Harvard Endowment: Where Deputies (Can) Out-Earn the Boss

(May 22, 2013) - The top earner at Harvard Management Company (HMC) made almost $1.3 million more than his boss, President and CEO Jane Mendillo, in 2011, according to fund documents.

Andrew Wiltshire, HMC's head of alternative assets, pulled down a $6.61 million paycheck for the calendar year, a release from the endowment manager said. Stephen Blythe, who leads public markets investments, was the fund's second-highest paid employee at $6.16 million. Mendillo earned $5.32 million for the year.

According to HMC, over 90% of portfolio managers' compensation hinges on investment performance-Harvard pays for alpha. If a certain portfolio does not beat its benchmark, the manager in charge can only collect 10% of his or her potential payout.

"This system ensures that incentives are earned only when the endowment receives added-value from HMC's active management," the Ivy League investor explained.

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Total compensation for the top six employees rose 45% from 2010 to 2011. HMC called the latter calendar year a period of "exceptionally strong endowment returns."

Not all of the investment gains posted in 2011-nor any other year-made their mark on employee's year-end compensation figure. HMC reserves a portion of performance-based earnings, which are subject to "clawback" should a manager underperform in subsequent years.

"This compensation system is designed to closely align the interests of the University with its investment professionals," said James Rothenberg, Harvard University's treasurer and HMC's board chairman. "HMC's market-beating performance in the reporting period once again added value to the resources upon which Harvard depends to fulfill its teaching and research mission."

In addition to the top three, other top earners at the investment office included natural resources specialist Alvaro Aguirre-Simunovic ($5.30 million) and global fixed income portfolio managers Apoorva Koticha ($3.11 million) and Marco Barrozo ($2.99 million).

(May 21, 2013) - Australia's superannuation funds are poised to make 2013 their second-highest returning fiscal year ever.

In the 10 months through April, the mandatory retirement system has gained a median 15%, according to data released Tuesday by Sydney-based SuperRatings.

If equity markets stay bullish until the end of June, the research firm predicted supers would beat their previous second-place finish of 15.8% from 2007. Still, the analysts' report said the industry record of 18% from 1997 will likely remain standing.

"With markets this financial year continuing to surge well into May, and with many funds benefiting from a weakening Australian dollar, balanced options really are poised to provide Australians with record real returns," the report said.

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Australia's superannuation funds, which manage employees' defined contribution assets, came into existence 21 years ago with legislation making employer contributions mandatory. Businesses currently have to contribute 9% of employees' salaries to an approved fund. Over the next six years, that portion will rise to 12%.

SuperRatings' founder Jeff Bresnahan said the stellar results of the last 10 months may bode well for super funds' relationship with members, which took a hit—along with Australians' retirement savings—in the financial crisis.

"It has been six long and challenging years since the onset of the global financial crisis, for the superannuation industry and its members," he said.

However, these results "could well be the catalyst for Australians to re-engage with their super funds and begin to trust the long term benefits of diversified portfolios," Bresnahan continued. "The people you really have to feel sorry for are those that switched from balanced options to cash options at the bottom of the market, only to see fund returns rebound by 46.7% over the past four and a bit years."

Related Profile:John Pearce, CIO of Unisuper