board presentation/executive summary 4...board presentation/executive summary quarter ended: march...

Texas Municipal

Retirement SystemBoard Presentation/Executive Summary

Quarter Ended: March 31, 2016

Capital Markets Update

Capital Markets Update

Breakeven Inflation does not have 20 years of history; therefore, its 20-year average is shown as "N/A."Treasury data courtesy of the US Department of the Treasury. Economic data courtesy of Bloomberg Professional Service.

Annual Asset Class Performance

TMRS Total Fund

Total Fund Composite

Performance shown is gross of fees and provided by State Street. Allocations shown may not sum up to 100% exactly due to rounding. Gain/Loss figure includes both realized and

unrealized gains and losses. Asset Allocation vs. Target Allocation charts reflect targets approved in July 2015 and do not include the Transition Account. Domestic Equity includes Citi

Global Markets, Inc.

Total Fund Composite

Allocations shown may not sum up to 100% exactly due to rounding.

TMRS Historical Asset Allocation

TMRS Asset Allocation vs. Peers

• The TMRS actual allocation has more exposure to fixed income than its peers, but the portfolio

continues to move towards a well-diversified structure.

• A slow pace into new asset classes and strategies via ongoing research and due diligence efforts,

coupled with dollar cost averaging into new investments over multiple time periods continues to be

prudent.

Universe Median allocation is based on actual plan allocations.

All Public Plans >$10B universe has a population of 23.

Total Fund Performance vs. Benchmarks

• The Total Fund Composite returned 5.50% over the trailing five-year period ending March 31, 2016,

lagging the Investment Policy Objective for performance relative to the Policy Index.

– The Total Fund outperformed the Actual Allocation Benchmark by 24 basis points over the five-year period,

partially due to relative performance of the International Equity Composite.

– The Total Fund underperformed the Policy Index (Target Allocation) by 14 basis points over the same period.

Please see Supplemental Information for custom benchmark definitions.

Performance shown is gross of fees as of March 31, 2016.

Total Fund vs. Long-Term Target

Performance shown is gross of fees and based on monthly periodicity.

• The assumed long-term rate of return established by the actuary is currently 6.75%.

– In September 2009, the System shifted return objectives from income generation to a total return approach.

– Prior to that date, Total Fund performance on a total return basis versus the assumed actuarial rate is of interest,

but is a less meaningful comparison as the Policy objectives were different at that time.

• As of March 31, 2016, the Total Fund Composite has underperformed the assumed long term rate

over a rolling five-year period.

Total Fund Performance vs. Peers

• While performance relative to other systems is not an objective of the TMRS fund given the wide

range in investment objectives and different benefit plan structures, it is generally of interest to be

aware of the performance of other public pension systems.

Populations data refers to All Public Plans > $1B-Total Fund Median / All Public Plans > $10B-Total Fund Median.

Please see Supplemental Information for custom benchmark definitions.

Performance shown is gross of fees as of March 31, 2016.

Performance shown is gross of fees. Calculation based on monthly periodicity. Parenthesis contain percentile ranks.

Total Fund Composite vs. All Public Funds > $1B-Total Fund

Performance shown is gross of fees. Calculation based on monthly periodicity. Parenthesis contain percentile ranks.

Total Fund Composite vs. All Public Funds > $10B-Total Fund

TMRS Asset Class Composites

Asset Class Composite Performance• The International Equity, Non-Core Fixed Income, and Absolute Return composites were the key contributors

over the trailing one-year period.

• The Absolute Return Composite had the highest relative return during the same trailing period, while Real

Estate had the largest absolute gain.

Performance is as of March 31, 2016 and is shown net of fees. Please see Supplemental Information for custom benchmark definitions. As the Real Return asset

class structure becomes diversified, the performance objective will be the Consumer Price Index + 4%. Real Estate and Private Equity fund and composite returns

are calculated by Private Edge. Private Real Estate fund returns are lagged 1 quarter.

1

Quarter

Year

To

Date

1

Year

3

Years

5

Years

7

Years

10

Years

15

Years

Since

Inception

Inception

Date

Total Fund Composite 1.31 1.31 -0.60 4.45 5.36 7.32 6.07 6.77 8.49 01/01/1989

Actual Allocation Benchmark 1.72 1.72 -0.54 4.47 5.26 6.99 5.88 6.25 7.92

Difference -0.41 -0.41 -0.06 -0.02 0.10 0.33 0.19 0.52 0.57

Global Equity Composite 0.73 0.73 -3.13 6.66 6.33 13.25 N/A N/A 3.79 02/01/2008

Global Equity Benchmark 0.52 0.52 -3.37 6.50 6.22 13.12 N/A N/A 3.67

Difference 0.21 0.21 0.24 0.16 0.11 0.13 N/A N/A 0.12

Domestic Equity Composite 1.08 1.08 -1.01 10.69 10.75 16.89 N/A N/A 7.28 02/01/2008

Russell 3000 Index 0.97 0.97 -0.34 11.14 11.01 17.09 6.90 6.38 7.44

Difference 0.11 0.11 -0.67 -0.45 -0.26 -0.20 N/A N/A -0.16

International Equity Composite 0.15 0.15 -6.69 1.63 1.32 9.09 N/A N/A -0.13 02/01/2008

