UT unloads its gold bars

Bloomberg:
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 yesterday in a telephone interview.

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

“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.
... 
I think the Permanent University Fund had some significant losses in the 2008 market downturn and the gold purchases were probably a hedge against further losses.  As it turns out, equities have done much better than gold in recent months leasing the fund with a very modest return on investment.  I have never been a gold bug and see no reason to be one now.  The recent activity looks like a hedge against its original hedge.

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