Fund Gambles Pay Off

Looking for a new hedge fund manager? So is every other high-powered investor who’s not staring down from a 81st-story ledge, contemplating both July’s ruthless credit crush and gravity. Every other investor, that is, except the UVA Investment Management Company (UVIMCO), the University-related foundation that handles UVA’s numerous investments.

And what a year it had. According to its Fiscal Year-End Commentary, UVIMCO closed its 2007 fiscal year in July with a $880 million increase in the school’s long-term pool, upping it to a cool $4.3 billion. That’s billions, folks, with a "B." UVIMCO pulled this off with the help of some savvy hedge-fund management, something that’s in seemingly short supply these days.

While most hedge fund are bleeding billions of dollars as the subprime mortgage mirage fades, UVIMCO’s hedge fund portfolio posted a 21-percent return in the 2007 fiscal year. That’s a 12-percent increase from 2006. So where’s the hedge fund magic? According to UVIMCO, it’s all in the manager.

UVIMCO points out that the hedge fund returns were the work of existing managers and not some new group of wunderkinds UVIMCO picked up after sacking its old shmoes. The market finally noticed what the managers had already seen: Large capitalization companies had become relatively cheap. These companies, which the cool kids are calling "large caps," are generally valued at more than $10 billion. Their size gives them a little more stability in a market that’s seen more ups and downs than Lindsay Lohan’s blood alcohol content. Many of UVIMCO’s hedge fund managers, too, continued to "exploit" (their word, not ours) opportunities in emerging markets. And by "emerging markets," UVIMCO means those markets in not-quite-so-democratic Asia.

So while most of us (meaning, those with more than $1 million of investment capital to toss around) continue to watch our hedge fund circle the drain, UVIMCO is sitting pretty in its investment ivory tower. Alice Handy, former president of UVIMCO, told C-VILLE last year that hedge funds can be less risky if you find the best managers. Turns out those UVA types know what they’re talking about.

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