The widely admired chief investment officer for Yale University's endowment has added his voice to the chorus urging reduced pay for financiers.
David Swensen doesn't blast only Wall Street - he sounds equally critical of buy-side firms. In comments in Sunday's Financial Times, he accuses Fortress, Microsoft and large buyout funds, right alongside Goldman Sachs and Morgan Stanley, of taking "self-interested actions at the expense of their investors....The overwhelming number of investors fail" due to "egregious" investment management fees, he adds.
As for Wall Street's role in the current financial and economic crisis, Swensen says, "Even if the returns they generated were real, they were paid too much, and in the context of the absolutely disastrous performance of these institutions their pay was obscene." He also voices hope the crisis will lead to some "moderation of compensation" on Wall Street.
What About Endowment Managers?
Earlier this month, Swensen told The Wall Street Journal that his own peer group's compensation - endowment and foundation investment managers - is "extremely generous." Swensen himself reportedly earned a peak of $2 million in one year - a pittance compared with fund managers who compile market-beating track records at for-profit institutions.
Compensation of in-house endowment fund managers sparked controversy earlier this decade at Harvard. That public dustup at Harvard Management Co. ultimately led to the departure of more than 30 professionals including at least two portfolio managers who had earned more than $25 million each in 2004.
Since taking charge of Yale's endowment in the early 1980s, Swensen inspired a movement by endowments and other institutions to emphasize private equity, hedge funds, real estate and other alternative investments rather than public stocks and bonds. Under his leadership, the Yale earned 16.3 percent annual returns over the 10 years through June 2008 - nearly three times the return of the average college endowment, according to the FT. (Yale's fund declined by an estimated 25 percent in the second half of last year.)
So where is he putting Yale's money now? The $17 billion endowment is moving "as much available money as possible" into distressed debt.