University of Michigan invested and committed a total of $125 million to four new alternative investment strategies from its $10.2 billion long-term endowment pool.
University regents approved the recommendations of the university's investment office at a meeting Thursday.
The largest allocation was $50 million to Sabal Debt Opportunities Fund, a hedge fund managed by Sabal Investment Advisors, which will invest in the junior securities of small-balance real estate mortgage pools that hold mortgages that are originated, underwritten and serviced by Sabal affiliates.
Two new private equity managers received their first commitments from the Ann Arbor-based university.
Summa Equity I, was awarded $40 million to invest in private, lower midmarket companies in the Nordic region. “The investment themes of particular interest to Summa include resource scarcity, energy efficiency, health care related to changing demographics, and technology-enabled businesses,” said Kevin P. Hegarty, executive vice president and chief financial officer, in a report prepared for the regents.
A $25 million commitment was made to Union Capital Equity Partners II, a fund that will focus on investment in small U.S. founder-owned businesses that have good growth projections and strong market positions that will benefit from operational improvements. Union Capital private equity portfolio managers will target business services, food and beverage and light manufacturing sectors.
The endowment also will commit $10 million to TI Platform Fund I, a venture capital fund of funds for institutional investors managed by Trusted Insight. The fund will invest mainly in the U.S. and will seek “new and disruptive” venture capital funds for early-stage investment at the pre-seed, seed or post-seed fundraising rounds, Mr. Hegarty said in his report.
Regents also learned during their meeting that the performance of the endowment as of June 30, the end of the university's fiscal year, was down 1.4% for the one-year period, and the annualized return over 10 years was 6.7%.
Fiscal year distributions from the endowment to the general fund were more than $300 million for the first time, a UM news release said. The total distributed from the endowment to support university activities was about $3.4 billion over the past 15 years.
The distribution formula is 4.5% of the endowment's average value over the preceding seven years.
“Basing the spending on a trailing average market value instead of the current market value allows the university to stabilize endowment distributions so operating budgets are insulated from the volatility in financial markets and receive dependable support over time,” the news release said.
