investment committee meeting senator fabian chavez …s3.amazonaws.com/boardaudio/november 12, 2019...

INVESTMENT COMMITTEE MEETING SENATOR FABIAN CHAVEZ JR. BOARD ROOM

PERA BUILDING

November 12, 2019 at 9:00am MT

COMMITTEE MEMBERS John Melia, Chair Steve Neel, Vice Chair Dan Mayfield Loretta Naranjo-Lopez Shirley Ragin

AGENDA

1. Roll Call2. Approval of Agenda3. Approval of Consent Agenda4. Current Business

ITEM PRESENTER

A Information Item: Performance Update

1. CIO Update2. Quarterly Market Review3. Quarterly Performance Review

Dominic Garcia Chief Investment Officer

Thomas Toth Managing Director, Wilshire

B Information Item: Quarterly Staff Consultant Report (Real Assets)

Kristin Varela Deputy Chief Investment Officer

Heather Christopher, Head of Real Estate, Albourne

Mark White, Head of Real Assets, Albourne

C Information Item: Internal Investment Process Enhancement- Monitoring

LeAnn Larranaga-Ruffy, Co-Head Alpha

Joaquin Lujan, Co-Head Alpha

Frank Mihail, Jr. Portfolio Manager

D Information Item: Benchmarks Review Thomas Toth Managing Director, Wilshire

E Information Item: Investment Division Updates

1. Cash Plan & Rebalance Update(July, August, September 2019)

2. Manager Selection Activity Report3. Securities Lending Update (Q3 2019)

Kristin Varela

5. Adjournment

Consent Agenda

Approval of minutes of August 29, 2019 Investments Committee meeting.

Any person with a disability who is in need of a reader, amplifier, qualified sign language interpreter, or any other form of auxiliary aid or service to attend or participate in the hearing or meeting, please contact Trish Winter at (505) 476-9305 at least one week prior to the meeting, or as soon as possible. Public documents, including the agenda and minutes, can be provided in various accessible formats. Please contact Trish Winter if a summary or other type of accessible format is needed.

Chief Investment Officer’s Update

November 12, 2019

Dominic Garcia, Chief Investment Officer

PERA Long-Term Investment Objectives Scorecard

PERA Investment Objectives Actual Results

Maintain appropriate strategic asset allocation to meet the actuarial discount rate assumption over the long run

Exceeded actuarial hurdle rates for 3 years, 10 years, 30 years, and since data inception (1985)

Meet 10-Year annualized returns to equal or exceed benchmarks

Exceeded Passive “Reference” Portfolio & Internal Benchmarks for 3, 10, 20, 30 years, and since data inception (1985)

For 10 years, PERA produced approximately $1.5 billion in value add over Passive “Reference” Portfolio

Achieve a total investment cost at or below a benchmark cost relative to peers adjusted for fund size and asset mix.

Compared to 317 Global funds (162 U.S. Pension funds, 74 Canadian funds, 70 European funds, 8 Asia-Pacific funds), PERA is low cost and saved approximately $1.7m in fees and costs.

As of 9/30/2019

Stra

tegi

c Dir

ectio

n1. Reference Portfolio

Set Risk Tolerance@ 10.5% Risk

2. Strategic Asset Allocation

Diversified Systematic (“Beta”) Risk/Return

3. Risk Budget

Illiquid Active Implementation

Liquid Active Structure Allocation

Liquid Active Manager Selection

4. Benchmarks Evaluate Results

IC and Board Investment Strategic Governance: Four Main Decision Points

PERA Current Total Risk Budget

Reference Portfolio

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

9.00 9.50 10.00 10.50 11.00

Expe

cted

Ret

urn

Expected Risk

10 Year Portfolio Expectations Comparison

Source: Wilshire 10 Year capital market expectations as of 3/31/2019

Total Expected Value Add

1.4%

Expected Value Add Over the Reference Portfolio

Market Beta Risk

AllocationSelection

• Risk and Return Coming from Passive Asset Allocation

• Risk and Return Coming from Active Allocation to Private Assets

• 10 Year Expected Active Risk = 1.40%

• Risk and Return Coming from Active Allocation to Liquid Strategies


Active Risk = 1.5%, +/- 0.5%

Passive Risk = 9.90%

Total Risk = 10.5%

Risk Budget 2019

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Passive + Risk Balance + Private Assets + Active = Total

5.60% 5.60%

0.40% 0.40%

0.60% 0.60%

0.40% 0.40%

10 Year Targeted Expected Returns

Passive Reference Portfolio Risk Balance Diversified Private Assets Active Management

7.00%

Strategy #1:Improved Risk Diversification

Beta Risk Budget

Strategy #2: Private Asset Allocation

Allocation RiskBudget

Strategy #3:Selective ActiveManagement

Selection RiskBudget

ValueAdd

Bridging the Return Gap

Reference Portfolio & Total Risk Budget Active Risk

Absolute Risk Tolerance: Beta + Active Risk = 10.5% Tracking Error 1.5% +/- 0.50%

1 year 6.9% 3.14%

3 year 4.82% 2.09%

5 year 5.56% 1.91%

10 year 7.59% 1.52%

• Realized total risk has been well below 10.5% risk tolerance.

• Why is TE over 2% in short time frames? A: lagging effect in private markets vs. public market benchmarks

Are We Staying Within Our Risk Tolerance?

TE = 1.52%

Active Return

Tracking Error and Active Return Over Time

What’s Ahead?

W i l s h i r e C o n s u l t i n g

WILSHIRE ASSOCIATES

November 2019

Thomas Toth, CFA

Q u a r t e r l y M a r k e t R e v i e w

©2019 Wilshire Associates. 2

Designed to review the current market environment, propose thought-leading investment strategies, and provide networking opportunities for our clients.


YOU’RE INVITED!

