Tuesday, October 18, 2016


University of California continues to cull active managers as performance suffers


Jagdeep Singh Bachher, the chief investment officer of the University of California Regents, cited volatile markets for the -3.4% return of the $9.1 billion endowment in the fiscal year ended June 30, and is continuing efforts to reduce the number of active equity managers.

“It's been a difficult time for endowments generally and UC specifically,” Mr. Bachher said, explaining the results at a UC committee on investments meeting Sept. 9.

Mr. Bachher, who also oversees the university's $54.1 billion defined benefit plan and other investment pools totaling more than $100 billion, has made major changes in his 30-month tenure, including terminating 66 of the fund's 80 external equity managers.

Mr. Bachher declined requests for an interview though a spokeswoman, who referred a reporter to a video of the Sept. 9 meeting of the UC committee.

Mr. Bachher said at that meeting that investment results were gross of fees. He said UC paid about $600 million in fees to external managers for the endowment, pension plan and the total return investment pool.

“We see a cost structure that is still very expensive,” he said, noting that equity fees by active managers were in the range of a 1% overall fee and a 12% carry fee.

UC statistics show that the endowment held $4.2 billion, or 46.3% of its assets, in equity strategies. Equities were UC's worst-performing asset class in the year, with a -10.6% return...

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