University of California Reports Biggest One-Year Gain in History

The investment portfolios for the University of California (UC) added $38 billion over the fiscal year ending June 30 to raise their asset value to $168 billion, a 28.9% increase over the prior year. It was the largest one-year gain in the endowment’s history.

The investment portfolios include the UC endowment, which returned 33.7%, and its pension, which was up 30.5%.

The endowment attributed the record returns to the strong performance of its private and public equity investments, which returned 58.7% and 41.1%, respectively, during the year.

“In so many ways, this past fiscal year was intense, and humbling,” CIO Jagdeep Singh Bachher said in a statement. “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.”

UC’s portfolios have grown by $73.1 billion, or 77% since 2014, when Bachher was named CIO of the university system. Since then, the UC Investments team has also generated $5.2 billion in returns over its benchmarks and saved $2.2 billion in costs by reducing its number of external managers and increasing direct co-investments in companies. UC Investments said it has cut the number of its key external partnerships to 50 today from 280 in 2014.

The university’s general endowment pool was worth $19 billion as of June 30, a $5 billion increase from the previous year, and a $10.7 billion, or 129%, increase since 2014. The one-year net return was 33.7%, which beat its benchmark’s return by 4.2%, and its three-, five, and 10-year annualized returns were 14.9%, 13.7%, and 9.9% respectively. Over the longer term, the endowment pool reported 20-, 25-, and 30-year annualized returns of 7.8%, 8.9%, and 9.7% respectively, all of which surpassed their policy benchmarks.

The asset value of the University of California pension rose $20.8 billion from the previous year, thanks to a one-year net return of 30.5%, which was 2% above its benchmark. The pension has three-, five-, and 10-year annualized returns of 12%, 11.6%, and 8.9%, respectively. Over the longer term, the pension has 20-, 25-, and 29-year annualized returns of 6.9%, 8.1%, and 9%, respectively, all of which met or exceeded their policy benchmarks. Private and public equity investments were also the top-performing asset class for the pension, returning 54.7% and 41.8% respectively for the year.

“Jagdeep and the UC Investments team, working entirely remotely, stayed calm and focused,” UC Regent Investments Committee Chair Richard Sherman said in a statement. “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.”