Brown University President Rejects Israel Divestment

Christina Paxson says endowment is ‘not a political instrument.’

Brown University’s president has rejected a student-approved referendum calling for the university to divest from companies that conduct business with Israel.

Last week, Brown University undergraduates voted for a referendum that called on the university to “divest all stocks, funds, endowment, and other monetary instruments from companies complicit in human rights abuses in Palestine.” The referendum also called for establishing “a means of implementing financial transparency and student oversight of the university’s investments.”

The referendum passed with 69% of the 2,810 students who voted approving it, although that was only 27.5% of the university’s total undergraduate student population.

However, shortly after the referendum passed, Brown University President Christina Paxson wrote a letter to the Brown community saying that the university is not obligated to take action on the referendum, and that she is opposed to divestment from companies that conduct business in the West Bank and Gaza Strip.

“Brown’s endowment is not a political instrument to be used to express views on complex social and political issues,” she wrote. “As a university, Brown’s mission is to advance knowledge and understanding through research, analysis, and debate. Its role is not to take sides on contested geopolitical issues.”

Paxson said Brown “should not embrace” the boycott, divest, sanctions (BDS) movement, adding that when several academic associations called for boycotts of Israel in 2013, “I made it clear that Brown would not support academic boycotts of Israel or any other country, since doing so would inhibit the open scholarly exchange that is critical for the advancement of knowledge.”

She said she had discussed the referendum with members of the Brown University students, faculty, staff, and alumni, who held a wide range of views, and concluded that divestment would polarize the Brown community.

Regarding the issue of financial transparency in the university’s investments, Paxson cited a recent op-ed in Brown’s student newspaper written by Joseph Dowling, Jane Dietze, and Joshua Kennedy, who are the CEO, CIO, and managing director, respectively, of the university’s investment office.

The three wrote that there were “misunderstandings” among the students about how Brown manages its endowment. They said that although many believe the endowment consists of stocks and other investments selected by the investment office, this is not the case for approximately 95% of investments.

They said Brown does not directly manage its own investments, but hires and oversees external investment managers who manage portfolios of investments. And as part of its agreements with the investment managers, it is prohibited from disclosing the underlying managers’ positions.

“The mix of investments that constitute these portfolios is essentially the managers’ intellectual property,” they wrote. “They allocate considerable research resources on developing these positions. In order to generate competitive investment returns, the managers cannot afford to have this intellectual property shared freely.”

They said a key part of generating competitive returns for the endowment is selecting the investment managers. Brown’s endowment portfolio gained 13.2% in 2018, beating its benchmark of 9.7%, and increasing its value to an all-time high of $3.8 billion.

“Some might argue that Brown simply should not be invested with external managers that don’t allow clients to shape the managers’ portfolio,” they wrote. “But such a position would lead to an endowment that does not generate the returns needed to sustain the University.”

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