Jagdeep Bachher, the University of California chief investment officer, had a glowingly painted image of himself: an investment genius running a well-oiled financial machine.
Lately, though, the image has been muddied: an investment genius who allegedly abuses his power and mistreats his staff – and happens to run a financial machine.
The jury is still out on whether that machine is well-oiled.
An article published in the Institutional Investor early in September detailed multiple allegations from staffers at the UC investment office of mismanagement by Bachher. The list of charges is long: Employees in the office claim Bachher made staffers carry out personal errands such as grocery shopping, ignored advice and concerns from other investment officers and used an employee’s green card application as leverage.
Not exactly what you would expect from a darling investment genius.
The UC Board of Regents is evidently concerned about these allegations. The damning claims could, among other things, reduce financial officers’ confidence in the UC administrators to lead them correctly. The Regents held a closed-door meeting to discuss issues within the investment office last week – and have since not commented on what decisions, if any, were made in that meeting.
As valuable as Bachher is to the UC’s investment operation, the regents must establish some form of oversight over the investment office and take preventive steps against future abuses of power. If the allegations against Bachher are proven true, it doesn’t matter how lucrative the University’s investment portfolio is – the employee mistreatment will have been on the Regents’ head.
That’s especially true given that the Regents appear reluctant to take action against Bachher. UC Regent Richard Sherman circulated a letter to UC Foundation officials after the Institutional Investor’s piece, calling the article “inaccurate” and claiming his conversations with employees had given him a favorable impression of the office culture.
Yet an employee almost immediately leaked the letter to the Institutional Investor. Sources close to the office also said Sherman’s conversation with employees took place with Bachher nearby. The fact that the internal letter was leaked means that there are deep-rooted issues that the regents must address.
And underplaying the office’s issues won’t make them go away. The Institutional Investor’s initial investigation of Bachher came amid a wave of departures from his office. Tom Fischer, an investment officer who quit the office in July, said he expected more departures from the office. Three senior investment staffers told the Institutional Investor they were seriously considering exiting, with one investor claiming that the only ones remaining at the office were those who couldn’t leave.
Most of these departures center around allegations that Bachher minimized the responsibilities of other staffers and misled them about the expectations of the job. There were also particular allegations that Bachher and Arthur Guimaraes, a close associate of Bachher, used staff for personal purposes. For example, one staffer said Guimaraes had a data and analytics director drive his family to and from the airport when they go on vacation.
Such incidents are clear-cut violations of UC policy, which prohibits use of university staff for personal purposes. However, the structure of the investment office gives Bachher near total impunity – one that he and his colleagues allegedly exploited.
These are claims the Regents must thoroughly investigate the investment office’s culture through collecting anonymous testimonials from staffers – ones not tampered by the CIO’s presence.
And yes, Bachher’s performance has been stellar. He’s slimmed down the UC’s investment operation by removing external money managers and decreasing the amount of public equity in the UC’s investments. The UC’s endowment and pension funds have consequently bested expectations for three years in a row.
But if the Regents continue to turn a blind eye to the internal operations of the investment office, more departures could potentially derail the UC’s investment bull run.
One employee anonymously remarked to the Institutional Investor that although the market knows who Bachher is, “We all have to wait for the Regents to realize it.”
And the Regents need to realize that as soon as possible.