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that point, it will then search out specific managers. Kannam says they look at all managers, including new ones. "We look for the best we can find. Whether it is hedge funds or private equity, we are willing to consider new managers, especially if they are spin-offs from a larger well-known hedge fund manager," says Kannam. "They are hungry when they start out and want to build a reputation." Kannam says they also look for teams that have worked together elsewhere.

Wesleyan is happy with how the absolute return plan is working out. "While the traditional equity managers have been down [in 2000], the hedge fund managers have been up." Risk has been lowered, and returns are different than those of traditional equities.

"We haven't yet perfected a benchmark in evaluating the managers," says Kannam. Currently, Wesleyan looks at the peer universe as well as achieving a multiple of T-bills. The endowment believes in rebalancing.

Wesleyan has not yet fired a manager. The main reason for terminating a manager would be for failing to adhere to his or her stated style or strategies—for example, if the manager says he doesn't use leverage and he does.

Kannam says they are trying to get the Wesleyan board to look at the seven hedge fund managers as a subportfolio rather than individually. One of the long/short managers has been volatile. While he did the best of the seven in 1999, he is doing the worst in 2000.

Kannam feels the staff and committee relationship at Wesleyan works well because the large investment committee has divided itself into small groups. The staff makes recommendations, and the overall board tends to defer to the small committee group.

What would Wesleyan like to see changed about the hedge fund industry? Kannam says he would like to see more information and transparency. He expects that fees will eventually be pressured lower but believes that you get what you pay for and doesn't have a problem with the current fee structure.