The Ritz-CarltonMarina del Rey, California

38th Annual Client ConferenceS u n d a y, A p r i l 5 t h – Tu e s d a y, A p r i l 7 t h


• Weighted average of 85 monthly indicators including 1) production and income, 2) employment, 3) consumption and housing and 4) sales, orders, and inventories (all inflation adjusted)

• Aims to identify when a recession may begin (during periods of growth) or end (when already experiencing a recession)


NATIONAL ACTIVITY INDEX

Data sources: Federal Reserve

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50CHICAGO FED NATIONAL ACTIVITY INDEX (3M MA)

Increasing likelihood that a recession has begun

Significant likelihood that a recession has ended


Text


RISK MONITOR

Data sources: Federal Reserve, Bloomberg Barclays

Text

Text Text

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sury

-3-

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Bill

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YIELD CURVE SLOPE VS RECESSIONS (IN GRAY)

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BLOOMBERG BARCLAYS CREDIT INDEXES

Investment Grade

High Yield

< — Investment Grade High Yield — >

-2.00

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ST. LOUIS FED FINANCIAL STRESS INDEX

Constructed from seven interest rate series, six yield spreads and five other financial stress indicators.0.00

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ay E

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CBOE VOLATILITY INDEX


Wi l s h i r e C o n s u l t i n g

GROWTH

• Globally, economic growth has slowed as trade concerns have impacted manufacturing

investment.

• U.S consumption is healthy, though the most recent read on consumer spending

unexpectedly fell.

• Wage growth has improved while inflation remains contained and unemployment is

low.


• Earnings growth in the U.S. has moderated for calendar year 2019 after two strong years in 2017-2018.

• Earnings slowdown combined with elevated valuations represents a risk to equity prices.


EARNINGS EXPECTATIONS


• Federal Reserve decreased their short-term rate twice during the 3rd quarter

• Markets are far more dovish, expecting additional decreases this year and next


SHORT-TERM RATES

Data sources: Federal Reserve, Bloomberg

0.00

0.50

1.00

1.50

2.00

2.50

3.00FEDERAL FUNDS RATE (%)

Effective Rate FOMC year-end est. Market expectations



ASSET CLASS PERFORMANCE

Data sources: Wilshire Compass Note: Developed asset class is developed equity markets ex-U.S., ex-Canada

ANNUALIZED5-YEAR

2014 2015 2016 2017 2018 2019 YTD AS OF 9/2019REITs REITs MLPs Emrg Mrkts T-Bills REITs U.S. Equity31.8% 4.2% 18.3% 37.7% 1.9% 27.2% 10.6%

U.S. Equity U.S. Equity High Yield Developed Core Bond U.S. Equity REITs12.7% 0.7% 17.1% 25.6% 0.0% 20.1% 10.2%

Core Bond Core Bond U.S. Equity U.S. Equity U.S. TIPS Developed High Yield6.0% 0.6% 13.4% 21.0% -1.3% 13.4% 5.4%MLPs T-Bills Commodities High Yield High Yield High Yield Developed4.8% 0.1% 11.8% 7.5% -2.1% 11.4% 3.8%

U.S. TIPS Developed Emrg Mrkts REITs REITs MLPs Core Bond3.6% -0.4% 11.6% 4.2% -4.8% 11.1% 3.4%

High Yield U.S. TIPS REITs Core Bond U.S. Equity Core Bond Emrg Mrkts2.5% -1.4% 7.2% 3.6% -5.3% 8.5% 2.7%T-Bills High Yield U.S. TIPS U.S. TIPS Commodities U.S. TIPS U.S. TIPS0.0% -4.5% 4.7% 3.0% -11.2% 7.6% 2.4%

Emrg Mrkts Emrg Mrkts Core Bond Commodities MLPs Emrg Mrkts T-Bills-1.8% -14.6% 2.6% 1.7% -12.4% 6.2% 1.0%

Developed Commodities Developed T-Bills Developed Commodities Commodities-4.5% -24.7% 1.5% 0.8% -13.4% 3.1% -7.2%

Commodities MLPs T-Bills MLPs Emrg Mrkts T-Bills MLPs-17.0% -32.6% 0.3% -6.5% -14.2% 1.8% -8.6%

ASSET CLASS RETURNS - BEST TO WORST



SEPTEMBER 2019 ASSET CLASS ASSUMPTIONS

Dev Global LT Dev ex-US ex-US Emg ex-US Global Private Core Core High US Bond US Global Private Real US

Stock Stock Stock Stock Stock Equity Cash Bond Bond TIPS Yield (Hdg) RES RES RE Cmdty Assets CPICOMPOUND RETURN (%) 6.00 6.50 6.50 6.75 6.45 8.05 1.60 2.70 3.25 1.90 4.20 0.75 4.70 4.90 6.60 3.15 5.70 1.55ARITHMETIC RETURN (%) 7.30 7.95 9.45 8.35 7.75 11.40 1.60 2.85 3.70 2.10 4.65 0.80 6.05 6.05 7.50 4.20 6.05 1.55EXPECTED RISK (%) 17.00 18.00 26.00 18.80 17.05 28.00 1.25 5.15 9.85 6.00 10.00 3.50 17.00 15.80 14.00 15.00 8.75 1.75CASH YIELD (%) 2.00 3.50 2.50 3.25 2.55 0.00 1.60 2.80 4.05 2.10 7.55 1.35 3.55 3.55 2.60 1.60 2.35 0.00

