It was pitiful hearing journalists from local radio stations being smug over the fact that the University of Malta had not placed at the front of the universities from those member states that joined the EU along with Malta.
Rightly enough the university Rector cut them down to size and showed them how faulty, puerile and indeed baseless and ill-informed is any of the local media’s expectation that ours, a small institution on an island 17 miles by nine and catering for only some 11,000 students, can ever expect to climb up the various league tables of athenaeums as they appear from time to time in media.
It is clear the only thing that those media pundits know about the subject of university standings is what they hear about the annual placement on international league tables of elite universities. Comparing ours to them is simply an idiotic exercise.
Wisely, and immediately going for the journalists’ jugular, Rector Alfred Vella named some of these elite universities and told the newspapers something about why in fact, year after year, the Harvards, Yales, Bocconis, Oxfords, etc, feature at the top of the league tables.
And the fact is that money, big money, is at the forefront of why such institutions maintain their high standards. Vella mentioned Harvard University en passant. It is a wonderful place, where I had the pleasure of a very short programme on European economics, and the stay was enough to tell me how much that university spends every year on its staff and its culture and, above all, how it invests.
Harvard Management Co Inc in 2017 came out of a decade of low returns and high turnover. This group is responsible for managing the university’s circa $37 billion endowment. Along the way they kicked out their former chief executive and brought in Nirmal (Narvy) Narvekar, with the specific task of putting right the deep structural problems that were plaguing the university’s investment office.
The previous, hybrid model had been one of internally and externally managed assets. In the US way of doing things, most university endowments on average invest about four per cent of assets in-house. But Harvard was an anomaly in this respect.
Now no longer, and in the process asset management teams at Harvard Management were dismantled, and outsourcing investments to external managers became the new transformation.
In truth Narvekar wasn’t being completely original. Harvard, and Narvekar’s former employer Columbia Investment Management Corp, are now more similar in the ways they operate.
There is no way the university can ever hope to generate suitable, adequate funding for some of the admirable wishes of many of our superbly clever researchers
Space does not allow me to detail fully the new, Yale-like approach which Harvard now uses for the profitable investing of its endowment resources. I will mention only a few details.
Harvard investd heavily in private markets and alternatives through allocations to external managers. There are, in fact, other local bodies (including what is possibly Malta’s historically oldest charity) already doing the same. To what extent is our university empowered to do the same?
In January 2017, Narvekar adopted plans to slash his workforce by half, in the process giving the remaining investment staff broader, more ‘generalist’ roles to develop new investment and risk frameworks.
By July 2017, Narvekar had shut down the endowment’s internally managed equities and relative-value investments. Even the university’s direct real estate group was expected to spin out to external managers. In September 2017, Narvekar was further emphasising in his newsletter a change of culture to one which is collaborative rather than hierarchical. He preached moving away from the endowment’s old “silo” approach, where professionals focus on specific asset classes, to a generalist approach.
In the process Harvard’s endowment staff was thenceforth paid based on total portfolio performance, not returns of a single asset class or sub-portfolio.
Above all Harvard is also in that part of investing life’s inevitable reality, viz. managing risk. The university’s former asset-allocation approach was replaced by a new model that subjects return seeking to a risk-tolerance level set by the university with the recommendation of the endowment’s board of directors.
Is there any relevance in all of this to Malta? There certainly is.
In the first instance, it is about time that journalists stop engaging in puerile comparative exercises between the University of Malta and elsewhere.
Secondly, there is no way that the uni-versity – a next-to-totally-State-funded athenaeum – can ever hope to generate suitable and adequate research funding for some of the admirable wishes of many of our superbly clever researchers.
Thirdly, it will take some extremely bold decisions that can be implemented only over a very long term to even start hoping to change current realities.
John Consiglio lectures at the University of Malta.
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