October 18-20 | Tucson, AZ

The Research Institution GAP Fund and Accelerator Program Summit

University of Michigan, Michigan State target funds for Venture Capital from endowments 

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October 18-20, 2023 / Tucson, AZ
The annual summit for research institution gap fund and accelerator programs, including proof of concept programs, startup accelerators, and university venture funds

The Story

The University of Michigan‘s endowment has bolstered its alternative assets with more than $100 million in commitments to venture capital and real estate funds.

Separately, Michigan State University reported its latest endowment strategies. The school doubled its commitment to $60 million to an outperforming alternative investment fund run byDrake Capital Advisors.

UM plans a new commitment of $50 million, subject to approval, to CD Capital Natural Resources Fund III, a London-based pool that will invest in early-stage mining opportunities, according to the agenda for the Board of Regents meeting on Thursday.

UM’s $10 billion endowment is the third-largest among U.S. public universities. MSU’s endowment was valued at $2.3 billion as of June 2015.

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UM joins Yale University in adding to venture capital funds. UM, which held 13.4 percent of its portfolio in venture capital in June 2015, committed at least $65 million to technology funds earlier this year.

In January, UM committed $25.1 million to two funds from Matrix Partners China, which invests in private technology companies and expects to benefit from the country’s “significant middle class of consumers,” according to the agenda. The endowment pledged $40 million in February to TCV IX, a fund that invests in expansion and late-stage technology firms.

Venture capital has fueled robust returns for Yale’s $25.6 billion fund. Yale reported this month a yearly 93 percent internal rate of return for its venture capital bets over the past 20 years, including triple-digit annual gains during three years of the Internet boom, Chief Investment Officer David Swensen said in an e-mailed statement. The asset class’s time-weighted return for the two decades through June was 32 percent, he said.

The UM endowment’s strong performance in venture capital in fiscal 2015, returning 24.5 percent, more than offset its losses in natural resources, according to a fund report.

In real estate, UM in December committed $40 million to IMT Capital Fund IV, which targets multifamily housing in major western and southern U.S. markets. That month, UM also added $4 million to its co-investment with Magna Hotel Fund V in a project for an all-suite, extended-stay Residence Inn in the Old Town area of Alexandria, Va.

“The hotel is being acquired at a below-market price and presents several opportunities for Magna to improve operations and performance,” Kevin Hegarty, Michigan’s chief financial officer, wrote in a memo accompanying the agenda. Kim Broekhuizen, a Michigan spokeswoman, declined to comment.

MSU’s trustees on Friday approved the $60 million allocation to Drake. In 2015, the Drake portfolio outperformed Michigan State’s mature hedge fund portfolio by 5.4 percent, according to an agenda submitted to the board. The Drake portfolio makes direct investments with emerging manager funds with less than three-year track records and less than $500 million under management, according to the agenda.

Source: University of Michigan, Michigan State target funds for endowments – Crain’s Detroit Business

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