CORRELATIONSUS Stock 1.00Dev ex-US Stock (USD) 0.81 1.00Emerging Mkt Stock 0.74 0.74 1.00Global ex-US Stock 0.83 0.96 0.86 1.00Global Stock 0.94 0.92 0.82 0.94 1.00Private Equity 0.74 0.64 0.62 0.67 0.74 1.00Cash Equivalents -0.05 -0.09 -0.05 -0.08 -0.07 0.00 1.00Core Bond 0.28 0.13 0.00 0.09 0.20 0.31 0.19 1.00LT Core Bond 0.31 0.16 0.01 0.12 0.23 0.32 0.11 0.93 1.00TIPS -0.05 0.00 0.15 0.05 0.00 -0.03 0.20 0.60 0.47 1.00High Yield Bond 0.54 0.39 0.49 0.45 0.51 0.34 -0.10 0.25 0.32 0.05 1.00Dev ex-US Bond (Hdg) 0.16 0.25 -0.01 0.18 0.18 0.26 0.10 0.67 0.66 0.39 0.26 1.00US RE Securities 0.59 0.47 0.44 0.49 0.56 0.50 -0.05 0.17 0.23 0.10 0.56 0.05 1.00Global RE Securities 0.65 0.59 0.56 0.62 0.66 0.58 -0.05 0.17 0.22 0.11 0.62 0.03 0.94 1.00Private Real Estate 0.54 0.44 0.44 0.47 0.52 0.51 -0.05 0.19 0.25 0.09 0.57 0.05 0.77 0.76 1.00Commodities 0.25 0.34 0.39 0.38 0.32 0.27 0.00 -0.02 -0.02 0.25 0.29 -0.10 0.25 0.28 0.25 1.00Real Assets 0.42 0.43 0.50 0.48 0.47 0.43 0.01 0.24 0.25 0.41 0.53 0.06 0.65 0.69 0.69 0.59 1.00Inflation (CPI) -0.10 -0.15 -0.13 -0.15 -0.13 -0.10 0.10 -0.12 -0.12 0.15 -0.08 -0.08 0.05 0.03 0.05 0.44 0.26 1.00

EQUITY FIXED INCOME REAL ASSETSReal Estate

APPENDIX



U.S. EQUITY MARKET

Data sources: Wilshire Compass, Wilshire Atlas

AS OF SEPT 30, 2019 QTR YTD 1 YR 3 YR 5 YR 10 YR

WILSHIRE 5000 INDEX 1.2 20.1 3.0 12.9 10.6 13.1WILSHIRE U.S. LARGE CAP 1.5 20.6 4.0 13.4 10.9 13.2WILSHIRE U.S. SMALL CAP -1.8 15.8 -7.0 8.2 8.0 12.1WILSHIRE U.S. LARGE GROWTH 0.8 22.1 1.5 16.0 12.3 14.1WILSHIRE U.S. LARGE VALUE 2.2 19.2 6.4 10.8 9.4 12.3WILSHIRE U.S. SMALL GROWTH -2.7 17.6 -6.6 11.0 8.5 12.7WILSHIRE U.S. SMALL VALUE -0.9 13.9 -7.4 5.5 7.4 11.4WILSHIRE REIT INDEX 7.9 27.2 18.4 7.2 10.2 13.1MSCI USA MIN. VOL. INDEX 4.1 23.5 14.0 13.8 12.9 13.7FTSE RAFI U.S. 1000 INDEX 1.7 18.1 1.8 10.6 8.7 12.2

20.1

15.4

24.7

4.0

28.6

21.9

22.0

22.8

20.2

5.8

18.8

30.9

1.2

-0.2

8.1

-7.1

7.6

5.9

2.4

0.7

0.2

-3.8

1.7

2.7

Wilshire 5000

Materials

Utilities

Energy

Real Estate

Consumer Staples

Communication Services

Industrials

Consumer Discretionary

Health Care

Financials

Information Technology

2.5%

3.5%

4.2%

4.6%

7.1%

9.4%

10.1%

10.5%

12.9%

13.9%

21.3%

WILSHIRE 5000 SECTOR WEIGHT & RETURN (%)

3rd Quarter Year to Date

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Larg

e C

ap in

exc

ess

of S

mal

l C

ap

LARGE CAP VS SMALL CAP

QTD Excess Return Rolling 3-Year Excess Return

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Gro

wth

in e

xces

s of

Val

ue

GROWTH VS VALUE



Higher quality names continue to lead the market during the third quarter


RETURNS BY QUALITY SEGMENT

Data sources: Wilshire Atlas

(10.00)

(5.00)

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

3Q 19 YTD 2019

Tota

l Ret

urn

(%)

RETURN BY S&P QUALITY RATING

A+ A A- B+ B B- C / D

A+ 6%A 9%A‐ 15%B+ 30%B 16%B‐ 8%C / D 2%N.A. 13%

Segment Weightsas of June 30



NON-U.S. EQUITY MARKET

Data sources: Wilshire Compass


MSCI ACWI EX-US ($G) -1.7 12.1 -0.7 6.8 3.4 4.9MSCI EAFE ($G) -1.0 13.4 -0.8 7.0 3.8 5.4MSCI EMERGING MARKETS ($G) -4.1 6.2 -1.6 6.4 2.7 3.7MSCI FRONTIER MARKETS ($G) -1.0 11.0 6.2 7.4 -0.9 4.0MSCI ACWI EX-US GROWTH ($G) -0.8 16.6 2.4 7.8 5.2 6.2MSCI ACWI EX-US VALUE ($G) -2.7 7.5 -3.9 5.9 1.5 3.6MSCI ACWI EX-US SMALL ($G) -1.1 10.7 -5.2 5.0 4.5 6.8MSCI ACWI MINIMUM VOLATILITY 2.9 18.2 10.5 10.5 10.1 10.9MSCI EAFE MINIMUM VOLATILITY 0.9 12.4 4.1 6.7 6.8 7.7FTSE RAFI DEVELOPED EX-US -1.3 9.9 -4.2 7.0 2.8 4.2MSCI EAFE LC (G) 1.8 16.2 2.1 8.8 6.5 7.5

13.4

19.9

10.7

24.0

16.9

10.2

11.6

-1.0

-0.9

-4.0

0.3

-1.6

-2.5

3.3

MSCI EAFE

Australia

Germany

Switzerland

France

United Kingdom

Japan

7.0%

8.5%

9.4%

11.4%

16.4%

24.6%

MSCI EAFE: LARGEST COUNTRIES & RETURN (USD)


6.2

-1.5

10.5

2.2

16.7

-0.7

8.1

-4.1

-11.8

-4.6

-5.2

5.9

-4.5

-4.6

MSCI Emrg Mrkts

South Africa

Brazil

India

Taiwan

South Korea

China

4.7%

7.6%

8.9%

11.5%

12.2%

31.9%

MSCI EM: LARGEST COUNTRIES & RETURN (USD)




