Within hours, the post was screenshotted and shared among some of MSU’s top financial and PR administrators, according to copies of the emails obtained by The State News through a public records request.

The controversial investment was news to them.

MSU’s vice president and chief financial officer, Lisa Frace, said the post was the first she had heard about the Israeli bond.

“We hire investment managers to manage our portfolio based on certain criteria,” she wrote in a Dec. 8, 2023 email to colleagues. “I wasn’t aware that this particular issue had become a part of the bond portfolio until (the Instagram post.)"

For months, student activists have demanded that MSU pull out of its investments in the Israeli bond and stock portfolios. They’ve done so through protest, meetings with university leaders, and most recently, a student government resolution passed with overwhelming support last night. 

They’ve gained some traction. Earlier this month, MSU’s board said it would review the university’s portfolio in response to the advocacy.

But, even if MSU wanted to act on their demands, a complex web of outside asset managers and contractually-bound investments would put the university in a bind — without much control over its own endowment.

The structure is the norm for modern universities, experts say. But, not exactly ideal.

Constraints in place

Student activists have publicly raised issues with the following investments:

• A $236,114 U.S. Treasury bond that gives aid to the state of Israel
• About $600 million in private portfolios from the firms Lockheed Martin, Northrop Gruman, Boeing, Black Rock and BNY Mellon, which the students say fund weapons manufacturing 

MSU pulling out of the Israeli bond would be “chaotic,” Assistant Vice President of Financial Management Jeff Rayis said.

The bond was purchased by one of MSU’s investment managers in March 2023, and the university does “not selectively alter portfolios of investment managers,” Rayis said.

The bond does not directly support Israel’s military, Rayis said. It was issued under a 2003 appropriations act that mandated the funds be used to refinance Israel’s debt and not for military purposes.

As for the stock investments, MSU wouldn't say if the portfolios included weapons manufacturers. MSU also wouldn't say if the direct investments in weapons companies were controlled by asset managers.

It is possible for the portfolios to contain weapons manufacturers at any given time as many of the funds are stock indexes, the compositions of which are out of MSU’s control, Rayis said.

The university does provide its investment managers with criteria for its investments, but it’s purely fiduciary, Rayis said.

“We don’t select them with a political component, it doesn’t exist in the criteria,” he said. “We want entities that are watching over money that are great performers and will develop returns for MSU.”

Rayis said other universities have “gotten in trouble when they’ve wavered from that.”

MSU asked its asset managers if other institutions have requested modifications to their portfolios in light of calls from divestment from Israel. The managers said that no institutions had, Rayis said.

Palestinian student activist Saba Saed has been advocating for the proposed divestment for months and said she’s heard little in response from MSU.

The role of asset managers and MSU’s supposed lack of control over them was news to her.

“We have not heard that,” Saed said. “They haven’t even given us the time of day to give us that excuse.”

Students demand divestment

The Associated Students of MSU, MSU’s student government, passed a bill Thursday night calling for the university to pull out of the relevant investments. The bill passed with the support of all present with the exception of one member, who abstained. 

Representatives from MSU’s Jewish Student Union, which had previously voiced opposition to the bill, weren’t present for the formal discussion.

They left in protest during the public comment section at the start of the meeting, saying the bill was antisemitic and that they did not want to be subjected to hateful rhetoric during the debate of the bill.

Before they left however, political theory and constitutional democracy Senior Joe Nordan, a member of the group, spoke in opposition to the bill.

Nordan said it’s part of a larger Boycott, Divestment, and Sanctions, or BDS, movement that he believes aims to “economically strangle,” “isolate” and ultimately “end” Israel.

“(The bill) is not intended to achieve results, but to vilify, demonize and ostracize Jewish students with a strong connection to the State of Israel,” he said.

The Anti Defamation League, an anti-hate group that was founded, in part, to combat anti-semitism, has described BDS as a campaign aimed at “delegitimizing and pressuring Israel'' by isolating Israelis and Jews who “support Israel’s right to exist” through diplomatic, financial, professional, cultural and academic means.

