The University of California’s Office of the Chief Investment Officer (UC Investments) announced today (August 31) that its assets under management grew to $168 billion as of June 30, 2021, a 29 percent jump over the prior fiscal year and the largest one-year gain in its history. The additional $38 billion in assets over the previous year represents a 77 percent increase since 2014.
“In so many ways, this past fiscal year was intense, and humbling,” said Chief Investment Officer Jagdeep Singh Bachher. “Beyond the tumult of the pandemic, the social and geopolitical unrest, with the effects of climate change in sharp relief, we made some bold moves to capture the unique opportunities a surging market provided. We’re well positioned to build on these strong returns for the long-term benefit of the University of California.”
Said UC Regent Richard Sherman, chair of the Investments Committee, “This past year has really tested all of us. Jagdeep and the UC Investments team, working entirely remotely, stayed calm and focused. We ended up significantly changing our asset allocation — by increasing our exposure to equities — in the middle of the pandemic. It proved to be the right move.”
“Only 10 years from now, the UC endowment will mark 100 years,” said President Michael V. Drake, M.D., “and our campuses, faculty, staff and students have benefited directly from the well-managed investments that UC Investments has made on their behalf. The same, of course, can be said of the pension, which UC Investments has managed for 62 years.”
The University’s investment portfolios contain both public and private assets and are spread across six unique financial products. Retirement, which includes the traditional pension and the Retirement Savings Plan, a defined contribution program, stood at $125.6 billion at the end of the fiscal year. The pension is now estimated to be funded at 94 percent on a market value basis.
The endowment, which includes the General Endowment and Blue & Gold Pools, stood at $19.7 billion. Working capital, which includes the Total Return and Short-Term Investment Pools, ended the fiscal year at $22.6 billion.
Asset allocation was the key driver behind these strong returns, led by the record performance of public and private equities. Moreover, the UC Investments team has shown once again that incorporating diversity into its investment process drives performance. This year, some of the strongest returns came from diverse external managers.
How each of the financial products performed
The General Endowment Pool stood at $19 billion as of June 30, 2021. That was up $5 billion from the prior year and represents an increase of $10.7 billion since 2014 (a 129 percent increase). The one-year net return was 33.7 percent (4.2 percent over the benchmark), the three-year return was 14.9 percent, the five-year return was 13.7 percent, and the seven-year return was 10 percent. The 10-year return was 9.9 percent, the 20-year return was 7.8 percent, the 25-year return was 8.9 percent, and the 30-year rate, 9.7 percent. All of these returns surpassed the policy benchmarks. Private equities in the endowment returned 58.7 percent and public equities 41.1 percent for the year.
The UC pension stood at $91 billion as of June 30, 2021, up $20.8 billion from the prior year and representing an increase of $38.9 billion since 2014 (a 75 percent increase). The one-year net return was 30.5 percent (2 percent over the benchmark). The three-year return was 12 percent, the five-year return was 11.6 percent and the seven-year return was 8.5 percent. The 10-year return was 8.9 percent, the 20-year return was 6.9 percent, and the 25-year rate, 8.1 percent, and the 29-year rate, 9 percent. Over these time frames, all returns were at or above the policy benchmarks. Private equities in the pension returned 54.7 percent and public equities returned 41.8 percent for the year.
UC working capital stood at $22.6 billion as of June 30, 2021, up $4.7 billion from the prior year and representing an increase of $7.9 billion since 2014 (a 53.7 percent increase).
The University of California’s 10 campuses and five medical centers rely on working capital to pay for the mission-critical projects and programs that make UC the gold standard of public universities in the United States. Over the past year, the Total Return Investment Pool returned 21.3 percent, compared to 0.6 percent for the Short-Term Investment Pool.
The UC Total Return Investment Pool, which was created in August 2008, stood at $13 billion as of June 30, 2021, up $5.6 billion from the prior year, representing an increase of $5.4 billion since 2014 (a 71.1 percent increase). The one-year net return was 21.3 percent, the three-year return was 9.5 percent, the five-year return was 8.1 percent, the seven-year return was 6.2 percent, and the 10-year rate was 7.2 percent. The 12-year return was 8.1 percent.
The UC Short-Term Investment Pool stood at $9.6 billion as of June 30, 2021, down $0.9 billion from the prior year, representing an increase of $2.5 billion since 2014 (a 35.2 percent increase). The one-year net return was 0.6 percent, the three-year return was 1.6 percent, the five-year return was 1.6 percent and the seven-year return was 1.5 percent. The 10-year return was 1.7 percent, the 12-year return was 1.8 percent, the 20-year return was 2.8 percent, and the 25-year rate, 3.4 percent.
The UC Blue & Gold Pool stood at $0.7 billion as of June 30, 2021, up $0.3 billion from the prior quarter. The three-month return was 5.8 percent. During the pandemic, in April 2020, campuses used the Blue & Gold pool to increase their liquidity and all assets were withdrawn. The pool was relaunched on March 31, 2021, with funding of $0.4 billion. The Blue & Gold Pool was first launched two years ago, on March 31, 2019, with $250 million in assets. By December 31, 2019, assets had grown to $2 billion from campuses.
The UC Retirement Savings Program ended at $34.6 billion on June 30, 2021, an increase of $7.6 billion from June 30, 2020, and representing a jump of $14.8 billion since 2014 (a 74.7 percent increase). The UC Retirement Savings Program is the second-largest public plan in the country, after only the federal government. It serves 316,000 participants at an industry-leading average cost of 0.04 percent and offers participants the best choices of any plan in the nation.
Since 2014, the UC Investments team has generated $5.2 billion in value added (returns over the benchmarks) and saved $2.2 billion in costs by reducing the number of external managers and increasing direct co-investments in companies. UC Investments has reduced the number of its key external partnerships from 280 in 2014 to 50 today.
Members of the UC Board of Regents will discuss UC Investments’ 2020-2021 fiscal year performance during the September 28, 2021, Investments Committee meeting, which will be held virtually and is open to the public.
More details can be found here.