A slightly lower-than-expected performance of the endowment in 1995 left most of the highest-paid fund managers at the Harvard Management Company, Inc. (HMC) with lower incomes during the 1996 fiscal year, according to federal tax returns.

The highest paid manager received more than $4.7 million, and others in the top five received between $1 and $2 million in compensation.

The president of HMC earned $897,523, down from more than $1.2 million in 1995.

HMC is a University-managed, non-profit corporation that manages Harvard's endowment. The salaries of its best fund managers, which dwarf those of senior administrators and faculty, have drawn criticism from campus activists who bemoan such a wide income disparity at a non-profit institution.

But HMC officials defended the income levels.

"For anybody to earn anywhere close to what their managers are, performance has to be excellent," said Jack E. Meyer, president of HMC.

Compared with other schools, most of whom hire outside management firms, Harvard's endowment fared well in 1996, with its 26 percent growth rate beating the average university's of roughly 17 percent.

Compensation of managers is based in large part on the performance of each financial manager's class of endowment funds--domestic and foreign securities, emerging markets, high-yield securities, etc.--relative to an internal benchmark, known as the Policy Portfolio.

Part of the decline in salaries is linked to the endowment's disappointing performance in 1995. The endowment performed .4 percent below the benchmark; in addition, bonuses paid because of exceptionally high performance in 1994--paid gradually over several years--are tapering off, according to Meyer.

Together, these two resulted in a reversal of a six-year trend of increasing compensation.

With 1996's yield almost four points above the benchmark, compensations can be expected to rise this year. But Meyer said that HMC suffers somewhat of a political injustice because of its efforts to save money through internal management.

Campus activist are critical of HMC compensations as high as $4.7 million, particularly at an institution where the President's salary is about $250,000 and the average tenured faculty member receives about half that.

"I find it amazing that they can pay that much and then say that they don't have the money to tenure new professors, especially minorities and women," said Megan L. Peimer '97, former co-president of the Radcliffe Union of Students.

"It substantiates my view that Harvard sees itself as an organization that grows for the sake of growth," she added.

Campus activists also point to the benefits scuffles between the administration and the Harvard Union of Clerical and Technical Workers as well as the recent hiring of UNICCO, an outside custodial contractor, as examples of the University's priorities.

"It's that and the failure to treat investment as a political and moral issue...that's really upsetting," said Jedediah S. Purdy '97.