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How university endowments operate


Here's a chant we've been hearing on some college campuses across the country in recent weeks. Disclose, divest. We will not stop. We will not rest. Student protesters are demanding that their universities sell investments tied to Israel. But is this actually doable? And is this in the best interest of these schools? And NPR's Rafael Nam has been digging into these questions and is with us in studio now. Hi there.


SUMMERS: OK, so disclose, divest. Can you just help us understand what students are actually asking for with these words and whether that request is realistic?

NAM: Well, let's take the disclose part of the student chants first. Endowments at some of these top universities have become huge. Columbia University, for example, manages around $13 billion. UCLA has an endowment of nearly 8 billion. Universities don't usually manage all this money directly. Instead, they have professionals investing this money in all kinds of areas, like stocks, real estate or private equity. Sometimes universities know where the professional investors are investing their money, but some investment funds will not disclose this information at all.

SUMMERS: OK, so if universities literally don't know where these professionals are investing, is that why they can't disclose and then divest?

NAM: That's right, Juana. Secondly, it's not just one company. The divestment demands of some of the students are really broad. And it's very hard to disentangle their investments when there's this many companies. They want universities, for example, to sell investments in all kinds of top companies with ties to Israel, like Amazon or Google. Both of them have contracts with Israeli government, among other investments. But there's another huge reason. Universities are very careful about how they manage their money. Keep in mind endowment money does not come from students. It comes from donations from alumni and others.

And endowments are meant to help current students by keeping tuition low or making improvements to the campus. Also, it's not just about current students. Endowments also need to set aside money for future students, like how one professor put it to me, for students who are now in grade school and may one day attend the university.

SUMMERS: Right. But haven't we seen examples of universities selling off investments in reaction to protests? I'm thinking about, say, the 1970s and 1980s with apartheid.

NAM: Yes, we have. Universities have taken a stand with their investments, though, I should say, not just because of student pressure. But this is a different issue altogether. Apartheid was universally condemned, and there was a much less complicated financial landscape at the time. Israel is a far messier debate, as you know very well.


NAM: And it's why no major university has said they're willing to divest from Israel. Perhaps the closest example is when universities responded to students on other stakeholders by divesting from their investments in fossil fuels. But those divestment decisions are still being debated.

SUMMERS: How so?

NAM: I mean, universities got to take a clear stand. We don't want to contribute to climate change. And that's fair. It's their money. But a lot of universities that divested from fossil fuels in recent years missed out on a spectacular rally in oil companies. So ultimately, was that the right decision? Well, it depends on how you look at it. Yes, it made a bold statement on climate. But it was also a lot of money that was left on the table that could have gone to benefit a lot of students.

SUMMERS: That's NPR's Rafael Nam. Thank you.

NAM: Thank you, Juana. Transcript provided by NPR, Copyright NPR.

Rafael Nam
Rafael Nam is NPR's senior business editor.