Britt Harris is bracing for an economic downturn, and he now has the reinforcements to do so.
The University of Texas Investment Management Co. chief investment officer said Friday that the hiring of a new deputy CIO and an asset allocation managing director will put the endowment in a position to weather a difficult parts of the business cycle.
“We are well along in the investment cycle and experience and character will be increasingly required as this cycle winds down,” Harris told Institutional Investor in a phone interview.
He added that while UTIMCO has reaped the rewards of a strong bull market — the assets grew roughly $6 billion in 2017 alone to about $42 billion — it’s only smart to prepare for less-than-favorable markets. Harris said he expects a downturn to occur sooner rather than later.
“We’re very pleased with the performance of the portfolio, but we also know that Mr. Market is a beast and at some point, probably within the next two to four years, he’ll rear his ugly head,” Harris said.
In response to this prediction, the endowment has stopped adding to the less-liquid and more aggressive parts of its portfolio, like private equity, Harris said.
“It’s not because we don’t believe in private equity.” But, he continued, “the pricing of assets in private equity today is awful. We will continue to harvest the investments we have.”
Beyond that, the endowment isn’t making radical changes to its portfolio. “We’re just making sure that we have everyone focused on the fact that this is not the time to get greedy,” Harris said. “It’s essential that the leaders of the fund are in a strong position.”
The hires of a new deputy CIO — Rich Hall, who was previously led private equity at Harvard Management Co. — and a managing director — Scott Slayton, most recently of Jamison Capital Partners — were announced Wednesday by UTIMCO. Hall will join UTIMCO mid-February, Harris said, while Slayton will start work at the end of January.
[II Deep Dive: UTIMCO Hires Harvard Executive as Deputy CIO]
These hires come roughly six months after UTIMCO hired Harris himself as chief investment officer and chief executive officer after serving as CIO at the Teacher Retirement System of Texas for more than ten years.
More new hires are likely to come. As Harris noted, UTIMCO has a lot of mid-level and junior positions open. “I have a strategy I like to use,” Harris said. “I call it ‘Come home to mama.’ I look for really experienced, high-integrity investors who have Texas connections.”
And once those new hires join UTIMCO? Then it’s all about teamwork, Harris said.
“The most common practice in investment management is not teamwork, but silos,” he said. “That is highly suboptimal, it’s not aligned, and it hinders long-term results. We’re going to be in alignment with one another.”