Kyle Bass, the Dallas hedge fund manager, urged overseers of Texas' state university endowment, the University of Texas Investment Management Co., to stick with a $1 billion investment in gold bullion even as the fund's assets decline.
“I'm against selling any of the gold,” Mr. Bass, a managing partner at Hayman Capital Management LP and a UTIMCO trustee, said Thursday at a meeting of fund directors in Austin, citing the need for a hedge against mounting risks driven by government deficits in the U.S. and Europe. “As every day goes by, I see deflation in the things you own and inflation in the things you need.”
The $19.1 billion endowment fund, the second-largest U.S. college fund, lost almost 3.8% on invested assets in the four months through December, preliminary figures distributed Thursday show. The Standard & Poor's 500 Index of shares gained almost 4% over the same period, including reinvested dividends. In 2011, the UTIMCO's allocations rose in real estate, natural resources and hedges to protect against slumping equities.
“Ho-hum performance is how I'd characterize our hedge fund portfolio,” said Bruce Zimmerman, UTIMCO's chief executive officer, referring to second-half 2011 performance. Hedge funds manage about $7.5 billion of the $19.1 billion. Their results aren't indicative of their abilities and no major change in the roster of funds is being considered, he said in an interview.
Charles Tate, chairman of Capital Royalty LP in Houston, and other UTIMCO trustees echoed the wary outlook held by Mr. Bass, citing concern that the Federal Reserve's plan to keep interest rates low for two years may only delay an economic decline.
Mr. Bass faulted the world's biggest central banks for expanding the money supply by what he said was $15 trillion during the past five years. In April, he advised the fund on holding gold bars rather than futures contracts.
Gold futures for April delivery, the most-active contract traded on the Comex Thursday in New York, touched $1,763.80 an ounce, the highest price since Dec. 2. The metal, which reached a record $1,923.70 on Sept. 6, climbed 11% last month, the biggest January rally since 1983.
The University of Texas and the Texas A&M University systems are subsidized by endowments overseen by UTIMCO.
