Approved by Council on 1 November 2021.
This document refers to the University of Oxford’s investments. The colleges are separate independent legal entities and have their own investments and investment policies.
University of Oxford’s endowment
The Chancellors, Masters and Scholars of the University of Oxford (‘the University’) has a variety of investments which support its financial objective. This objective is to provide long term resources to strengthen and further its pre-eminent position – nationally and internationally – as a place of outstanding learning, teaching, and research; and to enable it to provide additional support to its three core priorities of students, academic posts, and buildings.
Since its very beginning, the University has relied on philanthropic support to advance its mission and to sustain academic freedom. Over the centuries, many buildings, institutions, teaching posts, research posts and scholarships have been funded by the generosity of donors. These gifts are often endowment gifts – charitable funds held on trust to be used for the specific benefit of the University (further information is found here: Oxford University Trusts). The University also benefits from investment assets resulting from current philanthropy and innovative fundraising.
2. Governance structure
2.1 University Council
Council is the trustee of the University’s investments and it is bound by its fiduciary duties to ensure that investments are managed in accordance with the University’s charitable objectives. The University holds a large amount of funds on trust to be applied for specific purposes narrower than the University’s general purposes of teaching and research – for example for professorial chairs, lectureship posts, scholarship schemes, student bursaries, and academic prizes. As trustee, the University, acting through Council, has ultimate responsibility for these trust funds and their administration.
Council delegates the strategic oversight and supervision of its investments to the Investment Committee; except where investments are the responsibility of the Finance Committee or other bodies; and those held by Societies or Oxford University Press (OUP). Council’s key responsibilities are to set suitable investment objectives and, where relevant, distribution policies, as advised by the Investment Committee.
2.2 Investment Committee
The Investment Committee is responsible for supervising the management of the University of Oxford’s investment assets, as delegated to it. Full details of the Investment Committee’s responsibilities and membership can be found in Council Regulations 15 of 2002, Part 23: The Investment Committee.
There are two sub-committees of the Investment Committee: the Valuation Committee and the Ethical Investment Representations Review Subcommittee (EIRRS). EIRRS shall consider representations concerning ethical or socially responsible investment relating to the Investment Policy Statement.
For avoidance of doubt, the Investment Committee is not a regulated entity. It sets policies and guidelines but does not make individual investment decisions. Oxford University Endowment Management is the discretionary investment manager of the Oxford Endowment Fund and the University’s Capital Account.
2.3 Oxford University Endowment Management
OU Endowment Management (OUem) is a commercial operating subsidiary of the University of Oxford. OUem is authorised and regulated by the Financial Conduct Authority and is an Alternative Investment Fund Manager under the Alternative Investment Fund Managers Directive (AIFMD). OUem has a Board of Directors and two sub committees for Audit and Risk Management and Remuneration. Details on OUem including the team and its investment approach are available at www.ouem.co.uk.
3. Investment Policy
3.1 Investment objectives and distribution policy
The University does not have one pool of investment assets; instead, it chooses to manage specific pools of capital according to their time horizon, risk tolerance and liquidity requirements. In doing so it separates perpetuity capital from that which has a requirement to be drawn down more regularly. The University invests its perpetuity capital in the Oxford Endowment Fund and maintains a separate account for its expendable capital.
3.1.1. Expendable Capital
For this pool of capital, the University chooses to focus on maximum liquidity and low volatility, in order to be able to access a reasonably known sum at the time it is required to be spent. The University has set a specific investment objective of 2.5% nominal per annum over time, with annual volatility managed between 4%-6% per annum. The University chooses to implement this by investing in an account managed solely for the University by OUem, called the Capital Account.
3.1.2. Perpetuity Capital
The University aims to preserve and grow the value of its perpetuity capital, while providing a sustainable income stream to fund charitable activities.
In order to implement this objective, the University owns units in the Oxford Endowment Fund, managed by OUem. This is an investment vehicle where the University, some members of the collegiate University, and a small number of select external UK charities, have pooled their perpetuity capital to gain the scale and expertise of a dedicated investment approach. Details on asset allocation and investment strategy are available.
The specific investment objective of the Oxford Endowment Fund is to grow by an average of 5% per annum, in real terms, and to achieve this at a lower volatility than would be experienced by investing solely in public equity markets. The fund provides an annual distribution which is calculated by taking 4.25% of the rolling average of the last 20 quarters’ NAV, with a floor of the last year’s distribution and a cap of not more than 10% above the previous year’s distribution.
