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Alexander to Handle Institute Endowment New Head Not Proposing Big Changes

By Curt Fischer

Late on a Friday morning, Seth Alexander says he wants to enjoy the day’s clear weather. “Finance guys don’t get to see a lot of the sun,” he says.

Alexander will assume presidency of the MIT Investment Management Company, which controls the Institute’s $6 billion endowment, on May 15.

Alexander previously staffed Yale’s investments team, which recently outperformed nearly all other American universities, including MIT, achieving a 22.4 percent return on their endowment in Fiscal Year 2004. But MIT’s new money manager is looking more to avoid the limelight than to rock the boat. “Changes should be made incrementally,” said Alexander, who characterized his job as a “support function to the university.”

But college investments and their managers have come under increasing scrutiny recently. One long-standing controversy involves Alexander’s counterparts at Harvard, who were recently criticized for receiving exorbitant salaries. Jack Meyer, former head of Harvard’s investment operations, presided over a staff of six money managers who were collectively paid $78.4 million in 2004.

The big paychecks generated resentment among some members of the Harvard community, who alleged that the payouts, which made the investment staff members better-paid than any other university official, were inappropriate in the supposedly egalitarian realm of academia.

Most other universities, including Yale, pay their investment managers far less. One factor may be academic egalitarianism, but another is the way the money is managed. At most universities, external investment firms manage the bulk of university funds.

Usually, internal university staff manage the relationships with these external fund managers. In contrast, the bulk of Harvard’s enormous endowment, valued at over $25 billion, was managed directly by the staffers under Meyer, who paid his staff large bonuses to keep them from leaving for more lucrative careers managing their own funds.

The MIT model aligns closely with Yale’s, said Alexander. He and his staff will manage work with over 100 outside money managers. Trust is crucial to these partnership, Alexander said. “Once you find the right relationship, everything else is easier,” he said, adding that he expected good relationships with outside investment firms to last decades.

Alexander’s view on the salary controversy and his own position is that universities need to “find people that have a sense of the mission of the school they are working for.” He intends to keep his office out of the headlines. “It’s my contention that all the news at MIT should come out of the labs and classrooms,” he said.

Another issue colleges have faced is pressure to divest from Sudan. Harvard, Stanford, Yale, and others have recently announced divestiture to protest the apparent genocide being perpetrated in Sudan.

But Alexander said his job was to focus on returns and let others make the political decisions. “It’s important for such decisions to be made elsewhere.” MIT has not yet announced any investment policies related to Sudan.

Alexander takes his job at a new era for money management at MIT. The impending retirement of Allan S. Bufferd ’59, MIT’s treasurer since 1999 who has been at the Institute for over 30 years, will coincide with a restructuring of the way money is managed at the Institute. Bufferd currently oversees both the investment of endowment funds and the administration of MIT’s operating budget — quite an expansive domain of responsibility by modern university standards.

Alexander’s primary charge is MIT’s nearly $6 billion endowment, but he is also responsible for other MIT money, including the $2 billion employee pension fund. Responsibility for financial and budgetary oversight of the Institute’s operations will shift to MIT’s Executive Vice President, who, on an interim basis, is Sherwin Greenblatt ’62.

This split is not yet fully defined, however. Alexander said that he does no know yet how many staff currently under Bufferd will come under his management, and how many will work under the EVP.

Alexander is not planning to radically alter MIT’s portfolio, instead focusing on responding to changes in the world’s economic environment. Overall, the endowment right now is “very healthy,” Alexander said.

But would Alexander ever consider leaving MIT for a private industry job that could pay him many times more? “I doubt it,” he said. “I want to be here for a very long time.”

With that kind of dedication to MIT, it’s only natural to wonder about Alexander’s own salary. So, how does MIT compensate their new investment leader?

The sun glints off Alexander’s face as he looks up and smiles.

“Very fairly.”