As the cost of attending top-ranked universities continues to climb, some Harvard University alumni say their alma mater should rethink its financial priorities.

The Harvard Management Company, a separate entity owned by the university, paid its top six investment managers a total of $78.4 million for the fiscal year that ended June 30, an HMC press release said. A 27 percent drop from the previous year's $107.5 million payout, the salary figures are still a source of frustration for some alumni, who say the university should prioritize driving down the cost of tuition and offering benefits to the Harvard community over awarding bonuses to its money managers.

"University endowments should not be treated like private funds," said David Kaiser, one of the 11 members of Harvard's Class of 1969 who signed off on a Nov. 17 letter to Harvard President Lawrence Summers protesting the salary figures. "The university argues that they're being compensated at this rate because they're doing so much good, but what I want to know is who it's doing good [for] besides themselves. It's not helping the students or the students' families, and it's certainly not helping the library workers they just laid off."

HMC President Jack Meyer declined to comment on the salary figures, but his office provided the News with an internal report on the corporation's policies as an investment firm. The report said Harvard's investment managers are paid according to industry standards in order to keep them from taking more lucrative jobs in the private sector.

"Senior managers hired by HMC come from investment firms; those who leave often do so to start hedge funds," the report states. "The relevant compensation standards, therefore, are those of other investment firms and hedge funds with comparable performance."

Meyer earned $7.2 million in fiscal year 2004 and $6.9 million the previous year, compared to Yale Chief Investment Officer David Swensen's $910,937 salary.

The disparity in investment manager salaries at Yale and Harvard is due largely to differences in administration, said John Griswold '67, executive director of the Commonfund Institute, the educational arm of a group which provides fund management and investment advice to many universities.

While HMC managers can set their own compensation rates, Yale's investments office, which is not independent from the University, must have its managers' compensation rates approved by Yale committees.

Harvard manages the majority of its investments internally while Yale primarily uses external money managers. Still, despite the differences in the two schools' investment management policies, the universities have both been comparably successful, Griswold said. Both Harvard and Yale ranked in the top one percent of investment returns for private universities in the 10-year fiscal period ending June 30, 2003, with Yale ranked first at an average 16 percent return and Harvard ranked third at an average of 14.7 percent.

"You can look at them as examples of polar opposites, perhaps, but they're both at the top, so they both work, clearly," Griswold said. "Swensen is regarded as a genius in the business, and as for Meyer, if he wanted to go out and run his own hedge fund, I'm sure there are plenty of people who would give him lots and lots of money. Harvard managers have left because you can make a multiple of what they make there."

But Harvard alumni critical of HMC compensation policies argue the university should be capable of finding talented money managers without matching figures the managers might make on Wall Street.

"Why should these people be paid based on some hypothetical of what they might make in the business world?" asked William Strauss, another Harvard alumnus who has opposed the HMC bonuses. "If you were to pay other people based on what they could make in the private sector, what about top people in the sciences? They could argue that they could be CEOs and would be paid as such."

The Harvard alumni concerned with the HMC's manager bonuses said they will watch for the university's tuition increase in March, but said they are concerned for their alma mater rather than vindictive.

"I think it's a great university, but I think we needed to put Harvard on the defensive on this issue," said Yale Sociology Department chair Jeffrey Alexander, a member of the Harvard Class of 1969 who signed the letter. "Harvard risks polluting the humanistic values for which we fought in the sixties, but it's hard to balance humanistic values and the cutthroat nature of business when the university acts as an investment firm. I think Yale has the right idea."

Griswold said the public outcry over Harvard investment managers' compensation has raised doubts regarding the HMC model's survival. But he said he had substantial confidence in the strength of the company.