Commonfund Ceases Direct Real Estate Investing

Commonfund will discontinue direct real estate investments as it is aiming to restructure a losing $1 billion fund.

(November 8, 2010) — Commonfund, the 39-year-old money manager for endowments and foundations overseeing $25.5 billion for non-profits, has ceased direct real estate investing as it aims to restructure its fund.

“We’re not liquidating the fund, we’re just restructuring,” spokesman Keith Luke told aiCIO. “While our future will be in the manager of manager approach, which is how we oversee most investment programs we do, this particular program will very possibly involve recapitalization,” he said, adding that the firm lacks a timeline for the restructuring phase.

The property unit’s Commonfund Realty Investors fund, which was earlier managed by Timothy Shine, lost a significant portion of its value in the aftermath of Lehman Brothers Holdings’ 2008 collapse. It declined 87% in the fourth quarter of 2009 and first three months of 2010. Before Shine’s departure, co-head of the real estate fund Hugh Scott left in January. After seven years at the job and about 30 years at the firm, Lyn Hutton resigned as chief investment officer in October.

The property unit is “actively working with the fund’s lenders with the goal to recover as much investor capital as possible,” Verne Sedlacek, CEO of Commonfund, said in a letter to clients obtained by Bloomberg. “The Commonfund is active in all sectors,” Luke told aiCIO. “We believe strongly in real estate for the long-term for institutional investors — both as a diversifying tool and as an inflation-hedge.”

Commonfund, which is working with lenders to restructure its debt and recover the investors’ capital, has appointed Westport Capital Partners for advice, according to the news service. The money manager for endowments and foundations will continue to invest in real estate through its “more traditional fund-of-funds approach.”

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742