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Response to Investment Policy Referendum

Fellow Members of the Swarthmore Community:

During my term as Chair of the Board of Managers, I will look for ways for Managers and other members of the community including faculty, staff, students, and alumni, to come together to discuss and exchange views on topics of importance to all of us.  

It is important that as a community we are able to listen to each other’s views and find both the places where we agree and those where we might differ and do so respectfully. I respect the conviction of those who believe that the College should change the way the endowment is managed. I have spent time with some of the faculty and students who fasted as a way of showing their deep conviction, and I admire their resolve. However, the Board must consider our broader mission in determining any action that would potentially limit the performance of the endowment on which we are increasingly reliant.

At the last meeting of the Board of Managers, President Val Smith presented the results of a recent student referendum which advocated for a change in the policy of the Board which instructs the Investment Committee to manage the endowment to yield the best long term financial results, rather than to pursue other social objectives. The Board also received a letter from some faculty and staff members in support of that referendum.

While the referendum suggested that this policy dated back to 1991, in fact it was reaffirmed in 2013 and as recently as 2015 after considerable deliberation by the Board. In that deliberation, the Board considered its responsibility to be financial stewards of the College and to take a long term view to ensure we are able to pursue our mission as an educational institution. The endowment on which we rely for the majority of our funding comprises gifts from past donors who also believed in our mission and the importance of our educational leadership. The Board must consider any policy changes carefully, such as what was proposed, in light of how it could impact that mission.

The Board has many important issues to focus on consistent with its duty to advance the mission of the College, including maintaining our educational leadership, providing  financial access to all students on a need-blind basis, and ensuring that our facilities support the academic pursuits of our faculty and students. We are also committed to providing competitive faculty and staff compensation and generous benefits. Our goals are very clear, but they are also increasingly costly. For example, in the last five years alone, the cost of financial aid has grown by over 50%, increasing from $29.2 million to $45.6 million. If you look around campus, you will see construction projects, which, while also expensive, will result in new as well as upgraded academic, residential, and social spaces for our community.  

The College relies heavily on the endowment and that dependency has grown over time. When the original investment policy was put in place in 1991, the endowment was $343 million and in that year provided the college with $15 million, representing 31% of the total budget. Today, the endowment is over $2 billion and will fund the college in the 2018-19 academic year over $95 million, representing 55% of the budget. It dwarfs all other income sources for the College, and there is no identifiable replacement for those funds.

The Swarthmore College endowment has been among the top performing college and university endowments in the country. This performance has benefited from the asset allocation determined by the Investment Committee and the selection of investment firms managing both public and private investments who are among the best in their respective areas. The complexity of the portfolio has also increased over time. In 1991, there were eight investment firms managing the endowment of which all were in separately managed accounts. Today, there are over 100 investment firms managing the endowment and all but one have commingled funds.  The stellar performance has allowed the endowment to grow at the pace it has and, correspondingly, increase the budget of the college to pursue initiatives that are core to our mission. Any policy change that shifts the focus from attaining the best long term financial results would then require fundamental changes in both the asset allocation and the investment managers who serve the College, and would place that performance at risk. As with other policies of the Board, it may be revisited from time to time, but there is no current plan to do so.

The fact that the Board of Managers is not changing its investment policy does not in any way mean that we are not concerned about climate change and its impact on our society. Swarthmore has a deep and longstanding commitment to sustainability. The commitment to carbon neutrality by 2035 and the introduction of an internal carbon tax are two examples of board-supported initiatives which have made Swarthmore a leader in raising awareness and reducing our own impact on the environment. From an investment standpoint, the Investment Office of the College regularly surveys our external investment managers regarding how they assess climate change in their investment process. And we are not alone in asking these questions of our investment managers and through them to the underlying companies in their portfolios. Increasingly, companies are being pushed by investors to change business models and account for climate science.

I have always believed that Swarthmore can and should model for others what it means to be a community with deep convictions about improving the world around us, recognizing that we may not always agree on the path to do so.  It is in the nature of that dialogue and exchange of views that we evidence our respect for each other and our shared values.


Salem D. Shuchman ‘84

Chair, Board of Managers

Swarthmore College

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