Dwight Hall wrong to delay money transfer

As noted in the News on Monday, the Dwight Hall Trustees decided to delay the transfer of the bulk of the Hall’s endowment to the Yale Corporation’s oversight. They did so in response to concerns from several members of the Student Executive Committee (ExComm) and the Social Justice Network (SJN), who wanted more time to discuss the implications of this transfer with the Dwight Hall community. Pending consensus, the monies may be moved as early as December, although more likely at the January meeting of the Board.

Although conversation over such significant decisions is generally valuable, in this case the decision to defer the transfer represents pure fiscal irresponsibility and very little else.

Over the past 10 years, the Dwight Hall endowment (which has been invested at Grantham, Mayo, Can Otterloo & co.) has averaged a 6 percent annual return, which currently means that it contributes roughly $180,000 toward the operating budget. In the same period, the Yale endowment has averaged 18 percent, which would yield approximately $540,000 per year.

Ignoring compound interest for the sake of simplicity, this means that by deferring the decision for four months to January, the Board and some members of ExComm have essentially decided to forgo $180,000 — or the equivalent of the entire contribution of the current endowment to our annual operating budget — for the sake of a little conversation about whether or not that money would be “tainted” by Yale’s supposedly questionable investment practices.

It might be well and good to forgo that money if in fact there were evidence that the money would be tainted. However, as Carl Eifler, one of the Trustees, told the Board at its September meeting, “We believe that the Yale Corporation’s screening [of morally questionable investments] process is as good as any major institutional investor.”

Given that the Hall currently has its endowment invested in a firm that is self-acknowledged to have no ethical screens, moving to Yale represents not only a substantial step toward more ethical investing but probably the best option available out of standard market investment funds.

The SJN and ExComm have expressed concern about the lack of transparency in the hedge funds in which Yale invests. Because of that lack of transparency, they claim, Dwight Hall will not actually know whether they are investing in morally uncomfortable causes.

Although this is true, it is critical to realize that Yale’s office probably investigates such concerns far more seriously than other institutional investors, since they have a strong incentive to protect the University from bad publicity.

Thus, while there is always a danger that some tiny fraction of our money will be invested in something morally repugnant, that danger is significantly less if the Hall invests in Yale rather than another institutional investor.

Moreover, the only other real option besides an institutional investor (of which Yale is already amongst the most ethical) is a Socially Responsible Investment Fund, or an SRI. Dwight Hall does in fact have a history of such investment. In the late 1990s, the Hall decided to invest $200,000 in such a fund and ultimately pulled out only $110,000 last year.

The reality remains that good ideas, be they ethical or not, will be picked up by “regular” financial funds and thus investing in SRI dramatically raises the odds of poor or even negative return on investment.

Although investing in an SRI might let Dwight Hall support socially beneficial causes, it would certainly not allow the organization to fulfill its dual missions of promoting student leadership and building a stronger New Haven community. Likewise, it would prevent the organization from fulfilling the strategic initiatives that are necessary for its long-term health, such as raising employee salaries.

So, although it is clear both from a fiscal responsibility point of view and an ethical investing point of view that Dwight Hall should transfer its money to the Yale Investments Office, the powers that be have nonetheless decided that the Hall should discuss the decision ad infinitum.

Yet if this is to be the case, then Dwight Hall should at least do what is fiscally responsible now and move the money as soon as possible.

Yale has told the Hall that they may withdraw their investments at any time with 30 days notice; therefore, immediate investment is entirely compatible with discussion about the longer term.

By demonstrating fiscal responsibility, Dwight Hall can show both the Yale community and potential donors to the Hall that it is intent on actually using the resources available to make the largest possible impact in New Haven and the world.

Amy Zwanziger is a junior in Branford College. She is the Freshman Outreach Coordinator for the Dwight Hall Executive Committee.

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