Q4 2009 Investment Performance...

Office of the Treasurer of The Regents

University of California

I-1Investment Performance Summary S y

Quarter ended December 2009

Committee on Investments/ Investment Advisory Group

February 23, 2010

Contents

• Introduction

• Market Overview• Market Overview

• Performance

• Asset Allocation

• Total Fund Attribution

• Risk Measures

C t ib ti t i k• Contribution to risk

• Peer Comparison

Dec 2009 Investment Performance SummaryFeb 23, 2010 | 2University of California


Significant Events and Results

• Strong market gains in December quarter and Fiscal Year to Date

• Excellent absolute and relative performance for all UC portfolios• Excellent absolute and relative performance for all UC portfolios

• Portfolio repositioning was major contribution to performance

• Good management of liquidity

• No exposure to hedge fund partnership meltdown

• Strong performance in Private equity versus peers

M j t d i E it f• Major turnaround in Equity performance

• Limited exposure to Real estate

• UC active management of the Securities Lending program g g p gprecluded problems widely experienced by peers

• Top Quintile performance for GEP

• Top Quartile performance for UCRP



• Top Quartile performance for UCRP

Market Overview: Equity and Fixed Income Returns

Markets continued to rally in 4Q, but at a slower pace

130%

Global Markets Cumulative Returns, 9/2007 to 12/2009

100%

110%

120%

60%

70%

80%

90%

30%

40%

50%

7 7 8 8 8 8 9 9 9 9

9/20

07

12/2

007

3/20

08

6/20

08

9/20

08

12/2

008

3/20

09

6/20

09

9/20

09

12/2

009

Russell 3000 MS World ex-US MS Emg Mkt

Barclays Agg Bond Barclays US High Yield



Market Overview: Equity and Fixed Income Returns

Emerging Market equity and High Yield debt each rose more than 6% in Q4

Capital Market Returns for periods ending 12/31/09

78.5

58 2 60

70

80

90

31.2 28.3

33.7

58.2

30

40

50

60

5.9 2.4

8.5

0.2 6.2

23.2 22.3

4.0

21.3

5.9

-

10

20

30

Russell 3000 MS World ex-US MS Emg Mkt Barclays Agg Bond Barclays US High Yield

Q409 FYTD CYTD



Market Overview: Asset Class Returns

“Reversal of Fortune” for risky versus safe assets in 2008-09

Capital Market Returns: 2008 vs 2009

58.2

78.5

60

80

100 Capital Market Returns: 2008 vs. 2009

2008 2009

27.415.9

5.2

5.911.0 15.5

28.4 28.3 28.033.7

13.5

-

20

40

-1.0 -1.5-11.7

-26.2-37.3 -37.7

-43.6 -46.5-53.3

-13.9-3.9

(60)

(40)

(20)

( )



UC Recent Performance: Quarter and Fiscal Year to Date

Total returns for all funds were positive for the quarter and fiscal year to date

Active returns for all funds were positive for both periods

3.7 3 4 3 5 4 0

Returns for 3 Months Ending 12/31/0916 3 15 6 18

Returns for 6 Months Ending 12/31/093.7 3.4

3.0 3.5

3.1 2.7

1.5 2.0 2.5 3.0 3.5 4.0 16.3

13.8 12.8 15.6

13.1 12.1

6 8

10 12 14 16 18

0.7 0.2

-0.5 1.0

UCRP GEP STIP ENTITY

Portfolio Policy Bench

1.4 0.5 -2 4 6

UCRP GEP STIP ENTITY

Portfolio Policy BenchPortfolio Policy Bench Portfolio Policy Bench



UC Performance: Longer Periods

Returns for all periods closely track policy portfolios

The past decade has been very difficult for long term (equity) investors



UC Performance: UCRP Asset Classes

Trends were similar over both periods:

• All Equity classes and Absolute Return strategy added value

• Private Real Estate was down • Private Real Estate was down

10 Returns for 3 Months ending 12/31/09

40

Returns for 6 Months ending 12/31/09

(2)-2 4 6 8

10

-

10

20

30

40

(10)(8)(6)(4)

US Equity

Int'l Dev.

Eq it

Emg Mkt

Eq it

US Fixed Inc

TIPS Private Equity

Abs. Ret.

Strat

Priv. R.E.

(30)

(20)

(10)

US Equity

Int'l Dev.

E it

Emg Mkt

E it

US Fixed I

TIPS Private Equity

Abs. Ret.

St t

Priv. R.E.

Equity Equity Inc. Strat.

Portfolio Bench Active

Equity Equity Inc. Strat.

