Key Takeaways
- • Fordham University's $1 billion endowment faces structural disadvantages in private-equity negotiations, with Chief Investment Officer Geeta Kapadia highlighting that smaller endowments lack the bargaining power of larger peers to challenge fee structures.
- • High private-equity fees directly reduce capital available for the endowment's core mission; Kapadia stated that "every dollar that I spend on fees is a dollar that I'm not giving to a student [through] scholarships," underscoring the opportunity cost for institutional investors.
- • Smaller endowments strategically partner with boutique private-equity sponsors rather than mega-fund managers, as smaller shops demonstrate greater willingness to negotiate fee transparency and alignment—a workaround for institutions without scale advantages.
- • Kapadia called for industry-wide investor coordination to demand increased transparency and fee alignment from private-capital managers, framing fee reform as both a fiduciary and mission-critical issue for educational endowments.
Summary
Private-equity fee structures present a material headwind for smaller U.S. endowments, according to Geeta Kapadia, Chief Investment Officer at Fordham University in New York. Speaking to the Wall Street Journal in May 2024, Kapadia articulated a competitive disadvantage facing institutions managing approximately $1 billion in assets: the inability to negotiate favorable terms with marquee private-equity sponsors due to insufficient scale.
The fee burden operates as a hidden drag on endowment performance. Kapadia emphasized the direct trade-off between fee expenses and institutional mission fulfillment: capital consumed by elevated management fees and carried interest represents resources withheld from scholarship distribution and university operations. This dynamic creates a structural inequality in the institutional investment ecosystem, where mega-endowments at universities like Harvard or Yale command pricing concessions unavailable to mid-sized educational funds.
In response to this constraint, Fordham has adopted a deliberate strategy of partnering with smaller, more flexible private-equity sponsors rather than pursuing allocations from tier-one mega-funds. According to Kapadia, these boutique managers demonstrate openness to fee negotiation and greater transparency regarding cost structures. "We really want to try and make sure that the fees are appropriate for what we're doing," Kapadia said. "That's really why we end up partnering with smaller [private-equity] shops because they're more willing to have that conversation."
Beyond individual institutional adaptation, Kapadia advocated for collective action among investors to address the broader fee problem. She called on endowments and other institutional capital holders to unite in demanding heightened transparency and improved fee-to-performance alignment from private-capital fund managers. The characterization of fees as "visceral and personal" reflects an emerging consciousness among fiduciaries that legacy fee models may misalign manager incentives with investor outcomes, particularly for mission-driven institutions.
The fee burden operates as a hidden drag on endowment performance. Kapadia emphasized the direct trade-off between fee expenses and institutional mission fulfillment: capital consumed by elevated management fees and carried interest represents resources withheld from scholarship distribution and university operations. This dynamic creates a structural inequality in the institutional investment ecosystem, where mega-endowments at universities like Harvard or Yale command pricing concessions unavailable to mid-sized educational funds.
In response to this constraint, Fordham has adopted a deliberate strategy of partnering with smaller, more flexible private-equity sponsors rather than pursuing allocations from tier-one mega-funds. According to Kapadia, these boutique managers demonstrate openness to fee negotiation and greater transparency regarding cost structures. "We really want to try and make sure that the fees are appropriate for what we're doing," Kapadia said. "That's really why we end up partnering with smaller [private-equity] shops because they're more willing to have that conversation."
Beyond individual institutional adaptation, Kapadia advocated for collective action among investors to address the broader fee problem. She called on endowments and other institutional capital holders to unite in demanding heightened transparency and improved fee-to-performance alignment from private-capital fund managers. The characterization of fees as "visceral and personal" reflects an emerging consciousness among fiduciaries that legacy fee models may misalign manager incentives with investor outcomes, particularly for mission-driven institutions.
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