Austin Ventures refuses Utimco's money

By: Stacey Higginbotham
The Deal
March 23, 2005 Wednesday

With $16 billion under management, the University of Texas Investment Management Co. tries to invest about $800 million in alternative assets such as private equity and venture capital, but now the goal has become harder because of a new state disclosure policy.

On late Monday, March 21, in testimony before the Texas Legislature, Joe Aragona, a general partner with Austin Ventures, told the House State Affairs Committee that "uncertainty" over disclosure issues will discourage most private equity funds from accepting commitments from Texas public investment funds.

Essentially, Austin Ventures will not accept Utimco or other Texas pension and investment funds as limited partners in its $525 million Austin Venture Fund IX LP, expected to close on March 31.

"We will be partnering with entities in states that have dealt effectively," with disclosure issues, Aragona told the committee.

Utimco has invested $76 million in funds managed by Austin Ventures, and has enjoyed an average annual return of about 37%, according to Utimco's filings.

The issue of disclosure has haunted Texas for several years, but most recently came to the fore thanks to a lawsuit filed by The Texas Growth Fund, a state sponsored private equity fund. The lawsuit was filed to stop Texas Attorney General Greg Abbott from disclosing private data about management fees and private company data. Abbott has called for more disclosure of returns and investment data from public pension and investment funds who invest in private equity.

In December, Abbott came out in favor of Texas House Bill 223, which lists 13 items that public pension funds must disclose about their investments in private equity. Some of those items include rates of return, names of principals in the fund and management fees paid by the limited partner to the fund. However, representatives of the venture capital industry want the bill also to exempt from disclosure anything that is not on that 13 point list.

The bill is still in committee. It must be approved in the House as well as the Senate and then signed by the governor in order to become a law.

Neither Austin Ventures nor Utimco could be reached for comment.