University of Texas endowment to impose new rules for Iran ties

Bloomberg – The University of Texas Investment Management Co. has created a set of guidelines compelling managers of its $31 billion in assets to divest from companies with ties to entities sanctioned by the U.S.

The new policy comes less than a month before U.S. sanctions targeting foreign purchases of Iranian oil, as well as Iranian port operators, insurance and reinsurance businesses, go into effect.

Utimco, as the Austin-based nonprofit is known, said on Oct. 22 it has notified its 230 external managers and is compiling a list of companies that do business with sanctioned entities — and are therefore at risk of becoming sanctioned themselves.

Exited Accord

President Donald Trump announced in May that the U.S. would exit the 2015 nuclear accord that had been signed by Iran, the U.S. and five other countries plus the European Union. His administration began putting sanctions back into place in August, with more to take effect after Nov. 4, complicating efforts by companies that had rushed into the Islamic Republic after the accord was reached.

Under Utimco’s new guidelines, managers will have 90 days to sell publicly traded securities issued by companies on the list, according to the policy reviewed by Bloomberg. For illiquid private investments that already exist in the portfolio, managers won’t be asked to divest but they will be restricted from investing any further in those companies, Utimco said.

Utimco said the policy was developed between its management and hedge fund manager Kyle Bass, who is chairman of the risk committee.

“Western capital continues to allow businesses that openly defy U.S. law to grow,” Bass said in an interview. “The University of Texas is leading the way for institutional investors around the world to bring themselves into legal and fiduciary compliance with U.S. sanctions law.”

Bass, the founder of hedge fund Hayman Capital Management, made a fortune betting against U.S. subprime mortgages. He said he’s not short selling companies that he anticipates will be on the list, which is being prepared by a third-party research firm.

Finalizing List

The final list hasn’t yet been determined, but will be distributed to managers in the coming weeks, Utimco said. The procedure to compile the list allows for “subjective judgment” to determine if a company should be included or not, Utimco said.

Policies like Utimco’s aren’t widespread, but other institutional investors may not be far behind, Guy Talarico, chief executive officer of consulting firm Alaric Compliance Services, said in an interview.

Finding scrutinized companies is “not always clear cut,” he said. “How you do the analysis, the rules are around the analysis — that’s what’s required in order to get it right.”

Read More: Why U.S.-Iran Divide Is Widening Again Under Trump: QuickTake

While scores of European companies, from oil giant Total SA to Volkswagen AG, have said they will scale back or abandon operations in Iran after the U.S.’s reversal, the U.S. has struggled to get China and India to agree to cut off imports from the oil-rich Persian Gulf country.