The net drain on the Blackstone Real Estate Investment Trust (BREIT) - to which UC provided $4.5 billion added investment when the slow-motion run on the bank started - continues. The investment has triggered protests at Regents meetings, as blog readers will know, related to BREIT's landlord-tenant relations. However, only one Regent has ever raised questions about the financial side of the investment, as blog readers will also know.
Yours truly can't say whether the deal UC made with the BREIT will turn out to be a good investment. But the process by which the decision was made to provide bailout money seemed to be a one-man decision by the chief investment officer without a lot of analysis.
From Bloomberg: Blackstone Inc.’s giant real estate trust for wealthy individuals saw redemption requests ease to the lowest point this year as it limited withdrawals for a ninth consecutive month. Investors sought to cash out $3.7 billion in July from Blackstone Real Estate Income Trust, according to a letter Tuesday. BREIT returned about $1.3 billion, or about 34% of what was requested.
Withdrawal requests in July fell for the third consecutive month, dropping from the $3.8 billion that investors asked to pull in June. Since Nov. 30, when BREIT began limiting withdrawals, it has returned $9.4 billion to investors.
The $68 billion Blackstone trust has been working through redemption requests that picked up last year. Retail investors became more hesitant about locking up cash in commercial property while the sector was grappling with higher borrowing costs and falling property values.
BREIT has sold $12 billion of real estate assets since the beginning of 2022, generating $2.5 billion of profit during its ownership, according to Blackstone...
Full story at https://www.bloomberg.com/news/articles/2023-08-01/breit-s-redemption-requests-decline-to-lowest-point-this-year.
There is an official statement concerning an approach to risk on the CIO's website. There is plenty of ambiguity in that document but it seems to imply decision making is to be made with consultation with the various investment professionals in the CIO's office, although "analysis paralysis" is to be avoided and ultimately the CIO is accountable:
...Make sure all investment professionals are fluent in the same risk language, that they understand the approach to risk, are aware of the state of the portfolio risk, and are active in discussions of risk in those terms, both internally and with stakeholders and clients. The hallmark of a strong risk culture is thoughtful discussion across the investment areas, particularly when the markets seem to be going off the rails...
Turn communication into action. Finally, take action. If things stop with risk reports generated and recited in weekly investment meetings, it is a risk ritual, not a risk culture. We found that many decisions suffered from “analysis paralysis,” entering an infinite loop of discussions. So we have buttressed communication and consensus building with points of accountability, which of course ultimately come to the CIO... [pp. 10-11]
Full statement at https://www.ucop.edu/investment-office/building-a-risk-culture-at-uc-investments.pdf.
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