We are writing in response to the May 28 article in the Missoulian about the University of Montana Foundation’s investments, reprinted from UM’s student newspaper, the Montana Kaimin. The UM Foundation invests using standard practices, pays applicable taxes and abides by state and federal laws.
The Foundation’s mission is to inspire philanthropic support to enhance excellence and opportunity at UM.
The Foundation’s investment objective is to generate real rates of return over the long term to provide consistent support for UM’s students, programs and faculty in perpetuity. To achieve this growth, portfolio construction focuses on a diversified mix of investment assets while remaining within the appropriate risk profile. Maintaining a diversified investment portfolio — one that includes alternative investments and investments outside of the United States — is a sound investment strategy used by many university foundations and other institutional investors.
Investment decisions are made by an investment committee, made up of experts from the Foundation Board of Trustees, in consultation with the Foundation’s independent investment advisor. All investments are fully vetted, and investment contracts are reviewed by the Foundation’s legal counsel.
The article notes the IRS has sought to uncover offshore investments that dodged taxes. Private equity and hedge funds in which the Foundation invests do not use offshore entities to hide income or investments from the government. All Foundation income is properly reported to the IRS and other taxing authorities.
The Foundation also must comply with the Montana Uniform Prudent Management of Institutional Funds Act. The law states that, in addition to prudent investment strategies, the Foundation must consider the expected tax consequences of investment decisions, if any. That is, the Foundation is expected to use lawful best practices to minimize taxes and maximize the funds available to support UM’s priorities.
The article states that the Foundation has stock holdings in Gazprom and Petrobras, as well as other fossil fuel companies and tobacco companies. The Foundation has never had direct holdings in any of these companies. As is the case with many institutional investment portfolios, a portion of the Foundation’s portfolio may from time to time be invested in domestic and international index and mutual funds, whose holdings may include such lawfully organized and publicly traded companies. The mutual and index funds the Foundation invests in meet regulatory standards and are in good standing on multiple exchanges around the globe.
The article quotes Thomas Gilbert, who describes alternative investments as “illiquid,” rendering assets inaccessible. While investments in private equity and hedge funds can be less liquid than other investments, the goal of most education-related institutional portfolios is to provide consistent, long-term growth. That consistent growth is maintained by a balance between investment objectives and liquidity needs. The Foundation regularly performs a liquidity analysis on the portfolio to ensure support for the University endures during downturns in the market.
The intent of the Foundation’s investment portfolio is to provide perpetual support to UM. Hundreds of donors have established endowed funds for scholarships, programs, chairs, professorships and many other purposes. Today, the Foundation’s endowment includes approximately 900 individual funds, each used in accordance with the donor’s wishes.
Over the past 10 years, through the generosity of donors and sound investment practice, the portfolio has provided more than $60 million in support for the university’s students, faculty and staff. Last year the Foundation was proud to provide scholarships to more than 2,000 UM students.