The University of Michigan, lauded as one of the world’s best public universities, has an endowment now worth nearly $11 billion. University officials have invested a good chunk of that endowment in hundreds of private funds across the world. A Free Press investigation found a common trait among many of those who have benefited: top university donors and alumni investment advisors who run private equity, hedge and venture capital funds and real estate investment firms. Reporters Matt Dolan and David Jesse spent more than a year researching the endowment structure and reporting on conflicts of interest and questionable investment practices in putting together this series. In just the month since publication, there have been public demonstrations by student and faculty groups demanding reforms and more transparency by the university.
What makes this project innovative?
What was the impact of your project? How did you measure it?
Source and methodology
It started with a request from a top University of Michigan administrator and ended more than two years later with a complex data analysis by the Detroit Free Press of nearly 800 financial transactions.
The result of that journey can be found in a series of stories examining the University of Michigan's endowment.
In July 2015, U-M Chief Financial Officer Kevin Hegarty asked university regents whether they would be willing change their rules to allow him to make an initial endowment investment into a fund without board approval.
He promised the quick turnaround would be used sparingly and he would seek the regents' approval retroactively at the next meeting. The board unanimously approved the change.
Part of the reason behind Hegarty's request? A donor had called the university with an urgent investment opportunity.
That sparked our curiosity: How many people who donate to U-M receive university investments in their companies?
To explore the query in a systematic way, we pored over thousands of pages of U-M's records — online and in archives — to create a database of every published investment made by U-M since 1998.
We examined social networks and company websites to research key executives at each company that received a U-M investment.
Then we searched public records showing identifiable donors — though many are hidden because they are listed as anonymous — and their contribution amounts. The idea was to identify which investment funds were run by company executives who had donated to U-M.
Once the database was constructed, we used computer-assisted analysis to find trends and patterns in how and where the university invests it money.
We also asked two economists who study higher education finance for their analysis of how much U-M paid out every year from its endowment. They included projections of how much more money the university could spend on issues such as financial aid if it were to boost its endowment spending rate.
With dozens of reporters from the USA TODAY Network and the results of a congressional probe into private university endowments, we surveyed nearly 100 public and private colleges and universities to find key details on endowments and their spending rates.
We also spoke to investment professionals, policy experts, congressional committee staffers and U-M students, along with current and former U-M administrators and board members.
The connections between U-M donors and the university endowment turned out to be pervasive.
Executives at some of the nation's top investment firms donated hundreds of millions of dollars to Michigan while the university invested as much as $4 billion in those companies' funds, a Free Press investigation found.
More than $400 million of that amount was sent into funds managed by three alumni who advise the university on its investments.
Presented with our findings, many experts said they worry Michigan’s approach of investing with some of its top donors, who also help guide the university's nearly $11-billion endowment, creates a conflict.
Investigations Editor Jim Schaefer
Web Developer Brian McNamara