UTIMCO to slow private credit pace until economy turns

  • Endowment to wait for next default cycle
  • UTIMCO private credit portfolio valued at almost $1 bln
  • Private credit part of 36 pct allocation to private markets

UTIMCO is slowing its investments in private credit until it starts to see more distressed opportunities in market.

Staff plans to make “fewer new commitments until the next default cycle,” a presentation at its Feb. 7 board meeting shows. The investment plan also indicates the $37 billion endowment will reduce the number of general partners in its private credit portfolio moving forward.

It’s unclear how UTIMCO intends to do so, and whether the reduction will entail the sale of its interests in private credit funds on the secondary market. UTIMCO had 15 relationships in its private credit portfolio as of Nov. 30.

The endowment valued its portfolio at $998 million as of Nov. 30, endowment documents say. More than half the portfolio — 55 percent — is invested in opportunistic funds and assets. Another 30 percent is allocated to control-oriented credit investments. The rest is distributed across tradable assets and other investments, according to the report.

UTIMCO’s private credit portfolio generated a seven-year vintage-weighted return of 12.8 percent as of Nov. 30, the report says. Those returns are at the higher end of the 8 percent to 13 percent returns UTIMCO expects to generate from its portfolio, though they also fell short of the 13.7 percent generated by its general benchmark.

UTIMCO manages the assets of the University of Texas and Texas A&M University systems. A UTIMCO spokesperson did not respond to requests for comment.

UTIMCO’s private credit portfolio is part of a broader allocation to private investments that made up more than 36 percent of its total assets as of Aug. 31, its most recent annual report says. The portfolio also includes its allocations to buyout, growth, venture capital, real estate and natural resources funds.

The endowment committed $1.6 billion to new private market vehicles and $379 million to new co-investments last year, according to the report.

Action Item: For more on UTIMCO: www.utimco.org