University of Texas Investment Management, Austin, plans to launch a $3 billion combined operating fund on Feb. 1 to replace the three existing operating funds of the University of Texas System, according to Bob Boldt, president, CEO and CIO of UTIMCO, which also manages the university system's $14.8 billion endowment.
The new fund, called the intermediate-term fund, would have an asset allocation similar to that of the endowment, Mr. Boldt said in a telephone interview: 25% each in hedge funds and fixed income, 15% in U.S. equities, 10% each in REITs and TIPS, and 5% each in international equities, emerging market equities and commodities. The new fund will use passive, enhanced and active strategies through active managers, index funds and ETFs.
The change was made because "the account(s) had always been invested as if the liquidity needs were much higher than they actually were and that's the big reason to invest the account more like an endowment and less like a money market fund," Mr. Boldt said.
Active U.S. equity managers hired are: TCW, Blavin, ValueAct Capital, Relational Investors and BKF Asset Management, each of which will run $25 million; FortstmannLeff, $25 million in midcap and $40 million in small cap; Westport Asset Management, $40 million; and BlackRock, $20 million.
In addition, the fund will run $50 million in an enhanced index strategy, $50 million in a BGI Russell 3000 Alpha Tilts index fund and $25 million in a BGI Russell 2000 Alpha Tilts index fund. The remaining $75 million will be passively managed.
The fund's $150 million allocation to developed market equities will include active strategies run by BlackRock, Cundill Group and Lansdowne, each of which will manage $15 million. In addition, Dalton Investments will run $10 million, and GlobeFlex Capital will run two portfolios totaling $25 million. Barclays Global Investors and Goldman Sachs will run a combined $30 million in enhanced strategies, and the remaining $40 million will go into EAFE ETFs.
Of the fund's $150 million allocation to emerging market equities, all active, $70 million will go to ETFs; $30 million to Lansdowne; two portfolios totaling $30 million to Templeton; and $10 million each to LSV Asset Management and Dalton.
The fund's $300 million REIT allocation will be split between Cohen & Steers, which will run $200 million, and Morgan Stanley, which will run the other $100 million.
In TIPS, PIMCO and Reams Asset Management will each manage $120 million, and the remaining $60 million will be managed internally.
In the fund's $750 million fixed-income allocation, PIMCO and Reams will each run $300 million in active portfolios, and the remainder will be managed internally.
The $750 million hedge fund allocation will be split between two strategies, directional and absolute return. UTIMCO staff will tap into hedge funds the company already uses; about 24% of the endowment funds are currently invested in hedge funds.
