By R.G. RATCLIFFE
Houston Chronicle Staff
September 16, 2002

Between 1995 and 1999, the people in charge of investments for Texas' major statewide college systems placed about half a billion dollars with personally or politically connected investment managers.

It is hard to tell how those investments have fared because the University of Texas Investment Management Co. decided last fall not to detail performance results of individual managers in its quarterly reports.

UTIMCO oversees investments of university endowments funded by private donors, and of the Permanent University Fund, which consists mostly of oil and gas royalties from state lands dedicated to higher education. PUF investment proceeds are used to build and maintain facilities in the University of Texas and Texas A&M systems.

The Houston Chronicle was able to determine the general performance of some of the investment managers working for UTIMCO through records obtained in March 2001, and from limited information released by UTIMCO recently.

Bruce Schnitzer

Connection: Tom Hicks, then-University of Texas regent, and Schnitzer were college fraternity brothers and had previously been in business together.

Performance: A $36.8 million investment with Schnitzer has a negative return rate of 7.42 percent and has returned $10 million to the PUF. Two other investments with Schnitzer totaling $20 million have been successful and have returned $35 million to the PUF through May 31. The total dollars lost or gained on the three investments cannot be determined from information UTIMCO discloses.

Beacon Group

Connection: When the Beacon Group investment commitment was made in 1996, then-UTIMCO board Chairman Tom Hicks' investment firm, Stratford Capital Management, and board member Luther King's Capital Management were about to enter a deal with Beacon to purchase a Dallas movie theater chain. King, who is still on the UTIMCO board, and Hicks later said neither knew their staffs were negotiating the theater investment. When UTIMCO staff learned of the conflict, they directed that no PUF money go to the theater deal but did not call off investing with Beacon in other investments.

Performance: A $24 million investment has a negative rate of return of 17 percent. Actual dollar losses cannot be determined because UTIMCO will not disclose the current value of investments, but Beacon Group had returned only $4.8 million to the PUF through May 31.

Maverick Fund

Connection: The Maverick Fund was founded by Charles and Sam Wyly and Sam Wyly's son, Evan. The Wylys and their fund manager, Lee Ainslie, gave more than $685,000 to state and federal Republican committees between 1995 and 1999. They donated $76,000 to the Bush 1998 gubernatorial re-election campaign. And when Bush faced a tough GOP primary challenge from U.S. Sen. John McCain, R-Ariz., in the 2000 presidential race, Charles and Sam Wyly paid for a $1 million commercial attacking McCain. Since that time, Sam Wyly has disassociated himself from the Maverick Fund. One of the UTIMCO board members who voted for the original $96 million investment with Maverick in July 1998 was former UT regent Tom Loeffler, at the time one of the top money raisers for the Republican National Committee.

Performance: Characterized by UTIMCO officials as one of their most successful hedge funds, Maverick has had average earnings of 16 percent over the past three years. In the quarter ended May 31, the Maverick investments lost less than 1 percent of their value in a sliding market.

Carlyle Partners

Connection: Carlyle is run by former officials of the Reagan administration and the first Bush administration. The company also was an owner of Caterair, an airline catering business that had President Bush on its board of directors until he became Texas governor in 1995. The Carlyle investment was made several months after Bush took office.

Performance: 27 percent return on a $10.6 million investment made in 1995.

EnCap Energy Capital Fund

Connection: Three months after EnCap obtained its investment commitment from UTIMCO in 1997, it made a promise to invest $30 million in three Colombian oil wells being drilled by Harken Energy Co. Harken bought out Bush's oil company in 1986, and Bush served on its board of directors until he became governor.

Performance: So far has returned only $27 million of a $49 million PUF investment, but UTIMCO officials believe the fund eventually will earn a 13.98 percent return.