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Dowling, Dietze, Kennedy '97: Being transparent regarding investment transparency

Brown’s endowment is a vital part of the University. In FY17, it funded 18 percent of the operating budget ­— $165 million, or $19,000 per student. It is a permanent asset that is managed by Brown’s Investment Office with careful oversight and governance from the Investment Committee of the Corporation and members of the University administration. The goal of the investment program is to balance capital appreciation and capital preservation. Generations of future Brunonians are counting on this resource.

The recent commentary from students on the issue of investment transparency has revealed misunderstandings in the campus community about how Brown manages the endowment. Particularly in light of a pending Undergraduate Council of Students referendum, where students will vote on a question related to “divestment,” we perceive an opportunity to explain why the University is limited in its ability to selectively choose to remove individual companies or holdings from its investments.

Many may believe that the endowment consists of stocks and other investments selected by the Investment Office. This is not the case for approximately 95 percent of investments. Brown does not directly manage its own investments. Instead, the Investment Office hires and oversees external investment managers who manage portfolios of investments. In certain instances the endowment may use low-cost indexes. This model of employing external managers is also followed by the vast majority of our peers.

As part of the agreements we sign with our investment managers, we agree not to disclose our underlying managers’ positions. The mix of investments that constitute these portfolios is essentially the managers’ intellectual property: they allocate considerable research resources on developing these positions. In order to generate competitive investment returns, the managers cannot afford to have this intellectual property shared freely.

Brown’s investment managers, in almost all cases, manage portfolios that are shared by several clients. These are not bespoke solutions, and neither Brown nor the other investors have the ability to dictate specific requirements about the contents of the portfolios based on our own preferences or interests. The individual holdings also tend to change dynamically, sometimes dramatically so. Some strategies that employ systematic quantitative techniques change their holdings frequently, even daily.

Therefore, the Investment Office’s primary pursuit in generating competitive investment returns for the endowment is selecting the managers with whom the University will partner. In doing so, we take a holistic approach that balances the risk-adjusted returns the manager is capable of generating with other critical factors. One of these includes the ethical integrity of the manager’s strategy and personnel, as well as Environmental, Social and Governance policies. We place a high value on considerations of ethics and sustainability when evaluating our managers.

The other key decisions made by the Investment Office relate to determining the proportion of Brown’s endowment allocated to specific asset classes (equities vs. commodities vs. bonds, etc). The Investment Office does so within ranges approved by the Investment Committee of the Corporation of Brown University. We oversee the distribution of external managers invested across these asset classes, ensuring a diversified portfolio of world-class outside managers investing for Brown across multiple assets and securities. The portfolio is designed to weather multiple economic scenarios.

Additionally, the Investment Office maintains internal controls to monitor the endowment and ensure that it complies with investment policies at all times.

Some might argue that Brown simply should not be invested with external managers that don’t allow clients to shape the managers’ portfolio. But such a position would lead to an endowment that does not generate the returns needed to sustain the University and to increase the impact of the funds given to Brown for fulfillment of its mission of education and research.

And although the endowment is managed as a single pool of funds, it is in fact thousands of separate charitable gifts. Alumni, parents, students and friends of Brown have made generous donations to support a specific University purpose (financial aid, a specific professorship, research space, etc). The funds are invested with the intention that the original gifts will grow in size and will provide an ongoing income stream to support the specific endowed purpose. It is through the process of providing a stable and growing financial resource that Brown’s endowment reflects and ultimately helps to shape the values of the University.

In keeping with these values, we expect the highest level of integrity and intellectual honesty from our managers and our team while fulfilling our charge of enhancing the University’s long-term financial security.

Joe Dowling, chief executive officer of the Investment Office, Jane Dietze, vice president and chief investment officer and Joshua Kennedy ’97, Investment Office managing director can be reached at, and respectively. Please send responses to this opinion to and op-eds to


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