Annual Report Opportunity


Ideas into

Statement from
Jagdeep Singh Bachher
Chief Investment Officer
and Vice President of Investments
Jagdeep Singh Bachher

When I joined UC three years ago, I came in ready to listen and learn. I believed that before I could begin to create the strategies that would secure our future, I first had to understand the UC Investments Team, the Office of the President and indeed the entire University system. It was only after months of discussions and meetings with students, faculty, our investment partners, my team and many, many others that I began to see areas where we might improve, innovate and reset our foundations for long-term success.

What was clear to me in this process was that while the traditional model of endowment management was a good one, we are not a traditional university. We are an exceptional university. Quite literally, we have no rival on this planet (or, as our astrophysicists tell me, any other planet) in terms of research dollars deployed, awards given, patents filed and so on. In addition, our size and scale as an investment office presented both opportunities and constraints that were rather different from some of our “peers.” Moreover, the investment world in which we have been living for decades was about to be turned upside down, as many felt (and feel) we’re entering a prolonged low-growth environment.

So we needed to change. We needed to chart our own course. And to do that, we needed to truly understand ourselves and where we could compete in the global market for investments.

In the past three years, I’ve worked with people from every nook and cranny of the university. I’ve called upon our alumni to serve this university once more. I’ve sought to utilize the global reputation of our ten campuses, five hospitals and three national laboratories to develop a unique and thoughtful approach to investing. I’ve been building our own way of investing, what we have been calling the “UC Investments Way.”

We’ve realized that we’re not just investment managers focused on racking up assets in hopes of a good return. No, we are, first and foremost, risk managers who assess each decision based on how much risk we can tolerate. This year, we finished our new asset and risk allocation plan — three years in the making — and it is serving us well.

Another major shift we made was in our culture. We went from being siloed by asset classes to being focused on what will best serve our products and clients, from students to faculty, from chancellors to CFOs. That’s because we realize there are no holidays when it comes to delivering on the needs of our customers. Every UC stakeholder has distinct and urgent needs: a paycheck, a new piece of equipment, to see their nest egg grow. We’re here to serve them.

We’ve also worked to further entrench a culture of transparency. We go beyond just reporting results that get produced out by our systems. We take the time to do a deep dive to assess, compare and distill so that we provide results with the type of valuable context that helps us make better decisions.

For all the progress we’ve made in creating our own way, the thing I’m actually happiest to report this year is that we are now thought of as a true partner that’s integral to the success of UC. After years of operating as an isolated office, we’ve not only broken down silos internally, we’ve helped create a symbiotic and truly transformational relationship between our office and those we serve.

As I said at the beginning, I didn’t have a plan to do this when I got here; there was no slide deck that predicted the Return on Investment (ROI) of this collaborative approach. It’s been a grassroots process, one conversation at a time. One meeting at a time. One faculty member. One student. One Regent at a time. We’ve done a lot of listening. And we’ve made our default response to any challenge “Let’s work together. We can figure this out.”

We’re here to collaborate. We’re here to learn. We’re here to serve. And we’re humbled to have this responsibility.

Statement from
Janet Napolitano
University of California
janet napolitano

In a University as big and bold as ours, a culture of collaboration and innovation is a key to our success.

Over the past fiscal year, the UC Investments office has been an integral partner as we have moved forward together on some of our most important and exciting initiatives.

California has long led the nation on sustainability, climate policy and clean energy, and the University of California has taken groundbreaking steps to achieve carbon neutrality and other sustainability goals consistent with the state’s actions and the Paris agreement. At the same time, through our Framework for Sustainable Investing, we have worked to ensure that the investing decisions we make both reflect UC values and earn a competitive return.

Another area of collaboration I am particularly proud to see growth in this year is our UC Ventures program. In just its second full fiscal year of operation, UC Ventures has generated high-quality investments with top-tier co-investors, capitalizing on UC’s “homegrown” talent, then investing that value back into UC innovators.

The UC Investments team continues to serve as a valuable resource and partner as we pursue the best investment strategies for UC stakeholders. We have worked together this year to secure the long-term stability of the UC Retirement Plan (UCRP) for our faculty and staff. UC Investments has made significant progress in other areas as well, revitalizing our captive insurance program, optimizing our Working Capital and General Endowment assets to increase spending for research and initiatives across the UC system.

Together, we will continue to work to not only strengthen the core research and public service efforts, but also to guarantee that the next generation of Californians has the same exceptional higher education opportunities as past generations.

Our collaboration is an investment in the future that will enable us to preserve UC values, support innovation, increase sustainability and grow our assets while expanding opportunity for all Californians.

Q&A with
Richard Sherman
UC Board of Regents,
Chair of the Investments Subcommittee
paul Wachter

You are in your second year as Chair of the Investments Subcommittee. What is one area you feel UC Investments made the most progress on this past year?

