Yesterday, we shared private equity fund returns from the University of Texas Investment Management Co. (UTIMCO). Today, the man ultimately responsible for overseeing those investments is out of a job.
Robert Rowling, chairman of the UTIMCO board, resigned this morning, in the midst of a Texas state senate hearing about the system’s falling capitalization. The decision did not seem planned out, but instead was a reaction to intense grilling over UTIMCO’s decision to pay performance bonuses to members of its investment staff.
Specifically, UTIMCO last November paid out hefty bonuses based on the year ending June 30, 2008, in which the system had made money and outperformed most of its peers. Those details did not seem to assuage the legislators, however, who argued that the bonuses should have been renegotiated by the system, or declined by the recipients.
After a lengthy dressing down by State Sen Steve Ogden (R-Bryan), Rowling said the following:
“I’ve spent half my life at the University of Texas and UTIMCO. I volunteer, I travel, they never reimburse me for this stuff. It cost me a lot of time and money. The sacrificed of my family. I sacrificed my friends and you know what? You can have my job, I resign… I’m outta here. You come here and abuse him [UTIMCO CEO Bruce Zimmerman]? We did what we thought was right. We thought we had an obligation. Some people say you can walk away from your contracts, but we had an obligation.”
You can see the video here, by clicking on today’s meeting (fast forward to around the 2hrs 30 minute mark).
This is certainly not an isolated incident, and it’s only certain to get worse (as I predicted back in December). After all, UTIMCO actually made money in the time period for which these disputed bonuses were calculated. Imagine what will happen when a system pays out bonuses for a losing year, because that system’s losses were a bit lighter than that of peer systems? Absolute carnage.
By the way, Rowling so far seems to be sticking to his resignation guns, according to The Austin American Statesman (which first alerted us to this situation).