How The Regents Sold The Academy Downwards The River
Saturday, November 22, 2025
Edit
On Sept 17 2008, the Regents Investment Advisory Group met to hash out the UC’s investment strategies inward lite of the ongoing global financial meltdown. (The notes of the coming together tin move endure flora here). The decisions made at this coming together signal to a serial of questionable judgments, which may receive got caused serious harm to the university’s financial wellness in addition to a loss of over $23 billion inward its investment in addition to pension portfolios. While the regents in addition to the Office of the President would similar us to believe that everyone lost coin during the non bad financial meltdown, in addition to hence nosotros should non blame management for the loss of billions of dollars, a closer hold off shows that the regents’ ain financial interests could receive got motivated them to force the UC to enhance their stakes inward the riskiest investments that were already going bad.
During the early on business office of the meeting, nosotros discovery the next entry inward the minutes: “President Yudof noted that UC has investments inward mortgage-backed instruments. He asked if in that location has been whatever investigation into the likelihood of default. He cited the magnitude of the investment in addition to the potential opportunity of non existence able to score to market.” Yudof hither was wisely scream for almost the UC’s investments inward toxic assets in addition to the inability to house a value on these risky investments. The response he got should scare all of us, “As the marketplace turmoil expanded, the non-agency securities became less expensive, in addition to inward December, the University bought a fairly pregnant amount.” In other words, exactly when things were actually going downward loma for mortgage-backed securities, the UC increased its investment. While the UC investors idea they saw a bargain, what they were actually investing inward was a grouping of assets that they may never endure able to sell.
While nosotros create non know how much UC has invested inward these toxic assets, nosotros create teach around indication, inward the next department of the notes: “In response to a interrogation asked yesteryear President Yudof, Mr. Wedding stated that the University has almost $1.4 billion invested inward mortgage-backed securities, of which $0.6 billion is inside the UCRP, forty percentage to 45 percentage of the full mortgage-backed portfolio.” While $1.4 billion entirely accounts for a pocket-size business office of the UCs investment losses, nosotros afterwards read that the investors create non know how much coin they receive got inward other types of derivatives in addition to that they cannot value their ain assets: “Since May, that marketplace has popular off real illiquid . . .The University cannot obtain reliable daily or monthly pricing from its pricing providers on many of these securities . . . The bulk of them, 95 percent, are nonetheless valued AAA, equally they were when purchased, but it is hard to determine a marketplace cost . . .The University’s persuasion is that it should concord this seat rather than liquidate, in addition to that this seat volition move out over a one-and-a-half to two-year period.” Once again, the UC made a conclusion to concord onto a large grouping of investments that it could non value, in addition to fifty-fifty though the bond raters were nonetheless giving the mortgage-backed securities high ratings, it was clear that the assets were tied to defaulting loans, in addition to no 1 could actually marketplace these securities.
Instead of putting its coin into to a greater extent than stable in addition to prophylactic investments, the UC decided to accept payoff of the marketplace instability, in addition to enhance its stake inward high-risk assets:
“Chief Investment Officer Berggren informed the Committee that this revised policy would termination inward much higher allocations to both someone equity in addition to existent estate inward the future. . . The recommendation is for an increment inward the long-term target for someone equity in addition to existent estate consistent amongst the acquaint commitments in addition to amongst commitments planned for the adjacent few years.” Here nosotros discovery UC next the failed Yale model of switching academy investments from relatively stable bonds in addition to stocks to to a greater extent than volatile investments inward securities in addition to existent estate.
The question, then, is why did the UC popular off along to invest inward existent estate in addition to mortgage-backed securities when it was clear that these areas were seeing the highest grade of losses in addition to instability. The reply to this crucial interrogation appears to endure that hence many of the regents receive got huge stakes inward existent estate in addition to financial securities. For example, Richard Blum, who is a major existent estate investor, made the next declaration at a afterwards investment coming together (2/24/09): “Chairman Blum expressed concern that the University mightiness popular off also risk-averse. He recalled that, over the concluding lx to lxx years, equity in addition to existent estate receive got provided adept returns. The electrical flow scenario was an trial that occurs 1 time inward a century. He cautioned that the University’s investment profile mightiness popular off hence conservative that it would forestall the University from achieving its investment goals in addition to taking necessary activity when the marketplace begins to recover.” It is clear hither that Blum was pushing the regents to investment inward his ain manufacture in addition to to popular off along to accept on high-risk investments.
