Kim: Investments Office deserves trust now
Watching the deterioration of financial markets and the broader global economy has been dismaying, to say the least.
Since the third quarter of 2007, financial institutions have written down in excess of $900 billion worldwide. The IMF recently estimated that losses will be on the order of $1.4 trillion (revising it from a previously estimated $945 billion). The government has had to act in unprecedented ways, from the bailout of Bear Stearns in March of this year to its equity injections of billions of dollars into financial institutions most recently.
The balance sheet of...
I am incredibly grateful for the financial acumen of Swensen, Takahashi, and all the rest. But I agree with Trust, and further don't believe that pursuing a successful investment strategy to weather these financial times is not incompatible with an examination of Yale's endowment ethics.
Marcelo,
Thanks for an informative and well-thought out article. I agree that Dr. Swensen's investing skill has been and will continue to be incredibly good for Yale and its students. However, it is extremely important to acknowledge that investment flows have their most powerful effects in fostering business growth, which in turn fosters economic growth. By investing in companies with less-than-ethical (even if legal) business practices, Yale is essentially condoning a business paradigm that pursues profitability at any cost - a paradigm that is unquestionably negative, not only for citizens, but for the economy as well. It is this paradigm that led to this financial collapse, and it is this paradigm that must be addressed for the world to recover and growth again in a way that is both sustainable and addresses the needs of everyone.
Despite the fact that we are in a recession, with credit markets shrinking and risk premiums incredibly high, now is the best time to revamp an investment strategy along more socially responsible lines. Every business now needs money more than ever before, and the supply of capital is greatly constrained. By focusing investment on businesses with socially responsible products and practices, we can ensure that the companies that emerge from this recession with the highest growth rates (and therefore returns) are those that are the best for the world around us. To invest otherwise would be to both ignore the costs externalities have on our society and allow the paradigm that lets these externalities occur because they generate strong returns for small groups of people continue.
There has never been a more opportune and important time to question the "returns at all costs" ideology. Indeed, it got us into this mess, and only by solving it can we both get out and hedge against such a thing happening again.
#3, I am curious, have you received financial aid from Yale? If so, don’t you think you should return it, since the blood of the workers is paying for your comfy stay here?
Yes, why didn't anyone think of that before? It is totally reasonable that anyone on financial aid, i.e. is not independently wealthy, should just shut up, and not make moral claims. And people on welfare shouldn't complain about the war in Iraq. Don't bite the hand!
Next time you want to complain about potholes, think again. You're using the road so shut up.
Under this logic, we ought to have blindly trusted Bush after 9/11.
Oh wait ...