University student partisan, policy organizations call for transparency in conflict of interest endowment claims

Monday, February 12, 2018 - 6:55pm

Students are calling for the University to be more transparent in where and how it spends its funds.

Students are calling for the University to be more transparent in where and how it spends its funds. Buy this photo
File Photo/Daily

After the Detroit Free Press claimed the University of Michigan invested portions of its endowment in companies owned by major donors, students are calling for the University to be more transparent in where and how it spends its funds. The University’s Chapter of College Democrats and the Roosevelt Institute, a student-run policy think tank, came together to author a Central Student Government resolution requesting an investigation into possible conflicts of interest by the University, more oversight into investments from the elected Board of Regents and more transparency from the University overall.

The Free Press’ investigation raised doubts about the University Investment Advisory Committee’s intentions when choosing where to invest their available funds. According to the Free Press, as much as $4 billion of the University’s nearly $11 billion endowment has been invested back into the companies of large donors such as alumni Sandy Robertson, Sam Zell and Stephen Ross. The report also claimed the amount of oversight over the endowment has decreased while the endowment itself has increased over the past few years. According to the University’s 2017 Financial Report, the endowment has increased from $9.7 billion in 2016 to the current $10.9 billion.

In response to the investigation, University President Mark Schlissel wrote in an op-ed article published by the Free Press that the claims about the endowment are false and do not reflect the investment materials provided by the University. The University Public Affairs Department also published an explanatory webpage to respond to the claims made by the Free Press.

“We have said all along that our endowment’s purpose is to provide sustained resources to support our students and academic programs,” Schlissel wrote. “Without donor and endowment support, annual tuition in Ann Arbor would be nearly $6,000 higher per student. This success requires that we achieve the highest returns through the best investments.”

In response to the University and the endowment claims, the resolution sponsored by the Roosevelt Institute and College Democrats is particularly concerned with how students’ tuition is being invested in ways that will be beneficial to the community of which they are a part.

LSA junior Christopher Olson, one of the authors of the resolution and co-president of the Roosevelt Institute, wrote in an email interview that investments in companies of major donors limit the amount the University can use to assist students with rising condition costs.

“As students we have a vested interest in how the endowment is used to promote the educational excellence of this University,” Olson wrote. “Conflicts of interest with University endowment have the potential to reduce the returns of the endowment which in turn will reduce the money which could be used to reduce the cost of tuition.”

Public policy junior Lauren Schandevel, communications director of College Democrats, wrote in an email interview that allowing benefactors to serve on the Investment Advisory Committee is a large conflict of interest for the University.

“Students have a right to know where the University invests its money, especially if its motivation for doing so is purely to benefit donors,” Schandevel wrote. “It seems like common sense that if the University invests in your business, then you should not be permitted to sit on the its (sic) Investment Advisory Committee. That is an obvious conflict of interest and it not only keeps money away from programs that truly benefit students — like financial aid, housing and academic services — but it also erodes our trust in the institution.”

According to the webpage published by Public Affairs, including alumni donors in the investment process increases the efficiency and productivity of the committee.

“The fact is, U-M alums are some of the top investment managers in the nation,” the page stated. “We would be foolish not to reach out to these alumni for their high-level advice and, when it fits with the University’s investment approach, to invest in their well-managed funds. The key fact is that all investment opportunities get vetted in the same fashion and we only invest with funds and managers that meet our stringent criteria.”

In an official statement published on the Roosevelt Institute’s Facebook page, the two organizations criticized the 2 percent — or $218 million — the University invests in firms owned by members of the advisory committee, claiming the figure is still a large amount of available funds. They also mentioned the lack of specificity in regard to the criteria by which investments are considered and the claim that tuition would decrease if these endowment funds were spent at the University instead of through investments.

“We call on the Board of Regents to increase transparency on investment decisions and performance, to increase their oversight of the endowment, to appropriately address potential conflicts of interest, and to increase annual endowment spending to sufficiently serve the University community,” the statement read. “The University’s investment and endowment spending decisions have eroded our trust in U-M. Instituting these reforms would begin to restore it.”

University spokesman Rick Fitzgerald wrote in an email interview the Regents already publish approved investments on their website, so a call for more transparency from the Regents is not a reflection of the current situation.

“All new investments are approved by the Board of Regents and are publicly available as part of the board meeting agenda,” Fitzgerald wrote. “For example, later this week Regents will consider a $30 million investment in Detroit area housing.”

Fitzgerald also mentioned the segment of the Public Affairs Q&A pertaining to the spending of endowment funds. The website claims endowment funds cannot be spent on any area the University sees fit.

“How endowment funds may be spent is usually restricted by the donor,” the Public Affairs website read. “Such funds can be used only for the specific purpose for which the endowment was established … To ensure continuing support for future generations, the funds themselves are not spent but invested so that part of the annual distribution can provide a steady flow of dollars each year.”

LSA senior Enrique Zalamea, president of the University’s Chapter of College Republicans, stressed this is not a partisan issue and that all students should come together to ensure there are checks and balances to the people in power when it comes to investing tuition dollars.

“It’s not a partisan issue for us, we just think that the University needs more transparency,” Zalamea said.

LSA junior Amanda Delekta, vice president of College Republicans, voiced concerns about the endowment being utilized for future investments in addition to improving current University practices and lowering costs. She also explained why she is in support of a resolution asking for more transparency from the University on these large investments.

“Our motivation as students on this campus is to make sure tuition is going toward investments that best serve us, that will best reap rewards and create programs for us to thrive in and take advantage of,” Delekta said. “So I think it’s really important to make a more transparent system where the endowment is being invested to best serve students, and I don’t know if that’s necessarily happening right now.”