The board of directors of the University of Texas/Texas A&M Investment Management Co., Austin, approved a strategic asset allocation for the two endowments UTIMCO manages.
The new asset allocation for the $30.5 billion Permanent University Fund and the $18.6 billion Long Term Fund for fiscal year ended Aug. 31, 2022 is effective Sept. 1, 2021.
The directors approved the change during a June 29 meeting, University of Texas System spokeswoman Cathy Biow confirmed in an email.
In fiscal year 2022, the total target allocation to the endowments' broad global equity category rose to 65.7% of fund assets from 63.1% in fiscal year 2021, while new long-term target will raise the total target allocation to global equity to 65% of endowment assets from 63%, according to a report presented to the UTIMCO board at the meeting.
UTIMCO made the following changes to the sub-asset classes within the endowment funds' global equity portfolios.
The fiscal year 2022 target allocation to developed-market public equity will increase to 27% from 23% and the long-term allocation will rise to 27% from 25%.
The target allocation to private equity in the year ended Aug. 31, 2022 will rise to 24.2% from 22.8% and the long-term allocation will remain at 25%.
The fiscal year 2022 target allocation to emerging market public equity will drop slightly to 8% from 8.1% in fiscal year 2022 and will remain at 8% over the long term.
The target allocation to directional hedge funds will be significantly reduced to a 6.5% target in fiscal year 2022 from 9.2% in fiscal year 2021 while the long-term target allocation will stay at 5%.
The target allocation from the endowments to broad stable value portfolios will be slightly reduced in fiscal year 2022 to 17.5% of assets from 17.9% while the long-term target will drop to 16% from 18% currently.
In fiscal year 2022, the target allocation to stable value hedge funds will decline to 9.2% from 9.5% while the long-term target will remain at 10%.
The current 7.4% allocation to global aggregate bonds will drop to 4.5% in fiscal year 2022 and will be eliminated in the long-term target allocation. Currently, the long-term target allocation to the sub-asset class is 7%.
A new 2.8% target allocation to long U.S. Treasury bonds is planned for fiscal year 2022. The long-term allocation is 5%.
The target allocation to cash in the stable value portfolios will remain at 1% for the short- and long-term allocations.
UTIMCO's overall target allocation to the real return portfolios of the endowments will drop to 16.8% from 19% in fiscal year 2022 while the long-term target remains 19%.
The real estate portfolio's target allocation for fiscal year 2022 is lower at 7.3% from 7.9%. The long-term target allocation will be lower at 9% from 10%.
The short-term target allocation to natural resources for fiscal year 2022 will drop to 4.5% from 6.1% and the long-term target will remain as 3% of total fund assets.
In fiscal year 2022, the endowments' target infrastructure allocation will drop to 3% from 3.3% in the current fiscal year. The long-term target allocation to the sub-asset class will be lowered to 5% from 6%.
UTIMCO adopted a 1.7% target allocation to Treasury Inflation-protection Securities in FY 2021 which will rise to a 2% target for both fiscal year 2022 and long-term. Prior to fiscal 2022, there wasn't a long-term target set for the asset class.
As of May 31, UTIMCO managed a total of $64 billion, with $49.1 billion from the two endowments and the balance in operating funds for the University of Texas and Texas A&M Systems.