Texas Endowment Backs Ex-Ziff Hedge Funds in Talent Push

The University of Texas Investment Management Co., the second-largest U.S. university endowment, is backing three firms led by former Ziff Brothers Investments managers as it seeks to benefit from new hedge fund talent.

UTIMCO invested $100 million in Two Creeks Capital Management and $70 million in Immersion Capital, startups that make investments in equities, according to documents published this month.

The moves are part of a larger initiative by the $25.4 billion Austin-based endowment to be an early investor in promising hedge funds. Endowments have become a key source of capital for newer hedge funds as young money managers leave existing investment firms to start their own businesses.

“We want to be the first investor with some guys and gals that haven’t yet been discovered,” Bruce Zimmerman, chief executive officer of the Austin-based UTIMCO, said on a panel at the Cayman Alternative Investment Summit this month in the Cayman Islands. The endowment is particularly interested in managers from “the number two seat” at hedge funds they’ve already backed, and who decide to open their own firms, he said.

UTIMCO had more than $1.9 billion invested across 18 “next generation” managers as of Aug. 31 “with the objective of sustaining top-decile performance for years to come,” Zimmerman wrote in an annual report published late last year. Thirty percent of UTIMCO’s assets were in hedge funds.

Flexible ‘Opportunity’

Zimmerman, in a Feb. 23 interview, described new investments as “opportunity-driven.”

“We don’t have a certain amount of money that we’ve dedicated to this,” he said.

Two Creeks, a New York-based firm founded by former Ziff Brothers employee Ryan Pedlow, started in July and had $1.5 billion under management as of Nov. 1, according to a filing with the U.S. Securities and Exchange Commission. London-based Immersion, led by Michael Sidhom, raised at least $415 million, according to filings with the SEC in December.

UTIMCO also had more than $35 million invested as of Aug. 31 with Aravt Global, a New York-based hedge fund started with around $1 billion a year ago by former Ziff Brothers employee Yen Liow.

Spokesmen for Two Creeks and Aravt declined to comment. A message left at Immersion’s office wasn’t returned.

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