UT regents' chief forms financial review panel

Broad review of $15 billion investment arm gets April deadline

By Ralph K.M. Haurwitz
Austin American-Statesman
Wednesday, February 4, 2004

BROWNSVILLE -- The team of lawyers and financial advisers conducting an A-to-Z review of the University of Texas System's $15 billion investment arm has been given additional help and a deadline.

Charles Miller, chairman of the Board of Regents, which oversees the system, announced the appointment of a 12-member "working group" Tuesday. Miller, speaking at a regents' meeting at UT- Brownsville, instructed the panel to prepare a report by mid-April and said the regents would hold a special meeting late that month to consider it.

"It's as broad a review of the structure and investment services as you could have," Miller said. "It's very extensive."

The review was launched by the regents in December amid concern about their relationship with the University of Texas Investment Management Co., the private nonprofit that manages assets for which the UT regents are ultimately responsible. Those assets include endowments earmarked for the UT System, the Texas A&M University System and other state institutions.

The working group includes representatives of Houston-based law firm Baker Botts LLP and Chicago-based investment consultant Ennis Knupp & Associates. Both firms were previously commissioned to undertake the review.

The other members of the working group include four senior UT System officials, two UT-Austin finance professors, UT-Austin's chief financial officer and, to be named later, a representative of Texas A&M and a liaison from UTIMCO.

Woody Hunt, a regent and the chairman of the UTIMCO board, welcomed the appointment of the working group but warned against micromanagement of investments. He said it should not be the regents' role to directly manage assets, just as it would not be appropriate for them to take over a classroom.

Miller, a seasoned money manager himself, has been especially critical of the investment company's penchant for suppressing some of the details of its private equity portfolio. He has also questioned UTIMCO's decision to boost pay for top executives, a plan that is on hold pending the regents' review.

But there is more to the review than a tense relationship between the regents and their investment arm. The regents also have made it plain that they feel compelled to take a closer look at their financial responsibilities as a result of bankruptcies and scandals in recent years that have focused attention on governance.

"This is the first top-to-bottom review since UTIMCO was established in 1996," said Michael Warden, the UT System's chief spokesman.

Miller said in an interview that he wants the review to include a careful examination of the relationship between UTIMCO and the regents.

For example, he said, the UTIMCO board is free to hire a chief executive officer without the regents' approval, but the academic and health institutions overseen by the regents cannot hire their presidents without a signoff from the regents.