U.S. FIXED INCOME

Data sources: Wilshire Compass, Bloomberg Barclays, U.S. Treasury

0

100

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BLOOMBERG BARCLAYS FIXED INCOME INDEXES

Securitized IG Corporate Aa Corporate High Yield

0.00

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2.00

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3.00

3.50

0 5 10 15 20 25 30

Yiel

d (%

)

Maturity (yrs)

TREASURY YIELD CURVE

Current Quarter Previous Quarter One Year Ago

AS OF SEPT 30, 2019 YTM DURATION QTR YTD 1 YR 3 YR 5 YR 10 YR

BLOOMBERG BARCLAYS AGGREGATE 2.3 5.8 2.3 8.5 10.3 2.9 3.4 3.7BLOOMBERG BARCLAYS TREASURY 1.7 6.6 2.4 7.7 10.5 2.2 2.9 3.1BLOOMBERG BARCLAYS GOV'T-REL. 2.4 5.8 2.4 8.8 10.1 3.2 3.4 3.5BLOOMBERG BARCLAYS SECURITIZED 2.4 2.9 1.4 5.8 7.9 2.4 2.8 3.3BLOOMBERG BARCLAYS CORPORATE 2.9 7.8 3.1 13.2 13.0 4.5 4.7 5.6BLOOMBERG BARCLAYS LT G/C 3.0 15.9 6.6 20.9 21.9 5.6 6.8 7.4BLOOMBERG BARCLAYS LT TREASURY 2.1 18.3 7.9 19.8 24.8 4.1 6.8 6.9BLOOMBERG BARCLAYS LT GOV't-REL. 3.5 12.7 5.6 18.8 18.8 6.0 6.5 7.3BLOOMBERG BARCLAYS LT CORP. 3.6 14.4 5.6 22.3 20.1 6.5 7.0 7.8BLOOMBERG BARCLAYS U.S. TIPS * 1.6 7.6 1.4 7.6 7.1 2.2 2.4 3.5BLOOMBERG BARCLAYS HIGH YIELD 6.3 3.1 1.3 11.4 6.4 6.1 5.4 7.9TREASURY BILLS 1.9 0.25 0.6 1.8 2.4 1.5 1.0 0.5

* Yield and Duration statistics are for a proxy index based on similar maturity, the Bloomberg Barclays U.S. Treasury 7-10 Year Index



NON-U.S. FIXED INCOME

Data sources: Wilshire Compass, Bloomberg Barclays, Federal Reserve Bank of St. Louis


DEVELOPED MARKETSBLMBRG BRCLYS GLBL AGGREGATE xUS -0.6 4.4 5.3 0.4 0.9 1.3BLMBRG BRCLYS GLBL AGGREGATE xUS * 2.8 8.8 10.8 4.1 4.6 4.4BLMBRG BRCLYS GLOBAL INF LNKD xUS 2.0 8.4 7.2 2.1 1.9 3.3BLMBRG BRCLYS GLOBAL INF LNKD xUS * 6.0 13.9 15.4 5.5 7.3 6.5EMERGING MARKETS (HARD CURRENCY)BLMBRG BRCLYS EM USD AGGREGATE 1.3 10.8 10.6 4.4 5.0 6.7EMERGING MARKETS (FOREIGN CURRENCY)BLMBRG BRCLYS EM LOCAL CURR. GOV'T -0.6 5.3 7.9 2.4 1.1 3.3BLMBRG BRCLYS EM LOCAL CURR. GOV'T * 2.8 7.9 10.7 3.7 3.8 3.8EURO vs. DOLLAR -4.3 -4.6 -6.1 -1.0 -2.9 -2.9YEN vs. DOLLAR -0.3 1.5 5.1 -2.1 0.3 -1.9POUND vs. DOLLAR -3.2 -3.2 -5.5 -1.7 -5.3 -2.6* Returns are reported in terms of local market investors, w hich removes currency effects.

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Yiel

d to

Wor

st (

%)


U.S. Treasury Global xUS Gov't EM USD Sovereign EM Foreign Gov't

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

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U.S. DOLLAR INDEX: MAJOR CURRENCIES

Index Level Rolling 1-Year Return



GLOBAL INTEREST RATES

Data sources: Bloomberg

Much of Europe and Japan exhibit negative rates; Long rates are down globally during the past six months

United States

Germany

FranceUnited Kingdom

Japan

AustraliaCanada

China

South Korea

India Russia

Brazil

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

-2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00

10-Y

ear

Yiel

ds (

%)

3-Month Yields (%)

GOVERNMENT BOND YIELDS


• Pricing in some markets is such that short-term rates are discounted to remain negative

• Main concern with negative rates is that market participants hold cash rather than bank deposits

– Minimum deposit rates and tiered bank reserves partially protect against negative interest

– However, this limits the effectiveness of rate cuts below zero

• Markets with negative rates are thought to provide less diversification benefits to a diversified portfolio, although low but positive yields can still lower overall portfolio risk


NEGATIVE RATES

Data sources: Bridgewater

Expected 1‐Year Cash Rate (Years Forward) 0 1 2 3Switzerland ‐0.97% ‐0.99% ‐1.06% ‐1.10%Denmark ‐0.86% ‐0.91% ‐0.94% ‐0.93%Germany ‐0.71% ‐0.91% ‐1.00% ‐0.98%France ‐0.65% ‐0.79% ‐0.80% ‐0.72%Sweden ‐0.64% ‐0.83% ‐0.87% ‐0.81%Japan ‐0.29% ‐0.44% ‐0.56% ‐0.62%United Kingdom 0.49% 0.16% ‐0.01% ‐0.07%Australia 0.69% 0.47% 0.39% 0.44%Canada 1.61% 1.29% 1.10% 1.00%United Stated 1.69% 1.34% 1.21% 1.20%China 2.76% 3.24% 3.10% 3.68%