International Equity Benchmark -0.23 -0.23 -8.08 0.76 0.74 8.54 1.05 3.84 -0.59

Difference 0.38 0.38 1.39 0.87 0.58 0.55 N/A N/A 0.46

Core Fixed Income Composite 2.95 2.95 1.92 2.41 3.89 4.97 4.90 5.99 8.05 01/01/1989

Fixed Income Benchmark 3.03 3.03 1.96 2.50 3.78 4.67 4.73 5.48 7.49

Difference -0.08 -0.08 -0.04 -0.09 0.11 0.30 0.17 0.51 0.56

Non-Core Fixed Income Composite -0.34 -0.34 -1.16 N/A N/A N/A N/A N/A 0.50 10/01/2014

Non-Core Fixed Income Benchmark 5.38 5.38 -2.02 N/A N/A N/A N/A N/A -0.96

Difference -5.72 -5.72 0.86 N/A N/A N/A N/A N/A 1.46

Real Return Composite 4.64 4.64 -1.10 -0.19 2.70 N/A N/A N/A 3.01 02/01/2011

Barclays Wrld Gov't Infl Lnkd Index (Unhedged) 4.79 4.79 1.01 -0.13 2.48 4.72 4.45 6.31 2.97

Difference -0.15 -0.15 -2.11 -0.06 0.22 N/A N/A N/A 0.04

Real Estate Composite 4.00 4.00 13.59 13.34 N/A N/A N/A N/A 11.88 01/01/2012

Real Estate Benchmark 3.25 3.25 14.96 13.80 13.66 6.46 6.53 7.94 13.04

Difference 0.75 0.75 -1.37 -0.46 N/A N/A N/A N/A -1.16

Absolute Return Composite -3.86 -3.86 -2.71 N/A N/A N/A N/A N/A -0.14 08/01/2014

Absolute Return Benchmark -2.80 -2.80 -4.86 1.95 1.51 3.46 1.57 3.25 -0.71

Difference -1.06 -1.06 2.15 N/A N/A N/A N/A N/A 0.57

Private Equity Composite 3.42 3.42 N/A N/A N/A N/A N/A N/A 3.42 01/01/2016

Russell 3000 Index + 3% 1.72 1.72 2.65 14.48 14.34 20.60 10.11 9.57 1.72

Difference 1.70 1.70 N/A N/A N/A N/A N/A N/A 1.70

TMRS Unallocated Cash (SA) 0.38 0.38 1.06 0.52 0.32 0.27 N/A N/A 0.37 06/01/2008

BofA ML 3 Mo US T-Bill Index 0.07 0.07 0.12 0.07 0.08 0.10 1.15 1.51 0.23

Difference 0.31 0.31 0.94 0.45 0.24 0.17 N/A N/A 0.14

Domestic Equity Composite Performance and Allocation

Performance shown is gross of fees. Allocations shown may not sum up to 100% exactly due to rounding. Total Domestic Equity

market value excludes Citigroup Global Markets, Inc.

Domestic Equity Composite Performance Continued

Performance shown is gross of fees.

Domestic Equity Composite vs. IM U.S. Equity (SA+CF)

Performance shown is gross of fees. Calculation based on quarterly periodicity. Parenthesis contain percentile ranks.

Domestic Equity Composite vs. Russell 3000 Index

Data shown is as of March 31, 2016.

International Equity Composite Performance and Allocation

Performance shown is gross of fees. Allocations shown may not sum up to 100% exactly due to rounding.

International Equity Composite Performance Continued

Performance shown is gross of fees.

International Equity Composite vs. IM International Equity (SA+CF)

Performance shown is gross of fees. Calculation based on quarterly periodicity. Parenthesis contain percentile ranks.

International Equity Composite vs. MSCI ACW Ex US Investable Market Index (Net)

Data shown is as of March 31, 2016. Allocation to “Other” consists of holdings domiciled in countries/regions that do not meet the economic

development, size, liquidity, or market accessibility criteria as defined by the MSCI region standards.

Core Fixed Income Performance and Allocation

Performance shown is gross of fees. Allocations shown may not sum up to 100% exactly due to rounding.

Core Fixed Income Composite vs. IM U.S. Broad Market Core Fixed Income (SA+CF)

Performance shown is gross of fees. Calculation based on quarterly periodicity. Parenthesis contain percentile ranks.

Core Fixed Income Composite vs. Barclays U.S. Agg Bond Index

Allocation to “Other” consists of Euro/Yankee bonds held within the PIMCO portfolio.

Non-Core Fixed Income Performance and Allocation

Performance shown is gross of fees. Allocations shown may not sum up to 100% exactly due to rounding.

Non-Core Fixed Income Composite

Allocation to "Other" consists of miscellaneous differences between the account’s net asset value and its trade date based clean holdings.

Real Return Performance and Allocation

Performance shown is gross of fees.

Colchester Global Inflation Linked Bond vs. Barclays World Government Inflation-Linked Index

Data as of March 31, 2016.

Absolute Return Performance and Allocation

Performance shown is gross of fees.