Trustees of the University of Illinois Foundation have gotten cold feet about one of the fund's two recent alternative investment allocations.
The foundation, based in Urbana, added the two new asset classes last year: 2% of assets in hedge funds; and 3% in private equity.
The $725 million fund searched for managers and funded the hedge fund allocation last fall, hiring two fund-of-funds managers, said Bradley K. Hatfield, vice president for administration. It split the allocation between Grosvenor Capital Management LLC, Chicago, and Quellos Group LLC, Seattle.
For its initial private equity assignment, the foundation also wound up following the fund-of-funds route, selecting three firms as finalists last fall. But trustees decided to reject those managers, whose names Mr. Hatfield would not disclose. He said board members are concerned about risk and fees and the market for the asset class in general, and they felt more comfortable investing in hedge funds than private equity.
The board wants to study private equity further and might seek discussions with other endowment or other fund sponsors for ideas on programs, he said. Because of the size of the fund, the board doesn't have a specialized staff for private equity, he added.
Board members might decide later this year whether to renew a search for private equity managers, and they might consider both direct and fund-of-funds approaches.
If the board moves ahead with searches, funding the allocation would take several years, he said. "We're going to get there; but it's a lot to allocate (for its size fund). We're going to take our time."
Callan Associates Inc., San Francisco, is assisting the process.
