The Costs Behind a New Treasurer

The search for a new treasurer to replace George F. Bennett '33 may turn out to have a hidden extra cost of up to $4 million a year.

Bennett disclosed last week that when he resigns as treasurer this June, his investment firm, the State Street Research and Management Company, will drop all of Harvard's investment accounts.

State Street has managed Harvard's billion-dollar portfolio for the last 25 years. Because of a close association between State Street and Harvard, the firm has charged Harvard only minimal fees for its services.

Last year, for example, State Street charged Harvard about $100,000 for supervising the University's $1.4-billion assets. Under the firm's standard rate schedule, Harvard would have paid over $4 million in fees.

Bennett said a week ago that his firm charged the University so little "in part out of loyalty to our alma mater and in part as a charitable contribution."

With competitive pressures increasing in the booming investment management business, it seems unlikely Harvard will be able to find another firm which would be willing to supervise its endowment at so low a price.

Bennett estimated that the lowest fees Harvard could hope to pay would amount to about $2 million.

In order to avoid additional management fees, Harvard is considering moving to a system of internal management of its endowment. Under such a system, Harvard would set up its own investment department, and pay only for the upkeep of the office and the salaries of its staffers.

The decision on which investment management system Harvard should use in the future will not be made until a new man is found to take over the treasurership. This appointment is likely to come within a month.