UC REGENTS ADOPT NEW INVESTMENT POLICIES

To ensure the continued safety of the university's pension funds, the Board of Regents adopted at its March 16, 2000, meeting a set of revised investment policies and practices to improve the university's pension funds' accountability, to increase diversification and to reduce volatility. These new investment strategies resulted from a comprehensive review process that began in November 1998. 

Articles about the investment policy changes have appeared in the San Francisco Examiner, Los Angeles Times and Wall Street Journal. The following information provides an overview of the review process, a summary of the key university policy guidelines, and answers to questions about the regents' decision. Also included is a letter to the editor from Board of Regents Chairman S. Sue Johnson and Regent Judith L. Hopkinson responding to an Aug. 17 editorial appearing in the San Francisco Examiner.

THE REVIEW PROCESS AND ADOPTION OF NEW GUIDELINES

The Board of Regents has a state Constitutionally mandated fiduciary responsibility to the university and its employees to oversee UC's investment activities (Bylaw 5.1.f). UC's investment portfolio has outperformed similar funds in the past, and over the years, the endowment rate of return has compared favorably with appropriate financial indicators. Due to the plans' funded position, neither the university nor members have been required to contribute to the University of California Retirement Plan (UCRP) since November 1990. 

After an almost two-year review, the regents determined that a focused review of UC's investment activities was appropriate because the university's portfolio, similar to other public funds of its size, would benefit from having independent external evaluation.

What were the steps involved in the review process leading up to adoption of the new investment policy guidelines?

SUMMARY OF INVESTMENT POLICY CHANGES

The Board of Regents authorized a comprehensive study of investment strategies for the university's various pension fund assets, including the UC Retirement Plan (UCRP), the General Endowment Pool (GEP) and the Equity and Bond Portfolio investment options offered by the Tax-Deferred 403(b) Plan and Defined Contribution Plan.

The new investment policy measures include 28 guidelines for portfolio management, quarterly reports on fund performance and new market benchmarks to assist fund managers in tracking and adjusting investment performance targets to ensure fund safety and growth. These guidelines, policies and procedures form the foundation of the new asset allocation strategy. 

The strategy also brings UC's pension fund management more in line with investment industry standards by expanding independent external review mechanisms. It creates a regents' investment advisory committee to strengthen investment accountability to the Board of Regents, which has fiduciary responsibility for the safety and performance of the pension funds.

The 28-page report by Wilshire Associates, as well as an easy-to-understand summary of the revised investment policies, is available at www.ucop.edu/bencom/news/revisedasset.html. 

Questions and Answers about the New Policies