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Asset Owners

Fossil fuels to be history for UC investment office

At the University of California, fossil fuel investments are going to be, well, fossils.

Chief Investment Officer Jagdeep Singh Bachher, speaking at the March 13 investment subcommittee meeting in Los Angeles, said that in the long term, the $66.6 billion pension fund and $11.5 billion endowment are going to move out of fossil fuel investments.

"The traditional approach, not only with us but other investors, was the tendency to own oil and gas upstream assets," he said.

That's how oil and gas assets found a home in the pension plan and endowments' real assets portfolios, Mr. Bachher said. As of June 30, 2017, about 3% of UC's total public equity holdings were in fossil fuel investments. The pension plan had $38 billion in equities and the endowment, $5.2 billion, as of Dec. 31.

However, in the long-term "fossil fuels ... is a financial risk we do not want to take in the context of real assets. We will fundamentally reduce those holdings," he said.

Instead, the pension plans and endowments will invest in cash-flowing assets such as infrastructure including investment in transmission lines and utilities, he said.

"We can fill the gap with good assets if we are creative in what we buy," he noted. "It's not a project that is finished."