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Quinnipiac University has literally become a household name in recent years. Over the past five years, private universities in Connecticut have poured tens of millions of dollars into offshore hedge funds.
Public tax records show that Quinnipiac has maintained a multimillion-dollar investment portfolio in the Cayman Islands, where generous corporate tax laws allow investors to avoid paying taxes on offshore assets, since at least 2018. It is shown.
Quinnipiac’s latest financial audit valued its hedge fund investments at $48.4 million as of June 2023.
More than a third of those assets ($16.7 million) are owned by Monarch Debt Recovery, one of about 20 hedge funds managed by multibillion-dollar co-investment fund manager Monarch Alternative Capital. It is entrusted to Fund Co., Ltd.
And despite Quinnipiac’s pledge to “achieve results that support the long-term sustainability of our planet,” Monarch Alternative Capital’s filings with the Securities and Exchange Commission show that the company is committed to the fossil fuel industry. and has been shown to fund the tobacco industry.
As of 2019, Monarch held a 4.33% stake in Arch Resources, a $3.2 billion coal mining and processing company, valued at more than $104 million.
Monarch is also the majority shareholder in Pixus International, a $1.6 billion tobacco distribution company. The New York City-based company’s 24.6% stake in Pixus is worth more than $11 million.
And going back to 2018, the first year Quinnipiac disclosed its relationship with Monarch, the company invested more than $90 million in oil and gas acquisition company Resolute Energy and crude oil transportation company Gener8 Maritime. Both companies were subsequently acquired.
“Quinnipiac does not invest directly in fossil fuels and is committed not to invest directly in fossil fuel interests,” John Morgan, vice president of public affairs, said in a statement to the Chronicle on Tuesday.
But by investing in Monarch, the university is counting on the success of Monarch’s portfolio. So while Quinnipiac University may not be investing directly in fossil fuels, the university’s multi-million dollar stake in Monarch’s co-investment ensures it is benefiting from the industry’s success.
“Some commingled funds within our portfolio, which are funds that invest in a wide range of companies and industries, may include fossil fuel interests as part of the fund,” Morgan wrote. “Combined fund investments provide scale, access to leading investment managers, and the ability to grow our endowment to deliver significant improvements to our universities, and are essential to the long-term success of Quinnipiac University and the communities it serves.” It provides great diversification.”
The university disclosed that it had invested an additional $23.7 million in Poynter Offshore II, a Cayman Islands-incorporated hedge fund based in Chattanooga, Tennessee. Unlike Monarch, Poynter’s holdings are private and its investments are not disclosed in SEC filings.
Quinnipiac will invest the remaining $8 million in Ironwood International. Ironwood International is a hedge fund manager with more than $6.8 billion in global assets under management. Ironwood’s headquarters are technically located in San Francisco. However, the company is legally said to operate out of Agland House, a Grand Cayman law firm that serves as the official address for thousands of companies purportedly based in the United States. is registered in. Ironwood’s holdings are not disclosed.
Quinnipiac University’s finances are shrouded in mystery, so much so that the history of the school’s $48.4 million hedge fund portfolio (currently equivalent to what 873 students pay in annual tuition and fees) is unclear at best. It’s unclear.
Publication requirements rarely apply to private institutions. In other words, a university’s financial activities are, in principle, not subject to public oversight.
However, Quinnipiac, like most universities in the United States, is a nonprofit institution. Additionally, even private nonprofit organizations must file annual returns with the Internal Revenue Service to remain exempt from federal income taxes. This tax return, known as Form 990, is one of the few public sources of information about the financial activities of a private nonprofit organization like Quinnipiac.
Compared to public sector disclosure requirements, the 990 is relatively limited in scope and provides only a broad overview of a private company’s finances.
However, as far as offshore hedge funds are concerned, two relevant figures are subject to disclosure: the amount of the institution’s personal investments and the amount of the institution’s foreign investments.
Quinnipiac was forced to disclose its hedge fund investments in 2018 because of a technicality in Form 990 disclosure requirements regarding personal assets, not foreign assets.
For context, the IRS typically requires financial institutions to only disclose the net value of personal investments, not details of their holdings. There is one notable exception. That is, if a financial institution’s private securities constitute more than 5% of its total assets.
Quinnipiac University’s $81.9 million in private investments accounted for 5.2% of its total assets in 2018-19, and the university was forced to disclose that $39.8 million of that was held in three hedge funds in the Cayman Islands. I no longer get it.
Twelve private equity investments accounted for most of the remaining $42.1 million, according to the university’s 2018-19 filing. Ares Management, an alternative investment firm whose board includes Quinnipiac President Judy Orian, acquired Landmark Equity Partners, one of the private equity firms used by the university, in 2021. It is unclear whether Quinnipiac still has an investment in the company.
Quinnipiac’s foreign investment practices are very common in higher education. At least five other Connecticut universities maintain multimillion-dollar hedge fund portfolios: Fairfield University, Sacred Heart University, Trinity College, University of Connecticut, and University of Hartford, according to public tax filings. It turned out that In the 2021-22 fiscal year alone, these six schools disclosed a total of $288.1 million in hedge fund investments.
However, in another section of Quinnipiac’s 2018-19 filing, the university denied foreign investments exceeding $100,000. In fact, during his 10 years when the IRS required organizations to disclose foreign transactions, the university never reported investing any money outside the United States.
Without the IRS’s 5% disclosure standard, Quinnipiac’s offshore investments may never have come to light.
The multimillion-dollar discrepancy casts doubt on the credibility of Quinnipiac’s previous 990 filings.
Put another way, for the university’s old disclosures to be accurate, Quinnipiac would have had to invest all $39.8 million in those offshore hedge funds between July 2018 and June 2019. There shouldn’t have been.
But even Quinnipiac’s own financial statements do not support this hypothesis.
As a case in point, the university’s 2018-2019 990 filing shows that its private securities increased by only $8.9 million over the past 12 months.
And although Quinnipiac’s 2018-19 audit report does not specifically mention the term “hedge fund,” the listed value of one of the university’s so-called “alternative” investments is based on the value of its offshore hedge fund assets. Accurate dollars are accepted. .
Using that logic to trace these assets back, it appears that Quinnipiac held more than $31 million in offshore hedge fund accounts from at least the 2015-16 fiscal year, three years before disclosing these investments.
Quinnipiac University’s recent tax returns are more proactive about the university’s overseas assets than before.
In 2019-20, Quinnipiac’s reported foreign transactions totaled $53.7 million and spanned all IRS-defined geographic regions except Antarctica and South Asia. The university funneled about 90% of those funds, or $47.5 million, into foreign investment funds located in Central America and the Caribbean, according to Quinnipiac’s 990 filing. Subsequent filings valued Quinnipiac’s foreign investments in Central America and the Caribbean at $55.1 million in 2020-21 and $50.5 million in 2021-22.
The university’s offshore hedge fund assets were valued at $40.6 million in 2019-20 and $46.1 million in 2021-22, with annual overseas investments of $6.9 million and $4.4 million, according to Quinnipiac audit disclosures. It has not been accounted for.
However, because private investments in each of these years represented less than 5% of Quinnipiac’s total assets, the university was not required to publicly disclose details about these investments in its 990 applications.
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