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Texas Endowment Staying With Hedges Trails Equity Gains

Texas (STOTX1)’s public university endowment increased 5.1 percent this year through February, according to the University of Texas Investment Management Co., trailing the benchmark Standard & Poor’s 500 Index of equities.

The endowment, the second-largest in the U.S., rose to $20.1 billion, the management company known as Utimco reported at a meeting today in Austin. Utimco said total assets under management, including operating funds, climbed to $27.3 billion.

“Some markets have done better than others,” said Bruce Zimmerman, Utimco’s chief executive officer and head of investing. “We continue to have confidence in our diversified portfolio.”

In 2011, Utimco allocated more capital to real estate, natural resources and hedge funds to guard against slumping equities. The endowment put $1 billion into gold bullion to insure against inflation and declines in other asset classes. Gold futures gained 6.9 percent this year through February, while the S&P 500 rose 9 percent, with reinvested dividends.

“There’s a cost to buying insurance,” Zimmerman said in an interview at the meeting. “If nothing bad happens, then you’re simply out your premium. And that’s been the case over the last six months.”

“We haven’t seen severe negative events, and that’s OK because the rest of our portfolio is performing as expected,” Zimmerman said. “Because we remain concerned about the potential for severe negative events,” Utimco is sticking with its diversification strategy, he said.

To contact the reporter on this story: Kelley Shannon at kelley@kelleyshannon.com

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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