Berkeley Endowment

October 2, 2022
By AdmissionSight

Berkeley Endowment

What is the current Berkeley Endowment?  It is widely acknowledged that the University of California, Berkeley is one of the state educational institutions that hold the highest level of prestige in the United States. It was established in 1868 and is currently a part of the University of California System.

A vision of a university that would “give even more than California’s gold to the glory and happiness of advancing generations” was envisioned in the state constitution, which led to the establishment of the University of California, Berkeley.

The faculty at Berkeley has been awarded a total of 19 Nobel Prizes, most frequently in the fields of physics, chemistry, and economics. Recent winners include Saul Perlmutter, who was awarded the 2011 Nobel Prize in Physics for leading a team that discovered the accelerating expansion of the universe, which suggests the existence of a form of dark energy that comprises 75% of the universe; and George Akerlof, who was awarded the 2001 Prize in Economics for demonstrating how markets fail when buyers and sellers have access to different information. Both of these men were recognized for their contributions to their respective fields.

Since the establishment of the University of California in 1868, a public-private partnership has been in place at Cal, and throughout that time, it has gone through three distinct stages. Private contributions were the primary source of funding for the first half-century. The term “Builders of Berkeley” refers to the private citizens who contributed to the establishment and maintenance of the educational institution.

Phoebe Apperson Hearst, Jane Sather, and Charles Franklin Doe all have memorials on campus dedicated to their names. In addition to contributing financially to the initial construction of the university’s facilities, they also underwrote the institution’s operating expenses during the first three of its first ten years. During this time period, private sources accounted for an average of fifty percent of the total budget.

The following fifty years, beginning in 1919 and ending in 1968, were marked by assistance from the state: the state-funded 95% of Cal’s budget. (The fact that the majority of Cal’s alumni graduated during this time period has contributed to the widespread belief that the university continues to operate nearly completely on support from the state.) Nevertheless, a few prominent graduates had the impression that the current level of assistance from the state might not be maintained indefinitely.

Group of students talking in a room.

These individuals had the foresight to determine that the campus required the assistance of an external organization in order to advance its interests and promote its well-being. 1948 was the year that they established the California Alumni Foundation. In 1975, this entity was rebranded as the UC Berkeley Foundation and given the mandate to collect individual donations for the university.

Encourage private philanthropy, providing leadership, and serving as an advisory council and consistent source of assistance to Berkeley’s Chancellor and to the campus as a whole are some of the roles that the UC Berkeley Foundation plays to support and advance the University of California at Berkeley in order to ensure its place as a preeminent global institution. These roles are carried out by the UC Berkeley Foundation.

Teaching, research, and providing service to the community are all important parts of Berkeley’s mission, and the Berkeley endowment makes it possible for the university to continue fulfilling those missions.

How much is the Berkeley Endowment?

How much is the Berkeley Endowment? In the fiscal year 2020-21, the yearly return on investment for the UC Berkeley Foundation was 37.9%, while the return on investment for the UC Regents was 33.7%. As of the 30th of June in 2021, the total value of the endowment was 6.8 billion dollars. In the academic year 2020-21, the endowment contributed a total of $173 million in payouts to the university.

What is an Endowment?

What is an Endowment? A collection of assets that have been invested by a college or university to provide ongoing financial support for the institution’s educational and research endeavors is known as an endowment. It is a binding agreement between a donor and an institution that connects generations of the past, the present, and the future. These gifts also make it possible for an organization to make commitments that extend very far into the future, secure in the knowledge that the resources necessary to fulfill those commitments will continue to be accessible.

Young woman using a laptop in a library.

In reality, an institution’s endowment is made up of the combined contributions of hundreds or even thousands of individuals. Donors are able to convert their private funds to public purposes through the Berkeley Endowment, which provides them with the peace of mind that their gifts will continue to serve these goals for as long as the institution is in operation.

Gifts that are eligible for a campus matching program, in addition to monies from the Big Give contest, are typically matched within the same fiscal year that they were given. You will see a decreased payout and faster Berkeley endowment growth during partial payout reinvestment if you established a fund that is participating in the Graduate Fellowships Matching Program. This benefit will accrue to you if you formed the fund.