The work we’ve done this year to advance UC’s commitment to the fight against climate change is definitely a high point for me. We have committed to carbon neutrality by 2025 for our ten campuses, five medical centers and three national labs, and we’ve signed agreements to buy 80 megawatts of solar power, the largest amount owned by any U.S. university. The U.S. Environmental Protection Agency has also named us among the nation’s distinguished leaders in the use of clean, renewable energy.

To date, we are the only institutional investor that is a signatory to Bill Gates’ Breakthrough Energy Coalition, and earlier this year, we contributed $50 million to Congruent Ventures, a new energy seed-stage venture capital fund. We are also allocating $100 million to a fund that will target high-performing, mission-based companies that deploy clean energy, health, water and sustainable agriculture solutions.

And though our holdings of securities of oil and gas drilling and refining firms now represent only about 3 percent of UC’s total public equity holdings —below the real-world average of 6 to 7 percent share of the global economy — we continue to look critically at all our fossil fuel investments on a regular basis under our sustainable investment lens, and we are working to position our portfolio to acknowledge the transition to low carbon energy. This is imperative.

Last year’s numbers were down. This year’s were up. How does UC Investments approach such an unpredictable environment?

I’ll start by saying that it’s important to note that part of the reason we had a great year this year can be directly attributed to the implementation of our asset allocation by Jagdeep and his team. But in general, we’re approaching this as a continued low-growth, low-return environment, and we have to temper our expectations accordingly. Because even though the equity market has done well, wage growth is still pretty low, inflation is growing at a small rate, and the federal reserve is unwinding its $4 trillion balance sheet. All of this means we’re in uncharted territory and so in a place of extreme caution. We have to stay highly attuned to where our assets are deployed on a broad level and moderate our return expectations for our products.

The UC Ventures program is still in its infancy, but it had quite an active year.

Yes, it’s exciting to see UC Ventures really start to gain momentum. Given the significant number of inventions and patents created daily in our system, we are looking to capitalize on these opportunities as part of our overall private equity strategy. We’re looking to “eat our own cooking.” It’s going to take some time to deploy that money and it’s a long harvest period — so we have to be patient, but we’re long-term investors; we can do it.

What do you think of the work UC Investments has done to further evolve its culture and strategy over the past year?

One thing I’ve been very happy to see in my first full year as chair is the right-sizing of UC Investments, both internally and externally. They’ve continued to reduce the number of external managers and are now working with only the best of the best. And because we now have more dollars with fewer people, we’ve been able to negotiate better, performance-oriented fee structures. In fact, our overall cost of managing $100 billion continues to shrink, and for the office, it costs us only 3 basis points for our investments and operations.

In terms of strategy, we transitioned a significant part of the public equity portfolio to passive management (index products), which have historically been proven as a better way to go. We’re also well on the road to outsourcing our defined contribution plan target date investment options. Overall, this plan is in excess of $20 billion, so this will make a big difference and will be much more efficient both for UC and for our participants.

Finally, I’m very impressed with the overall culture of collaboration, transparency and excellence in the office. All the staff are working really hard with a shared focus. Egos are checked at the door and everyone talks to each other, not just to those who work in their own specific area. It’s an all-for-one and one-for-all approach that makes the office stronger.

Ideas into action

The world around us continues to change, sometimes in dramatic fashion. Massive technological revolutions in the investment industry and beyond. A shift in the balance of power away from short-term investors toward large, long-term investment organizations like ours. Unknowable global financial risks.

To keep up with the external forces that threaten to disrupt our plans and even beliefs about the world, we’ve had to forge a new path. And we’re rewriting some of the rules of our organization along the way to take advantage of these shifts and prepare for the world ahead, while still delivering on the core promises that we’ve made.

This is why we’ve been so preoccupied with innovation and efficiency.

These are the actions that the great organizations — the ones that last — do and do exceedingly well. But great organizations are a rarity, since the natural state is to be either innovative or efficient. It’s kind of like oil and vinegar: one does not naturally go with the other without a concerted effort at combining the two, often through vigorous shaking. But the results can be delightful.

So in pursuit of this duality, we’ve had to be proactive about shaking up our own organization. It’s not always pleasant, but we hope the outcomes will be delightful and rewarding for our organization and the university we serve.

How we’ve been shaking things up over the last three years:

  • We empowered people and built a culture of accountability and creativity.
  • We expended internal resources to build stronger relationships with our sponsors and stakeholders, which has given us more leeway to try innovative things.
  • We built a quasi research and development team that’s been running for three years.
  • By doing fewer, simpler things, we’ve been able to combine innovation and efficiency in the organization (if not in the same strategy or approach to the market).
  • We re-negotiated our fees and costs we pay to our partners, as we view them as key elements in ensuring an alignment of interests and long-term performance.
  • We changed our focus. We are product-centric and risk savvy. We are collaborative, innovative and solution-oriented.

And here are some of the positive shifts we’ve seen:

In the last three years, we’ve explored dozens of ways to shift how we invest in assets and have actually launched five new platforms: UC Ventures, Aligned Intermediary, Congruent, UC RNT Associates (with Ratan Tata in India) and Risk 3.0. Each of these new programs seeks to capitalize on our comparative advantages in the marketplace, while exploring new ways of accessing assets.

