University of Michigan, Ann Arbor, committed $50 million to Lake Whillans Fund I, managed by Lake Whillans Capital Partners, a new manager for the $10.5 billion long-term portfolio of UM's endowment.
Lake Whillans is a litigation finance specialist that provides “funding for commercial litigation involving breach of contract or trade-secret misappropriation,” said Kevin P. Hegarty, executive vice president and chief financial officer, in a report to regents in advance of their Thursday meeting.
Mr. Hegarty said the fund receives a portion of the proceeds from successful cases and noted that “in most instances, the investee company would otherwise be unable to exercise the legal rights without outside funding.”
Regents approved the commitment at their meeting, a requirement before UM investment staff may invest endowment money with a new money manager.
Separately, Mr. Hegarty described the U.S. Small Business Administration's Small Business Investment Company program, which provides capital to small companies “to foster economic growth and job creation,” in a report to UM regents.
“By becoming licensed as an SBIC, private investment partnerships enjoy access to long-term, low-cost government guaranteed debt financing, which increases the expected returns of the private investment capital,” he added.
University of Michigan is building an SBIC-focused investment program which will include a number of these investment partnerships, which are small in size and capacity constrained, Mr. Hegarty said, stressing that these characteristics will “require the university to respond to each fundraising swiftly to obtain a material fund allocation.”
Regents approved Mr. Hegarty's recommendation to delegate approval authority to him for commitments to SBIC funds from the endowment's long-term portfolio. The cap on such investments will not exceed 1.5% in a fiscal year.