The nearly impossible task of following Yale’s money

In the complex battle between Palestinian nationalists and Israelis, those who have adopted the cause of Palestinian liberation have been using traditional tactics to damage the Israeli state. There have been teach-ins, rallies and silent vigils. And there have been calls for Yale to divest its financial investments in Israel.

The problem is that we have no idea what kind of financial investment Yale has in Israel (if any), because Yale discloses very little information about its $10.5 billion endowment. The Yale administration and its investor-genius, David Swensen, are more than happy to report each additional penny in the bank; but when it comes time to report their holdings, this past quarter they disclosed only $388 million, or roughly 4 percent. The issue of divestment from Israel is extremely complicated: Is such a call “anti-Semitic,”as Harvard President Larry Summers has charged? Or is the analogy between Israel and apartheid a fair one? This is a debate worth having, but it’s one that we cannot have at Yale unless and until we know what our endowment invests in. Yale students, as members of Yale’s purported community whose tuition funnels into the endowment, have a right to know about the investments that Yale is making.

While Yale, like every other corporation, is required to file reports on its investments, it, like so many others, obfuscates the paper trail by creating scores of subsidiaries and entrusting its money to many investment agents. To follow the trail is to crawl detective-style through the few public statements and accountings that corporations publish, and too often one emerges covered in dirt. For example, as reported this summer on, it is very probable that one of Yale’s investment managers is investing Yale’s endowment in the Canadian energy company Talisman, which has been instrumental in funding the brutal civil war occurring in Sudan. U.S. government sanctions prevent U.S. businesses from doing business directly with the Sudanese government. But they don’t prevent U.S. endowments from investing in companies that do.

In response to the revelations about Talisman, many investors, running the gamut from Christian organizations to state pension funds, have divested their Talisman stock. They don’t want blood on their hands; neither do we. But Yale’s lips are sealed. David Swensen responded to inquiries about Talisman with the following letter: “It is Yale’s policy not to disclose individual security positions in its Endowment portfolio or in the portfolio of any person in which the Endowment holds an interest. Consequently, you may assume nothing on the basis of our failure to confirm or deny your speculations as to what securities Yale owns.”

There are at least two common counterarguments against transparency. First: to release confidential information (especially about private equity) would sacrifice the University’s competitiveness as an investor. Because Yale’s endowment supports an institution that does untold good in the world, the more money Yale makes, the better the world becomes. The end justifies the means, something the do-gooders and bleeding hearts just don’t understand. While potentially compelling, this argument holds much less sway now that the largest fund manager of the University of Texas (third-largest university endowment behind Harvard and Yale) has agreed to open its books, a decision that came only after the Houston Chronicle demanded information under the Texas Freedom of Information Act. Mark Heesen, president of the National Venture Capital Association, said, “In the environment that we’re in, [UT's decision] will increase pressure on other entities, public or private.” We can only hope.

A second argument is that the Yale Investments Office is just like any private corporation and should be engaged in the business of making money, not being politically correct. While we perhaps expect nothing better than consideration of the bottom line from Enron, Yale is different. Yale claims to be an intellectual and moral force in the world; President Levin has stated publicly that the purpose of Yale is to “improve the human condition.” Put simply, we should expect more from a university. Yale has already formally signed on to guidelines established in law professor John Simon’s 1972 book “The Ethical Investor,” which provides a mechanism for the Yale community to use Yale’s investments to stop companies from causing “social injury.” The only problem? The mechanism only works with public equity owned in Yale’s own name (the 3.7 percent of the endowment covered above). The Talisman investment was made by a private investment manager; hence, no disclosure.

This is of course not the first call for transparency, nor the last. Every shout for divestment is followed by a modest plea for information, please, at the very least. Even those who argue that Yale cannot “afford” to be a socially responsible investor must agree that there are investments so heinous and deleterious that Yale ought to wash its hands of them to damage the odious institutions as well as to take a moral stand. But without the information, how can we know where to begin?

Matthew Schneider-Mayerson is a junior in Davenport College.