Just curious if anyone else has noticed that every month one of the CIO from a state plan is being sued/quit/indited for some type of fraud or stealing. But endowment CIO you never hear any of them do something bad.
is this cause lack of transparancy or because they have great systems in place? because they are set up the same cio/directors/analysts… maybe the DOL doesn’t care about endowments? or maybe cause endowsments pay better and provide bonuses.
any thoughts?
Endowments typically have higher assets relative to expected liabilities, whereas pension plans tend to be funded to the miniumum that is required to support (often optimistic) capital market expectations relative to (often optimistic) liability streams.
So, for endowments, there is typically more room to take risks and make mistakes. There is also more room for skimming and fraud before the effects start to be noticed.
With pension funds, the margin for error tends to be a lot less. This also means that some people will start looking to blame poor performance on fraud instead of overoptimistic liability assumptions or capital market expectations. That doesn’t mean that fraud doesn’t exist, but merely that it is harder to get away with and people will start looking for it a lot sooner than at endowments.
I haven’t really noticed this, but if it’s true, then it’s probably due to everything above. Also, endowments probably don’t have the same number of controllers and auditors going through their records. State pensions probably have more auditors than actual investment professionals, and they are generally required by law to publicly disclose many of their records, including the compensation details of their staff. Endowments are run with relatively loose rules by just a handful of guys, who are probably supervised by a committee of part time volunteer directors or trustees. If the endowment managers were to commit minor violations, such as giving preferential asset allocations to certain outside managers, I’m not sure who would catch them.
speaking of endowments, is the AF endowment hiring?