HIGH YIELD BOND MARKET

Data sources: Wilshire Compass, Bloomberg Barclays


BLOOMBERG BARCLAYS HIGH YIELD 1.3 11.4 6.4 6.1 5.4 7.9CREDIT SUISSE LEVERAGED LOAN 0.9 6.4 3.1 4.7 4.1 5.4HIGH YIELD QUALITY DISTRIBUTION WEIGHTBa U.S. HIGH YIELD 47.8% 2.0 12.8 9.5 5.8 5.9 7.9B U.S. HIGH YIELD 38.7% 1.7 11.9 7.0 6.2 5.0 7.5Caa U.S. HIGH YIELD 12.7% -1.8 5.6 -4.2 5.5 4.5 8.2Ca to D U.S. HIGH YIELD 0.6% -6.7 7.6 -18.3 10.7 -5.8 0.7Non-Rated U.S. HIGH YIELD 0.2% -0.5 4.3 2.5 5.3 -1.0 5.6

0

200

400

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1,200

1,400

1,600

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BLOOMBERG BARCLAYS HIGH YIELD INDEXES

HY Index Ba B Caa



REAL ASSETS

Data sources: Wilshire Compass, National Council of Real Estate Investment Fiduciaries


BLOOMBERG BARCLAYS U.S. TIPS 1.4 7.6 7.1 2.2 2.4 3.5BLOOMBERG COMMODITY INDEX -1.8 3.1 -6.6 -1.5 -7.2 -4.3WILSHIRE GLOBAL RESI INDEX 5.2 22.8 15.3 7.1 8.4 10.9NCREIF ODCE FUND INDEX 1.3 3.8 5.6 7.3 9.3 10.9NCREIF TIMBERLAND INDEX 0.2 1.3 2.1 3.1 4.4 4.0ALERIAN MLP INDEX (OIL & GAS) -5.0 11.1 -8.1 -2.5 -8.6 6.3

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Cur

rent

Yie

ld

Cur

rent

Cap

Rat

e

REAL ESTATE VALUATION

NPI Current Value Cap Rate Wilshire RESI Current Yield 10-Year Treasury Yield

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Retu

rn (

%)

NCREIF ODCE FUND INDEX RETURN

Appreciation Income Total Return


W i l s h i r e P r i v a t e M a r k e t s

PRIVATE EQUITY – FUNDRAISING & INVESTMENT ACTIVITY

Source: Preqin, as of September 30, 2019.

0100200300400500600700800

$0

$50

$100

$150

$200

$250

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2014 2015 2016 2017 2018 2019

No.

of F

unds

Agg

rega

te C

apita

l Rai

sed

($B

)

Global Quarterly Private Equity Fundraising (Q1 2014 - Q3 2019)

Aggregate Capital Raised ($bn) No. of Funds Closed

02004006008001,0001,2001,4001,6001,800

$0$20$40$60$80

$100$120$140$160$180


2014 2015 2016 2017 2018 2019

No.

of D

eals

Agg

rega

te D

eal V

alue

($B

) Global Quarterly Private Equity-Backed Buyout Deals (Q1 2014 - Q3 2019)

Aggregate Deal Value ($bn) No. of Deals



PRIVATE EQUITY – PRICING & VALUATIONS

Source: S&P LBO; PitchBook, *as of September 30, 2019.

7.1x 7.3x8.4x 8.4x

9.7x 9.1x7.7x

8.5x 8.8x 8.7x 8.8x9.7x 10.3x 10.0x 10.6x 10.6x

11.5x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

LBO Purchase Price Multiples (2003 - Q3 2019)

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Venture Capital Pre-Money Valuations ($M) (2009 – Q3 2019)

Angel & seed Early VC Late VC



U.S. INVESTMENT ACTIVITY BY DEAL SIZE

• Deal volume continues to be dominated by lower middle market deals with investment sizes below$100 million through the third quarter of 2019

• However, deals with below $100 million check sizes comprised only 15% of all deal volume byamount of capital invested in the third quarter of 2019

Source: PitchBook, *as of September 30, 2019.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017 2018 2019*

Percentage of Deal Volume by Deal Size (by Dollars)*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017 2018 2019*

Percentage of Deal Volume by Deal Size (by Count)*

$2.5B+

$1B-$2.5B

$500M-$1B

$100M-$500M

$25M-$100M

Under $25M



PRIVATE CAPITAL DRY POWDER

Source: Preqin, *as of October 23, 2019.

• Global private capital dry powder continues to increase, topping $2.5 trillion across all fund types

• Private equity comprises just over 60% of total dry powder in the market as of Q3 2019

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Agg

rega

te D

ry P

owde

r ($B

)

Private Capital Drty Powder by Fund Type (2010 - Q3 2019)

Private Equity Private Debt Private Real Estate Unlisted Infrastructure Unlisted Natural Resources



PRIVATE EQUITY - U.S. DEBT MARKETS

Source: S&P LBO, *as of September 30, 2019.

• 2019 has generated approximately $110 billion in loan volume and is on pace to once againincrease year-over-year through the fourth quarter of 2019

• As debt capital becomes less available, the percentage of debt used to finance leveraged buyoutsof less than $50 million of EBITDA through the third quarter of 2019 has dropped from 2018 marks

$0

$50

$100

$150

$200

$250

Total U.S. LBO Loan Volume ($B) (2003 - Q3 2019)

Pro Rata Institutional

0%

10%

20%

30%

40%

50%

60%

70%

80%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Percentage of Debt Used in LBOs (2007 - Q3 2019)

Less than $50M of EBITDA $50M or more of EBITDA



PRIVATE EQUITY - U.S. LBO PURCHASE PRICE MULTIPLES

• Due to the amount of equity that is readily available, purchase price multiples for U.S. LBOs havecontinued to rise through Q3 2019, relative to 2018 levels


9.7x9.1x

7.7x

8.5x8.8x 8.7x 8.8x

9.7x10.3x 10.0x

10.6x 10.6x

11.5x

0x

2x

4x

6x

8x

10x

12x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Purchase Price Multiples of U.S. LBO Transactions (2007 - Q3 2019)

