Lawrence Kochard, chief executive officer and chief investment officer at the University of Virginia Investment Management Co, hates your fund structure.
That doesn’t mean UVIMCO won’t commit to your fund, but just be aware that your high fees, your illiquidity, your total control of LP capital, makes Kochard pretty uncomfortable.
“The fee drag is tremendous, the length of time investments stay outstanding and lack of control we have over those is huge,” Kochard said during his keynote speech at the IFC EMPEA Global Private Equity Conference 2015 Tuesday.
Kochard also said he is not a believer in private markets investments as a diversifier in a portfolio. As an example, he used yielding assets. Because UVIMCO does not control the sale of the asset, “it does absolutely nothing for me from a diversification standpoint because [with] a real diversifier, I can get liquidity, sell that asset that’s held up and buy the cheap asset that’s [trading down],” he said.
These factors have pushed the university endowment to move toward a strategy of buying secondaries, seeking co-investment opportunities and making direct investments with unfunded investment shops, he said.
UVIMCO will continue to commit to funds and that will make up the bulk of the system’s private equity exposure, Kochard said on the sidelines of the conference. The endowment generally commits to smaller funds, but can target larger funds if the opportunity is right, he said.
The endowment had an actual allocation of about 19.9 percent in private equity as of June 30, 2014, according to the system’s 2014 annual report.
The $7 billion endowment has allocated 60 percent to equities, 30 percent to fixed income and 10 percent to real assets. It’s actual allocation as of last June was 65.1 percent equities, 22.4 percent fixed income and 12.5 percent real assets, according to the annual report.
UVIMCO returned about 19 percent for the fiscal year that ended June 30, 2014, according to the annual report.
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