But one particular reason all of this matters so much is that the greatest loss of revenue to the UC was not, in fact, from state budget cuts, but from investment losses (though the privatization of the university was well on its way even before the financial crisis). And as Peter Byrne shows in his massive series, the UC investment strategy was radically shifted in the early 2000′s away from safe and reliable (and more modest) methods of investing into (ultimately disastrous) modes of investing that caused the UC’s finances to drop like a stone when the bubble burst:
“[After 2003] regents Gerald Parsky, Richard C. Blum, and Paul Wachter—all financiers by trade—took control of UC’s investment strategy. Sitting on the board’s investment committee, the three men steered away from investing in more traditional instruments, such as blue-chip stocks and bonds, toward largely unregulated “alternative” investments, such as private equity and private real estate deals. According to UC internal reports, the dramatic investment change has led to an “overweighting” of investments in private equity. One concerned regent has likened the change to “gambling in Las Vegas.”
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