UC Investments Seeks to Reduce China Holdings

By David G. Barry


UC Investments, the University of California’s investment arm, is working to reduce its holdings in China – a move that comes as U.S. institutional investors grapple with how to deal with the world’s second-largest economy.

In remarks to the investment committee of the Regents of the University of California, Chief Investment Officer Jagdeep Singh Bachher said he is “explicitly working” with Ronnie Swinkels, managing director, public equity investments, “to find ways to repatriate our capital from our Chinese managers where possible.”

UC Investments has more capital in China – $4.2 billion as of June 30 – than any other country in the world outside the United States. The $152 billion UC Investments portfolio had more than half of its assets $77.4 billion – in the United States as of June 30. After China, Japan is its largest international market at $3.3 billion. It had $3 billion invested in both the United Kingdom and Canada.

The system’s China holdings do not include Hong Kong or Taiwan, which were at $380 million and $878 million, respectively.

Bachher did not disclose the asset allocation of UC Investments’ China holdings and did not respond to a request for additional comment. His comments are particularly significant because UC Investments has been an early mover on potentially sensitive topics. It, for instance, sold off all its fossil fuel holdings in 2019 and 2020.


Saying that he is “not a fan of China,” Bachher said in response to a question from a trustee that, “I would take down our position in China and I would bring home our money from China.”

He said his reasoning for this view is the “reset in China” and the way it has been dealing with the COVID crisis, the lack of transparency, the lockdowns, and supply chain issues.

“Almost everybody,” he said, “thought that China is the second-biggest economy therefore we should put as much money to overweight China. That’s not my view. I’d like to bring that money back home.”

Russia’s attack on Ukraine has led an increasing number of institutional investors to also look at their China holdings – given that country’s continued interest in reclaiming Taiwan.

The Maryland State Retirement and Pension System (SRPS), for example, recently had Melissa Ma, co-founder and managing partner of Asia Alternatives, and Ajay Krishnan, a partner and head of emerging markets for Wasatch Global Investors, give the pro and contrarian view on why China still makes sense as a place to invest.

SRPS had 6.6% of its $64.6 billion in assets in China as of June 30. That figure included Taiwan and Hong Kong. SRPS has a 7.1% target to China, which is well above the 5% of its peers, according to materials presented at the system’s September meeting.


Others, like California State Teachers’ Retirement System (CalSTRS) are actually looking to up their investing in the country. Over the summer, CalSTRS launched its first search for China public equity managers, according to a request for proposals posted on the California procurement website.

And while souring on China, Bachher has come around to see the benefits of investing in India.

He told the trustees that when he arrived as CIO eight years ago, he had a bias against the country.
“I never thought about it, looked at it or ever wanted to entertain it,” he said.

UC Investments’ team, however, pushed Bachher on investing in India, and today, he says, “I’m glad we did, candidly.”

The country, he said, has generated an annualized 9% return, whereas China’s stock market has “been pretty dismal” and returned 2% annualized. India, he said, has “some interesting tailwinds,” but UC Investments is moving into the area “very cautiously.”

UC Investments had $2.7 billion invested in India as of June 30.

Bachher, however, left no doubt as to where he thinks the best place to invest is: “The U.S. dollar remains strong and I think the U.S. is the best place where we will see opportunities on planet earth,” he said.