00:00Seven years ago, the head of investments at the University of California system
00:04made a bet so simple that it's almost unexpected for the manager of $200 billion.
00:12While elite schools over time have poured billions of dollars into private equity,
00:18venture capital, hedge funds, the opaque high-fee stuff,
00:22UC's chief investment officer Jagdeep Singh Butcher did something quietly revolutionary
00:28with a small piece of the fund.
00:30He skipped the fancy strategies, invested in simple index funds,
00:36old school stocks and bonds, almost no fees, fully liquid and transparent.
00:42Butcher started with just a few hundred million in seed capital.
00:45During the pandemic, the money was fully liquidated to help schools pay for unexpected expenses.
00:52Over time, the system of 10 campuses, including UCLA and Berkeley,
00:57added more money, committing $5 billion.
01:01And the payoff?
01:02It worked extremely well.
01:05UC's plain vanilla, golden blue fund, named after the university's colors,
01:11has ballooned to about $8 billion,
01:14making it one of the largest standalone endowments in U.S. higher education.
01:19And in the last three years, it crushed the returns of some of the Ivy League giants, particularly Yale.
01:27Yale's investment office pioneered the model that dominated endowment strategy for decades
01:34and brought billions to schools that enabled them to create ambitious programs.
01:39Yale still leads the Ivy League in 20-year annualized performance.
01:44That Yale model, locking up cash for years in private funds, once generated huge returns.
01:52But today, it's under pressure because of fewer exits of public companies.
01:57Some of the universities that had the most success with the model suddenly have short-term means.
02:03Hundreds of millions of dollars owed annually in new endowment taxes
02:08and political fights in Washington threatening federal research funding.
02:12So now, even the big names, including Yale, have sold stakes in private equity.
02:18Meanwhile, schools that kept it simple, even those with endowments under $50 million,
02:24are outperforming the wealthy elites in the short term.
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