UTIMCO's total managed assets have fallen by about 12% to $45 billion so far this year, from $50.5 billion as of Dec. 31, investment officers told company directors during a board meeting Tuesday.
But the investment team is prepared to take advantage of investment opportunities resulting from current market turmoil to rebuild assets under management, said T. Britton Harris III, president, CEO and CIO, in an audiocast of the meeting.
Some University of Texas board members attended the meeting remotely, while others were present with staff at University of Texas/Texas A&M Investment Management Co.'s Austin headquarters.
"Valuations are so cheap now. For those who can look through the fog, this will be a great investment opportunity and we will be ready," Mr. Harris said.
Mr. Harris added that the market situation "will be very, very different in another six months," noting that "if you're buying now, it's probably too early."
When asked by directors about whether UTIMCO's investment team is looking for bargains in the private credit arena, Mr. Harris would not be drawn in.
"We won't talk about this on the public record, but we know exactly what we want to do. Credit is pretty attractive, but so are stocks. We are looking hard at credit," he said during the audiocast.
UTIMCO managed a total of $49.8 billion as of Feb. 29. As of that date, preliminary returns for UT's $23.3 billion Permanent University Fund were down 1.6% for the month and down 1.8% year-to-date, while returns of the $12.5 billion Long-term Fund were down 1.6% in February and down 1.7% year-to-date, an investment report showed.
The balance of UTIMCO's funds are managed in operating and health-care funds.
Richard Hall, deputy CIO, stressed to the board "that everything is working as we expected it to work" during current down markets.
The board also learned about changes that might need to be made in UTIMCO's growth assumptions for the next 10 years.
UTIMCO and UT's University Lands office staffers are jointly reviewing the contribution to the Permanent University Fund that can be expected from royalty fees paid for oil and gas leases on 2.1 million acres in West Texas.
Given the sharp fall in oil prices and the likelihood of persistent low prices, Mr. Harris told directors that he, Mark A. Houser, CEO of University Lands, and their teams will "rework the distribution values" that UTIMCO can expect from oil and gas royalties.
In 2019, the contribution to the PUF from royalties was just more than $1 billion, a board report showed.
UTIMCO's strategic plan includes the expectation that UT system assets will grow by $44 billion to $91 billion over the 10-year period ending Aug. 31, 2029, from $47 billion as of Aug. 31, 2019. UT's fiscal year-end is Aug. 31.
The factors used to develop the current growth estimate over the 10-year period are $11 billion from land lease royalties; $42 billion in investment returns (based on an assumed annual return of 7.3%); $16 billion transferred from Intermediate Term Fund (an operating fund); $3 billion in contributions from UT entities; and $24 billion in total distributions.
