Study finds insignificant returns on UC’s $1B hedge fund investments
By Laurel Scott
March 3, 2016 12:40 a.m.
The University of California’s largest employee union released a study Tuesday that showed the University has paid about $1 billion to hedge fund managers over the past 12 years for no significant increase in investment returns.
The study from the employee union, AFSCME Local 3299, said the UC’s hedge funds failed to fulfill promises of increased financial returns. According to the study, the returns mostly mirrored the stock market and did not achieve above-average increases.
Hedge funds are investments controlled by managers that use high-risk methods in hopes of yielding large financial returns.
In response to the study, the Union called for more transparency with the UC’s hedge fund dealings to guarantee better returns and scrutiny of hedge fund payments, said Todd Stenhouse, a spokesperson for AFSCME Local 3299.
“We want to guarantee the UC is getting the best possible value, and obviously the results of these findings call that into question,” Stenhouse said. “This should be a cause for alarm for anyone who cares about the UC.”
The UC paid $1 in fees to hedge fund managers for every $2 received in net returns, according to the study. Stenhouse added he thinks the UC could have saved nearly $1 billion by investing in traditional assets.
“Over the past 12 years, we’ve seen a tripling of tuition and dramatic cuts to student services,” Stenhouse said. “(The study) also calls into question whether these measures could have been prevented had these issues been understood and recognized.”
UC spokesperson Kate Moser said the University has not yet released an official statement on the findings of the study. She added the data used in the study predates the tenure of Jagdeep Singh Bachher, the chief investment officer and vice president of investments, who joined the UC Office of the President in 2014.
Moser said reducing the number of outside hedge fund managers has been one of Bachhler’s office’s key priorities.
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