Introduction

UC Investments oversees the University of California's investment portfolio, including its endowment, pension, retirement savings plan, and working capital, totaling $125 billion AUM. The portfolio spans both private and public assets, with a glide path to grow the proportion invested in alternatives, spanning 10 university campuses, five medical centers, three national labs, an endowment serving 280,000 students, a pension plan with 241,450 members, and a retirement savings plan with 320,000 individuals.

Rapid transformation within a large institutional investor is complex and some believe unattainable. Two organizations came together to prove otherwise.

The Challenge:  Fragmented Data, Legacy Infrastructure, and No Single Source of Truth  

Despite its scale, UC Investments faced the same operational pain that afflicts institutional investors across the industry: no single, standard data source across asset classes. The team was continuously faced with poor data quality from third-party systems and spreadsheets that lacked standardization within and across asset classes, resulting in a constant effort to modify and shuffle data from one application to another.

The starting point for most data requests was custody system data, which had proven insufficient for investment decision-making. Siloed, manual processes meant there was no holistic view across investments, operations, and risk. The last data "spring cleaning" had been in 2002. A previous technology overhaul at a large Canadian pension had yielded an expensive, nearly three-year implementation with limited access to data useful to investment decision-makers.

UC Investments set out to address this with three clear goals: create a data platform for all private assets rolling up to a total fund view; streamline communication across departments from front to back office; and overhaul a legacy technology infrastructure that was costly and insufficient.

Building the Business Case

They concluded that a single, consolidated, reconciled, and transparent dataset was needed, with the ability to pull data as easily as they could push it into the system. Five core needs drove the business case: a single source of truth for core data across the accounting and investment books of record; the ability to support all personas across asset classes and board level; trusted risk assessments; an efficient way to manage multiple pools of capital; and overcoming poor historical data dating back to 2002. 

The Journey to the Right Technology

The technology evaluation began in early 2017. The UC team scoured the investment management landscape for systems both legacy and modern, including eFront, Addepar, SimCorp, Eagle, custodial systems, BlackRock Aladdin, FactSet, and many others.

What became abundantly clear was that virtually every system fell into one of three categories: service providers with a technology layer, relying on outdated technologies bolted together per asset class; accounting systems requiring multi-million-dollar budgets and massive IT forces with limited flexibility; and performance systems that were asset class-specific point solutions rarely considering holistic portfolio outcomes, overall risk, or cohesive reporting.

None created shared ownership or cross-organizational consistency. The UC team searched further, looking to a new category of investment technology: emerging leaders in multi-asset class portfolio management with lighter-weight platform footprints, modern cloud platforms, and flexible software architectures.

One quickly rose to the top of the selection process: Solovis.

Solovis emerged to the top for its depth of functionality across all asset types with private and public assets on one platform; true IBOR capability with direct performance calculations more accurate than those supplied by incumbent custodial and risk systems; on-demand portfolio analysis tools from any angle; an analyst services team that could serve as an extension of UC's data operations team; and an attitude of true partnership. 

A $125 Billion Transformation in One Year 

In just over one year, UC Investments implemented an accurate accounting book of record and a near real-time investment book of record across all pools of capital, asset classes, and stakeholders, including a complex data implementation and transformation of its risk system. Solovis became the core of the platform, with its open APIs enabling easy communication with other elements of the ecosystem.

The transformation required alignment at every level of the organization. The internal team signed off on a charter led by the entire leadership team, including asset class heads and functional heads. A formal steering committee process held both organizations accountable, with asset class heads and executive leadership meeting every two weeks, then monthly, then every two months. Minutes were taken and sent to all parties for approval.

The simplest asset class with the shortest history went live first, demonstrating value immediately and building organizational confidence and momentum from the start.

 What's Next

UC Investments has proven that even a $125 billion pension fund can transform quickly, within one year, when provided with the right technology framework and a unified commitment to change. The UC Investment Office is an early adopter of a holistic approach to technology, one that will reap tremendous return on investment for years to come.

True innovation and a break from the status quo are paramount to being successful investors. UC Investments knew software was a core piece of what they needed to be successful. They also knew from past experience that an agile, collaborative, and process-oriented approach would reap the most benefits.