Texas Fund Seeks to Improve Returns, McRaven Says

  • Endowment needs better gains for risk taken, chancellor says
  • Search is on for CEO following Zimmerman’s Oct. 10 resignation

The University of Texas Investment Management Co. is seeking to improve returns with a new investment chief for its $37 billion fund, Chancellor William McRaven said.

“For whatever reason, we just couldn’t get the returns we were looking for,” McRaven said Tuesday in an interview in New York. “We’re always looking for more money.”

McRaven described the Oct. 10 resignation of Bruce Zimmerman after nine years as chief executive officer of the third-largest U.S. college endowment as “amicable.” Texas gained an annualized 5.4 percent in the past decade through June 30, trailing other public school funds such as the University of Virginia, which gained 8.5 percent.

Warner Considered

UTIMCO oversees funds for both the University of Texas and Texas A&M University, spending about 5 percent a year from the endowment to support academics. The fund posted returns under 5 percent for the past two years through June 30. The nine-member board, which includes McRaven, last week appointed Mark Warner as interim CEO while it conducts a national search for a new leader. Warner, who has served as senior managing director, is a candidate for the job, UTIMCO said.

While Zimmerman and his team deserve credit for the job they did, “we need UTIMCO to deliver the amount of money we need to fund higher education,” McRaven said at Bloomberg headquarters in New York. McRaven noted he was speaking for himself, not the board. “Bruce did a great job for us,” he said.

Zimmerman declined in an e-mail to comment on McRaven’s remarks. In an interview Oct. 10 when he announced his resignation, Zimmerman said that the decision was mutual and that it’s “healthy for an organization to have change.”

UTIMCO is known for making investments that seek to protect against losses including buying more than $1 billion of gold after the credit crisis in anticipation of inflation. It’s been seeking to amp up returns in recent years by expanding the buyout, venture capital and real estate portfolios to 40 percent of the fund in coming years from 35 percent.

‘More Involved’

McRaven, a retired U.S. Navy admiral, is the former head of U.S. Special Operations Command who is credited as being the architect of the raid that killed Osama bin Laden. He took over as chancellor of the University of Texas System at the beginning of last year.

He is one of five new members to join UTIMCO’s board in the past two years. In 2013, Jeffery Hildebrand, CEO of Hilcorp Energy Co. was appointed to a six-year term on the Board of Regents and is also chairman of the UTIMCO board.

While the endowment model has worked for Texas for the last 20 years, it needs to be constantly scrutinized, McRaven said. A number of good investments the management company made stopped performing as well in the last two years, he said.

“As we looked at our portfolio, things that did well for us two years ago, all of a sudden they didn’t do well,” he said.

The University of Texas is one of the largest public university systems in the U.S., with 14 institutions and an enrollment of more than 221,000, according to the statement. UTIMCO, created in 1996, is the first nonprofit investment corporation formed by a public university and operates under the authority of the system’s board of regents.

(Corrects University of Virginia returns in third paragraph in story published Oct. 18.)
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