Investment Performance: Above or Below?

In an earlier post, we provided the basic schedule of the upcoming Regents meetings of May 16-18.* The meetings kick off with the Investment Committee. Now, the more detailed agenda for the various sessions is available including for that committee.

The Investment Committee always includes a review of returns on the portfolios for the various funds the Regents control including the pension and endowment. Included is the actual return over various periods and a comparison with a "benchmark," essentially a comparison which the return should at least equal if not exceed. So, the question is whether the returns are above or below the benchmark. Note that the benchmark takes account of the ups and downs of financial markets so that the comparison is whether the return is better or worse than what might be expected given the state of the markets.

The pension fund and the endowment fund have different mixes of assets in their portfolios, each mix presumably assumed to be appropriate for the two purposes. According to the table available in the detailed agenda, the pension return is below the benchmark for all durations shown up through the 5 years ending March 31.

Source: https://regents.universityofcalifornia.edu/regmeet/may23/i2.pdf (p. 3).

The returns for the endowment are below benchmark for durations through 3 years. 

We noted in the context of the controversy over the chief investment officer's decision to put $4.5 billion into the Blackstone Real Estate Investment Trust (BREIT) that only one Regent asked a question directly focused on the financial risk entailed.** Will any Regents ask questions about the below-benchmark returns? 

The agenda for the committee includes two other topics apart from portfolio performance: diversity in the larger investments industry and artificial intelligence. While those other topics are undoubtedly of interest, the prime function of the Regents - and particularly those Regents on the Investments Committee - is to look after the health of the funds for which they are trustees. Discussion of other matters should not crowd out critical discussion of investment performance. 

We will be watching to see if there are any critical questions.

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*http://uclafacultyassociation.blogspot.com/2023/05/the-regents-will-be-back-at-ucla-may-16.html.

**http://uclafacultyassociation.blogspot.com/2023/03/hernandez-approaches-right-question-on.html. For full coverage of the BREIT matter, search for "BREIT" in the search engine of this blog.