University of Michigan endowment pledges up to $110 million to alternatives
By Christine Williamson | September 25, 2012 3:31 pm
University of Michigan Board of Regents, Ann Arbor, approved commitments totaling $45 million to two new private fund managers from the $7.7 billion long-term endowment fund, among up to $110 million in alternatives commitments.
A $20 million commitment was made to Shoreline China Value II, which will invest in distressed and special situations credit and debt securities in mainland China, according to a memo from Timothy P. Slottow, executive vice president and CFO, to the regents for their Sept. 20 meeting.
The fund is managed by Shoreline Capital Management which is a new manager for the endowment fund.
The Chinese financial system is in “an early stage of development,” and legal enforcement by the country's government might impact returns of the distressed investments in the fund, Mr. Slottow explained in his note.
Shoreline Capital's on-the-ground team in China has “expertise in sourcing attractive opportunities where legal enforcement risk is minimized. … Shoreline seeks to understand the political sensitivity of the underlying assets that determines the likelihood of enforceability,” Mr. Slottow wrote.
Regents also approved a $15 million commitment in Magna Hotel Fund IV, which is managed by another new manager for UM, Magna Capital Management. The fund will make opportunistic investments in hotels in primary markets such as New York, Boston and Washington, as well as in suburban U.S. and Canadian markets.
An additional $10 million commitment was approved for co-investment deals that Magna Capital will offer to limited partners in the fund when a hotel acquisition is larger than the fund's set limits, Mr. Slottow wrote. The co-investment deals will have more attractive terms than those of the commingled fund, the memo said.
UM investment staff also made commitments to funds from three existing private fund managers, according to Mr. Slottow's report.
Chengwei Ventures Evergreen Fund received a $20 million commitment with an additional $10 million on a “standby basis” if more money is needed to fund larger investments in entrepreneurial Chinese companies, Mr. Slottow reported. The university made commitments totaling $42 million to previous Chengwei Capital venture capital funds.
Advent International Global Private Equity VII was awarded $20 million for private equity investments in industries including technology, media, telecommunications and health-care services companies in North America, the U.K. and Europe. Mr. Slottow told regents that UM committed a total of $110 million to previous Advent International funds.
An additional $15 million commitment was made to private equity fund Russia Partners Technology Fund. Previous commitments to the fund totaled $40 million. The fund makes equity investments in businesses “related to technology and innovation in Russia and countries of the former Soviet Union, as well as companies which will implement global technologies throughout Russia” and former Soviet republics, Mr. Slottow's report said. The private equity fund is affiliated with Siguler Guff & Co.
Rafael E. Castilla, director of risk management in the university's investment office, did not return a call seeking more information about the new private fund commitments.