University of Texas/Texas A&M Investment Management Co., Austin, is slated to hire BlackRock and J.P. Morgan Asset Management to manage $1 billion each in public market strategic partnerships at a Dec. 5 board meeting.
The hires are the culmination of a search process that began in October 2018. UTIMCO's investment staff initially considered 11 firms, narrowed the field down to five semifinalists, and ultimately selected BlackRock and J.P. Morgan to present to UTIMCO's board for final selection, according to a report prepared for the board by Chief of Staff Kenneth Standley.
UTIMCO managed a total of $36.5 billion as of Sept. 30 of which $35 billion was in the system's two educational endowment funds.
If hired, BlackRock and J.P. Morgan each will manage customized portfolios with an 82% allocation to public market equity and 18% to publicly traded fixed income. Funding for the $1 billion allocation to each manager will be gradual, beginning in the first quarter 2020 and ending in the first quarter 2022, Mr. Shandley's report said.
J.P. Morgan will actively manage U.S., global, non-U.S. developed market and emerging market equities and global fixed income. BlackRock will run both systematically managed active as well as passive U.S., non-U.S. developed markets and emerging markets equity strategies. In fixed income, 15% will be passively managed and 3% will be managed in strategic, opportunistic funds, UTIMCO's board report showed.
UTIMCO will receive "significant" fee savings of 0.56% to 0.63% from the strategic partnerships, depending on the amount of net alpha each manager's portfolio produces, Mr. Standley said in the proposal.
The addition of the strategic partnerships is one of the investment priorities set by T. Britton Harris III, president, CEO and CIO, when he joined UTIMCO in 2017.
UTIMCO's strategic partnerships are similar in structure to those Mr. Harris first implemented in 2008 at his former employer, the $156.4 billion Teacher Retirement System of Texas, Austin.
Texas TRS has nearly $20 billion managed in public and private market strategies by six managers, including BlackRock and J.P. Morgan.
In another echo of Mr. Harris' tenure at Texas, Mr. Standley's report said UTIMCO's investment team is gearing up to add private market strategic partnerships with two to four private equity, real estate, natural resources and credit managers with mandates totaling $1 billion to $2 billion per partner.
Mr. Standley did not specify the time frame for UTIMCO's addition of private market in his report to the board.
