After a year-long search, the University of Texas Investment Management Company is preparing to form its first strategic partnerships.
UTIMCO chief Britt Harris plans to recommend BlackRock and J.P. Morgan Asset Management as the Texas endowment’s first strategic partners, according to meeting materials released ahead of the fund’s December 5 board meeting. BlackRock CEO Larry Fink and J.P. Morgan asset and wealth management chief Mary Erdoes are scheduled make presentations on behalf of their respective organizations at the December meeting.
If the board approves the new partnerships, each manager will receive a $1 billion commitment. As of October 31, UTIMCO managed about $48.7 billion across endowment and operating funds.
UTIMCO launched its search for potential strategic partners in October 2018, according to the meeting materials. Harris, who joined the endowment as president, chief executive, and CIO in 2017, had helped pioneer the use of such partnerships in his past roles as CIO of the Verizon Communications retirement plan and the Teacher Retirement System of Texas.
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According to meeting materials, UTIMCO screened 11 potential partners before selecting five firms for a final review. A selection team made up of ten members of the investment staff, including deputy CIO Rich Hall, scored candidates based on criteria such as their ability to increase returns and reduce risk, as well as offer resources such as research and technology.
For instance, the meeting materials noted that technology was one advantage of a strategic partnership with BlackRock, whose Aladdin platform was cited as an “industry-leading risk system.”
Other traits which UTIMCO said it looked for in a strategic partner included sharing the endowment’s long-term compensation philosophy and operating globally “with a sustainable business model.” UTIMCO also wanted a partner that offered — and would customize — a “full range of valuable investment products and services.”
In addition to the public strategic partnership program that’s up for approval next week, UTIMCO is also targeting strategic partnerships with two to four private-asset managers, according to the meeting materials. The endowment said it is looking to allocate between $1 billion and $2 billion to private equity, real estate, natural resources, or credit managers who can offer “fee-advantaged” investments in funds and access to co-investment.