Office Of The Chief Investment Officer Of The Regents Investing for the Long Term 201 7 /201 8
2016/2017 2
UC Investments Way 1. Less is More 2. Risk Rules 3. Concentrate 4. Creativity 5. Build Pays Knowledge 6. Team Up 7. What makes 8. Perfect 9. Man Meets 10. Centennial UC, UC Alignment Machine Performa n ce 3
UC Investments $1 18.4 Billion $6 6.6 B Pension $0.9B $ 6.4 B Captive Short Insurance Term $ 9.2 B $1 1.5 B Total Endowment Return $2 3.8 B Retirement Savings $1 18 . 4 B UC Investments 4
UC Investments 6 Unique Products Endowment Total Return Short Term 10 UC Campuses $82 Billion Serving 5 Medical Centers UC Cash Flows 265,000 Students 3 National Labs Annually with 5,400 Funds 31 2 ,000 233,000 $300 Million UC Savers Pension Plan Annual Premiums Members 26 coverages Retirement Savings Pension Captive Insurance 5
Our Products Where We Invest United States – 7 3.6 % $ 87.1 B India – 1. 0 % $1. 2 B Canada – 2.3 % $ 2.7 B China – 2.1 % $2. 5 B Latin America – 0 .9 % $1.1B Emerging Asia – 3.2 % $3. 8 B United Kingdom – 3. 0 % $3. 6 B Japan – 3.5 % $4. 1 B Emerging Europe, Middle East, Africa – 1. 8 % $ 2.1 B Developed Asia ex-Japan – 1. 9 % $ 2.3 B Developed Europe ex-UK – 6.7 % $ 7.9 B 6
How We Invest $1 1 8 . 4 Billion As of December 31 , 2017 Market Value Percentage in Billions ($) (%) Public Equity 60.2 5 0.8 Fixed Income 3 6.7 31.0 Other Investments 15. 1 1 2.8 Absolute Return 6. 4 5. 4 Private Equity 4. 0 3. 4 Real Estate 3.5 3 .0 Real Assets 1. 2 1.0 Cash 6.4 5. 4 Total $1 1 8.4 Billion 100.0% 7
UC Investments 26 Investment Professionals Investment Professionals 26 Operations 13 Risk 5 Treasury 6 Investment Fellows 7 Support 6 8
UC Investments $4. 5 Billion Managed Per Investment Professional $1 .1 B $4. 5 B Industry UC Investments 9
UC Investments 120 Partners 240 195 150 120 2014 2015 2016 2017 10
UC Investments $ 23 0 Million Saved in Fees Over 3 Years $ 23 0M $ 124 M $ 70 M $2 7 M $9M Retirement Total Return Endowment Pension UC Investments Savings 11
UC Investments 0.027% Office of CIO Costs 0.027 % 0.3 % 100 % 10 % 1 % 12
UC Investments $2.2 Billion of Value Added Over 3 Years $2.2B $1.5B $0.4B $0.3B Working Capital Endowment Pension UC Investments 13
How We Add Value Partner with our stakeholders to set realistic expectations Manage products differently based on their risk and return objectives Implement asset and risk allocation for all products Add value through active and passive management Aggressively reduce costs in a low return environment Creat e opportunities through innovation and collaboration Win from our competitive advantages Size. Scale. Patience. The UC. 14
UC Investments 0.027% $1 18 . 4 Billion $2.2 Billion C ost Value Added Assets Office of CIO 3 Year $4. 5 Billion +15. 1 % 6 per I nvestment Endowment Unique Products Professional 2016/2017 +14. 5 % $ 230 Million 120 Saved Pension Partners 2016/2017 over 3 years 15
ENDOWMENT UC endowment. 16
ENDOWMENT Total UCSB Endowment of $337.7 Miilion UCSB Foundation Assets $197.4 Million UCSB Regents Assets $140.3 Million A collection of more than 450 endowments 17
UC Endowment 201 7 /201 8 Market Value in Billions ($) $ 10.8 B June 30, 201 7 $ 0.7 B Market Gains ( $0. 2 B ) Value Added $ 0.2 B Net Cash Flow $1 1. 5 B Dece mber 3 1 , 2017 18
UC Endowment Asset Allocation Risk Allocation Public Equity 4 5 % Economic Growth 7 8 % Liquidity 1 2 % Foreign Exchange 3 % Absolute Return 1 7 % Emerging Markets 2 % Private Equity 1 0 % Residual 1 7 % Real Estat e 4% (Real Assets) Real Assets 2% $1 1. 5 5.9 % Billion Volatility Cash 10 % 19
UC Endowment Asset Allocation As of December 3 1 , 2017 Market Value Portfolio Policy Overweight / in Billions ($) Weight (%) Weight (%) (Underweight) 5.2 45.0 42.5 42.5 2.5 Public Equity 1. 3 1. 11.8 12.5 12.5 ( 0.7 ) Liquidity (Income) Other Investments 3.9 3 3.7 45.0 45.0 ( 11.3) Absolute Return 2.0 17.5 23.0 (5. 5 ) Private Equity 1. 2 10.1 11.5 (1.4) Real Estate (Real Assets) 0.5 3.9 7.5 (3. 6 ) Real Assets 0. 2 2.2 3.0 ( 0.8 ) Cash 1.1 9.5 0.0 0.0 9.5 Endowment $1 1. 5 Billion 100.0% 100.0% 20
UC Endowment Asset Allocation Where we are as of D e c ember 3 1 , 2017 Where we are headed Market Value Portfolio Long Term Allowable Ranges in Billions ($) Weight (%) Policy Weight (%) Minimum Maximum 5.2 45.0 30.0 30.0 Public Equity 2 0.0 0.0 52.5 1. 3 1. 11.8 10.0 10.0 Liquidity (Income) 0.0 17.5 Other Investments 3.9 3 3.7 60.0 60.0 28.0 82.0 Absolute Return 2.0 17.5 25.0 15.0 32.0 Private Equity 1. 2 10.1 22.5 10.0 32.5 Real Estate (Real Assets) 0.5 3.9 12.5 3.0 17.5 Real Assets 0. 2 2.2 Cash 1.1 9.5 0.0 0.0 0.0 0.0 0.0 0.0 Endowment $1 1. 5 Billion 100.0% 100.0% 21
UC Endowment Investing for the Long Term Net Returns Difference over Policy Benchmark 15% 14.6 % Policy Benchmark 12% 15.6 9. 5 % 1.3 9% 7.5 % 7. 1 % 0.4 0.5 6.7 % 5. 8 % 6% 0.6 8.2 6.6 7.7 3% 7.1 5.2 0% (1.0) (1.0) As of December 31, 2017 6 Months 1 Year 3 Year 5 Year 10 Year 20 Year 22
UC Investments 0.027% $1 18 . 4 Billion $2.2 Billion C ost Value Added Assets Office of CIO 3 Year $4. 5 Billion +15. 1 % 6 per I nvestment Endowment Unique Products Professional 2016/2017 +14. 5 % $ 230 Million 120 Saved Pension Partners 2016/2017 over 3 years 23
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