Robert F. Wallace, the new head of Stanford Management Company, has been aggressively culling his staff since he was appointed in late March.

This has not gone un-noticed by the media, and we can now name more names and connect more dots.

Last year, before Mr. Wallace succeeded John Powers, SMC had about 22 investment staffers (excluding operations, HR, the CFO, etc.).

Four were in the top tier as Managing Directors.  Now only one of that original group remains.

Departing MDs were: Craig Blanchard, Saguna Malhotra, Martina Poquet, and Wafa Wei.  

(Ms. Poquet was reaching retirement age, so her departure this month may not have anything to do with the CEO shift.  Mr. Blanchard left last year, after the announced departure of Mr. Powers, but before the arrival of Mr. Wallace.  In January he joined Makena Capital, an asset manager founded by Michael McCaffery, former CEO of the Stanford Management Company.  So, these two moves should not be construed as part of the “great purge”.)

Last year there were seven staffers with the Director title; now only four remain.

Departing Directors were: Vera Kotlik, Karen Horn Welch, and Joshua Richter.

Last year there were four staffers titled Manager; three remain.

The departing Manager: Ben Chiquoine,

At the junior level there are four Associates/Senior Associates and, as far as we know, all four are still in place.

So, six senior staffers (ignoring Ms. Poquet and Mr. Blanchard) have left since April and we believe they were all pushed out by Mr. Wallace.  That’s about one third of the pre-Wallace senior staff roster.  And, we suspect, one or two more may be contemplating an early departure.

Managing Directors at SMC have a base salary of approximately $400K and a bonus opportunity of another $400K, for a total comp of about $800K.  Directors have a base of about $250K and a bonus opportunity of $250K, for a total comp of about $500K.

The departures were partly offset by two new faces Mr. Wallace brought with him.

Greg Milani, who was Mr. Wallace’s right-hand man at Alta Advisers in London, was appointed Senior Managing Director, which makes him the highest-ranking staffer.  

Mr. Wallace also tapped Jay Kang as a new Managing Director.  Mr. Kang is a Yale grad (class of 2002, same year as Mr. Wallace) who worked at the Yale Investment Office under David F. Swensen.  More recently Mr. Kang was number-two at the Hilton Foundation in L.A. under CIO Randy Kim (who is another Swensen/YIO alumnus). 

Our Fearless Forecast: Endowment Returns will Disappoint for FY2015

We are here to  assuage all anxiety with a fearless forecast, and it’s not going to spread much joy across the campi 

The typical full-year number for big endowments will probably be just 4 to 6 percent.  A few of the high-flyers may do a little better.  Some others will be lucky to see 3 percent.

That means most endowments will fall short of their long-term target rate of return, which is a little north of 7 percent nominal.

That’s a big drop from last year’s average 16.5 percent and even below the recent 10-year average of about 8.2 percent for endowments over $1 billion.

Most schools won’t publish an official annual return number for some weeks, but a few major endowments release quarter-by-quarter reports.  We can use them to project full-year results and get a feel for what happened in the year just past 

We have hard numbers for the first three quarters for four big schools: University of California Regents, University of Washington, University of Florida and Cornell University; all over $1 billion. 

With the first three quarters baked in, it was only necessary to project a 4^th-quarter value, and we can do that with fair confidence since all the major benchmarks are available for the quarter ending in June.

In the case of University of Florida we don’t even need that crutch, since they’ve already released their full-year results.

Here are the full-year numbers:

Risky Business: Chief Investment Officers and Public Pension Plans

Happy August!

This is supposed to be the slow season in the media biz as torpid reporters and readers doze through late summer, but a story in the Wall Street Journal last week caught our eye.

The headline read: “Pennsylvania Attorney General Kathleen Kane Charged With Obstruction, Perjury”.

http://www.wsj.com/articles/pennsylvania-attorney-general-kathleen-kane-charged-with-obstruction-perjury-1438876492

The story even got big play in London where the Daily Mail gave it a lot of ink with many pictures of Ms. Kane wearing a smart white-on-white outfit for her day in court.

http://www.dailymail.co.uk/news/article-3190654/From-state-prosecutor-defendant-Pennsylvania-s-attorney-general-arraigned-court-leaking-secret-grand-jury-details-press-make-rivals-look-bad-enlisting-aides-spy-office-employees.html

Just another ho-hum episode of (alleged!) official misbehavior, and far removed from our investment-management beat you say?

Mais, non!  Ms. Kane is actually a peripheral figure in a story we’ve been following for many months which highlights the political pressures on public plans and their professional investment staff.

Our protagonist is Anthony Clark, the recently-retired chief investment officer of the Pennsylvania SERS pension fund, so it lies squarely in our professional cross-hairs.

We write about the careers, compensation, and investment performance of chief investment officers and money managers (at both nonprofit and very-much-for-profit organizations), these being the people we work with in our day job as executive recruiters. 

Commentators on U.S. public pension funds often lament that poor governance and political entanglements can hurt their investment performance.

The Tony Clark saga is a case in point.  It’s also a cautionary tale for investment pros working in or contemplating a move to a public pension.

First, we offer a short (or shortish) version.

For those who want the whole blow-by-blow chronology with links to sources (or who just have time on their hands) there is an addendum further below with our long version.

A New Crew for NYU:

New York University opened its doors in 1831 and it’s now the biggest private college in the country by enrollment.

But their $3.4 billion endowment is relatively small for a large private US university (it’s only the 28th-largest) and its performance hasn’t been very impressive. 

We’ve paid much more attention to their uptown rival, Columbia University, whose $9.2 billion endowment is bigger, higher-performing, and officially Ivy League.  We ranked Columbia and Yale tied for number one by 10-year performance in our annual review of Ivy and Alt-Ivy endowments.  See: https://www.charlesskorina.com/ivy-endowments-performance-pay-2014/

It’s nothing personal.  Greenwich Village is one of our favorite places; and any school that could give the world both Woody Allen and Alan Greenspan must be taken seriously.

Now there’s been a changing of the guard at NYU and we think some attention should be paid.

Michael Steinhardt, who had led the school’s investment committee since 1996, resigned last June.  Tina Surh, chief investment officer since 2010, announced her own resignation six months later.  NYU’s president, John Sexton, who’s had a long but stormy run, is stepping down in January.  And, long-time board chairman Martin Lipton, sometimes described as the school’s real power-broker, will be succeeded in October by insurance executive William R. Berkley.

Wall Street Pay and CEO Performance May 2015

As executive recruiters we have an unquenchable curiosity about the pay of senior executives in the investment-management world.

Unfortunately, many of the biggest for-profit money managers aren’t about to divulge those numbers.  We’d love to know what William McNabb makes as CEO of Vanguard, or James Simon’s comp at Renaissance Technologies.  But they, and many others, are not listed on the stock exchanges and therefore can keep that information confidential.

Still, many other important asset managers are public companies, and the number is growing as major private-equity players and other managers seek access to the stock markets.

We’ve listed 2014 pay for 50 CEOs who run some of the biggest publicly-traded money-management firms.

Most are “pure” asset managers, but we also include some big banks and insurance companies which have major AM platforms among all their other lines of business.  We limited our list to firms which have been publicly traded for at least five years, for reasons which will become apparent.

Then we try to measure how their pay is justified by the returns they generated for their stockholders.  Actually, this was Congress’s idea, but we’re going to play along and see if it makes sense.