Portfolio Bench Active



Asset Allocation: UCRP and GEP December Quarter

UCRP overweight US Equity and underweight TIPS and Real Estate

GEP overweight US Equity and underweight Real Estate and Private Equity

UCRP Asset Allocation GEP Asset AllocationC V i

Actual%Current Policy

Allocation

Variance from

Current

Policy Range

U.S. Equity 20% 19.0% 1% 14-24%Non-U.S. Equity-Dev. 18% 18.0% 0% 15-21%Non-U.S. Equity-Emerg. 5% 5.0% 0% 2-8%

Actual% Current Policy

Allocation

Variance from

Current

Policy Range

U.S. Equity 33% 32.0% 1% 27-37%Non-U.S. Equity-Dev. 22% 22.0% 0% 17-27%Non-U S Equity-Emerg 4% 4 0% 0% 2-6%

Global Equity 2% 2.0% 0% 0-5%Core Fixed Income 9% 8.0% 1% 5-11%High Yield Bond 3% 3.0% 0% 0-6%Non-U.S. Fixed Income 2% 2.5% 0% 0-6%Emerging Market Debt 3% 3.0% 0% 0-6%TIPS 4% 4 0% 0% 1 7%

Non-U.S. Equity-Emerg. 4% 4.0% 0% 2-6%Global Equity 2% 2.0% 0% 1-3%Core Fixed Income 12% 12.0% 0% 9-15%High Yield Bond 3% 2.5% 0% 1.5-3.5%Emgerging Market Debt 2% 2.5% 0% 1.5-3.5%TIPS 7% 8.0% -1% 6-10% TIPS 4% 4.0% 0% 1-7%

Private Equity 6% 7.0% -1% 4-10%Absolute Return 25% 23.5% 1% 20-26% Real Estate 3% 5.0% -2% 2-8% Liquidity Portfolio 1% 0.0% 1% 0-10%

TIPS 7% 8.0% 1% 6 10%Private Equity 6% 6.0% 0% 3-9%Absolute Return 6% 5.0% 1% 0-10%Real Estate 2% 4.0% -2% 1-7%Liquidity Portfolio 1% 0.0% 1% 0-10%



Performance Attribution: UCRP Fiscal Year to Date

77 90

UCRP Attribution for 6 months ending 12/31/09

Trends for Fiscal Year to Date were similar to December Quarter

38

77

304050607080

Total impact

8 9 4

(0)

3 5 0

(1)

-

12 2

(3)-100

1020

US E

q

-US

Eq

EM E

q

ob.l

Eq

ate

Eq

Bond

s

Y D

ebt

M D

ebt

$ D

ebt

TIPS

eal E

st.

bs R

et

Ca

sh

Tota

l

Non

-

Glo

Priv

a

Cor

e HY EM

Non

$

Re A

Values in basis points US Eq

Non-US Eq

EM EqGlob.l

EqPriv ate

EqCore Bonds

HY Debt

EM Debt

Non$ Debt

TIPSReal Est.

Abs Ret Cash Total

(bp)Eq Eq Eq Bonds Debt Debt Debt Est.

Allocation 5 (2) (0) (1) 3 (6) 1 1 - 11 48 (5) (3) 50 Selection 3 11 4 0 - 12 (1) (2) - 1 (10) 8 - 27 Total impact 8 9 4 (0) 3 5 0 (1) - 12 38 2 (3) 77



Performance Attribution: GEP Fiscal Year to Date

100GEP Attribution for 6 months ending 12/31/09

Trends for Fiscal Year to Date were similar to December Quarter

4 15

4 2 0 3

28

49

76

20

40

60

80 Total impact

4

(2) (4)

2

(5) (1)

0 3

(18)-40

-20

0

US E

q

US E

q

M E

q

b.l

Eq

te E

q

Bond

s

Deb

t

Deb

t

Deb

t

TIPS

al E

st.

bs R

et

Ca

sh

Tota

l

U

Non

-U E

Glo

b

Priv

a

Cor

e B

HY

EM

Non

$

Rea

Ab

US EqNon-US

EqEM Eq

Glob.l Eq

Priv ate Eq

Core Bonds

HY Debt

EM Debt

Non$ Debt

TIPSReal Est

Abs Ret Cash TotalEq Eq Eq Bonds Debt Debt Debt Est.

