior vice presidents earning $17 million and $18 million.
While officer compensation usually correlates with the size of a university’s endowment, Harvard’s investment model accounts for the vast difference in payment, said Lou Morrell, the vice president for investments at Wake Forest University. Most investment decisions at Harvard are made directly by in-house managers, while investment officers at most other universities, including Yale, delegate those decisions to carefully selected outside managers whose compensation the schools are not required to report. Yale hires about 200 outside managers, Levin said.
“I think it’s the best solution,” he said. “It keeps Yale’s salaries from being excessive, and we get better results.”
But seven-digit salaries are not the norm among endowment leaders nationwide. Only one university other than Harvard and Yale of those with the 15 largest endowments appears to have paid its chief investment officer more than $1 million. Bob Boldt, the former head of the University of Texas Investment Management Company, earned approximately $1.28 million in 2003. That same year, Swensen earned $1.42 million.
Swensen did not respond to a request for comment, and Takahashi declined to comment.
The salaries of some chief investment officers are unavailable because universities are only required to disclose the five highest non-officer salaries. But in almost all cases, a salary exceeding Swensen’s would have placed the investment officer in his or her school’s top five list. The top five non-officer salaries at Columbia University and the University of Pennsylvania were all well over $1 million and did not include any investment officers.
Swensen would likely make significantly more money working in the private sector, experts said. Boldt, for example, resigned to practice in the private sector in September.
Comparing chief investment officer salaries is difficult, said John Griswold, the executive director of the CommonFund Institute, the educational arm of an investment firm that serves nonprofit organizations.
“It’s a very difficult thing to compare on an apples-to-apples basis,” he said. “There are all different management models.”
Griswold said the institute, which studies endowments, does not track compensation. Deferred compensation can lead to misleadingly low stated salaries, he said. For example, University of California Chief Investment Officer Marie Berggren, who will be paid a base salary of $375,000 in 2006, could earn $1 million in compensation depending on endowment performance.
Some have criticized nonprofit universities for overcompensating their investment officers. William Strauss, an author and one of 11 1969 Harvard College graduates who publicly protested Harvard Management Company’s high salaries, said Sunday that salaries at some institutions are excessive.
“A great university is measured not necessarily by its wealth,” Strauss said. “We believe that as an organization that holds itself out as a charity … the same benchmark applied in government holds — no one in the U.S. government makes more than the president.”
The chief investment officers at Yale University, Harvard University, the University of Texas system, Princeton University and the University of Chicago all made more than their respective presidents in the most recent tax filing for each institution.