All of it is innovative. None of it was easy. It’s an exploration, an adventure.

We expect a sort of “J-curve” from these innovative projects, an incubation period before the programs are at a point where they are ready to add value. We believe we’re now coming out of the low part of the curve, and looking to the future, we’re convinced we have the pieces in place to perform well.

In this year’s annual report, we offer a deeper look into our shift to an innovative and efficient organizational culture.


Meaningful relationships.
Long-term results.

As institutional investors, we live and breathe ROI, the holy grail of metrics. It’s what we’re used to; it’s what’s expected. But as we continue to keep a laser focus on making the right decisions for the people of UC, we believe it’s important to think about an additional factor: our relationships and the role they play in delivering ROI.

The strong relationships we have with people across the UC system — whether they’re in the cubicle next to us or on a 16-hour flight across the globe — play a key role in our bottom-line ROI. When we work to cultivate and nurture these relationships, we set ourselves up to reap the benefits. Yes, it may take longer to pay off, but as long-term investors, we have the time.

Here’s how we’re working to boost the ROI of our relationships at UC Investments.

We concentrate on our clients.
Over the past three years, we’ve met with all our stakeholders — holding more than 100 meetings — and they have direct access to us.

We’re a trusted resource for UC.
We continuously look for new ways to partner and be of service to the greater University, including the Office of the President, campus CFOs and campus foundations, and we’re here to generate solutions that others can’t.

We operate from the same playbook.
Everyone in our office works together as a united team, no matter which product they’re responsible for. We share ideas freely and make every decision based on a shared set of investment beliefs.

We always find a way.
Fiat Lux, UC’s captive insurance program, wanted to expand their operations, but was having trouble finding a way to make it happen. When they came to us, we jumped on the opportunity to help. We partnered with our insurance team and their board to breathe new life into the program to better manage enterprise risk across the university —and save millions in the process.

We’re a thought leader in the industry.
By strengthening our presence in the industry, we’ve been able to develop powerful strategic partnerships with market and industry leaders, which solidify our reputation as an innovative organization focused on solutions.

We invest in ourselves.
Through the UC Investments Way we developed, we’re partnering with UC professors, researchers, students and alumni to invest in promising startups that emerge from our system.

We invest for our planet.
We’re working actively with our external managers and the president’s office to pursue investment opportunities that take our environmental, social responsibility and corporate governance (ESG) framework into consideration.

We invest in the future.
To foster the next generation of investors, we started the Investment Fellows program in our office to offer both experienced investors and passionate novices the chance to grow and become a part of the future of UC Investments.

As the investment world evolves to embrace new technologies like artificial intelligence, we understand that what we know may become less valuable —at least on a relative basis — than who we know.

By continuing to invest heavily in our relationships, we will ensure our best chance to see a strong ROI, one that will benefit all of UC.

UC Investments Way

UC Investments way.

The best investments tend to be found in areas where markets are inefficient and where information does not freely travel. If an opportunity fits in a box or a silo, it’s likely overpriced and unattractive. So the best investors use their unique characteristics in a deliberate attempt to move into markets with minimal competition. That’s what the “UC Investments Way” is ultimately about: understanding ourselves and our comparative advantages over the marketplace to cultivate and capitalize on persistent, high-quality investment opportunities.

What Makes UC Unique

The UC Ecosystem

We have one of the most robust innovation ecosystems on the planet, with 10 campuses, five hospitals and three national laboratories. Accordingly, we’ve built a mechanism to thoughtfully invest within that ecosystem. We call this program UC Ventures.

Long Term, Deep Pockets

We have a unique advantage over the market in large, long-term infrastructure assets. This is why we helped to launch the Aligned Intermediary, which is a collaborative peer platform that supports investors in making long-term investments in climate infrastructure, such as wind and solar projects.

Strong Relationships

The University of California attracts remarkable people from all over the world into its orbit. We proactively work to convert some of these connections into deep relationships. For example, we have been privileged to work with Ratan Tata, formerly chairman of the Tata Group, over the past two years. In fact, this relationship has now been formalized in an investment partnership with RNT Associates, Mr. Tata’s personal investment vehicle.

Tech Enablement

We manage multiple investment and finance businesses from our perch in Silicon Valley, giving us unique access and the ability to support fintech and invest tech companies. We proactively work with innovative tech startups and see this as a source of advantage in our investing.

By focusing on where we’re different, we hope to deliver consistent and reliable investment returns at lower cost and with lower investment risk.

Our investment beliefs

Delivering value
through values.

Investing for the next 100 years takes patience and persistence. So we developed 10 core investment beliefs to keep us grounded as we evolve and respond to dynamic market conditions. These act as a compass, guiding everything we do so that we secure the best results for the university and its many stakeholders.


Invest for the long term.

Where we can, we focus on investments over 10 years and beyond. This offers many more opportunities than those available to short- and intermediate-term investors. We aim to make the most of our scale and ability to be patient.


