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The group in charge of managing the endowment of the University of Texas system is apparently very anxious about the state of the American economy. The University of Texas Investment Management Company is so nervous that it converted $500 million of the fund into gold. According to a piece by R.G. Ratcliffe and Jeannie Kever in the Houston Chronicle:
Fearing unstable international financial markets and the possibility of high inflation, Texas’ higher education investment managers have bought more than $500 million in gold.
With the state’s endowment funds designed to generate a 5.1 percent distribution each year to the University of Texas and Texas A&M University, it is rare for the investment managers to put large sums of money into a commodity whose value usually only grows through inflation.
A move to gold as an investment strategy reflects economic problems. Prudent people historically invest in gold when they’re worried about a currency collapse, for example.
The head of UTIMC, Bruce Zimmerman, told the University of Texas Board of Regents that the decision to buy gold came about due to “a lack of confidence in financial markets. I wish I could tell you the future looked rosy,” said Zimmerman. “Unfortunately, that’s not our view.”
The total value of the endowment controlled by UTIMC is $22.3 billion.[Image via]
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Walker on July 19, 2010 8:54 AM:
I understand their concern, but the choice of gold does not give me a lot of confidence in the saviness of their Monet managers. We are clearly moving into deflation, not inflatiion. Furthermore, the price of gold is incredibly high (many would say a bubble) because of the number of investor that (wrongly) believe in inflation.