University of Michigan slates $60 million for alternatives

Updated with correction

University of Michigan's investment office committed a total of $60 million to three alternative investment strategies from the university's $10.9 billion long-term endowment pool.

A $25 million commitment was made to Bain Capital Life Sciences Fund, said Kevin P. Hegarty, executive vice president and chief financial officer of the Ann Arbor-based university, in a transaction report prepared for regents in advance of their upcoming meeting on Friday.

The fund is “an extension of Bain Capital's private equity investment activities … and will be managed by an experienced team with notable investing, industry and academic experience in the life-science sector,” Mr. Hegarty wrote.

The fund's portfolio managers will invest in companies at various stages of development, ranging from firms that previously were backed by venture capital funds but now are ready for more growth and more mature firms in need of expansion capital, Mr. Hegarty added. Specific investment sectors will include biopharmaceuticals, specialty pharmaceuticals, medical devices, health-care services and diagnostic tools.

UM also made commitments to two new natural resources funds offered by existing managers of the UM endowment.

Denham Oil & Gas Fund, managed by Denham Capital Management, was allocated a $30 million commitment for investments focused on upstream exploration and production companies.

Mr. Hegarty said in his report that the Denham investment team will “target high-quality assets that are low on the funding and operating cost curve (and) have long-life reserves. These assets provide significant development potential in an area with limited drilling locations available.”

Four Rivers Resources Co-Invest received a commitment of $5 million from the UM endowment for investments in upstream and midstream properties from a San Juan Basin (Colorado) owner, according to Mr. Hegarty's report. The co-investment is offered through PetroCap Fund II and is a joint venture between Catamount Energy Partners and PetroCap-Catamount. The joint venture will hold a 30% ownership stake of Four Rivers Resources.

UM's investment office has authority to invest in new funds and strategies offered by existing managers without approval by the board of regents.