University of Texas Investment Management Co., Austin, tweaked the 2014 fiscal year asset allocation of the $22.2 billion of endowment assets it manages for University of Texas System, Austin.
At a meeting on Monday, UTIMCO's board approved the following target allocation for the fiscal year beginning Sept. 1: developed country equity, 43.8%; emerging market equity, 15.4%; natural resources, 13.3%; investment-grade fixed income, 10.5%; credit, 8.8%; and real estate, 8.2%.
The actual allocation of the $14.6 billion Permanent University Fund and the $7.6 billion General Endowment Fund as of May 31 was developed country equity, 44.9%; emerging market equity, 15%; natural resources, 14%; investment-grade fixed income, 10.4%; credit, 10.1%; and the rest in real estate.
The Board of Regents of the University of Texas System must approve the proposed 2014 asset allocation at its Aug. 21-22 meeting, said Bruce Zimmerman, UTIMCO's CEO and chief investment officer, in an interview.
UTIMCO officials also unveiled a new five-year strategic asset allocation to board members by way of information; Mr. Zimmerman said approval is required only for yearly changes to the asset mix. The same allocation is used for both endowment pools.
The latest long-term asset allocation goes beyond tweaking to a fairly major increase to real asset investments at the expense of the global equity category by the end of the fiscal year in 2018.
The new five-year targets are developed country equity, 42.5%; natural resources, 16%; emerging market equity, 15% investment-grade fixed income, 10.5%; real estate, 10%; and credit, 6%.
The previous five-year strategic asset allocation targets were developed country equity, 45%; emerging market equity, 20%; investment-grade fixed income, 9.5%; natural resources, 11.5%; real estate, 8.5%; and credit, 5.5%.
UTIMCO officials told regents in their annual investment policy review that they expect a 7.47% annualized return over the five-year period through Aug. 31, 2018.
Separately, UTIMCO reported returns for the Permanent University Fund as of May 31, as follows: third fiscal quarter, 2.4%; fiscal year to date, 8.9%; one year, 12.9%; five years, 3.2%; and 10 years, 8.5%. Multiyear returns are annualized.