ANN ARBOR, MI – The University of Michigan has one of the nation’s 10 largest endowments at $17.9 billion.
The endowment grew about 5.2% last year, from just more than $17 billion to almost $18 billion by June 2023. The current value is ninth among all U.S. universities, with Harvard claiming first place at more than $50 billion.
For comparison, the Ann Arbor university’s endowment is more than the size of Nicaragua’s GDP.
The billions of dollars in the university’s name brings questions, including calls for divestment on various political issues over the decades. Most recently, pro-Palestinian and anti-Israel protesters on campus have demanded the university divest from Israel amid the war in Gaza.
Here are five things to know about the University of Michigan endowment.
Who runs university investments?
Erik Lundberg has served as the university’s chief investment officer since 1999. In the last 10 years, the endowment has grown from $8.4 billion to almost $18 billion, university officials said.
Lundberg has one of the largest base salaries of all university employees at $930,000. That does not include potential performance-based bonuses.
Prior to his role in Ann Arbor, Lundberg oversaw the investment office at Ameritech, which handled $22 billion in pension and other plan assets according to his bio. He graduated from Ohio State University in 1986 with a master’s degree in finance and international business.
How does it operate?
“The UM endowment supports the university’s mission and is meant to do so for generations to come,” according to an “Endowment 101″ factsheet from the university.
The endowment includes more than 12,700 separate funds, officials said, adding that most are restricted to purposes outlined by the donors who provided the funding. Fund managers manage the endowment, investing in major stock exchanges and private companies that are not publicly traded, officials said.
These fund managers are beholden to confidentiality obligations to ” preserve the fund managers’ competitive advantages,” officials said.
Lundberg’s office reviews the investment decisions and makes recommendations to the Board of Regents, who offer final approval.
Regents are allowed to meet informally in private to discuss university business, so it is unclear if certain investment recommendations were denied or modified in private.
About $470 million of the endowment was used to fund various university operations in 2023, or about 2.6% of the endowment. Last year’s distribution accounted for 4% of revenues for operating activities, officials said.
The Michigan State Legislature passed a law in 2009 governing how nonprofits, including public universities, can govern endowments. That law does not limit by percentage how much can be taken from an institution’s endowment.
The distribution limit on the Ann Arbor campus is 4.5% of the fair value of shares held in the University Endowment Fund, officials said.
Officials said $134 million of this amount went to student financial aid, contributing to the $332 million total in this type of spending last year, according to the budget. About $188 million supported research and patient care at Michigan Medicine, and about $148 million supported academic instruction and programs, officials said.
Divestment policy
University policy is meant to “shield the endowment from political pressures and to base investment decisions solely on financial factors such as risk and return.” Regent Chair Sarah Hubbard reiterated this stance in the March 28 Board of Regents meeting.
There are exemptions to this policy. The regents approved a resolution in 1978 that “serious moral or ethical questions” on a particular issue that involves the endowment would prompt the creation of an advisory committee to make investment recommendations to the regents.
It is not clear what rises to this level of moral or ethical issues. However, a 1978 faculty committee said the regents should consider the ethics of investing “in those cases in which an extraordinary social evil is apparent and a broad consensus develops within the University community concerning the moral shortcomings of a particular firm or type of investment.”
Previous changes to ‘political’ investments
The university has four examples of changing its investment strategy on political issues. They are:
- Divesting all holdings from South Africa amid apartheid in 1983
- Divesting in tobacco companies in 2000
- Shifting away in 2021 from investing in natural resources to support carbon neutrality
- Ending investments in Russia after the invasion of Ukraine in 2022
In the 1970s, student activists protesting apartheid including the Black Action Movement damaged university property, according to the article “Regents’ First Resolution for Divestment” from the College of Literature, Science and the Arts.
While regents eventually condemned apartheid in 1978, student activism was not the reason for divestment from South Africa. The 1983 divestment came after the Michigan Legislature mandated Michigan public universities to divest from companies doing business in South Africa, university officials said.
Tobacco was “antithetical to the university’s mission of research, teaching and service,” officials said, so the university pulled its holdings in the industry. That represented less than a half percent of the total endowment at the time.
The Ann Arbor university discontinued direct investments in companies considered large contributors to greenhouse gases. This is to commit to net-zero carbon emissions goals by 2050. Lundberg said in 2022 that the university had invested $420 million in sustainable energy since 2020.
The end of Russian investments wad made to protect the endowment from Russian market volatility related to the Ukraine war, officials said.
Calls for divestment from Israel
Student protesters, such as the Tahrir Coalition, are distributing a pamphlet saying that $6 billion of the university’s endowment is invested in “Israel and the U.S.-Israeli war machine.” Protesters contend that these investments are linked to hundreds of companies in Israel and hundreds related to defense.
The university denies these accusations, saying it has no direct investment in any Israeli company.
Read more: No arrests signal ‘hands-off’ approach as tents for Gaza came to 3 Michigan universities
“Instead, the university has investments in funds that may include companies based in Israel,” officials said in the “Endowment 101″ fact sheet. “Those funds invest in a diverse array of companies across many geographic regions, including companies specializing in life sciences, digital health-care applications, consumer products, software solutions and other sectors.”
These sorts of investments in funds account for less than $15 million, or 0.1% of the endowment, officials said.
“It is not possible for the university to divest from a single position in such a fund,” officials added.
There is not “broad consensus in the university community,” as the 1978 faculty committee put it, on the issue to consider pulling funds from Israel. Jewish organizations on the Ann Arbor campus such as Michigan Hillel have frequently criticized ones like Tahrir Coalition, including rhetoric seen as anti-Semitic.
Calls for divestment from Israel are not new on the Ann Arbor campus. The Board of Regents have formally denied these demands multiple times since 2014.
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