New University of Austin to Add $5 Million in Bitcoin to Endowment

The school, formed in opposition to what some critics call academia’s leftist mindset, goes against many allocators’ wariness about crypto.



The University of Austin, a new higher education institution in Texas will admit its first four-year undergraduate students this fall, and  
announced on Tuesday a plan to raise a $5 million bitcoin fund to be held in its $200 million long-term endowment.

The school has been touted as an antidote to “woke” thinking that some charge has stifled non-liberal voices in academia. Since its 2021 founding, it has offered several of what it called “forbidden courses,” such as one on “sexual politics” that a course description said would go beyond “standard feminist texts.”  The university is currently seeking full accreditation from the US Department of Education, a process that UATX says could take five to seven years. The university has certification in the state of Texas to grant degrees. 

The university, which has a $200 million endowment, intends to partner with Unchained, a cryptocurrency financial services company, to hold custody of the institution’s digital assets. 

In opting for bitcoin investments, the University of Austin is going against a lot of conventional wisdom among allocators. Institutional investors have been cautious about investing in crypto, with a few outliers such as the State of Wisconsin Investment Board, which recently bought $164 million worth of two bitcoin exchange-traded funds.

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For the University of Austin, committed proceeds to the bitcoin allocation would be held for at least five years. Unchained CEO and co-founder Joseph Kelly donated two bitcoins (roughly $140,000) to kick off the school’s crypto allocation. The university endowment has accepted cryptocurrency for donations and has a fundraising goal of $250 million by the fall of 2024, when UATX plans to enroll its first students.

“University endowments are about serving students, and bitcoin provides a unique opportunity for advancing UATX’s commitment to cultivating future generations of leaders and innovators,” said Thomas Hogan, incoming associate professor, at UATX in a press release. 

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Appeals Court Vacates SEC’s Private Fund Adviser Rule

The court ruled that the SEC lacked the authority to regulate private fund advisers' relationship with investors.



The U.S. 5th Circuit Court of Appeals vacated the Securities and Exchange Commission’s Private Fund Adviser rule on Wednesday. The rule had been finalized in August and was challenged in court by the National Association of Private Fund Managers and other plaintiffs in September.

The rule regarding advisement of private investment funds had required advisers  to issue quarterly performance statements to investors in the fund as well as an annual audit. Advisers were also prohibited from giving preferential treatment to some investors regarding share redemption and access to information about the fund’s holdings if doing so would negatively affect other investors. Those advisers were also limited in their capacity to pass on enforcement related expenses to investors without their explicit consent.

On Wednesday, a panel of the Court vacated the rule in its entirety by a 3-0 vote. The panel noted that the Dodd-Frank Act gave the SEC limited new authorities over private fund advisers, such as requiring them to register with the SEC and to issue rules to prevent fraud.

It did not, however, extend to the point where the SEC was seeking to regulate, according to the court, which wrote: “The Dodd-Frank Act only stepped towards regulating the relationship between the advisers and the private funds they advise,” and not the investors in said fund.

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The Court added that the statutory language that the SEC cited in defense of the rule applies only to retail investors and not to investors in private funds, who are virtually never retail investors.

Private fund advisers normally consider the fund itself as their client, rather than the investors in the fund. Investors in private funds tend to be more sophisticated institutional or accredited investors, though some institutional investors such as pensions represent non-sophisticated investors.

Joshua Broaded, head of global regulatory compliance at ACA Group, says that private fund investors are often some of the most sophisticated and “can ask for the things that they want and need” in terms of additional disclosures, but that there is a “spectrum of power and sophistication” among them. Some, including smaller institutions or high net-worth individuals, are not nearly as sophisticated and do not have the negotiating power to request additional disclosures. Those were the types of investors the SEC was seeking to protect, but according to the 5th Circuit does not have the authority.

Broaded adds that the rule was mostly popular with institutional investors, who were broadly demanding more transparency, especially around fees and performance.

The SEC has not announced if they intend to appeal the ruling.

Broaded says that this rule represented many of the most “important and fundamental objectives for the SEC,” such as “fairness in how investors are treated” and disclosures that are “consistent from adviser to adviser.” The SEC will need some time “to digest this ruling,” Broaded says, but it has the options of appealing to the Supreme Court, appealing to the full Circuit (as opposed to a panel), or not appealing at all.

Broaded says that even though the rule was vacated, he expects investors to continue to ask for the key features in the rule and he anticipates “some of the intent of the rule will come into common practice.”

 

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