Here are more questions that the Record should ask about the 2009 Investment Report. (For background, read this.)

A recurrent theme is that the Report is completely correct when it emphasizes the importance of, among other things, transparency and fees in its dealings with outside managers.

By continually monitoring outside managers, the Investment Office extends its initial due diligence into a formal regime designed to verify that each investment management firm is meeting its investment objectives, the overall objectives of the portfolio with respect to transparency, liquidity and concentration, and other requirements.

Just so. But then the we should hold Williams to the same standards. If the College is going to demand transparency from outside managers than we — alumni, students, and faculty — should demand a similar amount of transparency from Williams. In particular, Williams should meet the highest standards of endowment transparency.

Q: How many outside managers does the College employ? How many managers are there within each of the endowment categories? What is the largest amount managed by a single manager? [In theory, the College should not mind answering these questions. (I think that there are 50 – 75 outside managers, but I am not sure.) I am fairly certain that what the College does is consistent with best practices. They probably have lots of managers in each category with no one manager being too large. But there is no reason not to share these statistics with the Williams community.]

More questions below.

Q: How much money did Williams pay to all its outside managers last year? [This would be an interesting number to know. How are members of the College community to evaluate the performance of the Investment Office without knowing how much it spends? That spending comes in two components: that spent by the Investment Office directly and that spent to pay the individual managers. (We covered the first category in the initial set of questions.) My guess would be that this number was between $10 and $20 million, but I could easily be wrong. Different investment categories (e.g., corporate bonds versus venture capital) have radically different fee structures. The College may be able to negotiate special rates. And so on. Again, individual managers would not want the College to reveal how much they get paid, less their other investors realize that Williams is getting a better deal. But no outside manager cares if Williams reveals its total spending on managers.]

Q: How many of the outside managers have a direct connection to a Williams Trustee or to any of the members of the “Advisory Committees?” How much did the College pay these managers in aggregate? How did their performance compare to other outside managers employed by Williams? [Fiduciary Responsibility 101 argues that Williams must be very careful when the people making decisions about how Williams invests its money benefit from the investments so made. I have no problem with the College making such investments. Indeed, I suspect that such investments turn out better than the average investment, if only because rich alumni would hate to be embarrassed among their rich peers for putting Williams in a sub-par investment. Still, we need to be careful.

To some extent, this information is now released in the Form 990, at least in more recent versions. Here are some details from the latest available filing (pdf):

GREG AVIS, A TRUSTEE OF THE COLLEGE, IS A MANAGING PARTNER AT SUMMIT PARTNERS IN WHOSE FUNDS THE COLLEGE INVESTS.

E. DAVID COOLIDGE, A TRUSTEE OF THE COLLEGE, IS THE VICE-CHAIRMAN OF WILLIAM BLAIR & COMPANY IN WHOSE FUNDS THE COLLEGE INVESTS.

WILLIAM OBERNDORF, A TRUSTEE OF THE COLLEGE, IS A PARTNER OF SPO PARTNERS IN WHOSE FUNDS THE COLLEGE INVESTS.

Again, I think that these investments will probably work out quite well. Avis, Coolidge and Oberndorf are smart Ephs with the best interests of the College at heart. And these investments were, in many cases, made before these Ephs ascended to leadership positions at Williams. But, good intentions are no substitute for full disclosure. And, as best I can tell, the Form 990 does not require disclosure about investments made by alumni on the “Advisory Committees.” The Form 990 also reveals the amount paid $3,233,590 for “Investment Services” to:

HINTZ HOLMAN AND ROBD
17 STATE STREET
NEW YORK, NY 10004

If the College is comfortable revealing the compensation of its most highly paid manager, it should have no problem telling us the total compensation to all managers as well as the amount paid to managers with a (potential) conflict. Note also that, because of the College’s endless delays in filing its Form 990, this data is for the fiscal year ended in June 2008. We need more up-to-date information to make sensible judgments.]

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