When a donation is made to establish the Berkeley endowment fund, the amount of time it takes for the initial funds to be distributed to campus might range anywhere from six months to seventeen months, depending on when in the fiscal year the gift is made. The subsequent distributions will be made four times per year for the Foundation and once per year for the Board of Regents.

A percentage of each gift is put toward supporting fundraising and engagement activities at the University of Berkeley. This component, known as philanthropic allocation, is essential to the institution as it seeks to sustain its expanding investment in fundraising efforts. This will not have much of an effect on the earnings from investments, the future growth of the capital, or the payouts.

Additionally, an endowment cost-recovery charge is withdrawn from the fund on an annual basis in order to recoup the money spent on managing the endowment. The cost of the Foundation’s endowment is recovered at a rate of 80 basis points, which is deducted from the returns on investments; the cost of the Regents’ endowment is recovered at a rate of 55 basis points, which is deducted from dividends.

The quantity of money that is distributed during a particular year is decided by the spending rules of the UC Berkeley Foundation and the UC Regents. Instead of being directly applied to each individual fund, the annual payout rates that are set for both the Foundation and the Regents are utilized to compute the total payment amount for each of the two pools. This is done rather than applying the same rate to each individual fund.

This sum was determined by taking the market value of the pools as of the 31st of March for the Foundation and the 31st of December for the Regents and averaging it across their history. The total payout for each pool is then divided among the several funds in accordance with the percentage of the pool that each fund represents as well as the amount of time during the year that each fund had money invested in the relevant pool. When the endowment is growing, the fund distribution rate for individual funds is lower than the announced payout rate since the computation incorporates both historical averages (of the pool) and the present valuations (of each fund).

What Investment Firm handles Berkeley Endowment?

What Investment Firm handles Berkeley Endowment? The University of California Regents and the UC Berkeley Foundation each receive a portion of the endowment. The Berkeley Endowment Management Company is responsible for managing the majority of the endowment funds that are invested through the Foundation. The Office of the Chief Investment Officer of the Regents is in charge of managing the funds that fall under the purview of the Regents. TIAA-Kaspick is responsible for the management of all new-term endowments that are invested through the Foundation.

Two people talking to a student for a letter of recommendation.

The investment of the Berkeley endowment that has been provided in support of the University of California, Berkeley is managed by the Berkeley Endowment Management Company (BEMCO), which is a nonprofit subsidiary of the UC Berkeley Foundation (the Foundation). The Foundation’s general endowment pool (GEP)1 reported results of 37.9 percent2 for the fiscal year that ended on June 30, 2021, with assets increasing to $2.92 billion.

The mission of BEMCO is to protect and increase the value of the endowment while at the same time continuing to offer yearly financial assistance to UC Berkeley’s students and faculty. They have a long-term time horizon, which enables them to develop tactics that are well-positioned to deliver on this purpose. Having an intergenerational perspective is vital to the success of this endeavor.

The fiscal year 2020-21 was one that will go down in history. While breakthroughs in vaccines offered promise and a route for an uneven economic recovery, the effects of COVID-19 continued to disrupt as an ongoing public health disaster. The level of economic activity rose after hitting a low point toward the conclusion of the fiscal year before. The stock markets raced ahead in anticipation of the economy’s reopening, generating very good performance as a result.

The success of the market appeared to be in contradiction with a more realistic assessment of the status of the globe, but it also indicated substantial innovation and expansion. Throughout it all, there has been a wide range of responses regarding the rollout and acceptance of vaccines in different nations and communities; geopolitical tensions have increased; central bank-induced low rates and liquidity have persisted, and the economic recovery has been quite different depending on the circumstances and the society.

Three students using a laptop in a table.

Despite having strong exposure to conservative fixed income and cash, absolute return, and other sectors in a diversified portfolio, BEMCO’s fiscal year-end results of 37.9 percent kept pace with established equity markets. This was accomplished despite the company having a varied portfolio. Returns over a longer period of time, on the other hand, are more important for investing in endowments. BEMCO has reported an annualized return of 9 percent over a 10-year period, and an annualized return of 13.9 percent over a 3-year period.

