LPs

Utimco pays above-average fees on core buyout portfolio

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A University of Texas cheerleader performs in front of a giant Texas flag draped on the UT Tower during the Hex Rally in Austin, Texas on November 21, 2011. The tradition started in 1941 to break a losing streak against rival the Texas A&M Aggies. According to legend, in 1941 students consulted fortune teller Madam Augusta Hipple who instructed them to burn red candles the week before the game as a way of "hexing" the Aggies. UT's Hex Rally and A&M's Bonfire traditions are both ending this year as Texas A&M joins the SEC after the end of the season. Photo taken November 21, 2011. REUTERS/Julia Robinson (UNITED STATES - Tags: SPORT FOOTBALL) - RTR2UCR6
  • $34.6 bln endowment paying 2.1 pct to core buyout, growth managers
  • Average management fees usually 2 pct or less for buyout funds
  • $8.6 bln portfolio nets 13.6 pct as of Feb. 29

University of Texas Investment Management Co is paying above-average management fees for its core portfolio of buyout and growth-equity funds.

Utimco paid the $750 million portfolio’s general partners a blended management fee of 2.1 percent, according to a recent private investment report. Fund managers in its non-core portfolio, valued at a little more than $1 billion, were paid a blended 1.7 percent management fee.

Leveraged-buyout funds typically charge their limited partners 2 percent or less, according to a 2016-2017 PE/VC Partnership Agreement Study published by Buyouts Insider.

A separate data provider, Preqin, found the average 2014 vintage fund charged a 1.9 percent management fee compared with 2.01 percent in 2007.

It’s unclear why Utimco’s blended management fee is higher than average. Chief Executive and Chief Investment Officer Bruce Zimmerman declined to comment.

While management fees for late-stage and growth-equity funds can drift above 2 percent, Utimco invested just 19 percent of its core buyout/growth portfolio in those strategies, according to the report.

The $34.6 billion endowment paid a blended 2 percent fee on funds on its $885 million core venture capital portfolio, which it calculated separately from its buyout and growth holdings.

The average blended management fee for its entire private market portfolio, which includes credit, real estate and venture funds, was 1.7 percent.

Utimco’s $8.6 billion private-markets portfolio was generating a 13.6 percent return on a seven-year basis as of Feb. 29, according to the report.

In 2015, its longtime head of private markets, Lindel Eakman, left to take a position at Foundry Group. Whether Utimco has named a successor is unclear.

Action Item: Read Utimco’s latest private markets report: http://bit.ly/1rzvChP

Photo of a University of Texas cheerleader courtesy of Reuters/Julia Robinson