University of Michigan investment practices raise concerns

The University of Michigan has invested $4 billion in companies that have donated hundreds of millions of dollars to the university, a newspaper has found.

The Detroit Free Press investigation found that the university invested in more than 30 companies co-run or owned by university donors, including members of a group that advises the university on its investments.

Some industry experts worry that investing in the university’s top donors is a conflict of interest.

Sandy Robertson received a bachelor’s degree and master’s in business administration from the university in the 1950s. He’s served on the Investment Advisory committee since it was founded in the 1990s. Robertson co-founded the investment firm Robertson Stephens and Francisco Partners, a private equity firm.

Robertson has donated $18.4 million to the university. The university’s endowment has invested $179 million in Francisco Partners.

“We’re a private equity leverage buyout firm and I guess you could say there’s a conflict,” Robertson said. “But they look at what we’re doing and it does fit and they invest with some of our competitors.”

There’s a system to prevent conflicts of interest, university officials said. Members of the Investment Advisory Committee who are eligible to receive an investment from the university must disclose the financial interest or relationship. There’s no written record of those disclosures, which are typically done verbally, said Rick Fitzgerald, a university spokesman.

Disclosure is important because conflicts among alumni advisers do occur, according to endowment management experts.

“You actually leave the room when the issue is being debated. You don’t take part in the discussion,” said William Jarvis, former executive director of Commonfund Institute, which promotes best practices in financial management. “It doesn’t completely cleanse it, but it enables people to examine what’s going on there and draw conclusions about whether the behavior is proper.”

The university’s endowment currently has about $11 billion.

Source