University Of California Endowment To Nearly Double PE Allocation

Mar 16 2017 | 11:05pm ET

The University of California’s $10.3 billion endowment will double its allocation to private equity at the expense of equity holdings in a bid to improve performance. 

The university’s portfolio gained 7.1% for the six months through December 31, according to a Bloomberg article, driven by late-year surges in global equity markets. The return outperformed the 4.4% booked by the average university endowments over the same time span, the Bloomberg added citing data from Wilshire Associates. 

The move to increase private equity exposure comes as CIO Jagdeep Bachher seeks to improve performance since he became CIO nearly three years. Going forward, the private equity asset allocation in the endowment will reportedly rise from 11.5% to 22.5% and focus on mid-market, buyout, and niche strategies, while equities will drop to 30% from 42.5%.

Allocation to absolute return strategies, which includes hedge funds, will rise slightly from 23% to 25%, Bloomberg said, although the number of hedge funds in the portfolio has fallen from 175 in 2015 to 65 now. 

The new targets were announced following a Board of Regents investment subcommittee meeting Tuesday. The increased allocation to private equity was partly due to the illiquidity premium present in the asset class, according to a video of the meeting.

At the session, Bachher reportedly also tied hurdle rates to the payment of performance fees, reflecting a ongoing desire among large institutional investors to lower the fees they pay for alternative investment management. 

In Depth

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Cash: An Asset In Adolescence

Aug 31 2017 | 3:34pm ET

If the investment industry has a rebellious teenager in the house today, that teenager...


From the current issue of