Texas-size challenge awaits next CEO at UTIMCO

AUSTIN, Texas — The individual who succeeds Bob L. Boldt as CEO and CIO of the $19 billion University of Texas Investment Management Co. will face a double whammy, observers said.

He or she will be expected to maintain the performance momentum established by Mr. Boldt and to assuage a pair of boards recovering from what had been described by several people as an at-times fractious relationship with UTIMCO's former chief executive officer.

Mr. Boldt resigned Aug. 31 over what he called a "fundamental disagreement" with the UTIMCO board on investment strategy. "My philosophy is that we have to pursue a policy that is creative and competitive and value-added, based on risk management and risk budgeting," Mr. Boldt said. "At the end of the day, we came to a fundamental disagreement about that, and I decided that it was better for me and the organization to, rather than argue about that, move on and apply that philosophy someplace else."

Mr. Boldt said he is considering his next career move.

Interim CEO and CIO Cathy Iberg, UTIMCO's managing director of marketable alternative investments and deputy chief investment officer, did not return calls seeking comment. H. Scott Craven, UTIMCO chairman, also did not return calls.

Executive recruiters and people who have deep knowledge of the Austin-based investment company say it is not likely the UTIMCO board, or the board's overseer, the University of Texas Board of Regents, will want a repeat of the tumultuous four-year tenure of Mr. Boldt. But no one interviewed would name likely candidates for the job.

The UTIMCO board "needs the same kind of skill set that Bob brought to maintain our competitiveness, and also someone who can try and educate the board or regents and bring them along," said Woody Hunt, former UTIMCO chairman who left the board in July. "In addition to being an investment professional at a very high level, they need to be willing to spend some time managing the bureaucracy."

"This is one of the more complicated (positions) because you have political appointees overseeing you," said Hank Higdon, founding and managing partner of executive search firm Higdon Partners LLC, New York, which has placed investment officials at several universities and endowments. He noted that compared with Ivy League universities, the CEO post at UTIMCO is especially tough because part of the job is "spending half of your time examining constituencies."

"This is a fishbowl," he added.

But that isn't likely to put off many would-be candidates, executive recruiters said. Despite the headlines UTIMCO has triggered from various skirmishes between the UT Board of Regents and Mr. Boldt, headhunters said the CEO position at UTIMCO is a coveted post likely to garner a lot of interest.

The UTIMCO board was expected to put together a search committee last week to begin the process of finding a replacement for Mr. Boldt.

Mr. Boldt's resignation capped a tenure that generated both results and controversy for UTIMCO, which manages investments for the UT and Texas A&M systems, as well as several hospitals. Under his leadership, UTIMCO went from a $14 billion entity that had lost most of its management team in April 2002, the year before his arrival, into a $19 billion powerhouse that is among the largest in the country. According to a study by the National Association College and University Business Officers, Washington, the UT System ranked fourth in size among U.S. colleges and universities for 2005 with $11.6 billion in assets, while the Texas A&M system ranked ninth, with nearly $5 billion.

However, Mr. Boldt has locked horns with the UT Board of Regents over compensation and the regents' desire for more oversight of UTIMCO's investment activities. Some observers have also said the Board of Regents might have chafed at Mr. Boldt's investment style, which he described in a 2004 interview as being "toward the hedge fund end of the risk spectrum, but … not at the very of edge of it" (Pensions & Investments, Feb. 9, 2004).

"There was strong resistance for more oversight," on Mr. Boldt's part, said one person who is close to the both the UTIMCO board and the board of regents but asked not to be identified. "But (UTIMCO) is not a private entity; there are political ramifications."

For his part, Mr. Boldt said in an interview that his investment activities were not designed to harm the UT System, but in fact were designed to generate the kinds of results he achieved over his four-year tenure.

"I think the investment world has changed more in the last 10 years than it changed in the prior 50," he said. "There are a lot more tools available today … and I believe very strongly that a competitive and creative organization has to be open to at least using these tools."

According to people who are familiar with the situation, the Board of Regents has since established guidelines that ensure adequate reporting, compliance and information flow between UTIMCO executives and the funds' trustees.

And, in that sense, life might be easier for the next CEO, said Mr. Hunt.

"Bob helped set the stage, and won a lot of battles along the way," he said. "It's probably collateral damage that led to the separation, but it has made for a better platform for someone coming in."