Invest in people.

The contributions of talented people are among the most important drivers of success for any investment organization. So we’ve made the recruitment and retention of exceptional staff a cornerstone of our strategy.


Build a high-performance culture.

Every organization needs a clearly- defined culture to make sure everyone is working toward the same ends and speaking the same language. Our culture is one of responsibility, accountability and high performance. We are proud of our achievements but try to be humble, as markets sometimes surge and fall without warning.


We are all risk managers.

Our aim is simple: to earn the best risk-adjusted return that meets the objectives of our various portfolios. But achieving that aim is complex. An effective risk-management function is critical, enabling the leadership to delegate authority to the investment team. Everyone on the team is in the risk management business.


Allocate wisely.

The key to investing, and the most important driver of performance, is asset allocation. To make effective investment decisions and achieve the appropriate combination of risk and return, we have to maintain a clear and balanced understanding of stakeholders’ unique objectives, time horizons, risk tolerances, liquidity and other constraints. As a globally significant investor, we also aim to make the most of our scale and patience when we allocate assets.


Costs matter.

High-quality advice comes at a cost. We get that. But we also believe fees and costs for external managers must be fully transparent and straightforward. Anything else creates potential problems — opaque fees can mask risk. Plus, cost savings can be considered a risk-free return. If we can save money through efficient, well-executed strategies, then we must. We intend to aggressively capture every dollar of this risk-free return that we can.


Diversify with care. Act with clarity.

Diversification is invaluable, but it’s not a cure-all. It allows us to spread risk and reduce the impact of any individual loss. But diversifying too broadly has the effect of producing returns that are index- like and can draw investors into assets and products they don’t fully understand. We also need to be keenly aware of our own strengths and weaknesses in the global context in order to act decisively when we believe markets are behaving irrationally or when we have a skill or knowledge advantage. That means keeping a constant, clear-eyed check on our evolving capabilities. It’s not always an easy or painless process, but it’s an essential one.


Sustainability impacts investing.

Sustainability is not a “check box,” but rather a fundamental concern that we incorporate into decision making. We focus particularly on how sustainability can improve investment performance. Sustainable businesses are often more rooted in communities and resilient to future crises, which means investing in them makes good business sense. They are bound to affect portfolios in the future, and we need to consider them in our broader lens of investment decision making.


Collaborate widely.

We are proud to be a part of the University of California, as well as the broader community of institutional investors. Through active collaboration, we aim to leverage the unique resources of the university. We also want to foster collaborative relationships with our peers to leverage our long-term competitive advantages.


Innovation counts.

The best investors recognize that markets are constantly fluctuating and that no good idea lasts forever. We must always be innovating and identifying new opportunities. Getting in early brings rewards. Just as importantly, some of the best opportunities transcend asset-class silos. There are advantages in thinking differently and partnering with peers that are willing to work with us on innovative projects. Collaboration is one of the most powerful drivers of innovation.

Sustainable Investing

Gaining ground on
sustainable investing.

At UC, sustainable investing is at the core of our investment philosophy. Today, it’s part of everything we do, which — we admit — required a cultural shift to reorient our thinking around long-term performance and value creation.

In our view, true sustainable investing cannot be achieved by simply voting a proxy, adding a director of sustainability or even divesting from an asset class. Because traditional models of finance and investing often fail to appropriately integrate sustainability issues, we’ve had to build it into our thinking from the ground up. It requires integration across our products, across our product teams and across our entire organization.

While our students, faculty and staff tend to think about sustainability purely from a values perspective, we approach it both from a risk-management perspective and from an opportunity perspective. We are convinced sustainability can help us increase our risk-adjusted returns over the long term by helping us manage long horizon risks. Over the past two years, we’ve worked to further implement the framework for sustainable investing we created in 2015, taking bold steps to fully integrate the consideration of ESG factors systematically and holistically into our investment evaluation and risk-assessment processes.

Over the past 12 months we’ve actively engaged with all our external managers, new and old, to convey sustainability concerns and to stay in alignment. We’ve also improved our automated system for creating and conveying ESG restriction lists to our external managers. In addition, we are actively pursuing investment opportunities in and around the themes that we have identified in our framework for sustainable investment — themes we see as being important macro trends and drivers in the global economy.

Climate Change

We increased our focus on climate change this year. Our ultimate goal is to position our portfolio to be more resilient to this risk and consistent with the energy transition expected in the coming decades, while still accessing today’s opportunities to generate returns. We have instituted a targeted climate change risk modeling framework for use in our private equity, real assets and alternative investment opportunity assessments. We are also paying careful attention to the risks associated with investing in fossil fuels, as well as reassessing energy holdings in our portfolio to consider changes in overall economic conditions, shifting commodity markets, climate change risk and other emerging ESG risk factors.

