University of California Chief Investment Officer Jagdeep Singh Bachher put out a call to action among allocators to ask the largest investment managers and U.S. Treasury Secretary Scott Bessent to help universities.
“The government is saying they’re going to tax endowments, and they’re going to cut our funding, yet organizations … like pension plans and endowments are writing checks to Wall Street firms” that are supporting the administration, he said during a March 18 investment committee meeting. “I mean, we’ve got their ear. We’ve got their attention.”
Just two months into the second Trump administration, U.S. universities have been hit with bills to hike taxes on their endowments, threats to cut funding for research and operations, and uncertainty regarding the future of the Department of Education.
For those in the higher education space like Bachher, he said he hopes “that we get through some of this chaos. But the reality is it is not a place we all want to be,” he told attendees of the meeting.
As some higher education institutions speak up on politics and current events, for the sake of the endowments, “we have to advocate for it,” Bachher said.
As for the uncertainty for the markets over the next four years, “it’s not like we were used to President 45,” Bachher noted. “We just forgot how chaotic President 45 can be. We’re getting a good taste of that right now. This is a strange time, I get it. It’s uncomfortable.”
During his first term, President Donald Trump signed the Tax Cuts and Jobs Act, which imposed a 1.4% endowment tax for institutions with more than 500 students, and endowments exceeding $500,000 per student. Several bills have been introduced in Congress, including one on Jan. 15 by Rep. Troy Nehls, R-Texas, that proposes raising the tax on “certain private university endowment profits” to 21%.
Another bill introduced on Feb. 7 by Rep. Mike Lawler, R-N.Y., proposed raising the tax to 10%, and lowering the per-student endowment threshold to $200,000.
Additionally, the Trump administration has threatened to cut federal grants for universities, colleges and nonprofit institutions.
For instance, for March 7, the Department of Justice, the Department of Health and Human Services, Department of Education and U.S. General Services Administration announced the cancellation of approximately $400 million in federal grants and contracts to Columbia University “due to the school’s continued inaction in the face of persistent harassment of Jewish students,” referring to student protests related to the ongoing conflict between Israel and the Palestinian militant group Hamas. A March 13 letter to interim president and co-chairs of the board of trustees at the Columbia University gave a March 20 deadline to comply with nine requests requests to resume the funding.
Returning a favor
On behalf of the 10 campuses and six medical centers in the University of California Board of Regents, its investment office had $184 billion in assets as of March 14. This includes $142.7 billion in pension and retirement savings, and $30.1 billion in its two endowment pools.
Baccher noted that the university has long-standing ties with the Treasury secretary.
Bessent previously served as the CIO of Soros Fund Management, the family office for George Soros, philanthropist and founder of the Open Society Foundations.
After Bessent left to start Key Square Capital Management in 2015, the University of California was one of the hedge fund’s anchor investors, Bachher noted. The university system has been invested in Bessent, so “he would be a key partner” next to Trump, the CIO added.
But aside from Bessent, Bachher noted that CEOs of several other firms such as BlackRock’s Larry Fink, Blackstone’s Stephen Schwarzman, and Apollo Global Management’s Marc Rowan all have access to Trump.
Bachher called on the executives “to please reach out to us if we can be helpful.”
To Bessent, the CIO called on him to “make sure you take care of the educational institutions in this university.”
After all, “if you’re the Treasury secretary and you became successful on the back of pension funds, endowments and universities, you should have some sweet spot for them in your life,” he added.
By leveraging their networks and connections, academic institutions can get the point across, Bachher said.
“If we just blindly keep supporting by writing checks to make that next fund allocation of whatever else because we say ‘we desperately need the returns,’ but we’re going to cut key institution,” he added. “As I was thinking about this, I think it’s a very powerful tool, but we can’t do it individually with maximum impact.”
While the system faces funding reductions from both the state and federal levels, University of California President Michael Drake noted in a March 19 statement that he has asked all locations to implement cost-saving measures, such as delaying maintenance and reducing business travel when possible. Additionally, he implemented a systemwide hiring freeze.
“Throughout our history as an institution and as a nation, we have weathered struggles and found new ways to show up for the people we serve,” Drake wrote. “We will address these challenges, together.”
