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Endowments and Foundations

Harvard paid ex-head of real estate $23.8 million in 2016

The Baker Library of the Harvard Business School on the Harvard University campus in Cambridge, Mass.

Dan Cummings, Harvard University's former head of real estate, received $23.8 million in 2016, making him the highest-paid employee at the endowment in a period when the fund trailed peers.

Mr. Cummings left Harvard Management Co. earlier this year, moving with the team he led to Boston-based private equity manager Bain Capital. His pay, which includes $12.3 million of compensation that vested in 2016, was larger than the $11.3 million median compensation in 2016 for a CEO in an S&P 500 company, according to data compiled by Bloomberg.

Harvard Management revealed the figures Friday in its most recent tax filing disclosing compensation.

Endowment chiefs are often among the highest paid at the richest universities, sometimes compensated more than the president. Congress noticed and last year passed an excise tax on compensation of nonprofit leaders who earn more than $1 million annually.

Harvard is known for paying top dollar to senior staff at the world's wealthiest university fund. The top seven executives and money managers received a combined $50.9 million in 2016, a decline of about 5% from 2015, according to the filing. Of the seven, only two, CEO N.P. "Narv" Narvekar and Chief Operating Officer Robert Ettl, remain at the endowment.

Mr. Narvekar was paid a base salary of $57,000 for the month he started at the $37 billion endowment. Another $914,000 was deferred compensation and other benefits. Mr. Narvekar took the helm of Harvard Management in Boston in December 2016, joining from Columbia University.

Mr. Narvekar's predecessor, Stephen Blyth, received $6.7 million in 2016, which included a $6 million bonus. He left in July 2016 after only 18 months on the job. Mr. Blyth was compensated $14.9 million in 2015.

Drew Faust, Harvard's president who is stepping down this summer, received a pay package of $1.5 million, which included about $600,000 in deferred compensation and benefits such as housing.

The high compensation comes at a time of lagging performance at Harvard. The endowment gained 8.1% in the year through June 30, trailing the average 12.2% return for about 800 funds. Harvard lost 2% in fiscal 2016, slightly more than the average loss of 1.9%. The fund also trails over 10 years with an annualized gain of 4.4% vs. 4.6% on average for university funds.

Mr. Cummings, who was hired by Harvard in 2009, oversaw a portfolio of direct real estate investments that gained 20.2% in fiscal 2016, making it a standout at the endowment. The $3.4 billion in direct stakes is now being overseen by Bain as part of a deal where the private equity firm also hired Mr. Cummings and his team of about 20 people.

The endowment's bonus compensation in calendar year 2016 was determined using multiyear calculations based on asset class performance against industry benchmarks, according to a Harvard Management statement Friday.

A portion of the performance-based compensation was held back and kept in the endowment for potential payout, subject to clawback in subsequent years should the portfolio manager not outperform the applicable benchmark, Harvard Management said.

As part of a restructuring, compensation beginning in fiscal 2018 will be "driven by the aggregate performance of the overall endowment, not the siloed asset classes," according to the statement.

"An important part of the new investment model is building a compensation framework that fully aligns the generalist investment team with the performance of the overall endowment," Paul Finnegan, chairman of Harvard Management's board, said in the statement.

Separately, Harvard is trying to sell some of its timberland investments in South America to investors who will share management of the portfolio as the endowment retreats from bets on natural resources. It has approached investors to buy minority or majority stakes in as much as $700 million of property in Brazil, Uruguay and Argentina, and become strategic partners at the same time in an effort to reduce the endowment's risk, according to people familiar with the matter.

The endowment hired investment banker Jonathan Prather from Perella Weinberg Partners Group in February, according to the people, who asked not to be identified because the information is private. Perella Weinberg declined to comment.

Mr. Narvekar is trying to revamp the natural resources strategy after predecessors made a big wager on the asset class that initially produced solid returns but later backfired. Last year, Harvard wrote down the portfolio by $1.1 billion to $2.9 billion, a loss that included a decision to exit from one of its farm projects in Brazil where it invested at least $150 million.