Possibly emerging scandal around UM's endowment

[Michchamp]

Surprised no one else has posted about this yet. I was going to, but forgot. summary:

1) A couple months ago, someone at the Freep FOIA'd our great alma mater regarding oversight and management of our endowment.

2) They seemed to have uncovered some conflicts of interest, whereby rich alumni who also worked in the fund management business gave boatloads of money to our endowment, and in exchange were put in charge of managing even bigger boatloads of the endowment's principle, from which they reaped seven figure commussions.

3) recently... this new part is worse though, as it turns out the current head of our endowment fund, a guy named L. Erik Lundberg, steered management of $100MM in fund money to be managed by his former boss, William M. Stephens, who had been barred from fund management by the SEC for his role in a kickback scheme. (link)

oh, and they're raising tuition again.

it's more important to move that money from Pile A to Pile B so Lundberg and his buddies can charge fees to the endowment each time it's moved, instead of say... actually putting it to a practical use... or benefitting "people who don't matter" like students.

 

[Michchamp]

... you can probably delete the word "possibly" from the thread title.

 

[thewolverines24]

I wish I could say I was surprised, but nothing that involves large sums of money surprises me anymore.

 

[Michchamp]

also from the first article:

One recent survey, however, questions whether the U-M endowment is among the leaders and the best.

Lundberg is ranked in the middle of the pack ? 58th out of the 107 largest college endowments ? in terms of the performance of chief investment officers, according to the report from Charles Skorina & Co., a Tucson, Arizona-based executive search firm for investment professionals. The report evaluated college endowments and their top investment managers over a five-year period ending in June 2016.

In 2016, Lundberg received slightly more than $2 million in total compensation from U-M.​

He's ranked 58th? Lundberg, those are Brady Hoke numbers...

I wouldn't be surprised if someone crunched the numbers and found that it made more sense to simply park the endowment in a static mix of Index Funds, and bonds, and reinvest the millions in commissions we otherwise pay out to each fund manager in the actual endowment.

plus, then you eliminate the potential for conflicts of interest to ever even become an issue.

 

[Gulo Blue]

If I were politically oriented so that I distrusted or even hated higher education to begin with and I could benefit from creating a storyline where I appeared to be cracking down on conflicts of interest AND my base supporters had hypocrisy-proof shielding wrapped around their brains, I might try to make an example of Michigan here.

 

[Gulo Blue]

So, I can see the conflict of interest with donor companies, but how did Stephens get hired? What's in it for Michigan to hire this guy? Or was that just incompetence that happened to coincide with ongoing conflicts of interest?

 

[Michchamp]

So, I can see the conflict of interest with donor companies, but how did Stephens get hired? What's in it for Michigan to hire this guy? Or was that just incompetence that happened to coincide with ongoing conflicts of interest?

I forget what Lundberg's title is, but he's in charge of managing our endowment.

Stephens is his former boss.

the SEC ban on Stephens would have been publicly known, and certainly uncovered by a background check as simple as "googling his name" ... and you'd think more extensive background checks were in place before something like "giving a guy $100MM to manage."

 

[TheVictors]

I have a friend from undergrad who runs a hedge fund in CT. He's always ranked in the Top 25-30 by Barron's in its annual rankings of Top Hedge Funds managers. About twice a year he meets with folks from the endowment, trying to get UM to invest in his fund. It's nothing untoward and it's been a slow process and he's not been barred from the industry, but he's been working the lead for a few years now.


He created a scholarship in memory of his father and has had lunch with Hoke, Harbaugh & Beilein. I'm not sure how much money he's donated to UM to get that audience but its certainly well into 7 or 8 figures, I'm sure.

 

[Michchamp]

I have a friend from undergrad who runs a hedge fund in CT. He's always ranked in the Top 25-30 by Barron's in its annual rankings of Top Hedge Funds managers. About twice a year he meets with folks from the endowment, trying to get UM to invest in his fund. It's nothing untoward and it's been a slow process and he's not been barred from the industry, but he's been working the lead for a few years now.


He created a scholarship in memory of his father and has had lunch with Hoke, Harbaugh & Beilein. I'm not sure how much money he's donated to UM to get that audience but its certainly well into 7 or 8 figures, I'm sure.

I get it's really about greasing the skids, but paying a lot of money in exhange for lunch with then-coach Brady Hoke is ridiculous, in a more straightforward view of the situation.

I'd be like, "Yeah, Hoke can be there, but for this money, I'd really rather meet a philosophy professor or something."

 

[TheVictors]

I get it's really about greasing the skids, but paying a lot of money in exhange for lunch with then-coach Brady Hoke is ridiculous, in a more straightforward view of the situation.

I'd be like, "Yeah, Hoke can be there, but for this money, I'd really rather meet a philosophy professor or something."

It was some midtown Manhattan luncheon the other summer. I think he's a pretty big donor and gets invited to VIP stuff that the AD and school do, but I'm sure there are others on that list.

 

[tinselwolverine]

This has been brought up before.

I don't know of the IRS disallowing the majority the deduction adds up to a civil slap on the wrist, or not really more than correction of Ross's accountants work.

We'll see if whatever policing body that would oversee Michigan is going to do regarding Michigan, so far I don't think anything has happened.

I guess Michigan changed its own procedures slightly at the time regarding receiving donations, I don't know if that amounted to a violation.

I don't see how Michigan could be seen as having any control as to the way Ross files his own tax returns.

 

[Gulo Blue]

I have a friend from undergrad who runs a hedge fund in CT.

We should get rid of hedge funds. They are anti-capitalist.


OK. Not actually anti-capitalist, but they push in the exact opposite direction of Smith's invisible hand.

 

[TheVictors]

Depends on the strategy the fund employs. Some are super conservative/ cap preservation while others can be more ..diabolical.

In the case of my friend, he runs a micro cap equity fund which has helped infuse capital into some really cool companies and help them grow. It’s also a rather high beta strategy and not for everyone.

 

[TheVictors]

Holy shit ...Sinclair Broadcasting is a top holding in the fund.


Fuck that noise. Shut it down.

 

[Michlady]

I wish I could say I was surprised, but nothing that involves large sums of money surprises me anymore.

This

Makes me wonder about oversight by regents and cfo

Lundberg has had some good years

 

[Michlady]

Very disappointed to read all this

 

[Michchamp]

Very disappointed to read all this

Yeah, it's not great. Corruption always starts at the top. If those making the rules don't follow the rules themselves, no one else will, and they lose the ability to enforce them.

 

[Michchamp]

So in response to this, we're going to change our rules to be less transparent. If I am reading this correctly, instead of presenting detailed investment plans to teh regents (which would be public) they'll present more general guidelines. link.

They claimed some mumbo jumbo about missing opportunities because they can't move fast enough, which in my 10+ years of reviewing contracts and negotiating deals always translates to: we need to move fast because this will not stand up to scrutiny.

also, they need to move fast, even though private equity just produces the same return you'd get from buying an S&P 500 index fund, and going to the beach... minus the billions$$$ in fees they skim for themselves.

Don't slow us down!!!11 You'll miss out on the opportunity of a lifetime!

 

[tinselwolverine]

Is this still actually a thing?

I thought the IRS disallowed Ross to make all the deductions he filed for, and it was over.

 

[rumseyhouse77]

Is there going to be a rally on the diag or something in support of Lundberg?