sovereign wealth fund industry institutional investor genre public lands mineral rights land use rights founded 1876 founder by act of legislature headquarters austin texas united states of america key people paul l. foster chairman bruce zimmerman ceo total assets us 17.5 billion 2015 1 does not include public land holdings owner state of texas website www.utimco.org the permanent university fund puf is a sovereign wealth fund created by the state of texas to fund public higher education within the state . a portion of the returns from the puf are annually directed towards the available university fund auf which distributes the funds according to provisions set forth by the 1876 texas constitution subsequent constitutional amendments and the board of regents of the university of texas system and the texas a & m university system . the puf provides extra funds above monies from tax revenues to the ut system and the texas a & m system which collectively have approximately 50 percent of state public university students . the puf does not provide any funding to other public universities in the state of texas . contents 1 history 2 assets 3 management 4 allowed institutions 5 see also 6 references 7 external links history edit the permanent university fund was established by the 1876 constitution of the state of texas . 2 initially its assets included one tenth of university of texas at austin lands bordering the railroads ut austin was granted 1 million acres 4 000 km2 in west texas as compensation as well as 1 million acres 4 000 km2 additional . 3 in addition the 1876 constitution organized the university of texas system under which governance of texas a & m university and ut austin was placed . the original constitution provided for preference in puf investment in texas and u.s. bonds . 2 in 1883 texas and pacific railroad returned 1 million acres 4 000 km2 deemed too worthless to survey to the state government which turned the land over to the puf . 4 initially the little revenue puf earned from its lands were from grazing leases . 5 the terms of the annexation of the republic of texas in 1845 meant that texas kept its public lands . 3 the 1894 discovery of oil in corsicana texas and the 1901 discovery of oil at spindletop in beaumont texas began a subsequent oil boom in texas and the western u.s. 6 in 1901 the texas legislature authorized ut austin to sell lease and otherwise control oil and mineral rights for puf land . 3 in late 1916 after a report was submitted to the land commission of the ut board of regents the board forbade the sale of any university lands including those of the puf . 4 on 28 may 1923 the santa rita no. 1 oil well in reagan county discovered the first oil on puf land ; in the following decades the puf s revenue made ut austin among the best endowed in the nation . 5 in 1924 the ut regent robert story requested that the legislature direct oil rights revenue directly into the available university fund ; the 29th legislature complied on 3 april 1925 by passing house bill 246 . 7 the march 10 1926 texas supreme court case state ex rel attorney general v. hatcher decided against state treasurer w. gregory hatcher who refused to comply with attorney general dan moody s demands that oil rights revenue be placed into the puf rather than the auf . the texas supreme court concluded that the 1876 constitution directed subterranean revenue to be corpus of the estate rather than ut austin disposable income . 4 in 1928 state attorney general claude pollard issued a legal opinion that the ut board of regents could issue bonds against the auf the account that holds the annual distributions of the puf . 4 in 1931 the legislature authorized ut regent requested bonds to improve ut austin s buildings and campus in general . as the provision was repealed in 1932 it granted the only time ever that puf principal was spent . 5 the auf s distributions were directed in 1931 by the legislature such that 2 3 of the money would go to ut austin and 1 3 to texas a & m and also extended to be available for purchase of equipment and building construction . 2 in 1947 after world war ii and during the education boom from the servicemen s readjustment act of 1944 a constitutional amendment was passed that authorized the issuance of 15 million in auf bonds 10 million to the ut system and 5 million to the texas a & m system . 4 1956 saw another amendment to the state constitution this time setting the maximum bond issuance equal to the puf s total asset value excluding land as well as allowing southwestern medical school health science center at houston and m. d. anderson cancer center all of the ut system access to auf funds . 4 in addition the 1956 amendment guaranteed the 2 3 ut 1 3 a & m auf split that the legislature had directed in 1931 . in 1968 the puf constitution was amended again to include a broader range of both corporate bonds and investments available to puf as well as applying a prudent person standard for some amendments . the state attorney general in 1978 issued an opinion that interest accruing in the puf should be used to pay outstanding bonds and finance permanent educational improvements per the puf constitution . in 1984 the bond issuance capacity of the puf was raised to 30 % and the issuance of auf funds was expanded to all existing university of texas system and texas a & m university system schools ; another voter approved amendment the same year authorized the creation of the higher education assistance fund to help all public higher education institutions not covered by the puf . 