Why the University of Texas Invests in Gold

In an undisclosed location underground in New York City sit 6,643 gold bars, worth $987 million, recently acquired by the University of Texas Investment Management Corporation, one of the largest college endowments.

Gold bars
Tom Grill | Iconica | Getty Images

"We began buying gold in September of '09 at about $950 dollars an ounce, our average price is about $1,150, we've invested around $750 million dollars in gold over that twelve months and now it has a market value of around a billion dollars," Bruce Zimmerman, chief investment officer for UTIMCO, told CNBC Wednesday.

Gold represents 5 percent of UTIMCO's portfolio. "The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have access monetary and fiscal stimulus," Zimmerman said.

The endowment is worth an estimated at $20 billion.

"It really isn't for everyone. We had gotten to a size and our thought was that we probably will have our position for a longer, as opposed to shorter term, although we could sell at anytime."

"But rather than continuously roll the futures contracts, it just became easier and more economically for us to take possession of the bullion," he explained.

In addition, Zimmerman went on to say UTIMCO maintains a diversified portfolio—beyond gold. "Our fixed income investments, particularly investment grade fixed income investments, the role they play in our portfolio is to provide for liquidity and stability."

"Fixed income, just like the gold, is one element of a very diversified portfolio," he said.

UTIMCO manages four major endowment funds with a combined market value of $17.2 billion under the fiduciary of the University of Texas board:

  • Permanent University Fund (PUF)
  • Permanent Health Fund (PHF)
  • Long-term fund (LTF)
  • Separately Invested Funds (SIF)

Two of the endowment funds, the PHF and the LTF, are invested in shares of the General Endowment Fund (GEF), which is a broadly diversified pooled investment fund.

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