University of Michigan, Ann Arbor, committed a total of $114 million to two new managers, one for the $10.7 billion long-term portfolio of the university's endowment and the other for UM’s $1.4 billion investment pool for working capital.
Regents approved the engagement of the new investment managers at a meeting on Thursday, a requirement before UM investment staff may commit or invest with a new money manager.
From the endowment pool, $50 million was committed to Partners for Growth Fund V, a direct lending fund that will focus on emerging technology companies in the U.S. and Australia, said Kevin P. Hegarty, executive vice president and UM’s chief financial officer, in the investment proposal to regents.
“Loaning money to emerging technology companies requires a special set of skills to underwrite intellectual property assets, analyze key stakeholders and structure loans to ensure safety of principal,” Mr. Hegarty said, adding “investment returns consist of cash interest payments and warrants allowing lenders to participate in the growth potential of these small businesses.”
Also, Kartesia Credit Opportunities IV, managed by Kartesia Advisor, received a $64 million commitment from UM’s working capital pool. The fund will invest in senior loans of lower middle-market companies across Europe, Mr. Hegarty said in an investment proposal to regents.
“The emphasis is on performing companies sourced via the secondary and primary financing markets (that are) cash generative with predictable earnings and cash flows. This strategy takes advantage of the structural, long-term replacement trend of commercial and investment banks as traditional lenders of credit finance,” Mr. Hegarty wrote.