Higher Ed Hypocrisy: University Investments in Cayman Island “Blocker Corporations”

Today’s New York Times features a shocking expose of large university foundations. Indiana University is prominently featured, as are other schools. The problem? These multi-billion dollar funds are invested in locations such as the Cayman Islands.

When universities invest in stocks and bonds, gains are tax-free. But these mega-funds have tax exposure when they invest in hedge funds, and exotic LLCs and partnerships.

To boil this down, university fund managers use “blocker corporations” in these tax havens to avoid tax consequences.

This is legal—but also at sharp odds with the high-minded principles that unite schools as diverse as Indiana, TCU, Duke, Stanford, Colgate, Columbia, and Dartmouth (all mentioned in the NYT).

This “dark information” came to light in a massive leak of confidential investor files owned and maintained by a major tax-haven firm in Bermuda, Appleby.

Here is a specific example of higher ed hypocrisy (quoting the NYT):

“The Appleby records show that investment funds of Columbia and Duke, both ranked in the top 20 endowments, held shares as recently as 2015 in Ferrous Resources, registered in the Isle of Man. Its primary business is iron mining in Brazil.

The company drew criticism there with a planned 480 kilometer pipeline to transport iron slurry from a mine in Minas Gerais to a port.

A 2010 environmental study of the pipeline revealed that more than 110,000 people might be affected by noise, dust, soil degradation and water quality issues.”