The University of Texas Investment Management Co., the third-largest U.S. academic endowment, sold $375 million in gold bars from holdings of about $1.4 billion and reinvested the proceeds in gold futures and equities.
In the three months that ended Feb. 28, the Austin, Texas-based fund bought $75 million in gold futures, $225 million in developed-market equities and $75 million in emerging-market equity futures, Bruce Zimmerman, the chief executive officer, said yesterday in a telephone interview.
The fund, which manages $29.2 billion, started taking delivery of gold through futures starting in 2008 as a hedge against inflation, Zimmerman said. While fund managers and directors remain concerned global consumer prices may increase, the fund wanted to increase investments in equities, he said.
“Our idea was to buy and hold gold, and when the world’s central banks begin tightening, we’ll sell,” Zimmerman said. “The price of gold has traded off, but the world’s central banks haven’t started tightening.”
Because of the leverage involved in futures contracts, the new gold and emerging-market investments are valued at about $750 million, and the fund’s total exposure to the metal hasn’t changed, Zimmerman said.
The fund hasn’t bought or sold gold since February, he said. Its metal holdings are now valued at about $1.1 billion, while its cost basis is $967 million, he said.
Gold futures on the Comex in New York fell 12 percent in the 12 months that ended Feb. 28. On April 15, the price plunged 9.3 percent, the most in 33 years, after entering a bear market. On the following day, the metal touched a 26-month low of $1,321.50 an ounce.
Futures have tumbled 24 percent from a record $1,923.70 in September 2011, and exchange-traded products backed by the metal have dropped 13 percent from the all-time high in December, signaling that investors lost faith in the commodity following a 12-year rally. Goldman Sachs Group Inc., Barclays Plc and Credit Suisse Group AG are among banks to cut forecasts this year.
On the Comex today, futures for June delivery jumped 2.7 percent to close at $1,462, the biggest gain for a most-active contract since June. Demand has surged for gold bars and jewelry in India, the world’s biggest buyer, and China, the second-biggest. This month, sales of gold coins by the U.S. Mint are heading for the highest since December 2009.
In March, Russia and Kazakhstan added to gold reserves for the sixth straight month.
In Texas, lawmakers are considering a bill to start a state-supported depository for gold bars, a move that Governor Rick Perry has supported.
The holdings by University of Texas Investment Management, or Utimco, may help establish the depository as a major center for U.S. and international gold investors, state Representative Giovanni Capriglione, a Republican who sponsored the bill, said in an interview on April 23.
“I recently had a town hall meeting in my district with 200 people, and the gold depository was the No. 1 issue,” Capriglione said. “Most Americans are worried about an economic collapse.”
Distrust of the U.S. Federal Reserve and concern that the dollar will lose value spurred a push in more than a dozen states to recognize gold and silver coins as legal tender.
Utimco’s Zimmerman said the fund would consider moving gold to Texas from New York if storage costs were lower and its holdings could be easily traded through an exchange.
The largest academic endowments are Harvard University and Yale University, according to a Feb. 4 report by the National Association of College and University Business Officers.