A May 2024 report issued by the student activist group U of T Occupy for Palestine (O4P) claims that the university is indirectly investing billions of dollars in companies that are profiting from Israel’s military operations in Gaza.
O4P, the student group behind the occupation of Simcoe Hall and the encampment on King’s College Circle, has been calling on U of T to disclose and divest all of its investments in companies contributing to Israel’s military aggression in Gaza. This includes arms manufacturers, automotive manufacturers, and surveillance technology developers.
Here is a breakdown of what O4P’s calls for U of T to “disclose and divest” means for the university.
UTAM — U of T’s investment manager
U of T created the University of Toronto Asset Management Corporation (UTAM) in 2000 to manage the investment of U of T’s endowment, its expendable funds investment pool (EFIP), and — up until 2021 — its pension fund. The endowment consists of money donors give to the university, while the EFIP consists of the university’s “cash for operations, capital projects, [and] ancillary operations.”
As of December 31, 2023, UTAM held approximately $8.2 billion in total assets under its management, with $4.2 billion coming from the endowment and four billion dollars from EFIP.
UTAM follows the “manager of managers” approach in its long-term investments of the university’s endowment portfolio. This means that, rather than directly investing in company securities such as stocks, UTAM allocates the vast majority of its endowment funds to external investment managers. Many of these external managers have hundreds of clients in addition to UTAM, and invest clients’ assets in a broad range of companies—often, but not exclusively, pooling clients’ assets together in these investments.
Rotman School of Management’s Associate Professor of Finance Jan Mahrt-Smith, who also provided O4P guidance on early drafts of the report, told The Varsity in an interview that he believes this investment approach is by design — partially because he sees the use of external managers adding layers of secrecy to UTAM’s investments.
All of the alleged connections between UTAM and O4P’s boycott list are indirect — the external investment managers hold the securities of the listed companies, not UTAM itself. This is what President Meric Gertler referred to in his April 8 statement following O4P’s Simcoe Hall occupation. He wrote that the investment of the university’s endowment “does not hold any direct investments in companies.”
The indirect nature of these investments makes it more difficult to find concrete information on whether these specific companies’ profits circle back directly to UTAM. Mahrt-Smith explained that there is a possibility that, in each of the 17 external investment managers called out by O4P, UTAM’s capital may exist in separate portfolios that are not invested in the companies O4P has called on the university to divest from. These details are not currently available to the public or The Varsity.
A university spokesperson wrote in an email to The Varsity that “to comply with subscription agreements with external investment managers, [UTAM] is restricted from disclosing specific holdings and portfolio shares.”
O4P calls to divest from Lockheed Martin, Google, Palantir Technologies
O4P’s report lists 55 companies in the defense, arms and aerospace sectors that UTAM’s external investment managers are financially connected with. The report stated that at least 17 of UTAM’s 44 external investment managers oversee assets in these companies, according to the US Securities and Exchange Commission 13F filings.
Among these companies is Lockheed Martin, an American aerospace and defense manufacturer that has been heavily involved in Israel’s military action in Gaza by building ‘Hellfire missiles’ and supplying Israel’s military with F-16 and F-35 fighter jets.
O4P’s report also lists 33 companies profiting from Israeli military operations in Gaza, as identified by the American Friends Service Committee, a non-profit organization that researches and opposes the “corporate abuse of human rights.”
This list includes tech developers Alphabet — Google’s parent company — and Palantir Technologies on the grounds that each has continued to cooperate with Israel by supplying artificial intelligence and surveillance technology to the government and military. The report noted that UTAM’s investment managers collectively hold approximately $5.7 billion in Alphabet and $133 million in Palantir Technologies.
What divestment and disclosure would really take
In 2008, U of T’s governing council passed a blanket policy on how university community members can request UTAM to divest from companies on the basis of social and political issues. The policy’s preamble limits valid divestment requests to issues “directly pertinent to higher education and academic research,” and notes that the university will refuse requests that require it to “take sides in ongoing debates.”
The policy cites the Yale University principle of social injury as a viable basis for raising a divestment request. The principle places emphasis on a company’s injurious practices that violate domestic and international law. However, it notes that requests for divestment must identify U of T itself as the one committing injurious actions. The principle does not apply if U of T is simply doing business with a company that is committing socially injurious actions.
“[The policy is] complete garbage and outrageous,” Mahrt-Smith asserted. He claimed that the policy is not binding in any meaningful way, since he argues the council has the authority to change the policy at will. “If the Governing Council decides that this policy is not helpful in the present context, then they rip it up, and things can move very quickly.”
U of T President Meric Gertler affirmed the policy’s authority in an email statement to The Varsity on July 16. “We cannot override our policies and procedures and adopt a pre-determined conclusion guided by only one viewpoint,” he wrote.
Gertler added that, “the protesters have been invited to pursue the process clearly specified in the university’s divestment policy, but they have thus far chosen not to do so, even after the university offered to deploy the policy on an expedited process.”
Notwithstanding the Governing Council’s policy, the process of disclosing and divesting all of UTAM’s indirect investments in O4P’s listed companies would still be long and complicated. Mahrt-Smith explained that subscription agreements between UTAM and its external managers may prohibit UTAM from withdrawing money from a pooled fund for many years or from publishing information on its investment activity.
Paul Downes — a U of T English professor and one of the leaders of Divestment and Beyond campaign — told The Varsity in an interview that he presumes that many of the agreements between UTAM and the external managers are binding for at least a year if not longer. Downes further noted that legal impediments are probably limiting UTAM’s ability to rapidly exit from or nullify these agreements.
This means that UTAM would hypothetically have to wait for these agreements to expire and then renegotiate new contracts with exclusions on the companies outlined in the O4P report in order to address O4P’s demands. As a result, actual divestment and disclosure would be a lengthy process that would take years to complete. “These complex investment structures have succeeded in limiting the impact of divestment movements,” argued Downes.
When The Varsity asked the university to verify Downes’ claims, U of T’s Chief Financial Officer Trevor Rodgers repeated UTAM’s restriction from disclosing information about their holdings. However, he also noted that the university is open to engaging with their investment managers through UTAM to “achieve greater transparency” in how the university reports their holdings, without comprising their “legal obligations” or their “competitive advantage.”
