The Board of Trustees' recent decision to ban future direct investment in companies linked to the genocide in Darfur was both courageous and necessary.
As a place for learning, understanding and compassion, Duke University has no business sanctioning the wholesale rape and slaughter of hundreds of thousands of defenseless Africans. For their right action, then, the Trustees-along with the leader of the President's Advisory Committee on Investment Responsibility, Professor George Tauchen, and President Richard Brodhead-deserve our thanks and support.
But lest anyone be misled by the glowing press releases or fawning media coverage, it's worth pointing out that this first-ever invocation of Duke's investment responsibility policy represents a relatively small step in the right direction.
That's because Duke's endowment is now structured in such a way that we cannot know where or how a very large portion of the University's $8.2-billion cash pile is invested.
Going back to June 30, 2007-the last date for which detailed statistics were available-we see that of the $7.6 billion then in the Duke Management Company's long-term pool, just $254 million was in U.S. stocks. An additional $1.9 billion was invested in foreign stocks (talk about outsourcing!), while $1.4 billion went toward "private" investments and another $3.2 billion was held in hedge funds.
So when officials talk about the University's "direct" investments, they are only referring to the first two types of investments, those that are in U.S. or foreign stocks. But at just $2.15 billion, those holdings don't even constitute half of the University's endowment.
Only a few people-DUMAC employees, the president, some Trustees-know exactly where the rest of our money is invested, and even then their information may be grievously limited. The unfortunate truth is that in exchange for the promise of eye-popping returns, most hedge fund clients agree to be kept in the dark about how their fortunes are increased.
What we can say is this: Most hedge funds operate overseas, many in the developing and dangerous parts of the world that other investors avoid. Given that reality, it is a safe bet that although Duke officials have adopted the right and moral stance with respect to the University's direct investments, these indirect holdings still touch one or more of the "heavily engaged companies" that are now cosmetically off limits.
Although administrators would probably argue that the decision to limit our divestment to "direct" holdings represents an appropriate compromise between the need to seek the highest possible returns on our endowment (something Duke does exceptionally well) and the importance of a socially responsible outlook, I disagree.
I place this latest cop-out squarely within a decades-long trend toward secrecy in Duke's financial affairs.
Consider Duke's only precedent for this new Sudan policy, our divestment from South Africa in 1986. Back then, hedge funds still didn't exist, meaning observers could be sure that the policy covered 100 percent of our endowment's holdings. But also meaningful was the fact that officials released the Board of Trustees' vote at the time (it was unanimous)-something they bizarrely declined to do following this weekend's decision.
In other words, the 22 years since Duke's Board took on South Africa have left administrators less accessible, less responsive and less exposed to critiques from without and within. That may well be worth the tons of money we gain each year in exchange, but I'm not sold yet.
Among other things, Duke's financial opacity left us dangerously exposed when Amaranth, a global hedge fund, collapsed in September 2006. In fact, we only barely averted disaster by pulling our $85-million investment out weeks before the $6-billion fund went up in smoke.
It also leaves us behind our peers, many of whom have already had investment responsibility policies-along with active on-campus movements to enforce them-for decades. Yale, one of the schools Duke specifically compared itself to in a Feb. 29 press release, has been active in this regard since 1972, a stance Duke only adopted in 2004.
In other words, although there should be no question that Duke's newfound sense of global responsibility deserves heartfelt praise, we should not ignore the institutional obstacles that stand in the way of its full implementation.
Kristin Butler is a Trinity senior. Her column runs every Tuesday.
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