The University of California responded to our story, which also was published in partner publications in a condensed form.

To the editors:

While the University of California appreciates the attention that the Center for Investigative Reporting recently gave to the UC endowment, I would like to address its shortcomings.  First, the limited scope of the article provides an incomplete and inaccurate depiction of UC’s endowment returns.  While the article rightfully notes that the University performed poorly versus endowment peers a decade ago, it gives short shrift to the fact that the GEP’s ranking has improved significantly.  A more timely and relevant analysis of the UC’s 1-year and 5-year performance against comparable institutions shows that UC’s returns were better than the vast majority of its peers.  When broadening the scope to include more recent performance periods, the progress and steady improvement of the endowment is clear.

Second, the article discounts the progress that UC has made within the unique constraints that dictate investment decisions of large public institutions.  Many of the institutions that UC is compared to are private and have been investing in alternative asset classes since before 2000.  In attempting to improve returns, the UC has restructured its asset allocation while diversifying its portfolio and managing risk. In 2005, the GEP portfolio was allocated among four asset classes, with fixed income and public equity comprising 90% of the portfolio and the remaining 10% allocated to alternative investments.  By 2013, assets were allocated among six different classes and the alternative allocation had grown to 46% of the portfolio with the hedge fund allocation at 24% and private equity at 9%.  This demonstrates the substantive GEP diversification efforts pursued by the Board of Regents and investment staff over the years.

Finally, the article completely ignores the restrictions imposed upon UC as a result of the lengthy legal battles by outside entities that make it very difficult for us to pursue certain alternative investments.  While one might argue that as a public institution, UC should force private partners with whom we invest to fully open their files to everyone, the fact is that legal battles over this issue have caused top-performing money managers to refuse to work with us.  Your article failed to point out that private universities operate under no such restrictions.

We hope this letter provides more clarity to your staff and gives you a better understanding of the continually improving UC endowment.


Randolph Wedding

Acting Co-Chief Investment Officer,

University of California

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