Abraham Lincoln once said that you can please some of the people all of the time and all of the people some of the time, but you can’t please all of the people all of the time. Bob Boldt suggests an addendum to Lincoln’s theory. Since taking over in February as chief executive of the University of Texas Investment Management Co. (UTIMCO), Boldt has learned that it’s also possible to please none of the people most of the time.
To some, Boldt is just another backroom businessman whose initial reluctance to release sensitive fund performance data on UTIMCO’s private equity partnerships indicates an egregious lack of accountability. The Houston Chronicle’s editorial board, for example, wrote in early October that Boldt should resign after proving he is “on the side of those making money off the UTIMCO investments, not the investments’ owners-the people of Texas.”
Equally angry are the private equity partners who feel their nondisclosure agreements were violated when UTIMCO released its private equity returns (see data on pages 30 to 33). They believe that Boldt and the UTIMCO Board of Regents made the move simply to appease local reporters and politicians. Some threatened to sue (none did), while others said that they would probably bar UTIMCO from investing in future fund offerings.
From his tenuous seat in the middle of the maelstrom, Boldt insists that he is neither as callous nor nave as his detractors would like to believe. Instead, he is just a veteran investor trying to do the right thing without simultaneously destroying his alma matter’s ability to make money via the private equity markets.
“I believe in disclosure as someone managing public funds, but there has to be a sensitivity overlay if it is harmful to the public interest,” he says. “There is a level where it becomes harmful, and I hope people don’t go blindly toward that point.”
Boldt’s first significant exposure to private equity came in 1996, when he joined the California Public Employees’ Retirement System (CalPERS) as senior investment officer of global public markets investments. Even though Boldt’s $162 billion portfolio constituted 92% of all CalPERS investment assets, the group’s board meetings were dominated by venture capital, buyouts and real estate discussions. “I think that’s how it is with all public pension funds,” he says.
In 2000, Boldt left CalPERS for Pivotal Asset Management, a San Francisco-based shop that managed both a technology hedge fund and a later-stage venture capital fund. Although he was willing to stick out the economic downturn with Pivotal, he couldn’t resist UTIMCO it came calling.
“I had plans like many people to return to my home state, and maybe be fortunate enough to teach finance at [the University of Texas], where I had gotten both an engineering degree and a graduate business degree,” he says. “I wasn’t expecting that to happen for a few more years, but who knows when-or if-this opportunity would have ever come up again?”
There was, however, one significant catch. Back in 1999, UTIMCO officials had come under fire for allegedly investing in certain private equity funds connected to local political figures like then Gov. George W. Bush and then-UTIMCO Board of Regents Chairman Tom Hicks. Boldt was aware of the issue and he told UTIMCO that he would need to confirm for himself that the school’s portfolio was clean of political influence before accepting the job. UTIMCO officials accepted Boldt’s conditions and handed over the investment portfolio records.
“I did an extensive due diligence and didn’t discover any evidence that there were conflicts of interest,” Boldt says. “There are obviously some associations, but that’s to be expected. The private equity industry is small enough and the web complex enough that you’ll almost always find a relationship between two people if you look hard enough. This is especially true when you’re talking about people as well known as Tom Hicks.”
But the Houston Chronicle was not nearly as satisfied. Following Boldt’s hire, the newspaper revived its Texas Freedom of Information Act (FOIA) efforts. It was seeking detailed fund performance data in an effort to prove that UTIMCO had invested in private equity funds based on political influence, instead of on sound investment metrics. Although Boldt believed that the investigation was largely driven by a perceived Chronicle bias against Republican office holders, he knew that he was between a rock and a hard place.
The final decision in favor of disclosure was made by unanimous vote of the UTIMCO Board of Regents. Boldt says he supports the move and hopes others follow suit, even though he expressed some misgivings during the board’s three weeks of deliberations. “I know that might make it harder for us to get into certain funds, and I explained that [to the board],” he says. In other words, he knew that he was in a no-win situation.
Almost immediately following the Board of Regents’ vote, newspapers like the Chronicle began calling for a swift release of the UTIMCO fund performance numbers. But rather than immediately sending out spreadsheets, Boldt insisted on giving the affected general partners enough time to consider signing waivers or registering a legal challenge with Texas Attorney General and U.S. Senate candidate John Cornyn. He also felt that his 30-person staff needed time to go through the second quarter LP reports and factor in subsequent capital call-downs or returns. After two weeks of waiting, the Chronicle tried to expedite the process by calling for Boldt’s resignation.
“The Chronicle is off the edge,” Boldt says. “I was the one they had to pick on because they wouldn’t take on the regents directly. Plus I’m the one who said we wouldn’t release the results until [Oct. 4].”
Even after the release of the data, which included a congenial conference call with reporters, Boldt hasn’t seen his job get much easier. The Chronicle found no real evidence of corruption, but it still presented its story with a headline entitled “UTIMCO Records Show Favors, Failures, Fortune.” Most other press reports got the story right, although a handful failed to follow Boldt’s request that they stress the lack of private equity fund performance reporting standards and the expected IRR variance between funds of different vintage years. Then, there was the New York Times, which referred to the UTIMCO chief as Bob Bardt.
More important than Boldt’s personal reaction to the coverage was how his general partners responded. Many VCs said they felt that the ensuing coverage was indicative of why such results should not be made public, and that UTIMCO should have known better.
In an effort to calm nerves and to pave the way for future fund participation, Boldt began planning a two-week trip during which he would try to meet with all of his general partners. If nothing else, the travel would be an excuse to escape the office and the continuing flood of FOIA requests.
“This trip is probably something I would not have done in such a compressed period of time if not for everything that’s happened,” he says. “The problem will be that I’ll have to spend the first part of each meeting going over disclosure issues, when there are other things that we’d normally rather be discussing with our GPs.”
The only question now is whether or not the GPs will care to discuss any issues with Boldt other than disclosure. It will be his success in moving beyond that issue and into talks about future fund participation that will be the ultimate arbiter in Boldt’s success at UTIMCO. All that’s left now is the hard part.