Texas Endowment Sours on Multistrategy, Event-Driven Hedge Funds

  • University of Texas management company cites poor returns
  • Organization withdrew almost $1 billion from funds since 2015

The University of Texas Investment Management Co. is shifting out of multistrategy and event-driven hedge funds as it seeks to lower its exposure after returns disappointed.

The management company, which oversees $37 billion for two public university systems in the state, withdrew $156 million from those hedge funds in the three months through Nov. 30, according to a quarterly report released Tuesday. The nonprofit headquartered in Austin also redeemed more than $700 million from funds with those strategies in the fiscal year through Aug. 31 after they delivered an annual performance of just 0.3 percent.

“We’re skeptical this is going to come back,” Ryan Ruebsahm, a managing director overseeing the funds, said at a board of directors meeting today.

Credit Funds

Utimco’s 10 multistrategy managers, which invest across markets, have $2.3 billion in assets, according to the quarterly report. It also invests in long/short equity, macro and credit hedge funds. Ruebsahm said the organization is also shrinking exposure to credit funds while increasing exposure to macro funds. He didn’t name the funds that have been targeted for withdrawals or commitments.

The management company, which oversees endowments for the University of Texas and Texas A&M University, has been reducing exposure to hedge funds more broadly as it seeks to improve investment performance. The organization had $10.4 billion with 46 managers as of Nov. 30, representing about a quarter of the assets.

Mark Warner, Utimco’s interim chief executive officer, told the board the money has been shifted into public and private equities, as well as other strategies. Bruce Zimmerman resigned in October after almost a decade as CEO.

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