UWO’s Ill-Fated Benghazi Investment

The University of Western Ontario (UWO), like many institutional investors, seeks to diversify its endowment portfolio to generate returns that support its academic mission. A notable and ultimately unsuccessful venture involved an investment in Libyan assets prior to the 2011 revolution, specifically in Benghazi.

Driven by the prospect of high returns in a developing market, UWO allocated a portion of its endowment to an investment fund focused on North Africa. This fund, in turn, invested in various sectors within Libya, including infrastructure and real estate projects in Benghazi. The investment rationale centered on the belief that Libya, under Muammar Gaddafi’s regime, offered a stable, resource-rich environment with significant growth potential.

However, the Arab Spring uprisings in 2011 dramatically altered the landscape. Libya was plunged into a civil war, leading to the collapse of the Gaddafi government. Benghazi, the epicenter of the revolution, suffered significant damage and instability. This upheaval directly impacted UWO’s investment, rendering many of the projects in which the fund was involved effectively worthless.

The political instability, security concerns, and destruction of infrastructure made it impossible to realize any value from the Benghazi assets. Legal claims and property rights became muddled, further complicating efforts to recover the investment. The university faced the harsh reality of significant financial losses.

The UWO’s Benghazi investment serves as a cautionary tale about the risks associated with investing in emerging markets, particularly those with unstable political environments. Due diligence, while likely performed, could not foresee the scale and impact of the Arab Spring. The experience highlights the importance of thoroughly assessing political risk and having contingency plans in place for unexpected events. It also underscores the need for transparency and accountability when managing university endowments, ensuring that investment decisions are made with a clear understanding of the potential risks and rewards.

While the exact amount of the loss has not been publicly disclosed, it is understood to have been substantial enough to warrant internal reviews and adjustments to UWO’s investment strategy. The episode prompted increased scrutiny of the university’s risk management protocols and a greater emphasis on diversifying its portfolio across a wider range of asset classes and geographic regions.