Adviser: UT money is in capable hands

Investment company making steady progress, regents told.

By Ralph K.M. Haurwitz
Saturday, December 14, 2002

The investment arm of the University of Texas has capable leadership and a sound money-managing strategy, an independent consultant told UT System regents meeting Friday in Austin.

Consultant Bruce Myers, with Boston-based Cambridge Associates LLC, sought to reassure the regents at a time when some of them, notably Chairman Charles Miller, are questioning decisions by the University of Texas Investment Management Co.

The nonprofit investment company manages $13.3 billion in stocks, bonds and other assets for the UT System, the Texas A&M University System and other state institutions. Of that amount, $10.2 billion is held in endowment accounts intended to serve long-term needs for construction, faculty salaries, health-related research and other purposes.

Myers, whose company advises 45 of the 50 largest college and university endowments, said the UT investment company's performance has ranked in the middle for the past three years or so. In the past 10 years, though, the company has trailed two-thirds of the pack.

"This is one of the great university endowments in the world, and it should have the track record to go along with it," Myers said.

The UT investment company has made steady progress in recent years by improving its staff and diversifying its assets, he said.

The company's senior staff, including chief executive Bob Boldt and deputy chief investment officer Cathy Iberg, has crafted a prudent mix of assets, Myers said. For example, some money has been shifted from lower-performing domestic equities into private investments, hedge funds, international securities and other categories, resulting in broader diversification and better returns.

Doing well during an economic downturn, though, hasn't meant making a profit. The Permanent University Fund, one of four endowment accounts, declined 7.4 percent in the year that ended Aug. 31. Still, that's far better than the nearly 18 percent plunge suffered by the Standard & Poor's 500 Index, a widely used stock market benchmark.

Myers warned that achieving the investment company's goal of a 5.5 percent annual return above the inflation rate would be a challenge during the next five years. Few people expect the stock market to post more than single-digit returns after the double-digit runs of the 1990s and the losses of the past couple of years.

As he has at previous regents meetings, Miller challenged the projection of a lower return while stopping short of disputing it outright. The regents chairman also questioned whether investment strategy was driven too much by the interests of the UT investment company's staffers. He asked Myers to return periodically to update the regents, and Myers agreed to do so.

The regents have the final say on how the money is managed. They have stepped up oversight of the investment company in recent months -- for example, by reversing a decision to withhold information on the performance of individual private investments.; 445-3604