WUSET is in need of revision
Richard is a junior in Business. He can be reached via e-mail at firstname.lastname@example.org.
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.