University of Houston System's endowment management committee hired Lord Abbett & Co. to manage $42 million in a short-duration fixed-income portfolio and 400 Capital Management to run $17 million in a structured credit portfolio on behalf of the system's $1.1 billion endowment at its May 19 meeting, a webcast of the meeting showed.
The committee also approved the termination of Somerset Capital Management from its $11 million active emerging markets equity portfolio.
The actions were taken on the recommendation of investment consultant NEPC. Sam Pollack, partner at NEPC, said in the webcast that the recommendations were made to focus further on risk mitigation given the volatility in both equity and fixed-income markets.
In a presentation to the committee, Mr. Pollack recommended the Lord Abbett strategy because its focus on short-duration corporate debt could reduce "overall interest rate sensitivity, while providing some return potential to offset the impact of inflation."
He also recommended the 400 Capital structured credit strategy to provide return potential in the inflationary environment.
Funding for the hirings comes both from cash and the termination of Somerset. Mr. Pollack recommended the termination of that manager due to the sensitivity of the asset class to geopolitical developments and because reducing emerging markets equity exposure seems "prudent in the present environment," referring to the Russia-Ukraine war.
As of March 31, the endowment's actual allocations to equities and bonds/cash were 44.6% and 13.1%, respectively; the respective targets are 45% and 15%.
