University of California Shifts Assets from Public to Private Equity

Proposed changes include raising absolute return 2% and consolidating real assets and real estate into one asset group.

The University of California has proposed reweighting the asset allocation of its general endowment pool by slashing its holdings in public equity, while boosting its investment in private equity. 

“We’ve been spending a fair bit of time looking at how we’ve been invested and how we want to be invested,” said Jagdeep Singh Bachher, the chief investment officer of the University of California Regents, at a March 14 Regents Meeting.

Bachher said the University of California’s investment in private equity is half that of its peers, while its investment in public equities is double that of it its peers.

“With more volatility, or market-to-market changes in the public markets, you’ll see more noise in our results, versus the dampening from private assets,” said Bachher. 

The proposed changes include reducing the investment in public equities to 30% from 42.5%; increasing private equity to 22.5% from 11.5%; and raising absolute return to 25% from 23%. The changes also call for the consolidation of real assets and real estate into one asset group, while increasing the allocation to 12.5% from a combined 10.5%; and the consolidation of fixed income and liquidity into a single allocation to be weighted at 10% of total assets, which would reduce the fixed income current weighting by 2.5%.

“The changes that we are proposing in terms of asset classes and rebalancing are quite substantial,” said Sam Kunz, the University of California Regents’ head of asset allocation and investment strategy. “We made the conscious decision to use very long-term normalized returns, and that just means that we minimized the effect of the current market environment when we make our asset allocation… this asset allocation is very much focused on the long run.”


Asset Class

Current Weight

Proposed Weight


U.S. Equity




Non-U.S. Equity




Emerging Market




Private Equity




Absolute Return




Real Assets




Real Estate






Source: University of California Regents.

The University had commissioned a study from Cambridge Associates to help it determine how to adjust its asset allocation. According to Kunz, the results from the study showed that the general endowment’s allocation risk was similar to that of a pension fund, and that it can afford to take a very long-term view of its investments.


“What we observed was really that the endowment is not something the campuses rely heavily on for their operating budgets,” said Kunz. “So the cash flow needed from this endowment is relatively low compared to some of our peers. That’s very important because it allows us to have a very long-term view and focus on the long term for our asset allocation.”

 By Michael Katz