University of Houston System hired Franklin Templeton Investments as a global unconstrained fixed-income manager for its $592 million endowment, pending negotiations, according to a recording of the endowment management committee meeting on Tuesday.
Funding will come from the termination of existing active fixed-income manager Mondrian Investment Partners and reducing its allocation to another fixed-income manager, Smith, Graham & Co. Investment Advisors. Assets within the overall $77.3 million fixed income portfolio will be reallocated as follows: 50% to Franklin Templeton and 25% each to a new passive manager and Smith, Graham & Co. Further information on the new passive manager could not be learned by press time.
Separately, the committee terminated multistrategy hedge fund manager Och-Ziff Capital Management Group.
The committee invested $8 million in OZ Overseas Fund II in September 2010.
A shift in the endowment's strategy was provided as the reason for the termination.
Also, the committee approved a total of $17.5 million in private equity commitments.
The committee committed $10 million to Lexington Capital Partners Fund VIII, a global secondary fund managed by Lexington Partners. The fund will focus on “smaller, more concentrated direct deals opportunistically” with 60% of the portfolio invested in buyout funds and the rest in venture capital, growth equity and yield-oriented strategies, according to materials prepared for the committee meeting.
Also, the committee committed $7.5 million to Insight Equity III, which focuses on "operationally challenged or financially distressed North American middle-market companies,” according to documents prepared for the meeting.
Finally, several changes were approved to the endowment's long-term target asset allocations.
The target for private investments increased to 25% from 17.5%. Asset classes that had their targets reduced were domestic equity and international equity to 15% from 17.5% each and fixed income to 10% from 12.5%.
Targets that remained the same were absolute return, hedged long/short equity and developing markets equity at 10% each and marketable inflation protection at 5%.
