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May 31, 2006
Survey Starts to Pry Open Black Box of University Endowment Holdings and Proxy Voting
    by Bill Baue

The survey, conducted by the Sustainable Endowments Institute, finds the vast majority of universities and colleges veiling their holdings and proxy voting records in secrecy.

Anecdotal evidence, which the academic community spurns in favor of hard data, suggests that universities and colleges take a black-box approach to investing their endowments by shrouding their holdings and proxy voting records from the public--and even their own students. Yesterday, the Sustainable Endowments Institute started to lift the veil hiding academic investments by releasing hard data from a survey of the 331 largest US university and college endowments--all those with $100 million or more in assets.

"The survey found that universities and colleges haven't been transparent in where they're investing or, even more interestingly, in how they're voting," said Mark Orlowski, executive director of the institute, which is a special project of Rockefeller Philanthropy Advisers.

Of the 216 colleges and universities that responded to the survey (whose combined assets total $193 billion), two-thirds disclose endowment holdings only to trustees and senior administrators while less than a quarter (22 percent) disclose this information publicly. The remaining 12 percent limit disclosure of endowment holdings to students and the school community.

Many universities and colleges claim that disclosing their holdings will compromise their competitive advantage, arguing that private equity investments in particular (where endowments are increasingly concentrated) require secrecy to thrive. However, Mr. Orlowski points to the 73 institutions surveyed--with roughly $65 billion in assets--that do disclose their holdings and therefore do not buy the competitive advantage argument.

While the Sustainable Endowments Institute released only aggregate survey data as a condition for participation by many of the schools, Mr. Orlowski cites information from independent sources to contextualize this issue.

For example, some institutions use a time lag system to get around the competitive advantage issue. Mr. Orlowski cites his alma mater, Williams, which posts a list of endowment holdings (without asset allocation information) on a special section of its website accessible by the college community and alumni a few months after the end of its fiscal year. Who would want to trade on stale information?

Columbia holds an open forum where it hands out a list of holdings with asset allocations down to the penny. Also included is "very long list" of private equity and hedge fund holdings, with notations of which names are held in private equity, which in hedge funds, and which in both.

"Columbia, with their more than $5 billion endowment, doesn't feel like this disclosure compromises their investing strategies," Mr. Orlowski told

On the other extreme, Mr. Orlowski points to colleges such as Tufts and Bowdoin, which are very progressive in instituting campus sustainability programs and greenhouse gas reduction policies, but lag on endowment holdings and proxy voting disclosure. Positive action on campus can be dwarfed and counteracted by inaction on the investment front.

"Bowdoin has a full-time campus sustainability coordinator, is reducing campus emissions significantly, and also announced this month that it is buying renewable energy credits for 100 percent of their energy use--all of which is fantastic, but compared to the impact of their $700 million endowment portfolio, it really begs the question of where are the college's priorities?" asked Mr. Orlowski.

Bowdoin and Tufts are not alone in withholding their proxy voting records. The survey found that nearly three-quarters (74 percent) of the responding institutions keep proxy voting records private, and about the same (73 percent) do not actively vote their proxies.

"I think that in the long term, active proxy voting can encourage good governance, which is linked to enhanced shareholder value," said Mr. Orlowski. "If you look at many of the corporate scandals that have happened, there was a lack of good governance and a lack of oversight by active shareholders."

"Dartmouth does a very good job of active proxy voting and disclosing its record," said Mr. Orlowski. "It has a website online, it puts out annual reports, and in the last two years it voted in favor of all climate change and energy efficiency resolutions--that's a very impressive record!"

The survey also reveals that only five percent of surveyed schools have shareholder responsibility committees (which help vote proxies) that are open to students. Among the institutions implementing this best practice are Brown, Columbia, Dartmouth, Harvard, Pomona, Stanford, Swarthmore, UPenn, Williams, and Yale .

Middlebury, which is progressive on sustainability issues like Tufts and Bowdoin, is moving in the direction of best practice by proposing a shareholder responsibility committee, according to Mr. Orlowski.

"Unfortunately, shareholder responsibility committees are not the norm yet," said Mr. Orlowski. "The 95 percent of schools without such committees are missing a tremendous educational opportunity that requires minimal staff time and administrative cost.

"These committees represent incredible, hands-on learning opportunities for students, and schools that don't have them prevent their students from exploring these avenues of knowledge and experience," he continued. "These committees don't make endowment investment decisions, they simply advise the trustees and therefore there's not a question of negatively impacting investment returns."


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