University of Houston System's endowment management committee approved a direct hedge fund investment of $20 million in Broad Reach Master Fund for the system's $1.1 billion endowment, redeemed its investments in two other hedge funds and terminated Columbia Threadneedle Investments from a $29 million active domestic large-cap growth equity portfolio.
The committee approved the investment in the emerging markets-focused global macro hedge fund managed by Broad Reach Investment Management at its Aug. 21 meeting, a webcast of the meeting showed.
The committee also approved full redemptions from its $21 million investment in HBK Offshore Fund, a global macro hedge fund managed by HBK Capital Management, and its $19 million investment in a global macro hedge fund managed by Davidson Kempner Capital Management. The name of the Davidson Kempner fund was not provided.
Sam Pollack, partner at investment consultant NEPC, said in the webcast his firm recommended the new fund and the redemptions of the other two funds because the Broad Reach fund has had stronger annualized performance and its strategy is a better fit for the endowment, and also because the endowment is overweight its hedge fund target.
Pollack said the Broad Reach fund has had annualized double-digit returns for the past 10 years, while the other funds have had annualized returns during that period of 3.5% to 6%.
As of June 30, the endowment’s actual allocation to hedge funds was 6.5%, over its 5% target.
The committee also approved the termination of the endowment’s $29 million investment in Columbia Threadneedle’s Focused Growth strategy, citing underperformance. A Columbia Threadneedle spokesperson declined to comment.
Assets from the termination will be moved to existing passive strategies, Pollack said.
As of June 30, the actual allocation to public equities was 40.4%; the target is 46%.
NEPC assisted with all actions.
