Retirement Savings - UCOP

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSRetirement SavingsMarch 31, 2020U C IINVESTMENTSNVESTMENTSUC

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSUC Investments Way1

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSUC Retirement System 88 Billion in Assets as of March 31, 2020Pension & Retirement Savings Assets 1963 – 2020 MillionRetirement SavingsPensionAs of 3/31/2020PensionRetirement Savings2

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSSeptember 30, 2019 126.6 BUC Retirement Savings2nd largest public DC plan in the US with 23.6 Billion in AssetsR E T I R E ME N T SAV I N G S OV E RVI E W Established in 1967 Over 320,000 participants 3 Plans: 403(b), 457(b), DC Plan Largest 403(b) plan in the US Target Date Fund (Pathway) default since 2014 9.1 billion in Target Date Funds 23.6 BILLION ACROSS 3 PLANS 23.6BTax Deferred 403(b) Plan: 16.5B71%457(b) Deferred Compensation Plan: 2.9B11%Defined Contribution Plan: 4.3B18%3

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSUC Retirement Savings 23.6 Billion in Assets as of March 31, 2020UCRSP ASSETS 1967 – 20206 YEAR EVOLUTION2020Move 4 fixed income funds to passive2019Launch of Pathway 2065 Million20183rd Party manager for Pathway2017White labeled FundsMoved to Institutional Vehicles2015Reduced funds from 64 to 162014Pathway becomes DefaultAs of 3/31/20204

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSRetirement Savings over 6 Years2014 - 2020 Recruited strong team at UC Investments to manage Retirement Savings Program In 2013 -- 242 funds (just before CIO Jagdeep Singh Bachher’s arrival) In 2020 -- 13 funds (less is more) Target Date Funds become default choice replacing the Savings Fund in 2014 In 2020 -- 9.1 Billion in Target Date Funds versus 2.5 billion in 2014 Improved Target Date Fund asset allocation which helped participants overall performance Increased passive implementation to 75% from 38% in 2014 Reduced operational complexity for UC Investments Reduced management fees by 65% (14 bps to 5 bps), saving 65 million in fees for participants over 6 years Over the next decade, participants will save another 150 million in fees Significantly increased direct communication of UC Investments with participants Significantly deepened collaboration and engagement with internal and external stakeholders Retirement Savings Program 3.0: Innovation around guaranteed income5

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSCosts Matter – Saved Participants 65 Million over 6 YearsAssets( Billion)As of 3/31/2020Number of FundsManagement Fees( Million)Management Fees(Basis Points)2014 18.774 26.2142015 18.974 25.9142016 18.916 18.2102017 20.915 20.8102018 22.613 13.062019 25.613 12.852020 23.613 11.056

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSTarget Date Funds become default in 2014Replacing the Savings Fund Billion2014201520162017201820192020Target Date Funds(Pathway) 2.5 2.6 5.3 6.1 8.8 9.4 9.1Savings Fund 3.8 4.4 4.2 4.2 4.0 4.0 4.0Total 6.3 7.0 9.5 10.3 12.8 13.4 13.17

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSImproved Asset Allocation helped participants’ performance8

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSActive and Passive Funds - 2020Active Funds (Cost)Passive Funds (Cost)Blend (Cost)UC Bond: (0.03%)UC Domestic Equity: (0.005%)UC Pathway Funds: (0.05%)UC Long Bond: (0.03%)UC International Equity: (0.01%)UC TIPS: (0.03%)UC Real Estate: (0.01%)UC Short TIPS: (0.03%)UC Small Cap Equity: (0.01%)UC Savings: (0.03%)UC Social Equity: (0.01%)UC High Yield: (0.32%)UC Emerging Markets: (0.25%)UC Growth Company: (0.35%)UC Diversified International: (0.48%)Total Assets: 9.6 billionTotal Assets: 14.0 billion9

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSActive and Passive Funds - 2021Active Funds (Cost)Passive Funds (Cost)Blend (Cost)UC Savings: (0.03%)UC Bond: (0.01%)UC Pathway Funds (0.05%)UC High Yield: (0.32%)UC Long Bond: (0.01%)UC Growth Company: (0.35%)UC TIPS: (0.01%)UC Diversified International: (0.48%)UC Short TIPS: (0.01%)UC Emerging Markets: (0.01%)UC Domestic Equity: (0.005%)UC International Equity: (0.01%)UC Real Estate: (0.01%)UC Small Cap Equity: (0.01%)UC Social Equity: (0.01%)Total Assets: 6.1 billionTotal Assets: 17.5 billion10

