By Ross Goldberg
University endowments nationwide have not shifted toward socially responsible investing, despite public pressure to divest from companies with ethically questionable ties, according to a survey released Monday.
The annual survey reported that Yale falls within a 28 percent minority of schools that took social responsibility into account when making investment decisions. Yale President Richard Levin announced in November that the University would likely divest from any company found to be doing business with the Sudanese government, which has been accused of human rights violations.
The survey, co-authored by financial services organization TIAA-CREF and the National Association of College and University Business Officers, also confirmed the results of previous studies, showing a national 6-point drop to 9.3 percent in endowment performance during the last fiscal year. But Yale’s 22.3 percent rate of return defied the national trend.
Provost Andrew Hamilton said the Yale Advisory Commitee on Investor Responsibility plays an important role in the University’s investment choices.
“Important issues of ethical investments are … considered by a University committee with broad representation that brings forward any areas of particular concern,” Hamilton said.
Officials at TIAA-CREF said large endowments with sophisticated investment strategies outperformed their smaller counterparts.
“We found that while asset allocation is critically important, manager and strategy selection, as well as resources, also matter,” TIAA-CREF Asset Management Managing Director Nancy Heller said in a press release.
NACUBO officials said a 9 percent investment return is optimal for most higher education institutions, supporting the optimistic assessment published as part of a similar survey released Jan. 12 by the Commonfund Institute, the educational arm of a firm that manages a number of university endowments.
The NACUBO survey also found that endowment performance is stratified according to size — universities holding more than $1 billion in assets averaged a 13.8 percent return last year. With more than $15 billion dollars, Yale’s endowment led the pack in returns.
Commonfund spokesman Jud Koss said NACUBO’s results are unsurprising because nonprofit investors often discuss socially responsible investing without officially committing to it. Commonfund set up a socially responsible fund five years ago after consulting with investors, Koss said, but universities did not take to it.
“We went to the trouble to establish a fund, and nobody showed up,” he said. “It sounded like a benevolent and worldly thing to do, but schools looked at the returns from other socially responsible funds and decided it wasn’t worth it.”
Monday’s survey results also showed that universities have outsourced a greater percentage of their assets to external managers for the fifth year in a row.
Koss said institutions that manage few assets through their own investment office can contract outside experts in specific areas to diversify their endowments. Hiring the right mix of experts internally is becoming too expensive for most schools, he said.
“A lot of nonprofits would rather invest in professorships or other direct elements of the university,” Koss said. “Investing is not the core mission of a university. Educating is.”
But University officials said Yale’s high endowment returns are exceptional because of David Swensen, the chief investment officer who diversified the University’s portfolio and pioneered a strategy of investing in alternative assets such as hedge funds.
“He really is extraordinary, and we’ve had extraordinary results,” Deputy Provost Lloyd Suttle said. “While he has been in charge of the management of our endowment, we have been the top-performing endowment in the country.”
The survey polled 746 colleges nationwide.