The College has a large and steadily-growing endowment, and we are grateful and commend the Board of Trustees for its diligent stewardship in investing endowment funds. However, as the College has high ethical standards in nearly every realm of its operations, we are concerned by the College’s apparent propensity for investing in trustee-affiliated funds and the generally opaque policies by which those conflicts of interest have been reported in recent years. We are therefore encouraged by the College’s recent decision to explore changes in its conflict of interest disclosure policy, and hope that both administrators and trustees work to provide the clearest, most forthright disclosure possible so as to maintain the College’s reputation and the high ethical standards we hold dear.
The members of the Investment Committee are themselves experienced and successful in the world of finance, and many own or manage successful investment firms. We understand the College’s eagerness to invest with such profitable firms. However, we view investment in these trustee-affiliated firms as bearing an added risk to the College’s reputation that should be considered by the Board. While we fully recognize that related-party investment transactions are not illegal, they nonetheless risk the appearance of cronyism. No matter how unfounded this perception may be, we feel that it remains a widely-held concern that risks damaging the College’s reputation. Moreover, while we applaud the trustees for their conscientious process of recusal whenever a trustee-affiliated firm is discussed, we fear that a risk remains that trustees will be impacted by their relationships with their conflicted peers and that these relationships will, in turn, impact the trustees’ ability to perform their fiduciary duties. With a vast sea of investment funds open to the College’s investment, we view the decision to invest in trustee-affiliated firms as an unnecessary risk, the loss of which can only serve to benefit the College without unduly compromising the endowment’s growth.
If the College and trustees continue to invest in trustee-affiliated firms, we hope that they will pursue their recently announced intentions to evaluate their policy of disclosing conflicts of interest. The College’s decision to keep its specific investments confidential is consistent with industry-wide practice; however, the decision to safeguard investment strategies should always come second to forthright disclosure procedures. The risk associated with disclosing the amount of related-party investment transactions is minimal, and would go a long way in assuring community members and alumni donors that the College’s conduct is beyond reproach.
There is nothing illicit underlying investments with trustee-affiliated firms, but we nonetheless encourage both the College and the trustees to evaluate the necessity of those investments and any risks they may pose to our confidence in the trustees’ stewardship of the endowment. With that confidence in mind, it is time for the College to make it clear that we are committed to the same high standards and transparency in our investments that we are in all other aspects of institutional governance.