Contact: Monty Jones, (512) 499-4363

Date: May 28, 1996

UT System News Release

New Management Structure Adopted for U.T. System Investments

Austin -- The Board of Regents of The University of Texas System has entered into an investment management services agreement with the University of Texas Investment Management Company ("UTIMCO") to invest the $9 billion of Permanent University Fund and other U.T. System assets under the regents' fiduciary control. In so doing, the U.T. System becomes the first public university to adopt the external investment corporation model implemented by leading private universities such as Harvard, Stanford, Princeton and Duke.

Bernard Rapoport, chairman of the Board of Regents, said the decision to outsource the investment management function was based on the fiscal realities facing colleges and universities today.

"With public sector funding declining on an inflation adjusted basis, the U.T. System must look increasingly to private support and to its endowment resources in order to maintain and expand funding for its teaching, research and health care missions," Rapoport said. "Therefore, it is imperative that the board maximize the investment returns from its financial assets if it is to maintain its standards of academic excellence."

The board's evaluation was that the U.T. System's investment governance and management structure had to be restructured in order to compete successfully in an increasingly challenging investment environment.

"Contracting with UTIMCO will enable the board both to obtain private sector investment management services on a cost-effective basis and to preserve ultimate regental control of investments for fiduciary purposes," Rapoport said.

Thomas O. Hicks, chairman of the UTIMCO Board of Directors as well as a member of the Board of Regents, said a major objective in the formation of UTIMCO was to increase the level of participation by experienced investment professionals in the investment governance process.

In addition to Hicks, two other regents and the chancellor of the U.T. System, the UTIMCO Board of Directors consists of five outside investment professionals. They are Robert H. Allen, Houston; Susan M. Byrne, Dallas; Richard W. Fisher, Dallas; J. Luther King Jr., Fort Worth; and Monroe L. Luther Jr., Houston.

"The presence of these experienced outside directors enhances significantly UTIMCO's ability to participate successfully in an investment environment marked by integration of world financial markets, the emergence of private markets, and rapid technological innovation," Hicks said. "As a private sector corporation, UTIMCO is better able to analyze and respond quickly to market information and thereby control fund risk and return profiles."

Under the terms of the contract, UTIMCO will be engaged exclusively in providing investment management services to the U.T. System Board of Regents.

"The dedication of UTIMCO to a single client will allow UTIMCO to provide an organization which can recruit and retain high caliber investment professionals and to allow these professionals to focus exclusively on producing superior investment returns for the Board of Regents," Hicks said. "We believe this structure increases the board's ability to achieve its financial objectives. We look forward to seeing UTIMCO's efforts translated into enhanced academic and health care services for the citizens of Texas."