U. Va. Boosts Hedge Funds, Cuts Private Equity

Mar 2 2007 | 2:40pm ET

The $3.5 billion University of Virginia Investment Management Co. plans to increase its targeted hedge fund allocation from 45% to 47% this year, while cutting its private equity exposure from 14.8% to 12%, according to its 2006 year-end investment report.

The system’s decision to bump up its hedge fund exposure may have something to do with its perceived underperformance last year–its returned just 12% in 2006, trailing its benchmark. “While acceptable on an absolute basis, this return is disappointing in the context of the high returns delivered by our public,” noted the report.

“Our hedge fund portfolio also underperformed its Tremont composite benchmark, which returned 14% for the calendar year,” the report said. “The year is a tale of two halves, with the first half marked by lackluster returns and underperformance, and the second half with strong returns, outperformance and a good relative start to the new fiscal year.”

The system’s private equity portfolio didn’t fare much better: Venture capital returned 8% return for the calendar year, trailing its benchmark return of 10%, and its buyout portfolio returned 23% for the year, merely matching its Cambridge benchmark.

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