Statement on Investments
May 31, 2018
Re: Missoulian article, "University of Montana Foundation invested more than $30 million in offshore funds" (May 29, 2018)
The recent article in the Missoulian about the University of Montana Foundation’s investments, reprinted from UM’s student newspaper, the Montana Kaimin, is inaccurate and misleading in several places. The UM Foundation invests using standard practices, pays applicable taxes, and abides by state and federal laws. We are committed to setting the record straight and providing the facts for your readers.
The Foundation’s mission is to inspire philanthropic support to enhance excellence and opportunity at the University of Montana.
The Foundation’s investment objective is to generate real rates of return over the long term that result in the capital appreciation necessary to provide consistent support for UM’s students, faculty and staff 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 prior to any investment commitments.
The article inaccurately implied that the Foundation had used offshore accounts to “dodge” 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 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 regarding the management and investment of institutional funds. 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 implies that the Foundation had direct stock holdings in Gazprom and Petrobras, as well as other fossil fuel companies and tobacco companies. That is not the case. As is the case with many institutional investors, a portion of the Foundation’s portfolio may from time to time be invested in domestic and international index and mutual funds. The Foundation owned shares of index or mutual funds which may have been invested in these companies. The Foundation has never had direct holdings in any of these 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 also suggests that the Foundation’s investments are 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 the students, faculty and staff of the University of Montana. Over the years, 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 ten years, through the generosity of donors and sound investment practice, the portfolio has provided more than $60M in support for the University’s students, faculty and staff in the form of scholarships and academic support. Last year the Foundation was proud to provide scholarships to more than 2,000 UM students.
The Foundation encourages readers to review audited financial statements at supportum.org/FinancialNews, governing documents at supportum.org/aboutus or contact the Foundation for copies of these documents.
President & CEO
Chief Finance & Operations Officer
Acting Board Chair