University of Texas Investment Management Co., the largest public endowment in the US, plans to delve deeper into private equity and illiquid assets to boost returns.
(Bloomberg) — University of Texas Investment Management Co., the largest public endowment in the US, plans to delve deeper into private equity and illiquid assets to boost returns.
The Utimco board, which manages the endowments of the University of Texas and Texas A&M systems, agreed Thursday to increase allocations to private equity to 30% from 25% while reducing public equities to 27% from 35%.
Chief Investment Officer Rich Hall said the increased exposure will lead to higher expected returns for the endowments, which had $68.2 billion in assets at the end of April.
That rivals Harvard University’s massive fund, which oversaw $50.9 billion as of June 30.
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Hall takes over as chief executive officer in July after current CEO Britt Harris retires. Harris, 65, was instrumental in raising Utimco’s allocation to private equity in recent years.
Utimco’s move comes as other large endowments and pension funds increasingly target private assets, raising concerns about potential hidden risks, including transparency and valuations. Private debt expanded to about $1.5 trillion globally as of September, from just over $300 billion at the end of 2010, Preqin data show.
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Private equity and venture capital accounted for 30% of endowment allocations for the fiscal year ended June 30, according to the National Association of College & University Business Officers and TIAA. Harvard had 34% of its portfolio invested in private equity in 2021, the last year it disclosed such data.
Other changes approved by the Utimco board included a larger exposure to infrastructure and less to natural resources and TIPS. It also agreed to expand the maximum allotment of illiquid assets for each endowment to 75% from 70%. The changes go into effect in September.
Utimco’s recent fund performance has generally been in line with other endowments. Last fiscal year, when many endowments saw their worst results since the financial crisis, Utimco reported that returns dropped 6.2%. Harvard lost 1.8% that year, while Yale University eked out a gain of 0.8%. Columbia University trailed the pack, with a 7.6% loss.
A year earlier, Utimco’s portfolio gained almost 32% through the end of August. The median return for endowments before fees through June 30 that year was 27%, according to data by Wilshire Trust Universe Comparison Service.
–With assistance from Paula Seligson.
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