University of California The Auckland board is gradually liquidating its hedge fund portfolio and investing the money in private credit, chief investment officer Jagdeep Singh Bacher told the board on Thursday.
As of December 31, UC Regents’ $81.2 billion pension fund had an absolute return of $2.9 billion and the $19.6 billion fund’s absolute return portfolio was $1.5 billion.
UC has invested in hedge funds for 20 years, but the strategy failed to provide the portfolio hedging it needed in 2000, 2008 and 2020, Bachher said.
The investment team is withdrawing funds to invest in “safer things,” Bacher said. UC Regents plans to redeem its portfolio of hedge funds over three years or as soon as liquidity becomes available, replacing those strategies with private his credit.
UC’s pension fund held $2.4 billion in private credit as of December 31, and the fund had $849 million in private credit. At the end of the year, UC’s pension fund still had private credit quotas to invest more with a target allocation of 3.5% and an actual investment of 3%. However, the fund is over-allocated to private credit, with an actual weighting of 4.3% as of December 31 against a target allocation of 4%.
Separately, in response to questions from board members, Bacher disclosed that the private equity portfolio has $4 million in exposure to Silicon Valley banks.
In other actions, the Board will use equity and debt to invest $2 billion in pensions and endowments to invest in market-value real estate on or near the 10 campuses of the University of California. We discussed the staff’s suggestion to commit.
To do this, UC Investments will set up a separate team compensated at market wages to explore, acquire, operate and maintain these properties. At the board meeting, Mr. Bacher referred to the unit as an LLC or limited liability company.
Assets that the unit can acquire include student, staff and faculty housing, classroom buildings and laboratory space, the memo to the board said.
“These will technically be investment assets acquired at market rates,” the memo said.
The Chief Investment Officer makes the final investment decisions regarding real estate.
Bachher said the investment office already has nine years of experience investing in real estate on and around the UC campus.
“We did a $1.2 billion deal and made money for college, and I think we can scale that,” Bachher said.
He said the new model could benefit staff, students and the campus community. He pointed out that the investment firm has decided not to increase his rent in 2023, even though he was contractually entitled to do so on one of the properties he currently owns. bottom.
Bacher said at the meeting that UC Investments has been criticized by the media for increasing rents on properties on or near campus.
But he added that UC Investments has a fiduciary duty to profit from its investments.
