The University of Texas Investment Management Company (UTIMCO) was formed in March of 1996 by the special efforts of Tom Hicks and Vinson and Elkins. It is contracted by the UT Board of Regents to manage and invest the University's funds. UTIMCO is a first for a state university; it is a private company with control over public funds, including the Permanent University Fund (PUF), Permanent Health Fund, Long Term Fund, Short Intermediate Term Fund and other invested assets. The Board of Directors for UTIMCO consists of UT regents Woody Hunt, Rita Clements, James Huffines, UT Chancellor Mark Yudof, and five other directors.
UTIMCO has proven to be one of several examples of the University's ideals not matching reality. For a university that claims to teach and use basic democratic values, UTIMCO has left its mark as being grounded in anything but. Until the Texas Legislature intervened, UTIMCO insisted on acting in secret and proclaimed itself to be not subject to the public scrutiny. When pressure from various parties finally forced some level of transparency, it quickly became clear that the investment decisions by the company were suspect. UTIMCO has proven itself to be caught in a web of tit-for-tat political favors, and ethically questionable appointments that can be traced back to both big Texas money and George W. Bush. In addition, the performance of UTIMCO's investments have been bleak. The company has lost over $1 billion in the last year alone, including substantial losses from its ties to the scandal-ridden corporations Enron and WorldCom. Even if UTIMCO can post profits for certain investments, UTIMCO has continually performed well below the Dow Jones average.
In 1997 UT hired John Doner and Associates, a political campaign and lobbying agency to change the laws regarding PUF investments. This "grassroots" campaign proved successful in placing a constitutional amendment on the ballot in Texas and getting it passed in 1999. UT bigwigs funded John Doner and Associates through the Friends of the University PAC and Texans for Proposition 17 which were made up of essentially the same donors.
The Texas Constitution includes language requiring the use of "prudent investor" standards when evaluating and making investment decisions (Texas Constitution, Article 7, Section 11b). This means that decisions are to be made independent of social and political issues. Ideally free market policies, this means the most money possible is made from investing, but it also means that UTIMCO pours money into companies like PetroChina who is known for funding terrorism. Its disinvestment was called for by liberals and conservatives alike. But PetroChina is just the tip of the iceberg since UTIMCO has massive investments in other disreputable corporations. UTIMCO, suprisingly, does have an investment council, but it is in Vinson and Elkins, the same advisors for Alcoa, Inc. and Enron. They give UTIMCO free reign since they have a complex (and very worthwhile) relationship with UT. UT Watch believes that any entity that handles public funds for a university must be held to basic standards of any democratic institution, including participation, transparency, and accountability to the people.
Listed below are their general ethics policy and investment policies for two UTIMCO endowments.
Their general "ethics" policy.
GEF Investment Policy
PUF Investment Policy