The UAW Retiree Medical Benefits Trust, which had about $52.1 billion in assets at the end of 2011, has hired former Paul Capital senior advisor Brian Gimotty to run its private equity programme.
Gimotty joined the Trust on 27 May as a director on the equity team. He will lead the Trust’s activities in private equity as well as work with other professionals to “enhance the return of the public equity portfolio”, a spokesperson for the Trust told Private Equity International this week.
Gimotty worked as senior advisor emerging markets at Paul Capital for four years, from 2005 to 2009, according to his LinkedIn profile. He also has worked as a managing director at Growth Capital Group from 1994 to present and a managing director from 2010 to 2012 at Trinity Equity Investors, according to his profile.
A spokesperson for the Trust declined to provide details about the Trust’s private equity activities, but said the Trust has had minimum exposure to the asset class.
“We will continue to be quite selective regarding our private equity positions,” the spokesperson said.
We will continue to be quite selective regarding our private equity positions.
UAW Retiree Medical Benefits Trust
The Trust’s 2011 annual report reveals that it is mostly invested in stocks, bonds “and other traditional investments”.
The Trust, also known as a Voluntary Employee Beneficiary Association, was set up in 2007 by the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) and the “Big Three” auto manufacturers in the US, General Motors, Ford and Chrysler. The Trust was created to ensure funding of auto worker retirees’ medical benefits through the end of their lives. The Trust also allowed the auto makers to shift their huge and growing healthcare liabilities off their books.
As of 2011, the trust provided medical benefits to more than 852,000 people, according to the Trust’s 2011 annual report.
The Trust took a big hit in the global financial crisis, especially because two of the main participants, GM and Chrysler, filed for bankruptcy. The fund lost a portion of its value and has been working to recover ever since. As of 2011, the Trust was about $20 billion underfunded.
“[The global financial] crisis, including the restructuring of all three auto companies during 2009, had a negative impact on the Trust’s financial health,” according to the annual report.
Part of the way the Trust intends to stay solvent going forward is through investments, according to information on its web site. And while the spokesperson declined to comment about strategy, expanded private equity exposure could help boost the Trust’s returns beyond what it could hope to achieve through traditional stocks and bonds, especially in today’s ultra-low interest rate environment.