Key Investments & Liquidations

  • First and largest founder of the Aligned Intermediary, which helps long-term investors identify investable climate infrastructure projects in clean energy, water infrastructure and waste-to-value.
  • The only institutional investor that is a signatory to the Bill Gates Breakthrough Energy Coalition to accelerate clean energy solutions.
  • Partnering with family offices and sourcing ideas from our national labs and agricultural centers.
  • $50 million to Congruent Ventures, a new energy seed-stage venture capital fund.
  • $100 million commitment to the TPG Rise Impact Fund, seeking to achieve social and environmental impact alongside competitive financial returns.
  • Liquidation of holdings in high-yield bonds of Dakota Access Pipeline (DAPL) operating companies ETP and SUNOCO.
  • Sold holdings in the world’s largest coal mining firms and firms that generate profits from Canadian oil sands mining.
Social Responsibility

We continue to look for ways to magnify our collective voice on important social and governance issues. Our goal has been to enhance long-term returns by engaging companies to improve performance on governance and other ESG factors as part of their management focus and priorities. To this end, we served on a task force to draft and promote a U.S. Framework for U.S. Stewardship and Governance Code that was released to the public in early 2017. We also signed on to be part of the institutional investor committee of the 30 Percent Coalition, a unique and groundbreaking national organization committed to the goal of women holding 30% of board seats across public companies. And finally, we participated in an active dialogue between the UC administration and the Afrikan Black Coalition on issues of joint concern and supported efforts to engage Wells Fargo Bank regarding its responsible banking policies and practices.

Thought Leadership & Outreach

We are proud to be one of 1,400 signatories to the United Nations-supported Principles for Responsible Investment (UN PRI), an investor initiative that promotes the alignment of investment activities with long-term societal interests through integration of ESG factors. As part of our obligations as a UN PRI signatory, we’ve participated in the Ceres Investor Network on Climate Risk, and senior staff have served on UN PRI working groups with peer institutions to identify best responsible investing practices, as well as on the UN PRI’s fixed income and private equity advisory committees. We’ve also collaborated with the UN PRI on the Global Investor Statement on Climate Change in the lead up to the COP21 climate negotiations in Paris.

UC Investments has been a champion of sustainable investing in important global forums including the Milken Institute Global Conference, Institutional Investor Magazine’s Endowments and Foundations Roundtable and the Conference on Inclusive Capitalism.

UC Sustainable Investment Framework

Climate change

Continued emissions of greenhouse gases will cause further warming and changes in the climate system.¹ A transition to a lower-carbon economy, including low-carbon sources of energy, is necessary to ensure the health and well-being of future generations. Given the scale of existing infrastructure and the challenge to quickly shift the transportation sector to low-carbon fuel sources, this transition requires a multi-generational effort.


Food and water security

Global climate change, population growth and rapid urbanization are intensifying the strain on global water and agricultural systems. Human well-being is inexorably linked to water and food security, and failure to adequately ensure these basic needs for future generations will undermine global economic welfare, human security and political stability.




Addressing inequality is both a responsibility and an opportunity.² Solving inequality of opportunity can create new demographics that can contribute to economic progress and widen the market for goods and services, creating a more profitable and sustainable business climate.


Aging population

Rapid aging of populations will be a transformational force affecting society and the global economy, requiring new approaches to health systems, workforce organization, intergenerational relations and public finance.



Diversity enhances economic, social and environmental outcomes for business and society.


Human rights

Businesses whose profits are derived from direct harm to public safety, theunlawful deprivation of human dignity or the exploitation of children or other vulnerable workers undermine universally approved principles of the United Nations and create a seriousthreat to the conditions needed for a well-functioning, market-based global system.


Circular economy

The “take, make, dispose” pattern of growth is an unsustainable economic paradigm. We must transition to a more circular economy in which intelligent design allows us to decouple economic growth and development from consumption of finite resources.


Ethics and governance

Our market economy system relies on trust as a fundamental cornerstone. Good corporate governance and proportionate, transparent and responsible regulation are vital to well-functioning and sustainable financial markets. As long-term investors, we seek the sustained returns associated with strong governance, rather than the rapid gains that can vanish quickly if they are rooted in corruption, fraud or falsification. Recent financial crises highlight how destructive such fraud and corruption can be to the proper functioning of credit markets and the preservation of personal and corporate wealth.

1. Intergovernmental Panel on Climate Change (IPCC), the leading informational body for the assessment of climate change. The IPCC was established in 1988 by the United Nations Environment Programme and the World Meteorological Organization (WMO) to provide a clear scientific view on the current state of knowledge on global climate change.

2. World Economic Forum (Davos)

UC Ventures

The ultimate
investment: UC.

With top-ranked institutions, 61 Nobel Prize Winners and the best and brightest students, UC is the biggest entrepreneurial ecosystem in the world:

  • UC produces more patents than any other U.S. university, averaging about five new inventions every day.
  • More than seven new UC startups are formed every month.
  • UC startups have contributed more than $20 billion to the California economy and employ close to 20,000 Californians.

It became clear to us several years ago that supporting UC’s own inventors, builders and makers — the best in the world — was both the right thing to do and had the potential to provide tremendous long-term value to the university. So in 2015, we partnered with renowned Silicon Valley entrepreneur Vivek Ranadivé and Bow Capital as part of the UC Ventures program to discover, provide capital for, and then capture value from the ideas and research coming out of our own system.

