Special report: Targum investigates U. endowment ahead of divestment referendum

On Monday, the Rutgers University Student Assembly's Spring 2024 elections will commence with two pivotal referendums on the ballot. The referendum questions include one asking the student body to weigh in on whether the University should divest from firms with ties to Israel and the other asking whether Rutgers should end its relationship with Tel Aviv University, as previously reported by The Daily Targum.

The Targum recently filed a public records request under the Open Public Records Act (OPRA) to obtain access to comprehensive details regarding the underlying investments held by the endowment over the past five years: 2019, 2020, 2021, 2022 and 2023. 

Ahead of the upcoming student body vote, the Targum is publishing that information, as well as calculations of the University's investments in the specific companies that have attracted criticism for their connections with Israel.

In a statement to the Targum, the University said its endowment is compliant with governance related to University endowments, and any changes to it must be advocated for through messages to the administration's Joint Committee on Investments.

"The referendum, as we understand it, asks the student body in New Brunswick if it favors (the Assembly) advocating for divestment," the statement read. "It is not a referendum on divestment."

Assembly suspends rules, holds closed-door voting session in passing referendum

The resolution passing these referendums was made in a closed-door session during the Assembly's weekly meeting on March 7. In a statement to the Targum, the Assembly said the vote was done behind closed doors to allow its members to speak without concerns of documentation or retribution in the form of doxxing or other threats to their well-being.

The Assembly also acknowledged in a separate memo that it suspended Chapters 903 and 904 of its standing rules in passing this resolution. 

Chapter 903 establishes that referendum proposals not brought forth by at least 2 percent of the student body must be debated for at least a week by a relevant committee before being passed to the Assembly's executive board. From there, the executive board is tasked with producing an amendment that is subject to up to two weeks of deliberation before ratification. 

Chapter 904 establishes that referendums that are voted upon in an election period must be managed by a relevant election commission. 

The memo further explains that even with the suspension of Chapters 903 and 904, the referendum will be overseen by an election commission and will commence two weeks after its passing.

Rutgers' endowment holdings total slightly more than $7.7 million in four cited companies 

The Assembly resolution, and previously the Endowment Justice Collective (EJC), focus primarily on the endowment's shareholdings in four companies it notes to be complicit in supporting the Israeli government by providing weapons and other services:

• Lockheed Martin is an aerospace and defense systems company that began working with Israeli companies in 2004. Its collaboration with the Israeli Defense Force (IDF) dates back to the 1980s, and it expects to provide the IDF with 50 aircrafts this year.

• Motorola Solutions is a communications and intelligence company that first began operating in Israel in 1964. The company's technology was used to create a Wide Area Surveillance System to surveil settlements in the West Bank and Gaza Strip and an encrypted telecommunications system for the IDF and Israeli police officers.

• Boeing, an aerospace manufacturing company, has relations with Israel dating back more than 75 years. The company supplies nine unique aircrafts to the IDF. In 2018, the company entered a contract with Israel's government that, if seen to fruition, would result in Boeing vending more than $10 billion in products to the IDF over the next decade.

• General Electric is a conglomerate managing investments in various industries, from energy to healthcare. The entity has reportedly supplied engines and turbines used in Israeli militant aircrafts and ships.

While Rutgers does not invest in Tel Aviv University through shareholdings, the two universities have historically worked together. In 2021, the two universities signed a memorandum of understanding related to the New Jersey Innovation & Technology Hub. In 2022, Rutgers awarded a collective $200,000 to fund joint research led by Tel Aviv University and Rutgers researchers.

Most recently, Rutgers researchers announced a partnership with leaders at Tel Aviv University and Hebrew University to strengthen joint research opportunities on Alzheimer's disease and host a conference in Israel pertaining to the subject. 

PGIM accounts for almost 15 percent of University's public equity investments

According to information received by the Targum as part of its OPRA request, the University's public equities portfolio currently accounts for 34.6 percent of the endowment's total holdings as of June 2023 and is valued at approximately $651 million.

The University indirectly owns shares of public companies through a mix of mutual fund and hedge fund managers. The dollar amounts of these funds are listed below, with the largest single investment in Prudential's PGIM Quantitative Solutions U.S. fund, which totals approximately $100.5 million. 

