WUSET is in need of revision

| Staff Columnist

Richard is a junior in Business. He can be reached via e-mail at rmarkel@wustl.edu.

(Erin Mitchell | Student Life)

(Erin Mitchell | Student Life)

On Oct. 28, Student Life published an article discussing the recently formed student group called Washington University Students for Endowment Transparency (WUSET), a “New student group pushing transparency in endowment.” WUSET, acting in support of a group known as the Responsible Endowments Coalition, has begun to gain recognition on campus, claiming it promotes “responsible” investments. While the purported pros of this organization make it seem as though this group of students is presenting the administration with a delicious candy apple, they fail to take into account that—caramel coating aside—their idea is filled with worms. WUSET is bad. Let’s talk about why.

The most important question to ask is, what exactly constitutes a “responsible” endowment? According to www.endowmentethics.org, such an endowment is one that “screen[s] out or divest[s] from particular investments, such as in tobacco…” Additionally, these endowments make “proactive investments in companies or projects that align with the institution’s mission, such as green energy or low-income housing…” Now I won’t say that green energy is a particularly bad investment or that tobacco is an especially good place to park endowment funds. But I will say that opening up the endowment to student opinion could have potentially serious consequences for the student body.

The endowment, according to the University’s Web site, is a collection of funds designated for such purposes as supporting “professorships, scholarships and fellowships, research, the libraries, teaching, curricular development, buildings and grounds, technology, and new or evolving academic programs.” In short, it provides money to support just about everything a university does. Endowments operate as giant pools of money that are invested; the returns from said investments are then used for the aforementioned purposes. If the University’s money is invested well, then it ought to reap a higher return. This translates into more spending on the part of the University to improve itself. Note that it also yields more financial aid for needy students.

I truly wonder why WUSET would push an agenda that severely limits the types of investments that the school can make. It seems strange that the betterment of the University could be put in jeopardy because the school may soon have to weed out putting its money in anything that could be construed as controversial. The University is very vocal about its politics, and if WUSET accomplishes its mission of endowment transparency, the University as a whole could be very much worse off.

I will not go as far to say that this notion of “responsible” investing is entirely bad and that the school should pour its money into blood-soaked African conflict diamonds. I only say that opening the endowment’s components up to scrutiny by a student body more concerned with myopic politics and less informed about investing is not the best idea. Take the following two investments as hypothetical examples: The Vanguard Consumer Staples ETF (NYSE: VDC) and Market Vectors Global Alternative Energy Trust (NYSE: GEX). In the past six months, one of these ETFs has risen 18.73 percent. The other has dropped 3.14 percent.

I’ll cut to the chase and say that the alternative energy investment is the one that dropped. But out of the two, it’s the only viable investment according to the Responsible Endowments Coalition. The consumer staples ETF, which puts its money in a well-rounded mix of companies whose products have relatively stable demand, invests 7.07 percent of its assets in Philip Morris International. Cigarettes, as noted above, are a no-no under the “responsible” endowment scheme.

I’ll respond to the supposed evidence in favor of a responsible endowment. The $150,000 Wesleyan Student Endowment, a “responsible” endowment, has outperformed the market. It now stands at $150,065.46, according to an article on the Responsible Endowments Coalition Web site. That’s annually a 0.04364 percent return. In the past year, Altria (another cigarette manufacturer) is up roughly 3 percent.

Call it irresponsible, but making money is what the endowment is supposed to do. Before the student body throws its support behind WUSET, I urge everyone to consider whether it’s worth potentially hindering our endowment’s future growth just to help a few misinformed and quixotic students sleep better.

  • http://www.facebook.com/home.php#/group.php?gid=77236899090 Todd Zimmer

    Richard – I’m happy to tell you that I can assuage some of your concerns regarding WUSET’s proposals. First of all, I’d like to dispense with the assertion that we are misinformed, quixotic students (ouch!). In fact, a large number of our peer institutions, including Amherst, Columbia, Barnard, Tufts and UPenn already have socially responsible investing advisory committees in place. As far as I’m aware, these institutions and the many others who consider the ramifications of their investment decisions have yet to be destroyed by the practice.

    Washington University is blessed with one of the world’s largest endowments, standing at over $5.5 billion! Currently, there is no program in place that allows for consideration of social responsibility in making decisions regarding investment. We are proposing an oversight committee that would be able to recommend investment opportunities that provide genuine benefits to society in a way investing in cigarette companies would not. I seriously doubt that such a committee could damage the endowment of the university, especially since investment decisions would ultimately be determined by our current Chief Investment Officer, Kim Walker.

    There is no reason to fear an expansion of student knowledge of our university’s investment practices. We know that investment decisions have real-world ramifications, both for WashU and the broader community. We CAN grow the endowment of the university responsibly, without affecting the bottom line. There is no excuse for not considering the implications of our investment. Seeking profit without any concern for the practices of companies we partially own is unethical. Period.