Rutgers University is refusing to pay some instructors living wages or give its faculty raises that would keep up with inflation — prompting the first-ever strike in the school’s history. At the same time, New Jersey’s state university has continued to plow ever-more funds from its endowment into high-fee investments that are performing poorly.
The Rutgers strike, which began Monday, is over basic issues like wages, job security, and the cost of university-owned housing. Currently nine thousand educators are taking part in the action. New Jersey governor Phil Murphy (D), who appoints members of Rutgers’ Board of Governors, is currently acting as mediator between unions and university management.
The episode underscores the critical role that university endowments are playing in subsidizing the lifestyles of some of the wealthiest people on the planet — at the cost of livable wages for the people who teach students.
The interest from university endowments is used to fund school operations, including educator salaries, as well as designated scholarships and faculty chairs.
Instead, Rutgers has pumped more than $246 million, or 12.6 percent, of its $1.9 billion endowment investments into high-risk, high-fee hedge funds in just the past two years. The amount that the university has invested in hedge funds has more than doubled since 2020, from $213 million to $459 million.
Rutgers’s increase in hedge fund investments comes as other major investors, including the New Jersey state pension fund and the California Public Employees Retirement System, have pulled away from the sector, due to concerns about fees and performance. Hedge fund performance has overall suffered relative to the broader market.
The Rutgers endowment portfolio has massively trailed its peers, according to Markov Processes International, a research firm. In fiscal year 2022, the Rutgers endowment returned -9.7 percent, as opposed to an average of -4.5 percent for its peers. Had Rutgers’ endowment performed at the same rate as the average endowment over just that one year, it would have about $96 million more in its coffers, according to an analysis by us.
Compounding matters, hedge funds charge investors high fees — whether they perform well or not. Hedge funds typically charge a 2 percent commission on assets, plus a 20 percent commission on fund performance. Index funds, by comparison, typically charge a 0.1 to 0.4 percent commission for pension funds.
“Hedge funds have exponentially greater fees, the transparency is significantly less, and the risks are significantly greater,” said Ted Siedle, a former attorney with the Securities and Exchange Commission. “That’s why hedge funds say in their offering documents that they are speculative investments. The performance claims of the hedge fund industry have long been disputed. And the notion that these funds outperform has been discounted.”
While pumping fees to Wall Street, Rutgers management has declined to give its faculty raises that keep up with inflation or provide a living wage to graduate workers and adjunct faculty, according to the union.
The university has also rejected outright unions’ proposal for a $1 million “Beloved Community Fund” that would benefit community members in New Brunswick, New Jersey, countering with a $250,000 fund that would match money raised by unions. Management additionally rejected a $5,000 child care subsidy for graduate students and postdoctoral researchers.
Rutgers investment decisions are made by the chief investment officer, Jason MacDonald, who is supervised by the president of the university. A Rutgers spokesperson did not respond to our requests for comment.