In the wake of a years-long economic crisis in Puerto Rico, wealthy individuals and businesses have profited from the island’s debt and the crushing poverty of its people. But did you know that universities have also cashed in as well? At least we know for sure that one prominent university has. A group of activists have been organizing at Yale University to hold the institution accountable for the Puerto Rican bonds it has in its investment portfolio. They released findings on Tuesday calling for the university to be transparent about its holdings related to Puerto Rican debt, divest from them completely and to take up the cause of economic justice on the island.
A coalition of activists uncovered late last year that Yale University’s $27.2 billion endowment had a direct investment in Puerto Rican debt instruments through a Cayman Islands-registered shell corporation. It is believed to be the first documented proof of a university endowment holding Puerto Rican bonds directly in its portfolio. [...]
Yale’s endowment still has hundreds of millions in the care of at least four hedge fund managers that carry Puerto Rican bonds among their investments. In addition, Yale’s top alumni donor, Charles Johnson, is the retired board chair and largest shareholder in Franklin Resources, which holds $1.8 billion in Puerto Rican debt.
The group of organizers believe that Yale is uniquely positioned to be a guiding force in urging the United States government and banks to cancel Puerto Rico’s debt. With all of the clout behind the university’s name and its vast resources, it could easily challenge the status quo and motivate stakeholders to act. That, of course, would require a willingness for its leadership to do so and the belief that canceling the debt is a moral and just thing to do. And sadly, especially since money is at stake, that seems unlikely.
“The undersigned organizations urge you to provide leadership in relieving Puerto Rico’s unsustainable public debt burden,” reads a letter sent to Yale Chief Investment Officer David Swensen. [...]
The letter to Yale chief investment officer Swensen makes the following three demands:
- Immediately disclose all Yale endowment holdings in Puerto Rican debt
- Cancel all Puerto Rican debt held as Yale and Franklin assets
- Write to other investment managers like Baupost LLC’s Seth Klarman and other universities urging them to cancel Puerto Rico’s debt
Apparently, this is not the first time that Yale has made money off of debt in places where people and local government are struggling. This isn’t particularly surprising. After all, the debt business is good profit and smart business for some—especially if you aren’t the one who is hurting.
Yale has previously enjoyed profits from distressed government debt. Bracebridge Capital, a secretive hedge fund in which Yale has staked over $1 billion in capital, was paid $1.15 billion after a 15-year battle over Argentinian debt, earning a 952 percent return on its initial investment. Yale itself made $300 million in profit on the Bracebridge deal in Argentina, a 660 percent return, according to the Yale graduate employee union’s research.
Making profit to keep an institution running is important. But Yale is well-funded and could likely get millions without profiting off the misery and colonization in Puerto Rico. What message does it send to Yale’s students that the university would continue to invest in the suffering and financial devastation of entire communities and countries? Likewise, what message does it send to the Puerto Rican community in Connecticut, the state where Yale is located and where nearly 10 percent of the population is of Puerto Rican descent? Looks like Yale is willing to sacrifice marginalized lives for money and prestige. Shouldn’t we expect more of one of the world’s most elite institutions? Maybe not. But holding them accountable for their investments is a good start.