This hands-on supplement to the standard education and research regimen speeds the transfer of innovative UC ideas to high-impact technology development and commercialization. It’s also UC’s public service mission to meet society’s needs while supporting its ongoing research and education goals.

This year, Bow Capital worked to capitalize on their expertise and relationships with UC, other funds, incubators, entertainment and media, industry leaders and accomplished entrepreneurs to help companies we partner with to make the world a better place. The deal flow has led to high-quality investments made with top-tier co-investors. We also continued to build relationships with our own campuses to discover new talent by seeding local angel investment funds, hosting demo days, keynotes and entrepreneurship guest lectures.

And this is just the beginning.

Our Products

for all.

On June 30, 2017, our assets under management totaled $109.8 billion, an increase of $12.2 billion across all our products from the prior fiscal year, as a result of gains and a net inflow of about $200 million. Over the past three years, we added $12.3 billion, $10.1 billion from the markets and $2.2 billion from active implementation that is being used to meet the objectives of the UC products and stakeholders.

These assets are contained within the following investment products: Endowment, Pension, Retirement Savings, Working Capital (Total Return Investment Pool and Short Term Investment Pool), and Captive Insurance.

What happened in the equity markets this year

Equity markets posted double digits globally, reversing the declines from last year. We saw the equity volatility index (VIX) dip to lows seen before the global financial crisis, which has raised questions on whether the equity market has become too complacent.

With improvements in the global economy and expectations boosted for corporate earnings growth, global equity markets surged higher, up 19.6% (measured by the MSCI All Country World Index Investable Market Index) with all major regions posting double-digit returns. Continental Europe (24.4%) was the top performer, given the rise in the euro, improving economic conditions and earnings outlook.

Emerging markets (23.7%) rebounded from the weak returns in prior years driven by the decline in the dollar and improved growth. Regionally, emerging Asia (27.9%) led the gains given stabilization in China (32.2%), the star performer for the year, a reversal from last year. Japan (19.2%) followed closely behind despite a difficult year for the yen, and the U.S. was up 17.9% as measured by the S&P 500.

Across sectors, pro-cyclical stocks were up a lot: financials (35.0%), information technology (33.3%) and materials (23.9%) led due to the growth in earnings and the lack of any risks bubbling to the surface.

What happened in the bond markets this year

Global bond markets saw returns diminish during the year, given Fed tightening, the back-up in yields and sell-off after the election. When rates (yields) rise, prices of bonds go down, which results in losses. We started the fiscal year with U.S. 10-year treasury yield at 1.5% and ended the year at 2.3%, which led to losses of 5% for the 10-year treasury. Demand for yield and credit assets remained strong, and the markets delivered solid results. U.S. high-yield bonds (12.8%) gained given the rebound in the commodity sector. Emerging market debt (6.0%) bounced back from a difficult environment following the U.S. election, trade policy concerns and a weaker dollar.


The UC

The Endowment is the bedrock of our university, providing critical financial support to the programs and initiatives that make our system the best in the world.

Established in 1933 with $100 million when UC had fewer than 3,000 students, today the Endowment has grown to a collection of more than 5,400 different funds, serving almost 265,000 students, with a total value of $10.8 billion. In fact, spread across our university campuses, the overall endowment and foundation assets are more than $17 billion. With our assets combined we rank among the top 10 largest university endowments in the U.S.

Our Endowment investment model is — and should be —unique, and so we’ve worked to resize and reposition our portfolio. We’ve also reduced our management costs by negotiating our terms and conditions with trusted relationships and by cutting our number of external managers by half. We now have a more concentrated list of managers deeply focused on delivering long-term results. 

Over the last 20 years the Endowment has grown from $3.3 billion to $10.8 billion. This year marks the 20th anniversary of our spending policy, and we have paid out $3.9 billion during this time. In the past three years, we have seen $1.8 billion in new inflows and expect another $300 million in the coming year to total $2.15 billion. We are humbled by the confidence entrusted by our campuses and foundations in managing assets on their behalf.

A significant part of the inflows over the years (more than $650 million) came from working with all the campuses to optimize their capital and develop Funds Functioning as Endowments (FFE) to support new discoveries and developments, as well as student scholarships and fellowships. In 2015, the UC Santa Barbara Foundation showed a vote of confidence by selecting our team and the Endowment to invest their assets. Another notable partnership and inflow over the past year was the proceeds generated by the sale of royalties from a UCLA-developed drug, Xtandi.

Given the low cash-flow demands on the Endowment, we’re able to take on more risk — illiquidity risk in particular — than with our other products. So this year we’ve started a slow shift to reduce public equities and increase our exposure to private markets. This will be driven by the opportunity set afforded over time, and we believe that an opportunistic approach will help us achieve the best risk-adjusted returns for our capital.



The University’s Pension program dates to 1904, and the current Pension plan was designed in 1961 to provide a basic retirement income for the people who make UC what it is: the best in the world.

