Universities dumping Treasuries

Some of the smartest money in America is getting out of US government debt.

Many university endowments have scaled back their holdings of Treasury securities from as much as 30 per cent in 2008-09 to zero in some cases, say people familiar with their investment strategies.

The sell-off reflects a big change in the way fund managers view US government debt. The traditional attraction of Treasurys for US investors was that they were certain to be repaid. But with interest rates at such low levels, investors worry that bond prices could fall dramatically.

"Treasurys were a core holding," said one university fund manager. "Now everyone is holding less than 5 percent."

The fear on campuses is that universities, which profited in recent years from the rally in Treasury prices, could be caught flat-footed by a reversal of the Federal Reserve's low interest-rate policy.

"If you think you can change allocations quarter by quarter, and you believe rates will be low for longer, and you think you can make a quick switch, then maybe it is OK," the university fund manager said. "But that isn't the way we invest. Today government bonds should come with a warning about interest rate risk."
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James Rickards said:

#TX House Wed passed HB 2770 by voice vote; requires Comptroller to study investing Rainy Day surplus in #Gold. One small step for Texas...

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relating to the investment of certain money in the economic
stabilization fund.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter C, Chapter 404, Government Code, is
amended by adding Section 404.029 to read as follows:

Sec. 404.029. ALTERNATIVE INVESTMENT OF ECONOMIC
STABILIZATION FUND. The comptroller may invest an amount of money
in the economic stabilization fund, not to exceed one-third of the
balance of that fund at the time of the investment, in assets other
than bonds, securities, and other assets that are issued or
otherwise guaranteed by the United States or agencies or
instrumentalities of the United States, to the extent that the
investment meets the standard prescribed by Section 404.024(j).

SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2013.

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