Duke trustees approve investment method revisions

Also hear news of strong returns
Oct. 05, 2013 @ 08:31 PM

The Duke University Board of Trustees on Saturday approved revisions to the university’s approach to socially responsible investing, approved construction projects and received updates on a range of academic and financial topics, including the performance of Duke’s endowment investments for fiscal 2012-13.

The centerpiece of the new plan for socially responsible investing is the enhancement of the Advisory Committee on Investment Responsibility (ACIR), which was established to provide oversight and advice on social issues related to endowment assets, according to a university announcement.

The ACIR will expand from 10 to 14 members, adding one trustee, one faculty member, one undergraduate student and one graduate or professional student. The new ACIR will then consist of four faculty, four students, four administrators, one alumna/us and one trustee.

“These are the most significant changes to our approach to socially responsible investment in almost a decade,” said Duke President Richard Brodhead in a statement. “And the catalyst for this action has been persistent advocacy by our students. I am grateful to the DukeOpen group for raising questions and highlighting issues that have led to improvements in our approach to socially responsible investment.”

DukeOpen, a student coalition formed in January that is pushing for increased endowment transparency and socially responsible investments at the university, has organized demonstrations this week to spur activism and support on campus.

The ACIR will be charged with meeting on a regular basis to monitor trends and activities in investment responsibility that relate to the Duke University Management Corporation, or DUMAC, the university’s investment company.

Members of the ACIR will have access to information about DUMAC’s direct holdings and fund managers after signing non-disclosure agreements and will advise the president and DUMAC leadership on proxy voting for investments when applicable. 

The ACIR also will establish a public Web site, issue an annual report and hold a public forum to answer questions and gather feedback from the Duke community on issues related to investment responsibility.

The university also will streamline the process by which investment-related concerns are considered for review. Under the current two-step process, members of the Duke community must first go through the President’s Special Committee on Investment Responsibility (PSC), which would then refer specific issues to the ACIR. Under the new process, the PSC will be eliminated, and the ACIR will be the principal adviser to the president and DUMAC on social issues.

DUMAC will make available to endowment donors the ability to have their contributions invested in a social choice fund.

“We have a legal and moral obligation to manage the university’s assets wisely for the benefit of future generations of students and faculty,” Brodhead said in a statement. “At the same time, we want to improve our ability to monitor issues of social concern and share those concerns with the Duke community.”

The Board of Trustees formally adopted two out of three of DukeOpen's demands, and DukeOpen released a statement Saturday saying they were unsatisfied with how the issue of transparency was handled by the university. 

According to DukeOpen, its position on transparency reflects a months-long research effort and compromise with Neal Triplett, President and CEO of DUMAC. DukeOpen will continue to ask for a six-month delayed, paper-only disclosure of direct investments in a supervised reading room.

“This limited disclosure reflects a significant compromise from our initial ask for online full disclosure including fund managers,” according to DukeOpen’s statement.

Duke formally adopted guidelines on socially responsible investing in 2004. The policy noted that while the university’s primary fiduciary responsibility is to maximize the financial return on its resources, it could take ethical factors into account when setting investment policies and practices after careful consideration and “substantive discourse” on an issue.

Since then, the university has responded to student concerns, according to the university. In 2008, Duke ceased investing in companies doing significant business in Sudan/Darfur, and in 2012, the university adopted proxy voting guidelines for investments in companies that might be connected to conflict minerals.

Built on contributions from donors and investment returns, the endowment is a perpetual source of support for the university. With a market value of $6 billion as of June 30, the endowment will generate about $250 million in the current fiscal year. These funds support Duke financial aid, academic programs, faculty, facilities and other activities across the university and health system.

The trustees were informed this weekend that DUMAC had achieved a 13.5 percent return on Duke’s long-term pool, the primary investment vehicle for the university’s endowment assets, for the fiscal year ending June 30.

As a result of the investment returns and a record-setting year for new gifts and pledges during the Duke Forward fundraising campaign, the university's endowment has almost fully recovered from losses experienced during the financial downturn that began in 2008.

The endowment stood at $6.1 billion in fiscal 2008, before a drop of more than 25 percent the following year, according to the university.