Our core obligation is to provide sound management of the funds within the bounds of the Board of Regents’ funding policy. To achieve this goal, the UC Pension plan invests across various asset types such as equities and income securities (public and private), real estate, real assets, absolute return and strategic opportunities.

This year was a very good one for the Pension. The Pension earned 14.5%, primarily from the public equities markets which were up 22.5% in our portfolio. Our assets stand at $61.6 billion, up $7.5 billion from the end of the last year as a result of market gains and value-add offsetting outflows of about $300 million.

The discount rate is the expected return on investment for the Pension, and for more than 20 years, this rate was 7.5%. In 2015, we worked with the Office of the President to review our long-term expectations, and given the low return and inflation environment, the rate was lowered to 7.25%. Every 0.25% decrease in the discount rate increases our liabilities by approximately $2 billion. This year the Regents took action to increase employer contribution to 15% from 14% beginning in July 2018.

This year’s strong returns drove the growth in assets to $61.6 Billion improving the funding of the pension. We expect our funding ratio ending June 30, 2017 to improve to 82% on a market value basis from 78%.

We continue to prudently implement the Pension asset and risk allocation changes approved by the Board that became effective July 2016. And with a projected uptick in retirements over the next 5 to 10 years, we work to stay focused on the long term, taking steps to improve the management of the Pension and improving outcomes for our pensioners.

Retirement Savings

Design your

The Regents created our Retirement Savings program in August 1967 to allow members to voluntarily invest into a variable annuity. By the end of that first year, around 1,000 participants had saved $500,000.

Today, over 310,000 participants save for their future. Assets have grown to over $22.3 billion, making our Retirement Savings the second-largest public defined contribution (DC) plan in the U.S. and our 403(b) plan the largest in the country.

The best thing our participants can do to secure a better future is to save more. So we give them opportunities to invest their savings into a three-tiered investment lineup. Tier 1 is the default option: our Target Date Funds called UC Pathway. With assets of $6.1 billion, Pathway has more than doubled in the past five years. Tier 2 includes 14 core options that participants can use to build their own asset allocation. Finally, Tier 3 is a brokerage window that offers participants access to a menu of third party mutual funds.

The creation of the investment lineup has been guided by our core principles: to deliver the best-in-class DC plan focused on participant outcomes through superior performance and cost management.

Through our ongoing effort to enhance the Retirement Savings program, our participants now have access to an industry-leading lineup with an average management fee of just 0.07%, well below industry standards.

Working Capital


Our campuses and medical centers rely on Working Capital to pay for mission-critical projects and programs that make UC the gold standard of public universities in the U.S.

Working Capital is invested in both the Total Return Investment Pool (TRIP) and the Short Term Investment Pool (STIP). Total working capital ended the year at $14.2 billion, flat from the previous fiscal year after taking into account the payout of investment income and campus withdrawals to fund projects.

STIP, a high-quality, short-maturity portfolio, is managed to safeguard assets and ensure adequate daily liquidity to meet the University’s cash needs and external rating agency requirements. The Cash and Liquidity Management (UC Treasury) team, which provides banking services to our campuses and medical centers became a part of our office in 2015. We manage and forecast the system wide cash flows in and out of STIP, totaling $82 billion annually. Over the course of a year, we also process 93 million banking transactions, 20 million credit card transactions and $1 billion in credit card sales.

The investment objective of the TRIP portfolio is to produce higher long-term returns than STIP through an asset and risk allocation geared to an intermediate-term horizon. TRIP assets ended the year unchanged at $8.9 billion after outflows to campuses of approximately $600 million during the year.

As with all our products, we continue to work to reduce costs in our Working Capital portfolios. We project savings in TRIP of $20 million annually due to the shift to passive implementation of the public equity portfolio and restructuring of the absolute return portfolio to more liquid, lower cost strategies.

This year, we’ve also worked with the Office of the President to have the external debt rating agencies consider TRIP assets as part of the University’s overall liquidity.

Over the past three years we have worked with campuses to optimize their capital and have shifted more than $1.5 billion to TRIP from STIP, which has generated additional annual income for campuses of $30 million.

We continue to assess overall liquidity needs and look for ways to reduce fees, enhance investment results and make our capital work.

Captive Insurance

To protect
and serve.

UC’s captive insurance, Fiat Lux Risk and Insurance Company, was formed in 2012 as a single-parent captive to strategically finance risk across our entire system to reduce the net cost of loss, create greater financial stability and protect our resources.

Fiat Lux is the largest U.S. university captive insurance program with assets more than $900 million and liabilities close to $800 million.

While the captive insurance company is a separate legal entity subject to corporate formalities, its owner (UC Regents) and the Fiat Lux Board has direct involvement in and influence over the captive’s major operations, including underwriting, claims management, policy form and investments.

Fiat Lux came to us this year with a big request: would we work with them to assess their board’s risk appetite, draft a new investment policy and then develop a custom portfolio strategy to manage their assets? Of course, we said yes.

