UC Treasurer Bows to Pressure, Quits Over Portfolio Flap

UC Treasurer Patricia A. Small resigned under pressure Monday after tangling with newly assertive UC regents over the oversight and management of the university’s $52.9-billion investment portfolio.

The Board of Regents, meeting via telephone conference call, accepted Small’s resignation Monday and unanimously approved a severance package worth more than $500,000 for the 54-year-old treasurer. She is set to step down no later than Dec. 31, but an interim treasurer is likely to be installed sooner.

Small said she remains proud of her track record. She served 29 years in the treasurer’s office, the last five as treasurer, during which “assets have increased by $25 billion, and we have established a strong record of safety and performance for the university’s investments.”

Although UC regents have been satisfied with overall returns, which have averaged 16% over 20 years, they have grown increasingly concerned that the university’s portfolio is too heavily concentrated in a small number of high-growth stocks.

Furthermore, they have been displeased with the performance of the university’s bond holdings. Assisted by outside consultants, the regents have set a new strategy to reduce reliance on higher-risk stocks. They also have outlined policies to diversify the portfolio so it can more smoothly handle any downdrafts in the markets.

The portfolio includes the $37.9-billion pension fund and the $5.2-billion endowment.

Although the Board of Regents, appointed by the governor, has fiduciary responsibility, it historically had delegated most decisions to the treasurer.

But in 1998, Los Angeles financier Gerald Parsky took over the regents’ investment committee, which exposed the treasurer’s office to a thorough review by a special commission and an outside consultant, Wilshire Associates.

Small, who was used to far more freedom, bridled at such second-guessing--although independent reviews are common for such large public funds. The regents recently decided to give UC President Richard C. Atkinson joint oversight over the treasurer’s office. They have set up an advisory committee, with outside experts, to review UC’s investment strategies.

“We think it’s extremely healthy to have more than one person deciding how these funds should be invested,” said Board of Regents Chairwoman S. Sue Johnson.

“People ask, ‘Why are we doing this? She had good returns . . .’ But as we continued to look at different ways to invest, we began to see we are in a higher-risk category than we thought was prudent. We want to get on with it without meeting stiff resistance.”

Johnson said that UC Senior Vice President Joseph P. Mullinix has four “very promising” candidates for interim treasurer and that an announcement is expected soon.

Under the severance package approved Monday, Small will continue to earn her $273,600 salary through June 2002, with 3.5% annual raises. UC will provide $35,000 “for transitional expenses” including career counseling and outplacement services. The university also kicked in an additional $155,791 to sweeten the package.

Some of UC’s union leaders expressed concern about Small’s exit. “The people who participate in the pension fund were very satisfied with her performance,” said Elinor Levine, treasurer of the Coalition of University Employees, which represents 18,000 UC clerical workers. “Now taxpayer money, to the tune of a half-million, is being used to force her out. The whole thing is fishy. It looks to us that the regents are messing with our pension fund.”