8 as oil rights revenue was dropping from 262 million in 1981 to 57 million in 1995 the 1991 texas legislature reduced funding for the ut and texas a & m university systems by about one quarter . this placed increased pressure for the puf to make up much of the difference even after the 1984 expansion of the puf s list of beneficiaries . on 1 march 1996 the ut system board of regents authorized the nonprofit university of texas investment management company utimco to manage ut system assets including all of the puf . 5 a 1988 constitutional amendment eliminated all investment restrictions related to the puf for the ut board of directors in favor of adopting the prudent person standard for all investments which was subsequently amended in 1999 to the prudent investor standard for investments . 2 another 1999 statewide vote adopted an amendment that made further changes to the puf . 4 the first was that distributions to the auf would equal both realized income return and unrealized capital gains puf assets . the second directed payments to puf expenses come from puf assets ; the third directed the establishment of an investment and return policy that would preserve both a stable auf distribution and the real value of the investments . in 2001 puf annual distribution to the auf was changed from 4.50 % to 4.75 % . on 7 february 2008 after months of study the ut board of regents authorized an increase in auf annual transfers from 4.75 % of the puf value to 5.00 % citing recent puf growth of more than 10 % per year and unrest over the large annual increases in tuition at ut austin . the texas a & m system chancellor lauded the increased distribution which now matched other texas a & m endowment distributions . 9 assets edit puf fiduciary assets 1993 2008 in 1900 the permanent university fund earned approximately 40 000 mostly from grazing leases ; 10 by 1925 income had increased to 2 000 per day about 700 000 per year and by 1943 was just under 1 million per year . 5 in the late 1950s the puf earned about 8 513 000 per year and was valued above 283 642 000 ; in 1990 the puf was valued at 3 541 314 800 and earned 266 119 000 in income . currently puf land assets deliver proceeds through oil gas sulfur and water royalties rentals on mineral leases and gains on fiduciary investments . 11 grazing leases and other surface rights income are distributed to the auf . 12 as of december 2008 figures the puf holds approximately 8.8 billion in investments and 2 100 000 acres 8 500 km2 of land located in 21 counties mostly in west texas . 8 13 each year five percent of the puf s value is transferred to the auf which then distributes the money . the puf exclusively serves institutions in the university of texas system which receives two thirds of its proceeds and the texas a & m system which receives the remaining one third . 14 as of 2008 the university of texas system received the fifth largest endowment in the nation and the texas a & m system received the tenth largest . 15 at one time the puf was the chief source of income for the university of texas at austin citation needed but today its revenues account for less than twenty percent of the university s annual budgets . 16 of the 2007 08 year s 1 billion core academic budget of ut austin the auf s funding accounted for 143 million . 16 management edit the puf s land assets are managed by the university of texas system administration . 12 the puf s fiduciary assets are managed by the university of texas investment management company utimco a nonprofit group formed to manage various assets of the ut system and governed by a volunteer board of directors . 17 the board is composed of three member of the ut system board of regents one person selected from a texas a & m university system board of regents list the chancellor of the ut system and four investment professionals selected by the ut system board of regents . 18 in addition utimco has a chief executive officer and chief investment officer appointed by the board and a president appointed by the ceo and board ; all employees of utimco except the nine member board of directors receive a salary and are eligible for annual bonuses . 17 19 we did what we thought was right . we felt like we had an obligation . some people may feel like you can walk away from your contracts . we had an obligation to these people . robert rowling utimco chairman 20 in february 2009 utimco drew criticism from the state s legislative and executive branches for awarding bonuses to employees despite the global financial crisis of 2008 2009 . robert rowling chairman of utimco and vice chairman of the ut austin board of regents insisted that the bonuses he authorized were for the fiscal year ending 31 july 2008 in which the puf net fiduciary assets decreased by 3.26 % or 383 million as compared to nearly 14 % for the dow jones industrial average . the chairman of the board of regents defended rowling stating that the contracts obligated bonus payment and the large amounts 1.05 million for the utimco ceo and 2.3 million for other employees combined were fairly inflexible . 17 governor rick perry and lieutenant governor david dewhurst criticized w e can t imagine how such compensation is justified considering that in the same month this meeting was held reports surfaced that utimco s earnings for the year had dropped an estimated 23 percent . 21 perry s spokeswoman attacked the contracts stating the compensation structure ought to incorporate the health of the fund