Princeton Defends Fee Spend to Legislators

Princeton University’s endowment paid at least $299 million, or 1.4% of total assets, in fees to 160 outside managers in fiscal year 2015, the Ivy League university told US legislators in response to a US Senate inquiry.

The figure does not include performance-based compensation, Princeton added in the letter. The endowment earned 12.7% in investment return in 2015.

“PRINCO seeks to structure fees in a manner that helps align interests… and create a disincentive for advisors to take undue risk.”The US Senate Finance Committee and the House of Representatives’ Ways and Means Committee recently asked 56 private schools with assets north of $1 billion to explain how they manage and spend their endowment money. Princeton’s $22.7 billion endowment is the fourth largest in the US, according to the 2015 NACUBO-Commonfund study.

The university reported that fixed fees to external managers have increased over the last two years, despite little change in the overall number of managers. Management costs increased from $245 million in 2013 to $266 million in 2014, while the fund employed 161 and 159 external managers in each year respectively. The endowment gained 11.7% in 2013 and 19.6% in 2014.

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“PRINCO [Princeton University Investment Company] seeks to structure fees paid to outside advisors in a manner that helps align the interests of the advisors with the interests of the university and create a disincentive for advisors to take undue risk,” the letter said.

Internal costs of PRINCO staff and other departments decreased slightly over the last three years. The university paid $21 million to 42 staff members in 2015, a decline from $23 million in 2013.

The NACUBO-Commonfund report revealed in January that US endowments recorded the lowest fiscal-year returns last year since 2012—an average of 2.4% net of fees. The drop also pushed 10-year gains down to 6.3%, from last year’s 7.1%.

“2015’s lower average one-year return is a great concern,” said John Walda, NACUBO’s president and CEO. “Lower returns may make it even tougher for colleges and universities to adequately fund financial aid, research, and other programs that are very reliant on endowment earnings and are vital to institutions’ missions.”

Enrique Chang, Head of Investments, JanusJanus Capital has a new investment chief: Enrique Chang, formerly CIO of equities and asset allocation.

The Denver, Colorado-based asset manager promoted Chang to president and head of investments, effective April 1.

Chang now oversees Janus’ fixed-income teams, the firm said, in addition to the equities and asset allocation groups.

PIMCO founder Bill Gross joined Janus in 2014 as the lead portfolio manager for a new global unconstrained bond fund.

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Gross’ fund contributed $1.3 billion to the $192 billion Janus Capital Group managed across its three brands (Janus, Intech, and Perkins Investment Management) at the end of 2015, according to firm figures.

Chang joined Janus in September 2013—a year prior to Gross’ high-profile arrival—from mutual-fund competitor American Century Investments.

Janus’ company-wide assets under management have grown by roughly $35 billion since Chang’s hiring two-and-a-half years ago.

In the new role, he “will partner with CEO Dick Weil and President Bruce Koepfgen,” Janus said in the announcement.

Weil praised Chang’s “significant contributions to the firm” since arriving in 2014, and predicted he will “play an important role” in the firm’s strategy as investment chief.

Note: An earlier version of this story indicated that Bill Gross reports to Chang, due to an oversight in the original announcement. Gross reports to Weil.