A cautionary note on pension finance from CIO Bachhar

We'll be providing our usual coverage of the May 13-15 Regents meetings as time permits. But it is worth noting a brief excerpt from today's meeting of the Investments Committee. Regent Makarechian took note of item F6 to be discussed in tomorrow's meeting of Finance and Capital Strategies:

F6 Action: University of California Retirement Plan – Amendment of a Previously Approved Action: Authorization to Maintain the Current University Employer Contribution Rate for 2025-26 and to No Longer Transfer $700 Million from the Short Term Investment Pool in 2025-26.

He asked Chief Investments Officer Bachhar for his opinion on delaying previously-scheduled pension contribution increases and cancelation of the STIP contribution in the face of anticipated federal and state budget cuts.* Bachhar noted that the funding ratio for the pension has for years been in the mid-80% range but that the faculty wants the goal to be 100% funding. He diplomatically says that if the goal is 100%, relying on growth of the portfolio cannot be the strategy. Only a combination of growth and contributions will get you to the goal. Put another way, Bachhar did not come across as a fan of the F6 approach.

You can see this exchange at the link below:

https://ia800300.us.archive.org/27/items/cio-bachhar-on-deferring-pension-funding-5-13-2025/CIO%20Bachhar%20on%20deferring%20pension%20funding%205-13-2025.mp4.

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*Makarechian is a member of both the Investments Committee and Finance and Capital Strategies.