(Bloomberg News) TIAA-CREF, the largest U.S. manager of pensions for teachers and academic researchers, will provide $1 billion in capital to a new unit that will oversee investments for endowments.
Covariance Capital Management, based in Houston, will provide services to nonprofit groups with assets under management of $100 million or more, New York-based TIAA-CREF said in a statement today. In addition to the seed capital, Covariance will invest client money in stocks and bonds, as well as private equity, real estate and hedge funds, the firm said.
Scott Wise, the former investment chief of Rice University in Houston, joined TIAA-CREF last year to start Covariance, as the company expanded into investment management for nonprofit groups, following similar moves by New York-based Goldman Sachs Group Inc. and Pacific Investment Management Co. in Newport Beach, Calif. The companies are courting endowments and foundations as they assess their investments following record losses in the aftermath of the financial crisis.
"One of the strengths we have is being part of CREF, which already has relationships with many of the institutions we'd be interested in managing capital for on the endowment side," Wise said in an interview. "The introductions they make with their client base can give us the opportunity to jump-start the business."
The $1 billion seed money from TIAA-CREF will be invested across asset classes in a similar way to client money, Wise said. Covariance, which will start investing capital in the third quarter, is meeting with potential clients, Wise said. The firm will charge clients based on the size of their assets.
The firm has hired executives including Michael Jawor, previously the chief investment officer at Man Group's Glenwood Capital Investment Group LLC hedge fund, and Daniel Feder, a former manager at Sequoia Capital in Menlo Park, Calif., and Princeton University's endowment. The firm plans to customize investments for its nonprofit clients, it said.