Equity/EBITDA Debt/EBITDA



PRIVATE REAL ESTATE –FUNDRAISING ACTIVITY


0

20

40

60

80

100

120

140

160

$0$5

$10$15$20$25$30$35$40$45$50


2014 2015 2016 2017 2018 2019

No.

of F

unds

Agg

rega

te C

apita

l Rai

sed

($B

)

Global Quarterly Closed-End Private Real Estate Fundraising (Q1 2014 - Q3 2019)


566

211

72 36

$144$79

$21 $80

100

200

300

400

500

600

North America Europe Asia Rest of World

Closed-End Private Real Estate Fund Actively in Market in Q3 2019 by Primary Geographic Focus

No. of Funds Raising Aggregate Capital Targeted ($B)



UNLISTED INFRASTRUCTURE –FUNDRAISING & INVESTMENT ACTIVITY


0

50

100

150

200

250

$0

$50

$100

$150

$200

$250

Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Oct-19

No.

of F

unds

Agg

rega

te C

apita

l Tar

gete

d ($

B)

Unlisted Infrastructure Funds in Market over Time (Jan 2015 - Oct 2019)

Aggregate Capital Targeted ($bn) No. of Funds Raising

0510152025303540

$0$5

$10$15$20$25$30$35$40$45


2014 2015 2016 2017 2018 2019

No.

of F

unds

Aggr

egat

e C

apita

l Rai

sed

($B)

Global Quarterly Unlisted Infrastructure Fundraising (Q1 2014 - Q3 2019)




TIMBER

Data sources: Forest Investment Associates



HEDGE FUND PERFORMANCE


AS OF SEPTEMBER 30, 2019 QTR YTD 1 YR 3 YR 5 YR 10 YR

DJ CS HEDGE FUND INDEX 0.3 6.7 2.1 3.8 2.3 4.3EVENT DRIVEN -1.5 5.9 -0.7 3.4 0.4 3.8GLOBAL MACRO 2.1 9.6 7.7 5.3 3.1 4.9LONG/SHORT EQUITY 0.1 6.8 -0.4 4.9 3.4 4.9MULTI-STRATEGY 0.7 5.9 1.9 4.2 4.2 6.2WILSHIRE 5000 1.2 20.1 3.0 12.9 10.6 13.1MSCI ACWI EX-US ($G) -1.7 12.1 -0.7 6.8 3.4 4.9BLOOMBERG BARCLAYS AGGREGATE 2.3 8.5 10.3 2.9 3.4 3.7DOW JONES UBS COMMODITY -1.8 3.1 -6.6 -1.5 -7.2 -4.3

DJ CS Hedge Fund Index

Wilshire 5000 Index

Barclays Aggregate Bond Index

Dow Jones UBS Commodity Index

MSCI ACWI ex-US ($g)0.83

0.96

1.03

(0.34)

0.31

-8.00%

-4.00%

0.00%

4.00%

8.00%

12.00%

16.00%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Annu

aliz

ed R

etur

n

Annualized Risk

HEDGE FUND 10-YEAR RISK/RETURN

Note: Sharpe Ratio included to the left of each marker.

Performance and Risk Update: Q1 FY20

November 2019

Thomas Toth, Managing Director – Wilshire AssociatesKristin Varela, Deputy CIO

Total Fund versus Reference Portfolio – 10 Years

Expectations based on PERA target asset allocation and Wilshire asset class assumptions as of 2009

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Oct

-13

Apr

-14

Oct

-14

Apr

-15

Oct

-15

Apr

-16

Oct

-16

Apr

-17

Oct

-17

Apr

-18

Oct

-18

Apr

-19

Total Fund v. Reference PortfolioCumulative Distribution, 95% confidence interval

7.76% return and 11.24% risk expectation

Cumulative Reference Portfolio Return

Cumulative NOF Total Fund Return

Lower Band

Target

Upper Band

Total Fund versus Policy Index – 10 Years

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Oct

-13

Apr

-14

Oct

-14

Apr

-15

Oct

-15

Apr

-16

Oct

-16

Apr

-17

Oct

-17

Apr

-18

Oct

-18

Apr

-19

Total Fund v. Policy PortfolioCumulative Distribution, 95% confidence interval


Cumulative Policy Index Return


Lower Band

Target

Upper Band

Total Fund Active versus Policy Index – 10 Years

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Oct

-13

Apr

-14

Oct

-14

Apr

-15

Oct

-15

Apr

-16

Oct

-16

Apr

-17

Oct

-17

Apr

-18

Oct

-18

Apr

-19

Total Fund v. Policy IndexCumulative Distribution, 95% confidence interval

1.0% active return and 1.5% active risk expectation

Cumulative Excess NOF Total Fund Return

Lower Band

Target

Upper Band

Selection

Allocation

Market Beta Risk

(Passive)Expected Risk of 9.90% (Expected Return of 6.35%)

Expected Active Risk of 1.4% (Expected Return of 0.6%)

Expected Active Risk of 0.6% (Expected Active Return of 0.4%)

2019 Total Fund Risk BudgetTarget Return= 7.35%Target Risk = 10.2%

Total Fund versus Reference Portfolio

Cumulative Reference Portfolio Return, 6.52%

Cumulative NOF Total Fund Return, 8.43%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%





Lower Band

Target

Upper Band

FYTD value add = 0.42%

PERA Fund volatility (FYTD) = 0.43%

Reference Portfolio volatility (FYTD) = 2.37%

Total Fund versus Policy Portfolio

Cumulative Policy Index Return, 7.79%


-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%





Lower Band

Target

Upper Band



PERA Policy volatility (FYTD) = 2.18%

Active Risk versus Expectations – Cumulative Months

Total Fund One-Year Tracking Error as of September 30, 2019 = 3.05%

Cumulative Excess NOF Total Fund Return, 0.65%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%




