Yale defends record privacy



Disclosure was the main issue discussed at the annual open meeting of the Yale Advisory Committee on Investor Responsibility.

Approximately 25 students and alumni asked the ACIR to recommend that the University release more information on its investments, especially those in private equity. Yale Chief Investment Officer David Swensen, who attended the meeting, defended the University’s policy.

“Disclosure is completely at odds with the idea that you manage a portfolio actively,” Swensen said.

At the meeting, Swensen discussed the disclosure issue publicly for the first time since students began campaigning this February against the University’s investment in Farallon Capital Management, which they claim has damaged the environment and fostered poor labor conditions. Students learned Yale had invested in the company through the University’s 1999 tax return.

Swensen said if Yale instead managed its portfolio passively — that is, if it disclosed its investments and allowed the markets to drive returns — the University would have lost billions of dollars in returns over the past few years.

Yale is obligated as a limited partner to keep information confidential, Swensen said. For example, he said, a hedge fund with which the University of California had a long relationship dropped the University as a partner after its leaders learned the school would have been forced to reveal information about its investments.

“I certainly wouldn’t want Yale to be in a position where the University wouldn’t be considered the highest quality limited partner possible,” Swensen said.

The coalition of activists said the University should have other priorities in mind.

“I think it’s more important to look at Yale as the highest quality global citizen,” Marina Spitkovskaya ’04 said. “If disclosure is not compatible with private equity, then perhaps private equity is not compatible with what this University stands for.”

The ACIR, an advisory committee to the Yale Corporation Committee on Investor Responsibility, recommends policy and helps implement existing procedures, Yale School of Management professor and ACIR chairman Geert Rouwenhorst said.

“The goal of this meeting is basically to invite members of the Yale community to make proposals on issues you believe we should consider in presenting to the Corporation,” Rouwenhorst said to the attendees.

The meeting, held Friday afternoon at SOM, was scheduled to run only two hours, but Swensen and the students continued discussing the issues for almost another hour after the meeting officially ended.

In a presentation which began the meeting, Naasiha Siddiqui ’05 said Farallon, with which Yale is an investor as well as a limited partner for a project at Baca Ranch in Colorado, has caused social and environmental harm by promoting poor labor conditions in South America and causing environmental damage at Baca Ranch. Students at multiple universities began a campaign against Farallon earlier this year.

The coalition of students at the assembly said Yale needed to have a process to allow the release of more information while still allowing the University to thrive.

“We would like to see Yale’s funds invested in a way that makes money for the University and [is] socially and environmentally responsible,” John Tuxill FES ’04 said.

Swensen said that the University only invests with firms that maintain the highest ethical standards as part of due diligence, by, for example, refusing to invest in firms that do not tell their partners the companies in which they invest.

Committee member John Lapides ’72 suggested the coalition focus more on specific issues rather than management. The University has specific guidelines to prevent investment in companies that sell tobacco products, for example.

But Justin Ruben FES ’02 said while these guidelines prevented some harm, they were really just a “Pyrrhic victory” without disclosure. Even if the University only invests with firms they believe are responsible, students should still have access to give their input, Ruben said.

“Very reasonable, well-intentioned people can disagree on the issue of environmental responsibility,” Ruben said.

Several members of the coalition requested another meeting. The ACIR will try to have another open meeting before the end of the academic year to continue discussing the disclosure issue, Rouwenhorst said.

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