3.2.1. Investment time horizon
The University is committed to ensuring that its endowment is managed sustainably and with integrity, to benefit both current beneficiaries and future generations. In order to facilitate this, the University has chosen to establish its own investment manager, Oxford University Endowment Management (OUem), with a business model that enables investments to be made over its exceptionally long-time horizon.
The importance of managing charitable assets in a sustainable manner is deeply ingrained in OUem’s company culture and investment philosophy. Incorporating environmental, social and governance (ESG) factors into the investment process is a key risk management tool, rather than a separate activity. Further information on OUem’s approach to ESG Risk Management is available.
3.2.2. Sustainability member of the Investment Committee
The Investment Committee has one member appointed, by Council (who may be internal or external), to have recent and relevant expertise in investment management, as well as recent and relevant expertise in environmentally-conscious investment, to review and engage with progress on divestment and engagement. They report to the Chair of the Investment Committee and their role is strategic oversight of environmental sustainability, including, but not limited to, reviewing compliance with specific ethical restrictions and progress on net zero targets.
3.2.3. Engagement on Net Zero and Biodiversity Net Gain
The University is committed to ensuring its investments are part of an integrated approach to achieving net zero Greenhouse Gas emissions and biodiversity net gain by 2035, in line with broader sustainability targets across the University. As set out in Section 2 on Governance, the University’s Council delegates the strategic oversight and supervision of its investments to the Investment Committee. To fulfil the 2020 University Congregation resolution regarding net zero engagement and fossil fuel divestment, the Investment Committee requires the University’s endowment managers (OUem) to actively engage with fund managers per the Oxford Martin Principles for Climate-Conscious Investment to request evidence of net zero business plans across Oxford’s entire portfolio of investments, including but not limited to fossil fuel companies. The Investment Committee notes the long term nature of planning for net zero, and that this request will be best efforts, given the governance and legal structures that OUem operates within. The Investment Committee also requires the University’s endowment managers (OUem) to review annually any remaining fossil fuel investments for Paris- and IPCC-aligned, hard net zero plans, and requests that the University’s endowment managers (OUem) communicate a restriction on any fossil fuel companies which fail to meet that standard to all fund managers, and review and reallocate investments as appropriate. Section 3.2.6 outlines how the Investment Committee reports on the above.
The University recognises the importance of engagement to identify, avoid and reduce, where applicable, investments’ impact on biodiversity over the long term. To help achieve biodiversity net gain, the University supports the Taskforce on Nature-related Financial Disclosures, a framework for organisations to report and act on evolving nature-related risks.
Rather than invest in individual companies, the University owns units in the Oxford Endowment Fund or, for the Capital Account, it owns units in pooled vehicles or may have segregated accounts. On the occasions where the University or OUem, on the University’s behalf, retains voting rights for an investment through direct ownership, these will be enacted in full and summarised in annual reporting.
3.2.5. Ethical Investment Restrictions
The University has chosen at various instances to place restrictions on sectors in which it will not hold investments on ethical grounds:
- Direct investment in companies which manufacture arms that are illegal under the Munitions (Prohibitions) Act 2010 or the Landmines Act 1998.
- Direct investments in tobacco companies (as defined by UK Cancer Research).
- Direct investment in any fossil fuel exploration and extraction companies, including: coal, oil and gas exploration and extraction; in addition to a ban on thermal coal and oil sands.
- Investment in funds which invest primarily in the above listed categories of company.
In 2020, University Congregation passed a resolution regarding fossil fuel divestment and net zero. This resolution included aspects of policy, implementation and reporting. These require the Investment Committee to report to Council annually in a public document on the following: compliance with specific ethical restrictions and divestment, engagement and progress towards net zero targets, with reference to University research when appropriate, and an annual review of any remaining fossil fuel investments for evidence of Paris- and IPCC-aligned hard net zero plans. The Investment Committee will also provide an update on OUem’s progress on communicating a restriction to fund managers which may hold fossil fuel companies. The Committee also requires OUem to report on their actions in the event a fund manager continues to own fossil fuel companies which do not have a net zero plan. This is reported alongside an overview of sustainability and was made available following the June 2021 Council meeting.