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Bloomberg Piles On Trustee Investments

Memo to Carol: You have a PR problem.

Memo to Dartmouth: You have a real problem.

It seems that both the NYT and Bloomberg have come out almost simultaneously with extended stories about Trustees’ investments of endowment money in their own firms.

The 2,071-word Bloomberg piece casts the College in a negative light:

Howard Marks, who was chairman of Penn’s investment committee for the decade ended in 2010, says that while schools might miss out on some stellar funds, they also avoid the risk of board members getting assignments because of connections and not merit.

“It could be challenging to turn down an investment committee member seeking a money management assignment, or to fire him or her or even decline to re-up,” says Marks, who’s chairman of Oaktree Capital Group LLC (OAK), which manages $81 billion of distressed-debt investments. “At the hypothetical extreme, member A could vote for member B in the hope member B will reciprocate. For me, it’s all just too thorny.”

Trustees shouldn’t manage university money because of the potential for self-dealing and other abuses, says Mark Williams, a former Federal Reserve bank examiner who teaches risk management at Boston University.

“Even the appearance of conflicts of interest can create reputational risk and harm the institution,” Williams says. “The perception is almost as bad as the act of conflict. It does damage to that reputation, which has taken many universities centuries to create.”

Curiously, neither of these articles comments on the endowment’s poor growth over the last twelve years, compared to its best-in-show results in the 1990’s.


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