Saturday, September 13, 2014

Listen to the Regents' Committee on Investments, Sept. 12, 2014

As is our standard practice, we provide an audio archive of each Regents meeting since the Regents have a policy of deleting their recordings after one year (for no good reason).  You will find a link at the bottom of this posting to the audio.

Yesterday, the Committee on Investments met in preparation to the full Regents meeting next week.  As blog readers will know, a main event of the meeting was the presentation of the report on green investing, the product of a task force that was formed after pressure from student groups favoring fossil fuel divestment.  As blog readers will also know from an earlier post, the report produced by the task force does not explicitly favor divestment (but doesn't quite rule it out in some form at some future date).  The report is much more focused on INvestment in green stuff and announces a $1 billion plan to do just that.

During the public comment period, there were statements, mainly by students, favoring divestment.  However, the student regent did not push that view and instead primarily supported more student involvement going forward.  It wasn't clear what the students would be involved in, since the report presumably will be approved by the Regents and will become official policy.

It appears that out of the $90+ billion UC manages for its pension, endowment, and "working capital" (day-to-day "checking account"), about $10 billion is in fossil fuels.  But much of that is not directly held by UC but is "co-mingled" with other funds that are given to various outside investment managers who try to beat the market through stock selection.  About $3 billion of the $10 billion is in companies targeted by the pro-divestment group. 

The report on green investing was presented by Jagdeep Singh Bachher, the new chief investment officer.  His predecessor, Peter Taylor, was present at the session and presented an anti-divestment view.  An earlier blog post covered his position as expressed at a lecture at UCLA:
Concerns about a change in investment policy toward "picking winners" were expressed by Regent Hadi Makarechian.  However, most of the comments by committee members were positive about the report.  

It might be noted that no one asked whether the university, by some definition, already had investments in green stuff, possibly to the tune of $1 billion or more.  In that case, the report would not be an addition to current policy.  

It is likely that at next week's Regents meeting, the public comments on this issue will be repeats of what was said at the Committee.  And it is likely, to the extent there is Regental discussion, that the comments will support the report but with some cautions such as those by Makarechian.  Indeed, an unkind reading of the report might be that UC will invest in green stuff if it seems like a good idea in an amount of $1 billion more or less and we might or might not consider divesting in the future if oil-coal-gas seem like bad investments.  Given the fuzziness, the Regents should have no trouble endorsing the report.

Two other items were considered by the Committee.  There was a review of university investment performance for the last fiscal year.  Chief investment officer Bachher cautioned that the stock market cannot be expected in the future to continue gains such as occurred in the period after the 2008-09 financial crisis.

The Committee also looked at the returns of the various campus foundations.  There was a question raised about whether the independent foundations would comply with the green report and whether it would look bad for UC if they didn't.  But it was not clear what complying might entail, given the fuzziness of the report.  It was also noted that the foundations have the option of not managing their funds and instead turning them over to the central administration to manage.  They would have done better in recent years by doing so.  It was said that the foundations that insist on managing their own funds are doing it because donors want them to.  That sounds really, really fishy.  High-end job creation by the foundations might be an alternative rationale, but that's just another unkind thought by yours truly.  However, some campuses apparently do outsource their fund management to the central administration.  Presumably, their donors want their funds to be centrally managed.  Funny, isn't it, how donors can differ from campus to campus?

You can find the audio at the link below:

1 comment:

Michael Meranze said...


In the discussion of the Foundations did anyone discuss how little transparency there is in their reports or the information available? I have tried to work with some of the UCLA ones and their information is so general as to not really be informative in any way.