A Note about UC's Core Funds in this Current Turbulent Market
Recent credit market and insurance market conditions have raised
concerns about investments, including those within the UC Core Funds.
The Treasurer’s Office, which oversees the UC Core Funds, continues to
monitor these funds and notes the following:
The UC ICC Fund does not own insurance company contracts with AIG.
The Office continues to feel that the Fund is currently protected, as only
financially strong institutions are selected and are actively monitored.
Like many other institutional investors in the U.S. and abroad, the
University’s UC Savings Fund has investments in Fannie Mae senior
debentures. These bonds have traditionally offered the advantages of a
AAA rating, very good liquidity, and a material yield advantage over
comparable maturity U.S. Treasuries. Despite the turmoil in
the financial markets, the senior debentures in the Savings Fund have
maintained their value, and the Office of the Treasurer is highly confident
that they will continue to do so.
Due to ongoing stress in the housing and mortgage markets, the U.S.
Treasury and the Federal Housing Finance Agency (FHFA) announced on
September 7, 2008, a four-part plan to support the debt and primary
mission of the Government-Sponsored Enterprises (GSEs). The main
feature of this plan is that the FHFA would take over as conservator of
Fannie Mae and Freddie Mac. The purpose of this move is to:
o Preserve the companies’ assets
o Place them in a sound and solvent condition
o Insure that their business is conducted without interruption
In effect, as stated by the FHFA, this is a strong backing for their senior,
subordinated, and Mortgage-backed Securities debt.
The Treasurer's Office supports the efforts of the U.S. Treasury and the
Federal Reserve to calm the mortgage market and continues to believe
that holding GSE debt—and the UC Savings Fund’s policies and
strategies—are appropriate, given the Fund’s objectives.