BDS describes itself as “working to end international support for Israel's oppression of Palestinians and pressure Israel to comply with international law.”

Arts and humanities senior Alissa Hakim said the bill doesn’t explicitly mention BDS.

Saed said at the meeting that the bill isn’t a stance one way or another, rather a way to ensure neutrality in the Israel-Hamas war.

“To remain neutral and non-partisan, it's either we're investing in both or we're not investing in either,” Saed said. “As some public comments have said, why are we in international affairs?”

Saed said some opponents of the bill were mischaracterizing it as political, and urged them to read it.

“If you personally think it's political calling for divestment from weapon manufacturing, then I'm not sure what to say after that,” she said.

A similar resolution is being discussed by MSU’s steering committee — an advisory body with students and faculty — at their meeting next month, they announced at their last meeting.

MSU’s faculty senate will also consider a divestment resolution at their meeting Tuesday, ASMSU President Emily Hoyumpa said.

MSU’s response is more of the same, students say

MSU gave the same response during a recent effort to lobby the university to divest from an $88 million portfolio of oil and gas investments.

University leaders argued that pulling out of the investments would lead to breach of contract litigation with the fossil fuel firms and the asset managers responsible for the investments.

Comparative cultures and politics Junior Jesse Estrada-White — a student activist involved in both the fossil fuel divestment efforts and the ASMSU bill — said he didn’t buy MSU’s argument then and still doesn’t now.

“It’s their policy to sell the endowment away to these 'asset managers',” he said. “That’s why we’re in this, because the board chose that their policy is going to be to sell it to these managers.”

Even if it’s impossible to pull out of the current investments, the university’s hands aren’t truly tied, Estrada-White said.

He would like to see some sort of statement or formal commitment from MSU’s board, promising to revise the endowment strategy when the current agreements expire.

Estrada-White and the other student organizers are asking for the same thing he and his fellow anti-fossil fuel organizers demanded a year ago: broader input on the investment process.

MSU’s investment policy is set by a committee of board members, administrators and professional financial advisors.

Estrada-White said advocates would like to see that expanded to include more stakeholders.

“Students, faculty, staff, and the people living in the Lansing area have zero say in these decisions,” he said.

That lack of community input is common for modern university endowments, James Finkelstein, a George Mason University research professor who studies endowments, said.

“There is very little transparency in the way endowments are managed today,” Finkelstein said.

Divestment before, under different circumstances

In 1978, MSU became the first major university in the nation to divest from Apartheid South Africa.

Organizers have said that successful effort serves as inspiration for their efforts and proof that divestment is possible. The ASMSU bill cites the South Africa divestment as relevant precedent.

The tools with which modern endowments are managed however — asset managers controlling complex portfolios — weren’t common during the era of South Africa divestment, Finklestein said.

“The investment world has changed dramatically since the days of apartheid,” he said. “The different kinds of instruments and structures that are available for investment are radically different today than they were 40 years ago.”

A new era, no control

During that era, many major universities employed staffers tasked with manually managing their endowments, Georges Dyer, executive director of the Intentional Endowments Network, a non-profit that advises universities on endowment reform, said.

That greater control allowed universities to make ethical and political considerations with their endowments in addition to fiduciary ones, Dyer said.

Over time, that model became impractical as investments and the market became more complex, leading major universities to switch to the modern system of asset management, Dyer said.

It would be hard for a university to justify switching back to full control over its endowment, Dyer said, because asset managers promise a “deeper level of expertise in more sectors of the market” than one team at a single university would be capable of.

There are some recent examples of universities pulling out of investments after student protest, but only under limited circumstances.

It’s becoming clear that “climate impacts will erode the value of holdings in those portfolios,” Dyer said. That's a justification universities and investors have been willing to make.

“It’s not like it’s impossible or totally banned to take an ethical stance rather than a fiduciary stance,” he said. “It’s just a different thing to consider.”

Geopolitical issues though, like the conflict in Israel, are more complex and faster changing, making divestment more complicated, Dyer said.

“When it comes to situations like a war or a conflict, there are reasonable, smart, passionate people on multiple sides,” he said. “It’s not as clear as an issue like climate."