University endowments proceed with caution

Re-ups are the order of the day for many university endowments. But that’s only if they make any pledges at all.

Take, for example, Purdue University, which began its private equity program in 2003. The limited partner has committed $10 million to the asset class so far in 2009, but is being conservative with further pledges.

Scott Seidle, senior director of investments at the endowment, said that any more commitments this year would go only to existing managers.

The LP’s most recent slugs of $5 million each went to the latest vehicles of two mid-market buyout shops—Charlesbank Capital Partners and TA Associates.

“There’s really not a lot on our forward calendar at this point. We’re going very cautiously,” Seidle said.

The school might consider committing to a fund being raised by an existing manager, but it is not looking to commit to any first-time funds, nor to any secondary vehicles, Seidle said. Purdue has a target allocation of 10% to private equity, with a range of 5% to 15 percent.

Purdue University’s sentiment toward private equity reflects the current state of fund-raising activity. For the first half of the year, buyout and mezzanine funds launched by U.S. firms raised $36.2 billion, an amount that puts the overall fund-raising figure for 2009 on a pace to come in at less than 30% of 2009’s total of $264.1 billion.

Similarly, venture fund-raising hit a six-year low in teh second quarter.

Other university endowment managers echoed Seidle.

“The only thing we will probably do this year is a small investment or two to successor funds, maintaining relationships with existing managers,” said Tom Heck, CIO of the Ball State University Foundation.

Joe Nelson, vice president of finance for Kenyon College Endowment, also indicated that the school is maintaining relationships with existing managers. Kenyon College, which invests in private equity and venture capital funds, has made two commitments in the past year.

Nelson said he does not expect the endowment to make any commitments in the next six months, “only because I do not expect any of our current managers to be raising a new fund in that time,” he said.

Lehigh University, which has doled out $14 million between two private equity funds earlier this year, may or may not make a new commitment in the coming months, depending on the opportunities that present themselves, according to Peter Gilbert, CIO of the endowment.

Asked if he knew roughly how much the pension fund might commit to private equity for the rest of year, Karl Koch, CIO of the Iowa Public Employees’ Retirement System, said: “No. A lot is still dependent upon how the economy does and what impact that has on partnership fund-raising for the remainder of the year.”

Gregory Samay, CIO of the Arlington County (Va.) Employees’ Retirement System similarly said: “I expect no new commitments to private equity over the next 12 months minimum.”

Brendan Brosnan, CIO of the Louisiana School Employees’ Retirement System, fell into the same camp, when he said that he does not anticipate making any new commitments to the asset class this year.