Texas U fund sold gold in February, bought gold futures and equities


Texas University Fund Sold $375 Million in Gold-Bar Holdings

By David Mildenberg
Bloomberg News
Wednesday, April 24, 2013


AUSTIN, Texas -- The University of Texas Investment Management Co., the third-largest U.S. academic endowment, sold $375 million in gold bars from holdings of about $1.4 billion and reinvested the proceeds in gold futures and equities.

In the three months that ended Feb. 28, the Austin, Texas- based fund bought $75 million in gold futures, $225 million in developed- market equities and $75 million in emerging-market equity futures, Bruce Zimmerman, the chief executive officer, said today in a telephone interview.

The fund, which manages $29.2 billion, started taking delivery of gold through futures contracts starting in 2008 as a hedge against inflation, Zimmerman said. While fund managers and directors remain concerned that global consumer prices may increase, the fund wanted to increase investments in equities, he said.

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"Our idea was to buy and hold gold, and when the world's central banks begin tightening, we'll sell," Zimmerman said. "The price of gold has traded off, but the world's central banks haven't started tightening."

The latest investment didn't change the fund’s overall exposure to the metal because of the leverage involved in its gold futures, Zimmerman said.

The fund hasn't bought or sold gold since February, he said. Its gold holdings are now valued at about $1.1 billion, while its cost basis is $967 million, he said.

Gold futures on the Comex in New York fell 12 percent in the 12 months that ended Feb. 28. On April 15, the price plunged 9.3 percent, the most in 33 years, after entering a bear market. On the following day, the metal touched a 26-month low of $1,321.50 an ounce.

Futures have tumbled 26 percent from a record $1,923.70 in September 2011, and exchange-traded products backed by the metal have dropped 13 percent from the all-time high in December, signaling that investors lost faith in the commodity following a 12-year rally. Goldman Sachs Group Inc., Barclays Plc, and Credit Suisse PLC are among banks that have cut their forecasts this year.

The largest academic endowments are Harvard University and Yale University, according to a Feb. 4 report by the National Association of College and University Business Officers.

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