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSFocus on Asset Allocation through Passive tal100%100%100%100%100%100%100%100%11

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTS“We flattened the selling curve”Through proactive participant communication and monitoringEducational resources on how to handle market volatility CIO Video encouraging to stay the courseArticle “Stay the Course: How to handle market volatility” on our participant websiteAlert on netbenefits.com the participant trading platformLive webinars with CIO Discussed the market performance, drivers, best course of action and resources to helpOver 3,500 participants attended (live in 2 calls on March 20, 2020)Replay of webinar posted on our participant websiteWebinar was rerun 4 times in AprilDaily monitoring of Savings Program trading activityMonitoring of participant call volume to Fidelity12

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSParticipant Trading Activity during 2020 market volatility 340 million of equity sales13

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSInvestment Options at a GlanceTARGET DATE FUNDS - 9.1 billionUC Pathway FundsUC Pathway Income FundUC Pathway Fund 2020UC Pathway Fund 2025UC Pathway Fund 2035UC Pathway Fund 2040UC Pathway Fund 2045UC Pathway Fund 2030UC Pathway Fund 2050UC Pathway Fund 2055UC Pathway Fund 2060UC Pathway Fund 2065CORE FUNDS - 12.9 billionBond and Stock InvestmentsBond InvestmentsDomestic StockForeign StockShort-TermLarge CapDeveloped MarketsUC Savings FundUC Growth Company FundUC International Equity Index FundUC Diversified International FundIntermediate-TermSmall CapUC Bond FundInflation-ProtectedUC Short Term TIPS FundUC TIPS FundUC Domestic Small Cap Equity FundBroad CapUC Domestic Equity Index FundEmerging MarketsUC Emerging Markets Equity FundSpecialty StockUC Real Estate FundUC Social Equity FundBROKERAGE WINDOW - 1.6 billionFidelity BROKERAGELINK 14

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSCore Lineup Assets - DetailCORE FUNDS - 12.9 BillionBond and Stock InvestmentsBond Investments - 5,800Domestic Stock - 5,520Foreign/Global Stock - 1,022Short-TermLarge CapDeveloped MarketsUC Savings Fund - 4,068UC Growth Company Fund - 939UC International Equity Index Fund - 749UC Diversified International Fund - 116Intermediate-TermSmall CapUC Bond Fund - 1,391Inflation-ProtectedUC Short Term TIPS Fund - 68UC TIPS Fund - 273UC Domestic Small Cap Equity Fund - 349Emerging MarketsBroad CapUC Domestic Equity Index Fund - 4,232Specialty Stock - 572UC Emerging Markets Equity Fund - 157UC Real Estate Fund - 192UC Social Equity Fund - 38015

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSPathway our Target Date FundsLongShortTime HorizonPathway 2065Pathway Key FeaturesPathway 2060Pathway 2055Pathway 2050 An equity landing point of 35% with static allocations at andthrough retirementPathway 2045 Focus on diversification with broad asset class exposuresPathway 2040 Utilizes a strategic glidepath to help mitigate the risks associatedwith market timingPathway 2035Key Benefits for ParticipantsU.S. Large Cap EquityU.S. Small/Mid Cap EquityPathway 2030International EquityEmerging Market EquityReal Estate/Commodities Constructed to navigate the major sources of uncertaintyparticipants facePathway 2025U.S. Bonds/Short TermU.S. TIPSd Seeks to reduce volatility in an effort to keep participants saving andinvesting across market cyclesPathway 2020 Continuous research to anticipate, assess and adapt ahead of evolvingconditions to help meet participant needs now and in the futurePathway IncomeHigherInvestment RiskLower16

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSPathway focuses on the savings phaseRisks AddressedRisks RemainingAccumulationRiskLongevity RiskSequencing RiskRetirement Income Decision RiskInflation Risk17

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSPathway EvolutionImbed a guaranteed income streamSpend SavingsTargetDate Fund remains the defaultBuild SavingsPurchase DeferredAnnuity at Age 62Payments start at Age 78Purchase will only be an optionAge 20627818

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSPathway Performance - Quarter and 1 YearQ1 2020 performance relative to policy benchmarksNet of fee returns 2055Pathway2060Pathway2065Fund .86-18.86-18.86-18.71Policy Benchmark .68-18.68-18.68-18.68Value -0.18-0.03One year performance relative to policy benchmarksNet of fee returns (%) - thway2050Pathway2055Pathway2060Pathway2065Fund 6-9.06n/aPolicy Benchmark 7-8.77n/aValue -0.29n/a19