Our new strategy has only been in place for a few months, but Fiat Lux has already seen results: over $20 million in either saved premiums or new annualized revenues, with significant additional savings in development. Future growth plans in the next fiscal year include an incorporated cell captive for employee voluntary benefits, other University systems and additional coverages.


Small is

We work at one of the biggest universities in the world, producing some of the best research, innovations and scientific breakthroughs on the planet. And given the monumental task of managing a breathtaking amount of capital — $110 billion as of this past fiscal year — across a variety of products, you’d probably assume we’re a giant organization thinking big thoughts and making big plans. But that’s not us. To manage this much money and live up to the promises we make to our stakeholders, we actually think and act small.

  • We keep the number of decisions we’re making small so we can spend more time making right decisions.
  • We keep the number of investments we’re managing small to ensure we’re picking the right investments.
  • We keep the number of relationships we manage small to make them more meaningful.
  • We keep our team small to maintain a culture of accountability and high performance.
  • We keep learning and listening from one another to understand the small details to collaborate more.

By staying small, we may do fewer things, but we work hard to do those things better than anybody else. And it’s that focus on excellence we believe will allow us to live up to the significant responsibilities our clients and stakeholders have entrusted in us. Thinking small is, in a way, our key to delivering a beautiful future for everyone at UC. 

Regents and Officers
(In alphabetical order of last name)

Appointed Regents

Maria Anguiano

Richard C. Blum

William De La Pena

Gareth Elliot

Peter Guber

George D. Kieffer

Sherry L. Lansing

Monica Lozano

Hadi Makarechian

Eloy Ortiz Oakley

Lark Park

Norman J. Pattiz

John A. Pérez

Marcela Ramirez

Bonnie M. Reiss

Richard Sherman

Ellen Tauscher

Bruce D. Varner

Charlene R. Zettel

Ex Officio Regents

Jerry Brown

Governor of California

Harvey Brody

Vice President, Alumni Associations
of the University of California

Janet Napolitano

President of the University of California

Gavin Newsom

Lieutenant Governor of California

Anthony Rendon

Speaker of the Assembly

Cynthia So Schroeder

President, Alumni Associations of the
University of California

Tom Torlakson

State Superintendent of Public Instruction

Office of the President

Tom Andriola

Vice President and
Chief Information Officer

Jagdeep Singh Bachher

Chief Investment Officer and Vice
President, Investments

Nathan Brostrom

Executive Vice President, Chief Financial

Pamela Brown

Vice President, Institutional Research
and Academic Planning

Kimberly S. Budil

Vice President, Laboratory Management

Aimée Dorr

Provost and Executive Vice President,
Academic Affairs

Dwaine B. Duckett

Vice President, Human Resources

Arthur Ellis

Interim Vice President, Innovation
Alliance Services

Christine Gulbranson

Senior Vice President, Research
Innovation and Entrepreneurship

Stephen Handel

Vice President, Student Affairs

Claire Holmes

Interim Senior Vice President, Public Affairs

Glenda Humiston

Vice President of Agriculture and
Natural Resources

John Lohse

Interim Senior Vice President, Chief Compliance
and Audit Officer

Janet Napolitano

President of the University of California

Rachael Nava

Executive Vice President,
Chief Operating Officer

Nelson Peacock

Senior Vice President, Government Relations

Charles F. Robinson

General Counsel and Vice President,
Legal Affairs

John D. “Jack” Stobo

Executive Vice President, UC Health

Regents Designate

Albert Lemus

Treasurer, Alumni Associations of the
University of California

Francesco Mancia

Secretary, Alumni Associations of the
University of California

Paul Monge

Student Regent Designate

Officers of the Regents

Jagdeep Singh Bachher

Chief Investment Officer
and Vice President, Investments

Charles F. Robinson

General Counsel and Vice President,
Legal Affairs

Anne Shaw

Secretary and Chief of Staff to the Regents

John Lohse

Interim Senior Vice President, Chief Compliance
and Audit Officer

Faculty Representatives (Non-voting)

James Chalfant

Chair, Academic Senate

Shane White

Vice Chair, Academic Senate


Gene D. Block Los Angeles

George R. Blumenthal Santa Cruz

Nicholas B. Dirks Berkeley

Howard Gillman Irvine

Sam Hawgood San Francisco

Ralph Hexter (Acting) Davis

Pradeep K. Khosla San Diego

Dorothy Leland Merced

Henry T. Y. Yang Santa Barbara

Kim Wilcox Riverside

Staff Advisors

LaWana Richmond San Diego

Jason Valdry Irvine

(In alphabetical order of last name)

Committee on Investments,

Gareth Elliot (Vice Chair)

George D. Kieffer

Richard Sherman (Chair)

Charlene R. Zettel

Ex Officio Members

Jerry Brown

Monica Lozano

Hadi Makarechian

Janet Napolitano

Advisory Members

Albert Lemus

Shane White

Staff Advisors

Deidre Acker

LaWana Richmond


Gene D. Block