UTIMCO Bets $200 Million on Small Energy Buyout Firm

The $26 billion University of Texas Investment Management Company, better known as UTIMCO, made a $200 million commitment to Post Oak Energy Capital, a relatively young private equity firm that invests in middle-market oil and gas companies. UTIMCO is the endowment manager for the University of Texas and Texas A&M.

Houston-based Post Oak plans to manage its large UTIMCO commitment as a single LP fund and use it to create a relatively concentrated portfolio of seven or eight investments, according to the firm’s managing partner, Frost Cochran, in an interview with Buyouts. Post Oak, said Cochran, traditionally invests 80 percent of its money in oil and gas companies and 20 percent in oil field service firms.

“We found working with UTIMCO was particularly good because all of us came from the oil industry,” said Cochran. “And UTIMCO has a guy on staff, Mark Warner, who also came from the industry, which made this a very unique opportunity.”

In a written statement, Warner, who is UTIMCO’s managing director for natural resource investments, described the investment as an “innovative approach,” adding, “this is an opportune time to obtain focused exposure in the lower middle market segment of the energy industry with an experienced and dedicated manager.” Warner did not return calls requesting comment.

UTIMCO’s main portfolio, the Permanent University Fund, returned 14.6 percent net of fees in the year through Aug. 31, 2011. The Fund’s private equity portfolio, with a 25 percent allocation target, returned an impressive 23.3 percent during the same period.

UTIMCO has made some notable investments of late. The fund has been particularly active in new commitments to emerging markets private equity funds, a trend Buyouts wrote about in October, 2011. Recent fund commitments have included $40 million to the Black River Capital Partners Fund (Food), LP, a fund that will invest in Asia’s food industry, $42 million to Everstone Capital Partners II LLC, an India-focused private equity fund, and $100 million to Patria Brasil Private Infrastructure Fund II, LP, a Brazil infrastructure fund.

In addition, the giant endowment fund made headlines by disclosing that it had assembled a $500 million position in gold bullion.