Bailout

Harvard isn?t divesting from Israel

By Felix Salmon

The noise surrounding a perceived rotation out of Israeli stocks by the Harvard endowment is really rather hilarious. Benjamin Joffe-Walt has managed to amass a whole sequence of quotes from people who have no idea what they’re talking about: one person is calling on “all academic institutions in the US” to follow Harvard’s lead and “divest from Israeli war crimes”; a second claims Harvard “still have tens of millions of dollars invested”; and a third comes up with the convoluted explanation* that it’s all to do with the fact that Morgan Stanley no longer considers Israel to be an emerging market:

?There are some funds which invest only in emerging markets,? continued Heen, the Cellcom CFO. ?So Harvard had to sell our stock because Israel is no longer classified as an emerging market and they no longer have the ability to hold this stock within the emerging markets fund.?

Needless to say, university endowments, more than any other investors, are entirely unconstrained by such concerns.

The fact is that the Israeli holdings itemized in Harvard’s 13-F only added up to $41 million in the first place, or about 0.15% of Harvard’s total endowment. But it’s all pretty meaningless anyway, since the 13-F itself only accounts for a small fraction of the endowment’s total exposure.

The chances of this move being at all politically motivated are remote: the most recent concerted attempt that Joe Weisenthal can find to get Harvard to divest from Israel dates all the way back to 2002. And I’m sure that if you looked at all endowment 13-Fs on a quarterly basis, you’d find that every quarter a pretty large number of endowments will turn out to have sold out of some small market or other. It’s just that by sheer coincidence, this time it’s the two big hot-button names, Harvard and Israel, and hence there’s lots of headlines.

Next quarter, or the one after that, a few Israeli holdings are bound to reappear in Harvard’s 13-F. I wonder whether anybody will notice that.

*Update: The explanation might be convoluted and implausible, but according to a statement from Harvard, it also seems to be true!

The University has not divested from Israel. Israel was moved from the MSCI, our benchmark in emerging markets, to the EAFE index in May due to its successful growth.

Our emerging markets holdings were rebalanced accordingly. We have holdings in developed markets, including Israel, through outside managers in commingled accounts and indexes, which are not reported in the filing in question.

For some reason, it seems that Harvard’s EM holdings get itemized in its 13-F, while its EAFE holdings are run through external managers and don’t get itemized. No big story here.

Full post as published by Macroprudential on August 16, 2010 (boomark / email).