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Dartmouth's Endowment

June 1st, 2010

In earlier letters to Dartmouth alumni, we brought to your attention the conflicted behavior of some members of Dartmouth’s board of trustees. That story has now come to the attention of national news organizations. Please see the May 20, 2010 Bloomberg article (immediately below) which relates to the subject. One portion stands out:

“Dartmouth provides the most egregious example of conflicts,” said Joshua Humphreys, lead author of the report and founding director of the Center for Social Philanthropy at Tellus.... “Can you imagine the investment committee meetings at Dartmouth? Basically half the room has to leave including the chairman of the investment committee.”

We urge the board of trustees to practice the transparency necessary for alumni to evaluate their conduct with Dartmouth’s endowment.

Harvard, Dartmouth Helped Deepen Crisis, Report Says (Update1)
By Gillian Wee

May 20 (Bloomberg) -- Harvard University, the richest U.S. college, and five of its New England peers succumbed to Wall Street’s influence on investment strategies, took on too much risk and made the financial crisis worse, according to a report.

Investment losses at the endowments in the year ended June 2009 led to cutbacks and delayed construction projects, draining at least $1.35 billion from local economies for the next three years, said the study by Tellus Institute, a research and advocacy group in Boston. The report also examined Dartmouth College, Massachusetts Institute of Technology, Boston College, Boston University and Brandeis University, and was funded in part by the Service Employees International Union, which represents employees at schools including Harvard.

Harvard highlights how terribly wrong the endowment model can go when pushed to certain extremes in a climate of leadership crisis, said the 81-page report, which was released today. The endowment model, pioneered by Yale University’s investment chief, David Swensen, relies on alternative assets including commodities, real estate and private-equity holdings to boost returns.

Harvard’s endowment dropped a record 30 percent to $26 billion in the year ended June 2009. As the fund plunged in 2008, the value of the Cambridge, Massachusetts, university’s interest-rate swaps tumbled, forcing it to raise collateral by selling $2.5 billion in bonds in December 2008.

The school had an average annual gain of 8.9 percent in the decade ended June 2009, beating the 3.9 increase of the Standard & Poor’s 500 Index. Colleges that outperformed market indexes with the endowment model lost money when their hard-to-sell holdings fell more than stocks and bonds during the crisis that started with the collapse of the U.S. housing market in 2007.

Broken Model

The endowment model of investing is broken, the report said. Whatever long-term gains it may have produced for colleges and universities in the past must now be weighed more fully against its costs -- to campuses, to communities and to the wider financial system that has come under such severe stress.

John Longbrake, a Harvard spokesman, said virtually every issue raised by this report about endowment management practices has been addressed and continues to be addressed by the current leadership team at Harvard Management, which oversees the university’s endowment. The university’s large and positive economic impact to the region is well documented, and we consider it an important outcome of fulfilling our teaching and research mission, he said.


Jane Mendillo, Harvard Management’s chief executive officer, said in a letter this week that starting July 1 compensation of her senior managers will for the first time be linked to the fund’s performance. The university plans to reduce senior manager pay in any year the endowment loses money and will review compensation annually, she said in the letter.

The investment committee at Dartmouth, in Hanover, New Hampshire, included more than six trustees whose firms oversaw more than $100 million in investments for its fund over the last five years, the report said. Stephen Mandel, who is relinquishing his post as chairman of the school’s investment committee to lead the board later this year, originally managed $10 million for the school at his firm Lone Pine Capital LLC.

‘Egregious Example’

Other trustees who manage money for Dartmouth include Leon Black, with at least $40 million in his private-equity firm Apollo Global Management LLC, and William Helman, a partner at venture capital company Greylock Partners, the report said. Helman, who will take over the committee’s helm from Mandel, has received $10 million from the endowment, according to Tellus’s research.

Dartmouth provides the most egregious example of conflicts, said Joshua Humphreys, lead author of the report and founding director of the Center for Social Philanthropy at Tellus, on a conference call. He lectures at Harvard. Can you imagine the investment committee meetings at Dartmouth? Basically half the room has to leave including the chairman of the investment committee.

Roland Adams, a spokesman for Dartmouth, didn’t immediately return phone and e-mail messages seeking comment.

Tellus is a nonprofit group that works to advance a global civilization of sustainability, equity and well-being through research, education, and action, according to its website.

To contact the reporter on this story: Gillian Wee in New York at

Last Updated: May 20, 2010 14:05 EDT

 Last Updated:  Friday June 04, 2010

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