Allocation 3 5 (0) (2) (4) (6) (2) 1 1 2 44 6 (18) 29 Selection 1 11 4 0 - 8 (3) (2) (0) 1 (16) 44 - 47 Total impact 4 15 4 (2) (4) 2 (5) (1) 0 3 28 49 (18) 76



Portfolio Risk: UCRP and GEP

Aggregate fund and benchmark volatility continued to decline in Q4

As a result, active factor risk and active residual risk (manager specific) also declined

UCRP Risk Measures

1.00

1.25

1.50

1.75Active Resid RiskActive Factor RiskBetaTotal Active Risk

UCRP Risk Measures

10 5

11.011.5

12.0

12.5

UCRP Total RiskPolicy Benchmark Risk

-

0.25

0.50

0.75

.00

Dec-0

4Ma

r-05

Jun-05

Sep-05

Dec-0

5Ma

r-06

Jun-06

Sep-06

Dec-0

6Ma

r-07

Jun-07

Sep-07

Dec-0

7Ma

r-08

Jun-08

Sep-08

Dec-0

8Ma

r-09

Jun-09

Sep-09

Dec-0

98.0

8.5

9.09.5

10.0

10.5

Dec-0

4Ma

r-05

un-05

Sep-05

Dec-0

5Ma

r-06

un-06

Sep-06

Dec-0

6Ma

r-07

un-07

Sep-07

Dec-0

7Ma

r-08

un-08

Sep-08

Dec-0

8Ma

r-09

un-09

Sep-09

Dec-0

9

D M Ju S D M Ju S D M Ju S D M Ju S D M Ju S DGEP Risk Measures

1.75

2.00

2.25Active Resid RiskActive Factor RiskBetaT l A i Ri k

GEP Risk Measures

9 09.5

10.010.5

GEP Total RiskPolicy Benchmark Risk

0.25

0.500.751.001.25

1.50-04

-05

-05

-05

-05

-06

-06

-06

-06

-07

-07

-07

-07

-08

-08

-08

-08

-09

-09

-09

-09

Total Active Risk

6.06.57.07.58.08.59.0

-04

-05

-05

-05

-05

-06

-06

-06

-06

-07

-07

-07

-07

-08

-08

-08

-08

-09

-09

-09

-09



Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Mar-

Jun-

Sep-

Dec-

Contribution to Risk: UCRP

US and Developed Equity contributed over 70% of Total Risk.

• Over 80% of Active Risk contributed by:

• Real Estate underweight• Real Estate underweight

• Absolute Return overweight

UCRP F t C t ib t S t ti Ri k t D 09UCRP Forecast Contrib. to Systematic Risk at Dec 09

30

40

50

t

0

10

20

Perc

ent

-10

0

USEquity

Int'lDev.

Equity

EmgMkt

Equity

GlobalEquity

USFixedInc.

USHighYield

EmgMktDebt

TIPS Cash PrivateRE

PrivateEquity

HedgeFunds

Contrib to Total Risk Contrib to Active Risk



Contrib. to Total Risk Contrib. to Active Risk

Contribution to Risk: GEP

US Equity, Developed Equity, and Absolute Return contributed over 75% of Total Risk

• Almost 90% of Active Risk contributed by:

• Real Estate and Private Equity underweight

• Absolute Return Overweight

GEP Forecast Contrib. to Systematic Risk at Dec 09

30

40

50

-

10

20

30

Perc

ent

(10)US

EquityInt'l

Dev.Equity

EmgMkt

Equity

GlobalEquity

USFixedInc.

USHighYield

Int'lFixedInc.

EmgMktDebt

TIPS CashPrivateRE

PrivateEquity

HedgeFunds

Contrib to Total Risk Contrib to Active Risk



Contrib. to Total Risk Contrib. to Active Risk

UCRP Peer Comparison – TUCS Universe

Trust Universe Comparison ServicePerformance Comparison

Total Return of Master Trusts > $1BCumulative Periods Ending: December 31, 2009

Percentile Rankings 3 Month Fiscal Year Cal. Year5th 4.53 18.89 26.4025th 3.83 16.23 22.0625 3.83 16.23 22.0650th 3.43 14.71 18.5175th 2.58 13.10 14.6495th 0.74 6.90 6.86

No. of Obs 177 177 175

U UCRP Total 3 82 (26) 16 72 (19) 23 26 (20)



U UCRP Total 3.82 (26) 16.72 (19) 23.26 (20)

GEP Peer Comparison – Cambridge

GEP Peer Comparison - CambridgePerformance Comparison

Cumulative Periods Ending: June 30 and September 30, 2009

5th 12.05 -16.06 3.022 th 0 0 8 99 0

Percentile Rankings Quarter Ended 6/30/09 Fiscal Year Ended 6/30/09 1 Year Ended 9/30/09*

25th 10.07 -18.99 -0.7750th 7.79 -20.57 -3.7775th 6.34 -23.48 -6.7695th 4.07 -26.54 -10.67

GEP Total 10.65 -17.74 0.63

* Preliminary



* Preliminary

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