Lower Band

Target

Upper Band

As of 9/30/2019

MarketValue

% MarketValue

% Target

Total Fund Performance

Q1FY20

FYTD 1-yr 3-yr 5-yr 10-yr

Global Equity $6.3b 40.4% 40.8%NOF Return 0.97% 0.97% 3.65% 10.77% 7.71%

Value Add v. 0.67% 0.67% 2.00% 0.76% 0.02%

Risk Reduction $3.3b 21.0% 21.0%

NOF Return 2.43% 2.43% 10.51% 3.25% 3.65%

Value Add v. 0.12% 0.12% 0.20% 0.22% 0.20%

Credit $2.3b 14.6% 15.0%NOF Return 0.66% 0.66% 4.04% 5.00% 3.25%

Value Add v. 0.47% 0.47% -3.06% -0.53% -1.41%

Real Assets $3.1b 19.9% 20.0%NOF Return 0.67% 0.67% 3.70% 4.75% 3.13%

Value Add v. -1.14% -1.14% -2.97% -1.11% 0.35%

Risk Parity $0.6b 4.1% 3.25%NOF Return 6.11% 6.11%

Value Add v. -0.30% -0.30%

Performance Detail – Asset Class

FYTD Performance Attribution:Active Risk Budget Framework

-0.25% -0.25%

-0.04%

0.15%

-0.84%

0.39%

0.92%

0.16%

0.32%

-0.30%

-1.00%

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

Total Fund Global Equity Risk Reduction &Mitigation

Credit Oriented FixedIncome

Real Assets

Allocation Return Selection ReturnReturns are net of fees

Presenter

Presentation Notes

Allocation Return = dynamic – policy Selection Return = portfolio – dynamic (use BNY figures)

1-year Performance Attribution:Active Risk Budget Framework

-0.63%

0.61%

-0.12%

-3.12%

-1.00%

0.26%

1.38%

0.32%0.06%

-1.97%

-3.50%

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%



Real Assets


Presenter

Presentation Notes



-0.10%

0.23%

0.04%

-0.34%

-0.73%

0.20%

0.53%

0.18%

-0.19%

-0.38%

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%



Real Assets


Presenter

Presentation Notes



-0.42%

-0.15%

0.02%

-0.85%

0.39%

0.22%0.17% 0.18%

-0.56%

-0.05%

-1.00%

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%



Real Assets


Presenter

Presentation Notes


Historical Risk Measurements (1-Year)As of Sept 2019 Capital

AllocationVolatility

(𝝈𝝈)Sharpe Ratio

Tracking Error

InformationRatio

Beta Alpha*

Total Fund 100% 7.25% 0.40 3.05% -0.12 0.71 0.60%

Policy Benchmark 10.07% 0.33

Global Equity 40.4% 13.78% 0.09 3.31% 0.59 0.82 1.87%

Risk Reduction 21.0% 3.65% 2.18 0.24% 0.72 1.01 0.11%

Credit 14.6% 1.59% 1.01 5.26% -0.55 0.16 0.90%

Real Assets 19.9% 5.70% 0.23 5.81% -0.47 0.49 -0.75%

Risk Parity 4.1%

*Jensen’s alpha

Summary • Long term 10 year performance on both an absolute and relative basis remains

strong for the PERA Total Fund

• The PERA fund outperformed the policy benchmark by 14 bps for Q1 FY20, but

underperformed the policy benchmark by 37 for the 1-year period, net of fees

• The PERA fund outperformed the passive reference portfolio by 42 bps for Q1 FY20,

and outperformed by 48 bps for the 1-year period, net of fees

• As of September 30th, the fund is at target weights for all asset classes (+/- 1%)

Appendix (Formulas)

• Selection return = (portfolio return – dynamically weighted selection benchmark return)

• Allocation return= (dynamically weighted selection benchmark return – policy benchmark return)

• Historical Alpha = (R– Beta*P) *√12Where:Beta is portfolio beta;R - mean of the portfolio real returns (portfolio return- 91 day T-bill return) ;P - mean of the policy real returns (policy return – 91 day T-bill return)

Total Real Assets Composite Review

Real Assets Portfolio: Portfolio Exposures

• Portfolio Construction Building Blocks

Liquid Real Estate (60% low TE implementation)- Domestic REITS- Global REITS

Illiquid Real Estate- Balanced risk exposures across strategies and

risk profiles- Opportunistic, value-add and core real estate

across diversified property types

Liquid Real Assets (40% low TE implementation)- Listed infrastructure- Master limited partnerships- Inflation linked bonds- Commodities

Illiquid Real Assets- Diversification away from legacy energy

concentration- Energy (upstream, midstream, downstream,

and renewable)- Infrastructure (core & value-add)- Agriculture (agribusiness, farmland, and

midstream)

as of June 30, 2019 (USD Millions)

Targeted Funded Difference (Funded - Targeted)

Total Fund - $15,648 -

Total Real Assets $3,130 $3,112 ($18)

Liquid Real Estate $313 $361 $48

Illiquid Real Estate $782 $711 ($71)

Core $235 $332 $98

Value-Add $235 $56 ($178)

Opportunistic $313 $323 $10

Liquid Real Assets $782 $1,300 $518

Illiquid Real Assets $1,252 $736 ($516)

Agriculture $313 $65 ($248)

Infrastructure $469 $352 ($118)

Energy $469 $320 ($150)

Market Neutral $0 $3 $3

Internal Investment Process Enhancement-Monitoring

PERA Investment Team November 12, 2019

Strategic Direction

• Investment Committee/Board set Risk Budget & Benchmarks• Investment Committee/Board set Active Management (Alpha) target• Investment Committee/Board set Strategic Asset Allocation (Beta) target

Planning

• Work with consultants and strategists to evaluate opportunity set• Identify and build pipeline• Priority-setting, work plan

Manager Selection

• 5- Stage Manager Selection Process• Delegated to staff and staff consultant

Implement

• Final contracting (internal/external legal)• CIO approval• On-boarding and funding

Monitoring&

Attribution

PERA Total Portfolio (Beta +Alpha)

Investment Process Overview

Monitoring and Review

Driven by the ethos of constant improvement, PERA’s monitoring and review process seeks to measure, monitor, and track performance and risk metrics at the strategy, composite, and fund level. This creates a constant feedback loop that informs our understanding of how our portfolio responds to past, current, and future market environments.

