Temple will hire Seattle-based Pugh Capital Management Inc. to manage its fixed-income Operating and Auxiliary Reserves fund, the investments committee of the Board of Trustees announced in a meeting last week.
Pugh, which has $2.8 billion in assets, also manages the investment portfolio for corporations and the University of Washington.
The university will notify Pugh this week and ask for a final fee negotiation, which Chief Financial Officer Ken Kaiser said was currently 26.7 basis points, or 0.27 percent of the managed assets. Investments committee chair and local investment banker Christopher McNichol said he would like to see the fee reduced, and noted that the committee only approved the selection of Pugh, not the fee.
Kaiser told the trustees that his office, with help from Temple’s financial advisers, Cambridge Financial Associates, considered five firms and interviewed three before recommending Pugh.
For fixed-income projects, Pugh selects investment opportunities based on identifying trends and “inefficiencies within the market that can be exploited,” according to the corporation’s website. It then develops a portfolio profile and interest rate forecast for clients.
The OAR fund exists to manage university debts through the use of fixed-income sources, Kaiser said. Since the income is fixed, no risk is involved.
“It’s not a complicated portfolio for somebody to run since its all fixed-income,” Kaiser said. “You just need to align your investments with your liabilities.”
Though his office could manage the fund, Kaiser said it was more efficient to leave it to Pugh.
“Every time you had a new bond issue, you had to reset the fund,” Kaiser said. “You had to babysit it.”
In February, the committee fired RS Investments from managing part of the university endowment, saying that personnel changes at the firm were cause for concern. Temple assigned RS’ duties to Van Eck Associates Corp., which already had an investment manager for the post-retirement plan and is heavily invested in gold mining companies such as Barrick Gold Corp.
“Every manager we hire, we want to have a long relationship,” Kaiser said. He added that Temple’s relationship with Pugh “could be for 30 years, unless they screw up.”
The investments committee recommended that the OAR fund, founded in 1984 as the Retirement of Indebtedness fund, be renamed in a March 26 meeting, a resolution waiting for approval at the May 13 general body meeting. The general body has rarely rejected committee recommendations.
The trustees’ audit committee met at 2 p.m. in executive session for roughly an hour, Kaiser said. Since executive sessions are not public, Kaiser did not share all the details from the meeting, but did not deny that the committee discussed taxes and the new fiscal year.
“We’re nonprofit, so we don’t have a heavy tax burden,” Kaiser said. “All we have to fill out is a 990 return,” he said, referring to the IRS’ special tax form for nonprofit organizations.
Any recommendations from the committee will be brought forth at the May 13 general body meeting.
The next trustees meeting is the facilities committee on May 5 at 12 p.m., a newly rescheduled date from the originally scheduled April 30 meeting.
Joe Brandt can be reached at email@example.com.