Peer Comparisons of the Investment Performance of the University of California Retirement Plan (UCRP)

 by Charles Schwartz, UC Berkeley, January 2007

Large Comparison Groups

  Table 1.  Percentile Ranking of UCRP Total Returns as of 6/30/2006
Comparison Group
Size of Group*
 1 yr
 2 yrs
 3 yrs
 4 yrs
 5 yrs
 7 yrs
10 yrs
All Master Trusts
Assets > $1 Billion
Public Funds
*First size is for 1-Year data, second size is for 10-Year data.

     The above data are from the Trust Universe Comparison Service (TUCS), prepared by State Street Bank & Trust, UC’s custodial bank, and obtained after repeated requests to UC's Office of the President (UCOP) under the California Public Records Act.

Percentile Ranking (a LOWER number means you are performing BETTER than others)
1-25 means in the top quartile
25-50 means in the second quartile
50 means at the median
50-75 means in the third quartile
75-99 means in the lowest quartile

Summary of Table 1:  In all but one of the cumulative time periods looking back from 1-Year to 7-Years, UCRP performance was below the median of each comparison group, and sometimes it was in the lowest quartile.  Looking back over the 10-Year period, by contrast, the performance was in the first or second quartile.  In other words, there was outstanding performance in that earlier period and poor performance since then.

     The letter of transmittal from UCOP included the following:

“I should caution you – as I have repeatedly – the Treasurer’s Office has moved away from peer group comparisons and has discontinued its subscription to the Trust Universe Comparison Service ("TUCS") Public Fund Media report.  The Treasurer’s Office has no more peer group comparison information in its files beyond what has been produced to date and has no plans to subscribe to any service providing peer group comparison information in the future.”

- - - - -

California Comparisons

Investment Performance of UCRP v. CalPERS & CalSTRS

     In a previous note I have shown that UCRP total fund Returns have been well behind those of CalPERS (California Public Employees Retirement System) and CalSTRS (California State Teachers Retirement System) in each of the past three years (1-year returns as of June 30, 2004, 2005, 2006).  The official investment policy statement adopted by the UC Regents [see footnotes below] says that they do not concern themselves with peer or peer group comparisons, because there may be different needs and goals for different institutions.  Instead, UC relies solely upon comparing their investment performance to their own adopted benchmarks, and here one does see that UCRP has performed ahead of its adopted benchmark in each of these last three years.

     This raises interesting questions about the choice of benchmarks.  I do not pretend to be expert enough to make any direct criticism of what the Regents have chosen as their investment benchmarks, based upon recommendations brought to them by their own Treasurer and their outside investment consultant.  However, I can collect and compare benchmarks for some other institutions. The Table below presents the data I have gathered from available online publications of UC, CalPERS and CalSTRS.

Table 2.  Comparative 1-Year Investment Data as of the specified dates


 Total Return
 Policy Benchmark


 Total Return *
 Policy Index


 Total Return
 Policy Index

*Note. The CalPERS data here are Gross (of fees), while UCRP data are Net. This implies only a small correction above: CalPERS’ Net for 2006 is given as 11.94%.

     What we see in Table 2 are several lines of comparison:

a)    As noted previously, UCRP Returns are significantly lower than CalPERS’ and CalSTRS’ Returns each year.

b)    UCRP’s Policy Benchmarks are significantly lower than CalPERS’ and CalSTRS’ Benchmarks each year (with one exception out of six comparisons).

c)    CalPERS’ and CalSTRS’ Returns exceed their own Benchmarks by a significantly greater margin than UCRP exceeds its own Benchmark, in each year.

     If we go back another year, to 6/30/03, the comparisons are completely reversed; UCRP did better than the others and its benchmark was higher and it exceeded its benchmark by a wider margin.

     I think the UC Regents should ask their investment advisors (the Treasurer and outside consultant) to examine this data, along with any other data they might think relevant, and give a public accounting of what appear to be major shortcomings in the overall UCRP investment program.

     Why would one want to set low benchmarks?  One possible answer is that it means taking lower risk. One might also ask whether those who are involved in setting the benchmark have any self-interest in the matter.  Certainly those who are paid on the basis of outperforming the benchmark would gain from a lower benchmark; and others in the chain of responsibility might just like to look better by the lower standard.


Relevant excerpts from the Regents’  UCRP Investment Policy Statement:

    Peer risk refers to the difference in Retirement Fund performance relative to peer institutions. The Committee acknowledges that similar institutions may have different liabilities and different levels of investment risk. Comparisons of performance with other institutions are meaningful only after adjusting for differences in investment policy and risk among peers. This risk is the responsibility of the Committee.

    The Committee shall review the investments of the Retirement Fund no less than quarterly to assess whether policy guidelines continue to be appropriate and are met. The Committee shall monitor investment risk, as well as monitor investment returns on an absolute and benchmark relative basis.
The Regents’ Committee on Investments had its last quarterly review meeting in August 2006. The usual November meeting was skipped and the next one is not expected until March 2007.