Since the regents are stacked amongst trace concern people amongst huge investments inward existent estate in addition to financial securities, it should endure clear that they should non endure the one’s managing the UC’s financial health. There are exactly also many potential conflicts of involvement to let these investors to steer the UC’s investments. As a offset pace inward changing how the regents are chosen, in that location should endure an independent investigation into the UC’s recent investment decisions.
During the early on business office of the meeting, nosotros discovery the next entry inward the minutes: “President Yudof noted that UC has investments inward mortgage-backed instruments. He asked if in that location has been whatever investigation into the likelihood of default. He cited the magnitude of the investment in addition to the potential opportunity of non existence able to score to market.” Yudof hither was wisely scream for almost the UC’s investments inward toxic assets in addition to the inability to house a value on these risky investments. The response he got should scare all of us, “As the marketplace turmoil expanded, the non-agency securities became less expensive, in addition to inward December, the University bought a fairly pregnant amount.” In other words, exactly when things were actually going downward loma for mortgage-backed securities, the UC increased its investment. While the UC investors idea they saw a bargain, what they were actually investing inward was a grouping of assets that they may never endure able to sell.
While nosotros create non know how much UC has invested inward these toxic assets, nosotros create teach around indication, inward the next department of the notes: “In response to a interrogation asked yesteryear President Yudof, Mr. Wedding stated that the University has almost $1.4 billion invested inward mortgage-backed securities, of which $0.6 billion is inside the UCRP, forty percentage to 45 percentage of the full mortgage-backed portfolio.” While $1.4 billion entirely accounts for a pocket-size business office of the UCs investment losses, nosotros afterwards read that the investors create non know how much coin they receive got inward other types of derivatives in addition to that they cannot value their ain assets: “Since May, that marketplace has popular off real illiquid . . .The University cannot obtain reliable daily or monthly pricing from its pricing providers on many of these securities . . . The bulk of them, 95 percent, are nonetheless valued AAA, equally they were when purchased, but it is hard to determine a marketplace cost . . .The University’s persuasion is that it should concord this seat rather than liquidate, in addition to that this seat volition move out over a one-and-a-half to two-year period.” Once again, the UC made a conclusion to concord onto a large grouping of investments that it could non value, in addition to fifty-fifty though the bond raters were nonetheless giving the mortgage-backed securities high ratings, it was clear that the assets were tied to defaulting loans, in addition to no 1 could actually marketplace these securities.
Instead of putting its coin into to a greater extent than stable in addition to prophylactic investments, the UC decided to accept payoff of the marketplace instability, in addition to enhance its stake inward high-risk assets:
“Chief Investment Officer Berggren informed the Committee that this revised policy would termination inward much higher allocations to both someone equity in addition to existent estate inward the future. . . The recommendation is for an increment inward the long-term target for someone equity in addition to existent estate consistent amongst the acquaint commitments in addition to amongst commitments planned for the adjacent few years.” Here nosotros discovery UC next the failed Yale model of switching academy investments from relatively stable bonds in addition to stocks to to a greater extent than volatile investments inward securities in addition to existent estate.
The question, then, is why did the UC popular off along to invest inward existent estate in addition to mortgage-backed securities when it was clear that these areas were seeing the highest grade of losses in addition to instability. The reply to this crucial interrogation appears to endure that hence many of the regents receive got huge stakes inward existent estate in addition to financial securities. For example, Richard Blum, who is a major existent estate investor, made the next declaration at a afterwards investment coming together (2/24/09): “Chairman Blum expressed concern that the University mightiness popular off also risk-averse. He recalled that, over the concluding lx to lxx years, equity in addition to existent estate receive got provided adept returns. The electrical flow scenario was an trial that occurs 1 time inward a century. He cautioned that the University’s investment profile mightiness popular off hence conservative that it would forestall the University from achieving its investment goals in addition to taking necessary activity when the marketplace begins to recover.” It is clear hither that Blum was pushing the regents to investment inward his ain manufacture in addition to to popular off along to accept on high-risk investments.
Since the regents are stacked amongst trace concern people amongst huge investments inward existent estate in addition to financial securities, it should endure clear that they should non endure the one’s managing the UC’s financial health. There are exactly also many potential conflicts of involvement to let these investors to steer the UC’s investments. As a offset pace inward changing how the regents are chosen, in that location should endure an independent investigation into the UC’s recent investment decisions.