Earlier this week, the Gannett news organization in Tennessee put out a story across the state implying that the University of Tennessee lobbied for “secrecy laws” to be able to “hide” investments housed outside the U.S., specifically in the Cayman Islands. Our team believes that our UT Advocates deserve the facts that unfortunately did not get reported related to our legislative activity and investment practices of Tennessee state government and UT.
For decades, the State of Tennessee has invested in various funds and markets throughout the world, including the Cayman Islands. This is not uncommon for public and private universities, non-profits, or state and municipal governments. Since 2010, the State of Tennessee Consolidated Retirement System (TCRS) has benefitted from legislation that provided an exception to open records that protect the investment analysis and strategies undertaken by fund managers to maximize return on state employee retirement funds.
In 2017, the University requested that it be able to benefit from the same provision in maximizing its investments of private donor gifts. This would not include state appropriated tax dollars or tuition. The legislation contains a provision, authored by the University, that requires public institutions of higher education to disclose the name of the alternative investments, the name of the investment manager, and the amount invested, as well as the fiscal year-end value of these investments.
The University’s Government Relations team was asked in mid-February 2017 if it might be possible to secure such a legislative provision as was given to TCRS. Given that the bill-filing deadline had passed, our team identified a caption bill and approached its sponsors about including such a provision in their legislation. The case was made not only to the bill sponsors, but also the respective Education Committees, the State Treasurer, and the legislation ultimately passed with the knowledge of all these entities including the State Comptroller and was signed into law by the Governor.
Although concerns have been raised by the Tennessee Open Government Coalition in recent days, at no time during the legislative process did they raise concern with the University, the bill sponsors, or in Committee testimony.
Clarification: In discussing this issue with the Executive Director of the Coalition of Open Government, we have since learned that the organization was not aware of the legislation.
Important facts to know are:
- The State of Tennessee, a number of other state governments, municipalities, non-profits, and universities legally and regularly participate in investment funds located throughout the U.S. and the world. The UT endowment follows the same best practices as virtually all other major university endowments.
- In 2010, legislation was passed that ensured the State had access to the best investment funds available by protecting proprietary information related to investment funds of the state’s retirement system. Some of the most successful funds are hesitant to do business with an entity that cannot provide confidentiality for proprietary information.
- In 2017, the University of Tennessee asked for the same provision to cover alternative investments of all public higher education institutions, so that public higher education institutions would not be precluded from participating in the highest-performing funds.
- The 2017 legislation only affects investments made with private gifts to UT. It does not apply to tax dollars or tuition revenues provided to the University.
- The 2017 legislation, authored by UT, contains a built-in accountability provision that was not cited in any news article. The provision allows total and complete access to these records by the legislature, the State Comptroller and Treasurer, and any other government agency performing an official function.
- The endowment is invested with regulated, registered investment managers. A list of these investments is available online here: https://treasurer.tennessee.edu/reports/
- Every fiscal year, the entire endowment undergoes an audit by the State Comptroller. Part of that process includes verification of each individual fund’s value and audited financial statements.
As advocates of the University of Tennessee, we appreciate your support and trust of our efforts to advance the UT System. Please feel free to share this information with friends and other advocates that may be interested.
As always, thank you for your continued support of the University of Tennessee.