“We certainly like mid-market, buyout, any niche-y type strategy," he said. “We like focus.”
Bachher said his office is more heavily invested in public equities than private equity, and staff is trying to change the asset allocation so the endowment competes with its peers.
“If you look at the best performance of the last decade, you don’t have to look too far to notice something very striking,” Bachher said. “We’ve been much slower at going into private assets.”
The endowment’s investments declined 3.4 percent in fiscal 2016, the lowest return among U.S. colleges with assets of more than $4 billion, according to data compiled by Bloomberg. The loss was driven by poor returns from public equity fund managers and hedge funds.
University endowments of all sizes had their worst year since 2009, losing an average of 1.9 percent, according to National Association of College and University Business Officers and money manager Commonfund.
For the six months ended Dec. 31, the California endowment’s gain was 7.1 percent, according to documents prepared for the board meeting.
Asset Classes
Every major asset class contributed positively to the endowment’s performance, Fong said at the meeting. Gains were mostly driven by public equities. Non-U.S. equity, which accounts for 14 percent, rose 16 percent in the six months through Dec. 31 while U.S. stocks, which make up 21 percent, increased 11.2 percent, according to documents. Private equity had a 10 percent gain.
Bachher said his office doesn’t view investments in terms of their asset class, but instead for the risk they may pose.
“You’re buying risk in two different ways, it doesn’t matter in some ways that you’re shifting from one to another,” he said. “We’re making sure that we manage the equity risk factor by looking at more private opportunities.”