• PGIM Quantitative Solutions U.S.: $100,436,224

• Silchester International Value Equity Trust: $88,817,239

• Eagle Capital Management: $82,048,667

• Vulcan Value Partners: $68,563,745

• Kiltearn Global Equity Fund: $51,351,204

The PGIM Quantitative Solutions U.S. fund intends to track the overall U.S. stock market, as measured by the S&P 500 index, which includes major companies part of the aerospace, defense and manufacturing industries. The University's endowment invests in two additional PGIM funds that track foreign and emerging stock markets. All other public equity funds the endowment currently invests in are actively managed funds that choose stocks at their discretion and do not mirror market indices.

Beyond its public equities portfolio, the remainder of Rutgers' endowment has holdings spanning private equity, real estate, opportunistic fixed income and hedge funds. The Targum has compiled the values of these portfolios for public use. 

PGIM and Alger are rated F by ESG Rater for weapons manufacturer exposure, other funds have minimal weapons, defense-linked holdings

As the largest money manager for the endowment, PGIM and its underlying investments have received the most focus from divestment proponents. 

According to its 2023 prospectus, PGIM Quantitative Solutions U.S. owns 11,244 shares in Boeing, 4,566 shares in Lockheed Martin, 3,356 shares in Motorola Solutions and 21,700 shares in General Electric. 

Based on the most recent public filings from the U.S. Securities and Exchanges Commission (SEC), Vulcan Value Partners owns 1,184,715 shares and Eagle Capital Management owns 14,310,619 shares in General Electric, respectively.

The Targum performed proprietary data analysis to determine the amount of shares the University endowment indirectly owns in each of the four companies highlighted in the Assembly's resolution. Per the paper's findings, the University owns the following amounts in each:

• 1,384 shares in Boeing valued at $360,769

• 562 shares in Lockheed Martin valued at $254,740

• 413 shares in Motorola Solutions valued at $129,338

• 68,126 shares in General Electric valued at $6,979,829

As You Sow, a non-profit dedicated to empowering companies in their efforts to develop corporate social responsibility (CSR), publishes grades around key environmental, social and governance (ESG) issues including sustainability and values-based investing. 

These grades also detail information on constituent holdings of the largest mutual fund families in the world across key ESG issues, including the percentage of holdings in companies that support fossil fuels, deforestation, tobacco, weapons manufacturing, prisons, guns and other controversial areas of investment.

A review of the University's public investments against data compiled in As You Sow's database tracking funds' investments in Weapons Manufacturers, "As You Sow Data," the Targum found that two of its public investments in PGIM Quantitative Solutions U.S. and Alger Small Cap Focus received "F" grades from the organization as it relates to their respective holdings in companies involved in the manufacturing of weapons. 

Only one of the University endowment's public equities investments, Ariel Fund Institutional, received an "A" grade for this category. There are more than 60 large-cap public equity tracking mutual funds within the Weapon Free Funds database that have received "A" and "B" grades, according to the Targum's analysis.

Such grades were not immediately available for the University's other investments due to differences in SEC reporting requirements, but a preliminary review of SEC filings that compile these funds' holdings only identified one additional fund with exposure to weapons manufacturers.

Though, the qualities of firms that As We Sow tracks are gaining more attention and importance to investors. 

In a recent report from Morgan Stanley, 77 percent of investors indicated attraction to entities and funds that not only yield high sums but also demonstrate a commitment to social and environmental good. In the report, 54 percent of respondents said they would likely increase their investments in such companies this year.

The Assembly's resolution, which was co-sponsored by the EJC and the Students for Justice in Palestine at Rutgers—New Brunswick, concerning Rutgers' investments also calls on the University to finance entities in accordance with its morals and to prioritize investments that do not make gains off others' tragedies.

"(The Assembly) is a body containing a myriad of perspectives, however, our duty as your representative government is to remain neutral as an overall organization," the Assembly's statement to the Targum about the resolution read. "We sincerely hope that students feel empowered to use their voices and share their opinions and encourage all undergraduate students to vote on the referendum during our Spring 2024 elections."