Boris Tsang / Sun Staff Photographer

S.A. members discuss divestment resolution.

February 9, 2018

S.A. Tables Resolution Calling for Cornell to Investigate Possible Puerto Rican Debt Holdings

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Cornell’s Student Assembly tabled a resolution on Thursday night that would have called on the University to investigate its investments and withdraw any money it may have invested in Puerto Rican debt bonds.

It’s unclear if Cornell has any money invested in the bonds. Hundreds of students at Harvard and Yale protested their universities’ investment in The Baupost Group, a hedge fund run by Seth Klarman ’79, for whom Klarman Hall is named. The group reportedly manages a hedge fund that owns nearly $1 billion in Puerto Rican debt.

Zachary Schmetterer ’18, the S.A. parliamentarian, said Cornell appears to invest in The Baupost Group. He cited a report by Preqin, a company that reports on investment groups, that listed the Boston-based group under Cornell’s “Fund Manager Relationships.”

The drafted resolution called for Cornell to investigate and terminate any financial commitments it may have to Puerto Rican debt holdings.

The Assembly voted to table the vote until next Thursday’s meeting, when its members hope to summon an administrator to explain the University’s response in the event that the Assembly passes the resolution.

“Allowing an investment partner to engage in a speculative activity with donated money is irresponsible,” Schmetterer said. “On the Puerto Rican side, this also indirectly harms the island’s rebuilding efforts.”

Rahul Mukherjee ’20, president of Cornell Impact Investing, an undergraduate private equity club, argued that the debt obligations held by Baupost exacerbate a humanitarian disaster in a country already devastated by Hurricane Maria.

“Baupost group claims about approximately $930 million in bonds issued by Puerto Rico as of January 2018,” Mukherjee said. “This debt is structured to be paid back [using] funds gathered through the sales tax revenue in Puerto Rico, money that is also needed for basic services … and also the economic recovery.”

The resolution also would call on Cornell to “list investment partnerships in their yearly tax filings in terms of both the initial investment amount, the fund’s name, and affiliation.”

“[Cornell] only discloses the numbers of partnerships, and [they] are not named,” Mukherjee said, calling the practice “concerning.” He said Yale, Princeton and Harvard “clearly list their partnerships and investments managed by them.”

In response to activism encouraging Baupost to divest, Klarman said in October that the pressure was “well intentioned” but “impractical.”

Gabe Kaufman ’18, S.A. vice president of finance, said he was concerned that divestment from Baupost may adversely affect the University’s bottom line, which he said may in turn reduce financial aid.

“If we were to invest in something else instead of Baupost, which normally gets a higher rate of return than the average for Cornell, then we could actually see a significant impact on our annual operating budget,” Kaufman said.

“Millions of dollars could just go away,” he added. “That doesn’t outweigh the immorality of investing in this, but I think it’s important to consider that there are real costs, in terms of financial aid that students want that will not happen.”

Christopher Schott ’18, S.A. international student liaison at-large, was skeptical about whether the University would accept the Assembly’s recommendation if it is passed next week, and actually divest from Baupost.

“Even when the University as an entity stresses social issues … sometimes they still have not divested from investment that goes against that cause, even when the entire voice of campus was raised,” Schott said.

A previous S.A. resolution requesting financial transparency of the University’s relationship with the Cornell campus in Qatar was acknowledged by President Martha Pollack but no changes have been implemented.

S.A. president Jung Won Kim ’18 said Pollack “takes the issue seriously” but claimed she cannot disclose the information because of confidentiality agreements.

“Especially in regards to investment and hedge funds and things like that … there may be some confidentiality agreements that prevent them from disclosing something,” Kim said.

Puerto Rico’s government requested a five-year freeze on its debt obligations in January, following Hurricane Maria. The U.S. territory’s request is pending authorization by the Financial Oversight and Management Board for Puerto Rico, which is composed of members appointed by the U.S. government.

In exchange for authorizing the freeze, the Board demanded revisions to the island government’s finances and labor laws, Reuters reported. Christopher Arce ’19, co-president of the Puerto Rican Students Association, said the demand was indicative of the territory’s treatment “as a colony of the United States.”
The Assembly’s resolution is part of a larger local mobilization in support of Puerto Rico and follows a rally at Cornell demanding federal assistance for the island territory, and Cornell is currently hosting 62 students from the University of Puerto Rico who were affected by the hurricane, free of charge.