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSPathway Performance – 3 Year and 5 YearThree year performance relative to policy benchmarksNet of fee returns 2055Pathway2060Pathway2065Fund olicy Benchmark alue -0.22n/aThree year performance relative to policy benchmarksNet of fee returns 2055Pathway2060Pathway2065Fund olicy Benchmark alue .02n/a20

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSCore Funds PerformanceAnnualized Total Return (%)US Large EquityUC Domestic Equity Index FundRussell 3000 TF IndexMarket Value( M)Weight(%)QTD3 Months1 Year3 Year5 Year6 Year10 Year 0.175.945.780.166.996.850.1410.2610.130.13 17.207.26-0.068.438.50-0.0711.0711.18-0.11 2.280.400.720.530.400.390.40Value AddedUC Social Index FundSpliced Social IndexValue AddedUS Small/Mid Cap EquityUC Domestic Small Cap Index FundSmall Cap Spliced IndexValue AddedGlobal/World ex-US EquityUC International Equity Index FundMSCI World ex-US TF IndexValue Added 7493.17%21

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSCore Funds PerformanceAnnualized Total Return (%)Capital PreservationMarket Value( M)UC Savings Fund 4,069Two-Year U.S. Treasury Notes Income ReturnValue AddedInflation SensitiveUC Short Term TIPS Fund 68Barclays 1-3 Year U.S. TIPS IndexValue AddedUC TIPS Fund 273Barclays US TIPS IndexValue AddedDiversified Fixed IncomeUC Bond Fund 1,391Barclays Aggregate Fixed Income BenchmarkValue AddedNew Large EquityUC Growth Company Fund 939Russell 3000 GrowthValue AddedWorld ex-US EquityUC Diversified Intl. Fund 116MSCI EAFEValue AddedUC Emerging Markets Fund 157MSCI Emerging Markets IndexValue AddedReal EstateUC Real Estate Fund 192REIT Spliced IndexValue AddedWeight(%)QTD3 Months1 Year3 Year5 Year6 Year10 .013.02-0.017.227.25-0.0322

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSTarget Date Funds PerformanceAnnualized Total Return (%)Target Date FundsUC Pathway Income FundMarket Value( M)Weight(%)QTD3 Months1 Year3 Year5 Year6 Year10 Year 2.402.812.54-0.30-0.30-0.130.050.100.27Policy BenchmarkValue AddedUC Pathway Fund 2020 -0.182.982.960.023.263.200.064.053.960.09 -0.213.023.03-0.013.393.370.024.344.250.09 -0.203.163.17-0.013.573.550.024.604.540.06 9604.06%Policy 73.574.804.73Value Added-0.22-0.38-0.22-0.020.000.07Policy BenchmarkValue AddedUC Pathway Fund 2025Policy BenchmarkValue AddedUC Pathway Fund 2030Policy BenchmarkValue AddedUC Pathway Fund 203523

U N I V E R S I T Y O F C AL I F O R N I AUC INVESTMENTSTarget Date Funds PerformanceAnnualized Total Return (%)Market Value( M)Weight(%)QTD3 Months1 Year3 Year5 Year6 Year10 Year .232.993.03-0.043.563.57-0.015.014.960.05 .242.902.94-0.043.533.55-0.025.255.170.08 .243.013.06-0.053.663.68-0.025.555.480.07UC Pathway Fund 2055Policy BenchmarkValue Added .223.143.15-0.013.783.770.015.865.760.10UC Pathway Fund 2060Policy Benchmark .223.133.15-0.023.783.780.006.116.010.10 20.01%-18.71-18.68-0.03-----Target Date FundsUC Pathway Fund 2040Policy BenchmarkValue AddedUC Pathway Fund 2045Policy BenchmarkValue AddedUC Pathway Fund 2050Policy BenchmarkValue AddedValue AddedUC Pathway Fund 2065Policy BenchmarkValue Added24

TARGET DATE FUNDS - 9.1 billion UC Pathway Funds UC Pathway Income Fund UC Pathway Fund 2020 UC Pathway Fund 2025 UC Pathway Fund 2030 UC Pathway Fund 2035 UC Pathway Fund 2040 UC Pathway Fund 2045 UC Pathway Fund 2050 UC Pathway Fund 2055 UC Pathway Fund 2060 UC Pathway Fund 2065 CORE FUNDS - 12.9 billion Bond and Stock Investments Bond .