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The Dartmouth
February 25, 2024 | Latest Issue
The Dartmouth

Moyse: Dartmouth’s Dirty Endowment Secrets

Dartmouth’s investment strategy is a betrayal of its stated values as a college.

The most recent publicly available information about the size of Dartmouth’s endowment puts the value of the school’s savings at almost double the GDP of Liberia at nearly eight billion dollars. If the College suddenly decided to split its total endowment value and divide it equally among each of its enrolled undergraduate population, every student would receive approximately 1.8 million dollars. 

It is obviously extremely important for our school to have ample resources to support the ambitious academic endeavors of its students and staff, and it’s hard to argue as a student here that Dartmouth should actively seek to have less resources. What is more interesting is how our school comes about and decides to manage its immense sea of wealth. 

Let’s start with how the money in the endowment is invested. Seed money flows into the endowment through almost 6,500 endowment funds, most of which are pools of money that are assigned for funding a specific activity of the university — and nothing else — in perpetuity. The College then uses this money to invest in various ventures with the goal of maximizing returns and therefore compounding the value of donations. So, what is Dartmouth’s investment strategy? Over 60% of all endowment assets are invested in either private equity or hedge funds. In fact, in the school’s 2022 endowment report, the Investment Office specifically highlighted the high performance of these “private asset classes” as compared to other types of investments in their portfolio. 

Private equity may be a familiar phrase to many. As an investment classification, it has become well known as mercilessly focused on profit above all other considerations. It’s private equity firms that have had their hands in the buying of apartment buildings and subsequent rent hikes in cities across the U.S, 1.3 million retail sector layoffs that disproportionately affected women and people of color and an untold quantity of surprise medical bills. Hedge funds represent a similarly opaque asset class that — up until this August — have not been required to reveal their financial outcomes to the U.S economy. Their aggressive speculative positions are also considered to make the stock market more volatile and dangerous for small investors looking to save for retirement, college and buying a home.

Dartmouth is remarkably opaque on what specific funds and firms it invests in. Yearly endowment reports provide a very brief overview of its general “investment strategy,” and the Dartmouth Investment Office website provides some information about its employees and an explanation of what the office does. But neither provide a specific breakdown of which firms and funds Dartmouth invests in, and how much money they put into each of them. Yet, even if we could better see which firms Dartmouth has chosen to invest in, the ethics of these choices would still be incredibly hard to determine, largely due to the opacity of private equity firms when it comes to their investment and strategy. While this secrecy is to some extent understandable to mitigate competition, it also creates an alarming black box for those who wish to track what Dartmouth’s fortune is directly supporting.

On top of this, the school makes little mention of ethics in its investment strategy. Although there is an Environmental, Social and Governance policy page on the Investment Office’s website that outlines the school’s commitment to divest from fossil fuels — which was only made in 2017 after long and determined activism — there is no mention of any ethical guides or commitments that members of the office make when they are deciding how to invest massive amounts of money every year. For a school that holds itself to such high ethical standards in almost every other aspect of operation, doesn’t it seem strange that these same guidelines are absent when it comes to the operations that directly impact the world the most?

Perhaps equally as perplexing is how Dartmouth’s endowment is managed. Trustees of the endowment along with university administration have consistently stuck to the “5% rule,” which was originally instituted by the IRS for “non operating foundations,” or philanthropies. The rule states that these foundations must pay out at least 5% of their total endowment for charitable causes each year. Most university endowments follow this rule as well. One important thing to note about the 5% rule is that it is a minimum, not a necessary number to stick to. In fact, many funds pay out more than 5%.

The result of maintaining the 5% rule is a massive windfall for the College and its investment partners, and pretty much no one else. Just a decade ago in 2012, Dartmouth’s endowment was worth $3.49 billion. What does this money do for us sitting in the bank? Dartmouth has continued to take an unnecessarily miniscule portion of its endowment for spending every year, as the endowment has doubled in size in the last 10 years. The only result of this investment strategy is a bigger topline number to go on letters to donors and alumni, and to compare to other universities around the country. Only a tiny increase in endowment disbursal could help pay for improvements of everything from housing to student mental health across campus, while causing virtually no change to the school’s investment strategy. 

A preoccupation with ensuring that Dartmouth functions “in perpetuity” has distracted us from present issues on campus that could be easily fixed. How much money in the bank does it take for stewards of the endowment to revise their 5% rule and take out just a little bit more to help solve countless issues across campus? Is our primary goal as an institution to simply amass more and more money every year, forever?

These investment choices create an uncomfortable dichotomy between what Dartmouth says, and what Dartmouth does. Our school has, in recent years, talked a lot about a persistent commitment to diversity, equity and inclusion. We discuss how we can welcome and learn from people of all types on campus, and how it is critical to work towards a better world. It is hard as a student to believe these sentiments are genuine when the same institution that espouses these values fails to put its money where its mouth is, and continues to partake in financial practices that hoard profits for the wealthiest in society while hurting the least fortunate. It is about time Dartmouth makes financial changes to better reflect the values it claims to hold so highly.

Opinion articles represent the views of their author(s), which are not necessarily those of The Dartmouth.