Here is one last question that the Record should ask about the 2009 Investment Report. (Previous questions and background here and here.)

Q: The Boston Foundation, run by former Williams trustee Paul Grogan ’72, and Grinnell College provide information on the outside managers they employ. Why doesn’t Williams?

I will admit that providing a list of outside managers is unusual. (Previous discussion here.) As an example of endowment transparency, consider the latest report (filed quarterly!) from The Boston Foundation.

Inv-Mgrs-06-30-09

Grinnell College provides (pdf) similar data:

grinnell

There is simply no reason why Williams could not share the same information with its stakeholders. Again, such transparency is uncommon but not unusual, especially for state schools subject to open records laws. Here are details (pdf and pdf) for the University of Texas. Needless to say, there are a lot of details to consider in what to release, how often to release it and so on.

Why doesn’t Williams release this information? Consider this claim from the Report:

Williams doesn’t publish a list of its outside investment managers. Because some of our most successful managers insist on confidentiality, and because the College prefers to treat managers equally, all remain confidential.

This is a deeply suspect claim. In fact, it is probably a flat out lie, just like the lie with which the College introduced us to Collette Chilton three years ago. In that case, the issue was the College’s ridiculous claim that Williams needed an investment office located in Boston because “[a]s is typical with such positions, she’ll be based in a financial capital.” (The quote is from Morty.) In truth, every other NESCAC and Ivy League investment office is based in the same town/city, no matter how backward and isolated, as the college itself. If you write the million dollar checks, then people come to you.

In this case, the lie is that the reason for the confidentiality is a desire to treat all managers the same. What is this? Kindergarten? Why would the College possibly care about treating all managers the same if the managers themselves prefer different treatment or don’t care either way? In fact, the truth is almost certainly that the powerful folks who run the endowment — hard to know who, exactly — like to keep their secrets. They don’t value your opinion. They don’t want your insights. They want you to sit down and shut up. You should be thanking them for taking time out of their oh-so-busy lives to run the endowment. Don’t bother them with questions.

For those unfamiliar with institutional investment management, here is some background information. Assume that there are 75 managers. First, the vast majority of them would be either indifferent or pleased if Williams were to release their names. That is great advertising! The easiest way to get people to invest with you is to show them that other smart people are already investing with you. They want the world to know that a sophisticated and successful investor like Williams is on board. Many of them have probably already sought permission to tell potential investors about Williams, or just done so anyway.

Second, even those who might prefer that Williams keep its investment secret — and, to be honest, I have almost never heard of such a thing — are unlikely to demand it. After all, they work for Williams. We are the client, the customer. What we say, goes. We are always right. If we want to include the names of our managers in the annual report, they are highly unlikely to even complain, must less threaten to do anything about it. (Publishing their investment returns would be much more problematic, mainly because it would make it harder for them to mislead other clients, both current and potential.)

Third, the College tries to imply that it is precisely the “most successful managers” who “insist on confidentiality” and that, therefore, we risk losing these managers if we were to publish their names. But notice that they never say that directly! They want us to infer that secrecy is a requirement for these oh-so-special managers. But they can’t say so explicitly because it is highly unlikely to be true. (And, even if it were true for a handful, why not just publish the names of other 70 managers?)

The investment world is very different today than it was even just two years ago. Back then, you could, perhaps, make a case that certain managers were so special and so popular that the College had to agree with all their demands, no matter what. But those days are long gone. 99% of all managers have available capacity. They are looking for your money. All that matters is that your check clears. If you want to put up a billboard in Williamstown with their names on it, they could not care less.

Can anyone name a single investment firm who would normally take money from Williams (or any large endowment) but who would refuse to do so if we released its names in our annual report? I doubt it. (Counter-examples welcome.)

UPDATE: Post edited to remove incorrect claim that Brandeis has invested directly with Bernie Madoff. See comments below.

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