Limited partners like Yale in private equity funds don’t have influence over particular investments and typically need permission from general partners to exit early, which can come at a significant discount.
Yale University, facing pressure to address ethical issues like gun violence, may consider exiting private equity and hedge-fund investments that it deems socially irresponsible.
Yale has about 60 percent of its $29.4 billion endowment in such alternative assets. The Ivy League school said it will work with its outside managers to adhere to its standards.
“In addition to attempting moral suasion, Yale might be able to avoid certain investments through ‘excuse’ provisions, which are part of some private equity funds, or work with the manager to liquidate the relevant position,” according to the updated policy posted on its website. “As a last resort, the university could dissociate from the investment manager by selling the fund interest to a secondary buyer.”
Students across the country have demanded schools reconsider investments in everything from polluters to private prisons. But limited partners like Yale in private equity funds don’t have influence over particular investments and typically need permission from general partners to exit early, which can come at a significant discount. Hedge-fund investments can be locked up for several years.
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Yale trustees also adopted a policy barring investment in assault-weapon retailers and any retail outlets that market and sell assault weapons to the public.
Yale said it’s easier to have an impact on publicly held stocks that aren’t in co-mingled funds than private investments.
“I think the investment office is going to go the extra mile,” Jonathan Macey, a Yale law professor who chairs the advisory committee on investor responsibility, said in an interview.
The university has taken positions on issues in the past, from apartheid in South Africa to climate change. In 2016, Yale said it sold less than $10 million in investments in fossil-fuel companies that were “inconsistent with our principles” of a sustainable environment.
The university, based in New Haven, Connecticut, has the second-largest endowment in higher education, and its longtime chief investment officer, David Swensen, holds considerable sway in the investment world.