UC Investments Sees Value in Cash

By David G. Barry

Amidst rising interest rates and economic uncertainty, Jagdeep Singh Bachher is seeing increased value in cash.

Between June 30 and August 31, the chief investment officer of UC Investments oversaw moves that increased the cash holdings of the University of California’s investment arm from $1.9 billion, or 1.3% of its $152 billion portfolio, to $4.9 billion, or 3.2% of its portfolio, which had grown to $154.9 billion. Incidentally, as of June 30, 2021, it had $1.3 billion, or 0.8% of its $167 billion portfolio, in cash.

In a presentation to the investment committee of the Regents of the University of California, Baccher said there’s a simple reason for the move: “cash is now an asset class.”

UC Investments, he said, can earn 4% on its cash “and that number is “going to go up.” It is not, Baccher said, “a bad place to be” considering that it is risk free and equities have over the past 25 years gained 6%.

In fact, as of August 31, UC Investments had a higher percentage of its portfolio in cash than it did in such other segments as absolute return, private credit and real assets. And real estate is only slightly larger at $6.5 billion, or 4.2%.

To increase its cash level, UC Investments sold some of its equities at the “height” of the July and August stock rallies, he said. As a result, $78.2 billion, 50% of its portfolio, was in equities as of August 31 compared with $79.4 billion, or 52.2%, as of June 30.

Baccher said he and his staff do not “have a very strong view on being to the left or right” but are striving instead to “be right in the middle of the fairway.” UC Investments, he said, will be “adding risk as necessary” and “will find excellent opportunities to put money to work.”

He stressed that he is “not pessimistic” but rather “optimistic about the United States and the rest of the world.”

The UC Investment portfolio consists of its pension fund, its endowment, the UC Retirement Savings Program and several smaller investment pools.

For the year ended June 30, the $81 billion pension fund recorded a negative 10.8%. matching its negative 10.8% benchmark. The $18.2 billion endowment, meanwhile, returned a negative 7.6%, besting its benchmark of negative 9%. Results for the UC Retirement Savings Program were not disclosed, only that it stood at $30 billion.