In addition, the Office of the Chief Investment Officer of the Regents is responsible for the management of a portion of the endowment held by the University of California at Berkeley, as well as portions of the endowments held by other University of California campuses, the retirement pool of the UC System, short-term investment pools, and cash assets. As of the 30th of June in 2021, the entire assets under the Office’s management had a value of $168 billion. Out of this total, $19 billion is invested as an endowment for the campuses of the University of California, of which Berkeley gets $3.9 billion.

The total value of the UC Regents’ investments rose by $38 billion in comparison to the previous year. This meteoric rise can be attributed to a number of different circumstances, including the federal stimulus package intended to combat the COVID-19 outbreak. Nevertheless, the one thing that remained the same was the Office’s capacity to implement rigorous long-term investment strategies in a consistent manner while working fluidly inside a virtual work environment. To our good fortune, the work that has been done over the course of the past six years to streamline and improve the Office’s efficiency has further assisted in navigating the markets during this historic year.

Where is Berkeley Endowment Invested?

Where is Berkeley Endowment Invested? During the fiscal year 2021, BEMCO made tremendous headway in moving its strategies forward. Because asset allocation plays such a crucial role in determining performance results, the team bases their decisions on the strategic aims they’ve established for themselves.

In 2018, BEMCO made a number of strategic adjustments, including shifting its focus to accept greater illiquidity and a higher risk-adjusted return. This was accomplished, among other things, by increasing their commitment to private alternatives and investing in emerging countries. BEMCO is certain that this will, over the course of time, create high returns and a risk-return profile that is in accordance with UC Berkeley’s institutional risk tolerance. This will, in turn, give the campus more support and reduce the chances of long-term capital impairment.

Students listening intently in a classroom.

This year, BEMCO was particularly active in the process of cultivating new relationships. Investment due diligence was carried out across a very large number of prospects, which eventually led to a number of different investment activities. On the private side, a significant portion of the commitment activity that took place this year will have an influence on the portfolio years down the road, which is in line with the long-term strategy and investment horizon.

It is heartening to see positive results so early on in the implementation of decisions made over the past few years. The group is delighted with the way the structure of the portfolio is taking shape and believes that they have made substantial headway in the process of reconstructing their private investment program.

BEMCO made a conscious decision to reduce its exposure to developed stock and fixed income while simultaneously increasing its exposure to private equity (including venture capital), developing markets, and certain unique situations. Although the absolute return was lower as a result of the excellent relative performance elsewhere, the team is nonetheless intent on keeping this exposure at or near the strategic targets they have set. A portfolio consisting of natural resources is considered to be illiquid and is currently experiencing a multi-year runoff.

Managing liquidity and maintaining readily available capital that is not vulnerable to drawdowns from the market are two challenges that BEMCO must overcome. It is necessary to have liquidity in order to meet investment obligations and maintain the campus. Above and above this, BEMCO seeks liquidity in order to play offensive during drawdowns in market conditions.

However, in the current market, liquidity in the form of cash and low-risk fixed income earns very little, which creates a headwind for attaining return objectives if BEMCO retains considerable exposure in this area. The team has not lost sight of the fact that striking a healthy balance between competing priorities is essential to achieving successful outcomes in the future.

BEMCO is continuing to strike a balance between areas of opportunity and short-term obstacles. The areas of quality, secular growth, innovation, and unique catalyst-driven or deep value situations are given a lot of weight when discussing equity investments. The team will keep rotating into private markets and will carefully manage but welcome its exposure in Asian markets.

It is essential to keep in mind the low-interest rates, high valuations, inflation and dangers from rising rates, geopolitical concerns, and the prospect of an environment with low returns over the next few years. With this information in mind, the BEMCO team has complete faith in its endowment management plan as well as the many high-quality individuals and organizations that they have collaborated with in order to manage the Berkeley endowment.

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