Saturday, September 20, 2014
Listen to the Regents meeting of Sept. 17 (afternoon)
In the afternoon meeting, the UCSA student president spoke against tuition increases. That presentation was followed by a discussion of the investment portfolio that pretty much tracked the discussion of last week at the Committee on Investments. One thing of note was the announcement that UC would continue to invest in hedge funds, even though CalPERS was getting out of that business. There was also discussion of the new venture capital fund (UC Ventures) being set up by UC to capitalized on university-based innovations. There were a number of probing questions. Why don't we get a share of the returns from such innovations if they are UC-based without having our own venture capital fund? Why would faculty want to use UC Ventures as opposed to outside venture capital funds? And sitting in the background was the general issue of risk; would a UC fund be good at figuring out which innovations had commercial potential.
If there is one lesson that seems to come out of the discussion of UC investments, UC Ventures, and the decision not to follow CalPERS in dropping hedge funds, it is that UC seems to be moving toward "active" management of its portfolio ("stock picking") and away from passive management (just buying the benchmark indices). The presentation noted that while most of the returns basically follow from general market trends, there can be "value added" of a few extra basis points from active management. Whether this is inevitably the case is debated in financial circles, i.e., can you consistently "beat the market" through active management?
The discussion then turned to the green investing report which did not include fossil fuel divestment. The estimates are that in its $90+ billion portfolio, UC has about $10 billion in fossil fuels, $3 billion in firms singled out by fossil fuel divestment advocates, and $0.5 billion in just coal. These figures include direct and indirect investments (the latter through outside money managers). There was a push by the student regent for some statement in the report that coal divestment could be considered and that there should be more student representation in whatever planning was to follow. The lieutenant governor (ex-officio regent) added indirect investment in guns - not an issue that was previously mentioned - and seemed to want some language about coal. (California has no coal industry but does have a significant oil industry.) At that point, UC prez Napolitano said that the Regents should just approve the report as written now and maybe there could be changes in November at the next meeting. At that point, the report was approved "as is."
There followed a brief presentation on export controls and how those rules might apply to UC. It was noted that some foreign universities can be seen as instruments of foreign governments and therefore payments to them could possibly run afoul of the rules.
Finally, the meeting ended with some discussion of NCAA rule changes by the Berkeley and UCLA chancellors. (As blog readers will know, there has been noteworthy litigation on the status of student-athletes, some stemming from a court case filed by a former UCLA athlete.) The lieutenant governor made a statement about low graduation rates of athletes at Berkeley and how the push for performance might be linked to the half billion dollar costs of the new campus stadium there.
We will try to post the Sept. 18th meeting soon. In the meantime, below is a link to the Sept. 17 afternoon session described above.