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Board expands investment advisory group, creates social choice fund

The Board of Trustees made several endowment policy changes at their meeting this weekend.

The changes include an expansion to the Advisory Committee on Investment Responsibility, the creation of a social choice fund and a more streamlined process to review investment-related concerns. These changes were presented by President Richard Brodhead, who held several meetings with DukeOpen—a student coalition that aims to increase the transparency of the Duke Endowment.

Although DukeOpen’s proposal for endowment transparency included the creation of a social choice fund, their recommendation for hard-copy, time-delayed disclosure of the endowment’s direct investments was not presented at the meeting. DukeOpen interrupted the meeting Friday to present this proposal, which would allow members of the Duke community to view paper records of the endowment’s direct holdings in an office setting, six months after investments have been made.

“We learned that over the past year the Duke Endowment return was [13.5 percent] because of the shrewdness of our investment managers,” Brodhead said. “If we make that public, we lose all of that [advantage].”

The ACIR, which oversees and advises on issues of social responsibility related to endowment assets, was previously composed of three faculty members, two students, four administrators and one alumnus. The ACIR will now add one trustee, one faculty member, one undergraduate student and one graduate student. The Board also voted to eliminate the President’s Special Committee on Investment Responsibility, making the ACIR the chief advisor to the president and DUMAC—the investment group controlled by the University that professionally manages Duke’s endowment.

The ACIR will also begin meeting regularly, rather than meeting on an ad hoc basis, though the frequency of its meetings has not been determined.

University donors who contribute to the endowment will now be able to make a contribution to the social choice fund—an account within the University’s endowment that supports socially responsible companies by investing in funds that follow socially responsible criteria.

David Rubenstein, Trinity ’70 and chair of the Board, said that though donors may make contributions to the social choice fund, it is still not a popular choice among investors. Rubenstein is the co-founder and co-CEO of the Carlyle Group, one of the world’s largest private equity firms.

“It’s a very, very small portion—it has grown modestly, but it is still an infinitesimally small part of the investment community,” he said.

Bobo Bose-Kolanu, a second-year doctoral student in literature, said he still considers endowment transparency a high priority even though it was not discussed at the meeting.

Brodhead emphasized that Duke has a fiduciary responsibility to maximize the financial return on resources and that making endowment disclosures public could put that responsibility in jeopardy.

“The point you always have to start with is that people give money to [Duke’s] endowment to support the University, and we have an ethical value to keep our word to the donors,” he said. “There might be moments where we must override our obligation to make the maximum return, but we have a system in place for that.”

Rubenstein analogized the situation to students’ personal transcripts, noting that not everyone should have access to them, but relevant individuals do.

Duke formally adopted guidelines on socially responsible investing in 2004, which has allowed administrators to respond to student concerns. In 2008, Duke ceased investing in companies involved in business with the Darfur region of Sudan, and in 2012, the University adopted voting guidelines for investment in companies that could be connected to conflict minerals.

The trustees were also informed that DUMAC has achieved a 13.5 percent return on Duke’s long-term pool, which is the primary investment vehicle for the university’s endowment assets, for the fiscal year that ended June 30, 2013. The market value of the University’s endowment was $6.0 billion as of June 30.


In other business:

The Board of Trustees also discussed the Duke University Health System in light of federal budget cuts and the Affordable Care Act going into full effect Oct. 1.

“We are living in a time where pressures of change has made it prudent to think about [DUHS’] future,” Brodhead said.

Michael Schoenfeld, vice president for public affairs and government relations, said a significant portion of the Board’s discussion on Friday centered on the future of health care because it is a “big part” of what Duke does financially.

He added that it is too soon to tell how DUHS will be affected by the penalties and the lower hospital reimbursements, but that there have been cost reduction strategies implemented over the past several years to prepare for any change.

The Board also discussed the progress of Duke Forward, the capital campaign to raise $3.25 billion over seven years.

Rubenstein noted that Duke Forward is in “good shape,” having made more than 50 percent of its goal. He added that one purpose of a capital campaign is to get more people to donate annually, and that there has been an increase in the amount of donors since Duke Forward was launched.

Presentations were also made by Tracy Futhey, vice president for information technology and chief information officer, and Richard Hays, dean of the divinity school.

Schoenfeld said that Futhey discussed the large volume of attacks on the Duke network and the importance of protecting Duke from them, especially with Duke medical information.

Futhey could not be reached in time for publication.

Schoenfeld noted that the Divinity School is doing well considering it did not charge tuition until 40-50 years ago and that the endowment for the Divinity School is smaller than the ones from other universities with divinity schools.

Hays could not be reached in time for publication.

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