Let’s spend five days reviewing the latest annual report (pdf) from the Investment Office. Greatest hits commentary on related topics include here, here, here and here. Today is Day 3.

The Investment Report provides no information about the underlying managers. As with yesterday’s example of lousy transparency when it comes to performance measurement and attribution, the College does not measure up to the best practices of its peer group.

Abigail Wattley’s ’05 addressed the topic of manager transparency in a 2015 Record op-ed:

We don’t disclose the list of our fund managers because of agreements we have entered that relate to confidentiality.

Unsophisticated readers might assume that Wattley meant, “Our managers require us to not reveal that we have invested in them, otherwise they would not want to do business with us.” That is, the managers insist on confidentiality and there is nothing the College can do.

This is absurd, at least for 95%+ of the managers the College invests with. If Williams asked them for permission to reveal their name on a list of all its managers, the vast majority of investment managers would say:

1) “Williams is the client! If Williams wants to include us on a list of managers, that is its right. Indeed, many of our investors, especially state pension funds like Texas Teachers, are required by law to reveal all their managers and even our fees!” See below (pdf) for an extract:


Indeed, many (most?) of the College’s managers are publicly identified by at least some of their clients.

2) “We hope that Williams reveals our name (if not our fees and performance)! Having smart, sophisticated endowments invest with us is great advertising! The more people that know that Williams trusts us, the more money we are likely to be able to raise.”

The easiest way to see that Williams could easily make its list of managers public is to take note of other institutions that do so. (Previous discussion here.) Consider Grinnell College’s listing (pdf):


Or how about the listing provided by The Boston Foundation (tBf):


If The Boston Foundation can provide a listing of its managers, then why can’t Williams? Note, also, that these managers are some of the most elite and sought after in the business. Some (Baupost?) are probably even closed to new investors. And yet they have no problem with tBf making their status public.

Should we expect members of the Williams Investment Office (like Wattley) and the Williams trustees to know about the practices of places like The Boston Foundation? Well, in addition to being a similar sized endowment in the same city, The Boston Foundation has a CEO (Paul Grogan ’72) and a board chair (Michael Keating ’62) who are both former trustees at Williams!

Not enough evidence? Consider the comments (via personal correspondence) of Churchill Franklin, CEO of Acadian Asset Management and former chair of the board of trustees at Middlebury.

You are right (as usual) the answer is no we [Acadian] don’t care and are happy to have the advertising. Some fund of funds and outsourced CIOs are reluctant to share the names of the managers they select, because that is their “edge” and their value-add. Huge funds are sometimes reluctant to share the names of their managers if they are trying to protect limited capacity, but the managers are almost always happy to have their names shared.

I could produce similar quotes from Ephs in money management if I thought doing so wasn’t a huge waste of their time.

Is there any way that Wattley isn’t lying? The naive among you might guess that, perhaps, for historical reasons (or because our lawyers are stupid), there are stipulations in every investment contract along the lines of: “Williams agrees to never publicly reveal the name of the investment manager.”

But, if that were so, then how could I possibly know that all of these firms (pdf and pdf) have managed money for Williams in the last few years?




charles bank

If the College really had “agreements … that relate to confidentiality” and which prevented the College from reporting that its managers included SPO, Summit, William Blair, Charlesbank and so on, then how do I know about these managers?

The cynic in me is afraid that Wattley is purposely trying to mislead the Williams community. She (or her boss Collete Chilton . . . or her boss’s boss) don’t want other Ephs to know who we invest in. Of course, they don’t want to lie too obviously. They just want to string together a bunch of mostly-true-individually but misleading-in-the-aggregate sentences that give everyone the impression that the College’s hands are tied.

And note how the reasoning for this secrecy has changed over time. In the 2009 Annual Report (pdf), the rational for opaqueness was:

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

Compare and contrast this (more honest!) 2009 version with what Wattley wrote in 2015:

We don’t disclose the list of our fund managers because of agreements we have entered that relate to confidentiality.

Now, we pretend that lots (all?) managers have (legal?) agreements protecting their identity. Then, we admitted that some (10? 3? 2?) of our managers insisted and that, only because we felt like it, did we decide not to publish the names of the other managers.

If the Record were a better paper, it would find out the truth. Start by asking for some example language from one of these “agreements” about the required “confidentiality,” perhaps from one of the firms that are already public.

In fact, why not start with Charlesbank! It is perfect. First, it happily allows some of its clients, like The Boston Foundation, to report its involvement. Second, Williams already reports an investment. Third, a (the?) senior member of Charlesbank is Michael Eisenson ’77, chair of the Williams Trustees, and Abigail Wattley’s boss’s boss’s boss.

Here are more questions for the Record to ask:

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.]

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 a few years ago.) 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.

The College already collects all this information. The (very smart and experienced!) Ephs on the Advisory Committee — people like Noriko Chen ’89 and Liz Robinson ’90 — already study this data closely, or would if/when Collette Chilton provides it to them.

There is simply no reason why Williams could not share the same information with its alumni/faculty/students. 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? Not because anyone is evil, but because bureaucracies (and bureaucrats) are naturally secretive. The more that Collette Chilton and her team know — relative to what you know — the less likely you are to make trouble for them.

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