The UTD Mercury

University of Texas System investments lost more than $2 billion during September, according to figures released by the University of Texas Investment Management Company (UTIMCO) which oversees the funds.

The largest of the investments, the Permanent University Fund (PUF), dropped 8.4 percent during September after losing 3.3 percent the previous year, said UTIMCO CEO Bruce Zimmerman. Figures for October have not been released.

The losses have impacted both endowment funds, which are used for the long-term development of universities in the UT System, and operating funds, which are used to cover day-to-day expenses. Altogether, they are worth $21 billion.

Zimmerman said in the current financial climate, the losses were not unexpected.

"Many of us felt like we were going to hit a rough patch for a couple of years," he said. "What caught us by surprise was the rapidity with which the change came about."

The losses could have been much more severe, he said. In January, UTIMCO began moving out of public equity markets in anticipation of a market downturn.

UT System investments have far exceeded overall market performance and comparable funds, Zimmerman said. The Standard & Poor 500, a broad measure of U.S. market performance, has dropped 36.6 percent so far this year, three times the losses sustained by the UT System.

Matt Flores, a UT System spokesman, said while the long-term effects of the losses are uncertain, there will not be any spending cuts for the remainder of fiscal year 2009, which ends Aug 31.

"It's a little premature to say exactly what's going to happen beyond that," Flores said.

Flores said if investments continue to lose money, academic excellence programs such as the Faculty STAR program, which attracts high caliber faculty to the UT system, would be the first to see cutbacks.

Assistant Vice President for Business Affairs Calvin Jamison said that UTD operations, including construction projects, are unlikely to be affected by market losses in the near future. Any impact on UTD's future plans will depend on what happens in financial markets over the next six to nine months.

"There are probably a lot of 'what if' scenarios that could happen," Jamison said. "We have in place a number of contingencies for a number of scenarios."

Zimmerman said UTIMCO is well situated for the future. The UT System does not directly own any of the bad debt that has caused significant losses in the banking sector, and he said, its investments are well-managed and diversified.

Although the long-term goal for PUF is an annual return of 5.1 percent, he said, gains in recent years have been as high as 15 percent. UTIMCO has even purchased debt from insolvent companies at a bargain in expectation of high yields.

"I think we've got a terrific portfolio," Zimmerman said. "We have our money in the right places with the right people managing it."

UTD president David Daniel is optimistic about the university's financial situation. He said UTD has been fiscally prudent, setting aside millions of dollars of unallocated funds to cushion unforeseen budgetary cuts.

"Barring some truly unforeseen economic catastrophe in the state of Texas," Daniel said, "right now things look pretty good."

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