The University of California’s investment portfolios ended the 2022-2023 fiscal year at $164 billion, a $12 billion increase over the previous year that was fueled by market enthusiasm for artificial intelligence, the Office of the Chief Investment Officer (UC Investments) announced today (August 4). The UC pension was up by 10.1%, while the UC endowment returned 8.8% and working capital, 7%. Since 2014, the University’s total investment assets have grown by 73%.
UC Investments manages the University’s retirement, endowment, and working capital portfolios, with each financial product tailored to the needs of UC students, faculty, staff, retirees, and the 10 campuses and five medical centers.
“Our culture is defined by what we call the UC Investments Way, and the first of our 10 investment pillars is “Less is More,’” said Chief Investment Officer Jagdeep Singh Bachher, Ph.D. “That certainly held true for us this year.
“We made some big moves and simplified our lives in the process,” he said. “We sold $4 billion in real estate as markets were rising and then reinvested $4.5 billion for an 11.25% annualized return over seven years. Acting on our conviction that the best investment opportunities are in the United States, we made a $10.5 billion investment in the S&P 500. The world’s awakening to the transformative power of artificial intelligence gave a big boost to public equities and UC’s portfolios reaped the rewards.
“And we continue to look inward at our own UC ecosystem, where we’ve already invested some $1 billion in ground-breaking innovation that will continue to power the future.”
Said UC Regent Richard Sherman, outgoing chair of the Investments Committee, “Jagdeep and his team at UC Investments are, to paraphrase baseball legend Joe Maddon, ‘Doing simple better.’ They are leveraging their size and scale to not only lower their costs but to get access to the best opportunities.
“When you tune out the noise and keep your focus streamlined, you have more space and freedom to think creatively and see new ways of doing things. And most important, you have far more bandwidth to be proactive in moving the needle on our most significant opportunities. That’s where UC Investments excels.”
“Making smart, well-timed decisions in uncertain economic environments is a hallmark of UC Investments,” said President Michael V. Drake, M.D. “Record high inflation, rising interest rates, and the threat of recession were with us for most of the fiscal year. UC Investments successfully navigated these investment risks and many others, including climate change, which is one of my key presidential priorities.
“UC Investments sold its fossil fuel assets five years ago, and the results of that move show that fossil-free investing returned the same or better than traditional energy. The team never wavers from its fiduciary duty to our many University of California stakeholders.”
The 2022-2023 fiscal year marked the last of nine years that Regent Sherman has served as chair of the board’s Investments Committee, where his guidance on asset allocation has proved crucial to UC Investments’ performance gains.
Said Bachher, “Richard’s partnership, his advice and mentorship, have been a constant over the past nine years that I’ve been at UC Investments. He shares in whatever success we have achieved.”
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The UC Endowment, which comprises the General Endowment Pool and the Blue & Gold Pool, stood at a combined $23.4 billion as of June 30, 2023, up from $20.4 billion the year before. UC’s investment office has been investing the General Endowment Pool for 91 years. Since 2014, it has grown by 163%.
The General Endowment Pool was at $20.7 billion as of June 30, 2023, up from $18.2 billion the year before. The 30-year annualized net return was 8.8%, the 20-year return was 8%, the 10-year return was 8.8%, the five-year return was 8.7%, and the one-year net return was 8.2%.
The Blue & Gold Pool, which was launched on March 31, 2019 with $250 million, stood at $2.7 billion as of June 30, 2023, up from $2.2 billion the year before. The three-year return was 0.7%, and the one-year net return was 13.3%. To increase campuses’ liquidity during the pandemic, all assets of the Blue & Gold pool were withdrawn in April 2020. The pool, which is 100% passive and extremely low cost to manage, was re-launched on March 31, 2021 with $200 million.
The UC pension stood at $88.3 billion as of June 30, 2023, up from $81 billion the year before. The 30-year annualized net return was 8%, the 20-year return was 7%, the 10-year return was 7.4%, the five-year return was 6.7%, and the one-year net return was 10.1%. UC’s investment office has been investing the pension for 63 years. It is currently funded on an actuarial basis at 83%. The pension has 258,485 members, 134,900 of them currently active.
The UC Retirement Savings Program, the nation’s second largest public defined contribution plan behind the federal government, stood at $33.7 billion as of June 30, 2023, up from $30 billion the year before and $19.8 billion in 2014. As of June 30, 2023, the program counted with 335,000 UC participants, up from 301,000 in 2014. In keeping with the ethos of Less is More, over that same period, the number of investment funds in the program went from 75 to 14, and the management fee to participants fell by 64% to 0.05%, the lowest in the nation.
UC Working Capital, which comprises the Total Return Investment Pool and the Short-Term Investment Pool, stood at a combined $18.7 billion as of June 30, 2023, down from $20.8 billion the year before.
The Total Return Investment Pool stood at $13.5 billion as of June 30, 2023, up from $11.7 billion the year before. The 14-year annualized net return was 6.6%, the 10-year return was 5.3%, the five-year return was 4.8%, and the one-year net return was 8.6%.
The Short-Term Investment Pool stood at $5.2 billion as of June 30, 2023, down from $9.1 billion the year before. The 30-year annualized net return was 3.6%, the 25-year return was 3.1%, the 20-year return was 2.5%, the 10-year return was 1.6%, the five-year return was 1.8% and the one-year net return was 3.9%.
Members of the UC Board of Regents will discuss UC Investments’ 2022-2023 fiscal year performance during the September 19, 2023, Investments Committee meeting, which will be held at UCLA and open to the public. It will also be livestreamed from the UC Regents website.