Retaining Endowment Chiefs Is No Easy Feat

When Harvard University announced last week that Mohamed A. El-Erian, the head of its $35-billion endowment, was leaving the post after only one year to take the newly created job of co-chief executive and co-chief investment officer at the Pacific Investment Management Company, many people were stunned, but endowment experts say retaining such leaders is challenging, The New York Times reports.

“Being the chief investment officer of an endowment is one of the hardest jobs in the investment business because there are so many constituencies involved,” said Verne O. Sedlacek, president and chief executive of Commonfund and a former chief financial officer at Harvard Management Company. “In my job, I have 1,800 clients with one objective — investment performance. An endowment has one client with 1,800 objectives.”

The difficulties of the job arise from the many constituencies with whom an endowment manager must contend, including not only endowment board members, but also students and professors who want the university to divest of holdings for various political or ideological reasons.

Nationally, more than 40 percent of the top investment executives within universities and nonprofit organizations with endowments left in 2005 and 2006, according to a 2007 compensation survey by Mercer Human Resource Consulting. The number is high even for Wall Street, where turnover is common.

See The Chronicle’s most recent survey of nonprofit endowments.

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