Baylor University's roughly $1 billion endowment is scouting for niche opportunities following the recent upheaval in the financial markets. The fund is looking for investments in energy, bank loans, distressed debt and real estate. These areas have been under consideration for several months, but recent events have accelerated the discussion, explained Charles Wall, interim cio. "Last week created an enormous amount of opportunities," he added. Baylor typically allocates around 1% of the portfolio per sector.

A move into bank loans would mark the first time the school has invested in that area. It looked at investing in a fund earlier in the year but was unable to complete its due diligence before the fund closed, said Wall. With current state of the credit markets, an investment is even more attractive, he added. It's also keen on investing in more distressed debt but the moves are contingent upon finding the right opportunities with a top tier manager the Waco, Texas-based school is comfortable with, Wall noted. The key is to find the appropriate valuation point and not to invest too early, as those who jumped in when debt was trading around 85 cents on the dollar rode it down to 70 cents, he added.

Like most endowments in Texas, Baylor already has exposure to energy. Outside of oil, gas and mineral interests that were gifted to the school, its inflation hedge bucket, which constitutes roughly 20% of the overall portfolio, has 3% energy allocation that includes master limited partnerships and upstream investments. It's now keen on scouting

Wall is overseeing the portfolio on an interim basis following the departure of long-time CIO Jonathan Hook who left to take a similar position at The Ohio State University.Wall is a candidate to take the job permanently.