Show Duke the money

As of June 30, 2011, Duke University’s endowment was invested in more than 4,000 individual funds whose aggregate value totaled approximately $5.7 billion. This represents a 24.5 percent increase over its fiscal year 2010 value, putting the University endowment’s growth in line with the national average of 19.8 percent.

While the positive returns come as good news for the University’s financial health, they also rekindle concerns of how exactly the University achieves these gains. As the global financial climate continues to call for more transparency, Duke’s endowment should follow suit in providing more disclosure on its holdings.

Duke’s endowment ranks as one of the least transparent among national universities, earning a D grade in a recent College Sustainability Report Card survey. This is just one assessment, but other evidence suggests that we can do a better job of disclosure. The University’s endowment is currently operated by DUMAC, a professional investment management organization controlled by Duke University. While DUMAC provides long-term targets for asset allocation, it does not disclose its current asset allocation, what funds it invests in and what particular equities—and other assets—make up those funds.

As an entity whose core mission is to support the University in perpetuity, DUMAC places a heavy emphasis on long-term risk management. With this in mind, why not periodically disclose an updated breakdown of asset allocations within DUMAC’s overall portfolio? DUMAC’s website even publishes a historical analysis that favorably pits the volatility of the University endowment against a blended mix of both stock and bond indices, so the lack of disclosure seems to unnecessarily raise questions on how the University’s financial lifeline is invested.

The University shouldn’t just stop here, though. Even with a breakdown of what types of assets the endowment invests in, assessing the riskiness of a portfolio without knowing what types of companies the University is investing in—or even what types of funds receive our money—remains difficult. Although it may be impractical to publish every stock or bond that University funds are invested in, DUMAC should proactively seek to reassure us that the companies and firms they support are not only risk-aware, but also ethically sound. It’s difficult for the University to improve its brand­—as a green campus or one that supports human rights—if our endowment is invested in firms that actively undermine those values. One lasting argument for this secrecy is that keeping an exact list of holdings secret can provide a competitive advantage over peer endowment management firms. While this may be true, one can also point to firms like Berkshire Hathaway—Warren Buffet’s holding company—as successful investment managers who fully disclose their entire equity holding portfolio to the public. Buffet’s success as a long-term value investor seems to undermine the competitive advantage argument, and it also eliminates any doubt behind what his portfolio truly invests in.

Just because DUMAC manages money does not mean it is an independent hedge fund whose sole purpose is to outperform the market. It represents an extension of the University, and we believe that more disclosure will assuage fears that the types of investments the endowment makes do not fall in line with the fundamental values of Duke University.