Kaizen – or constant improvement

Each strategy delivers performance, risk, and diversification to the total portfolio and it is the job of each analyst and portfolio manager to understand any attribution thereof. Gone are the days when asset owners could set an asset allocation and forget it. PERA’s monitoring and review process uses knowledge management techniques, state-of-the-art risk techniques, human capital and judgement to continually improve upon our return and risk outcomes, and ultimately improve our funding position.

Knowledge Management

Portfolio Managers and Associates regularly conduct review calls with asset managers. Areas of focus include:

Qualitative Notes• Asset updates• Strategy updates• Market updates• Team review

Quantitative Notes• Performance

attribution• Risk update• Guideline enforcement• Reconciliation

PERA utilizes a custom knowledge management system - Backstop

External Risk and Performance Analytics - Liquid

BNY Mellon- Holdings and returns based ex post & ex ante risk analytics and scenario testing

Castle – Returns and factor-based beta and alpha analytics

Portfolio Managers and Associates utilize multiple, specialized risk systems

External Risk and Performance Analytics –Liquid Cont.

Bloomberg holdings and returns based ex post and ex ante tracking error & factor analytics

External Risk and Performance Analytics -Illiquid

Burgiss- deal by deal and cash flow based performance, alpha, and PME reporting

TopQ- deal by deal and cash flow based valuation bridge, what if scenarios, and track record attribution analytics

Internal Risk and Performance Ratings Matrix-LiquidQualitative and quantitative risk statistics culminate into internal, CIO level matrix or dashboard with heat mapped P&L, risk tolerance, and conviction ratings

Internal Risk and Performance Ratings Matrix-IlliquidQualitative and quantitative risk statistics culminate into internal, CIO level matrix or dashboard with heat mapped alpha, quartile, and conviction ratings

Annual Review Example

Annual Rating and Conviction ScoreStrategy – MFS

Policy Benchmark - MSCI ACWISelection Benchmark – MSCI EAFE

Inception: April 2010

PERA Rating: A/1Wilshire Rating: 1st Decile

Risk Budget Assumptions

Alpha Team Expectations

Excess Return (v Policy) 135 200

TE 400 400

IR 0.34 0.50

Rating

A Manager exemplifies principles and SPORTE. Risk aware, separates Alpha and Beta, independent firm/alignment, fee structure alignment, strong track record/pedigree, skill based (high alpha content)

B Manager meets most principles and SPORTE

C Manager meets some principles and SPORTE

Conviction Score

1 Highest conviction. Manager has proven adept and skillful. Its opportunity set is very strong. Strong belief in out-performance 1-3 years and/or high confidence in information ratio. Size up to maximum within risk budget.

2 Strong conviction. Manager is skillful. Opportunity set good. Confidence in long-run IR. Size up when possible.

3 Moderate Conviction. Manager has near universe IR or skill level. Sizing no more than risk budget.

4 No conviction. Manager has less than universe IR or skill level. Terminate when possible.

Annual Meeting Location Manager Rep

October 30, 2019 PERA Office Terry Welch

MFS Investment ManagementInternational Value Equity Strategy

OrganizationFounded in 1924, MFS is one of the oldest asset management companies in the world and has been credited with pioneering the mutual fund. The very first mutual fund, the Massachusetts Investors Trust fund, is still in operation today. As of 1982, MFS became an independently operated subsidiary of Sun Life Financial. MFS employs over 1,900 professionals with over $448 billion in assets under management.

Investment Team The International Value Equity strategy is managed by Benjamin Stone, Pablo de La Mata (London) and Camille Humphries (Client Facing, Portfolio Specialist, Boston). They are responsible for portfolio construction, final buy and sell decisions and risk management. The portfolio managers are supported by research analysts in 9 offices around the world, that are organized into 8 global sector teams which include equity and fixed income.

Investment StrategyThe team’s strategy employs a fundamental bottom-up investment approach based upon a rigorous and disciplined process that tries to identify opportunities where the long term value of the company is not adequately reflected in the stock price. The team endeavors to make sensible projections for returns over the next 5-10 years. The resulting portfolio typically has a value tilt across all capitalization stocks and fairly concentrated with an average of 80-100 holdings, with very low turnover of 9% a year.

EdgeThe team believes investing in stocks that are underrated in the broader market should result in long-term capital appreciation while limiting the downside risk when markets perform poorly. The strategy has the approach of searching for “steady eddy” companies that perform for the long term in sustainable industries where the consumer has basic needs.

Highlights PERA Inception: April

2010

Focus: Non-U.S. all cap developed markets

Return Target: Active return of 2.00%, residual risk target of 2-8%

Selection vs. Policy Benchmark

107.70%

56.60%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

Apr

-10

Sep-

10

Feb-

11

Jul-1

1

Dec

-11

May

-12

Oct

-12

Mar

-13

Aug

-13

Jan-

14

Jun-

14

Nov

-14

Apr

-15

Sep-

15

Feb-

16

Jul-1

6

Dec

-16

May

-17

Oct

-17

Mar

-18

Aug

-18

Jan-

19

Jun-

19

MSCI EAFE vs MSCI ACWICumulative Distribution, +/- 1 STDEV

7.50% georeturn and 17.00% risk expectation04/30/2010 - 9/30/2019

Cumulative Policy Return (%)

Cumulative Selection Return (%)

Lower Band

Target (Policy Return)

Upper Band

Cumulative value add-51.10% or ($60M)

Manager vs. Selection Benchmark

56.60%

133.41%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

160.00%

Apr

-10

Sep-

10

Feb-

11

Jul-1

1

Dec

-11

May

-12

Oct

-12

Mar

-13

Aug

-13

Jan-

14

Jun-

14

Nov

-14

Apr

-15

Sep-

15

Feb-

16

Jul-1

6

Dec

-16

May

-17

Oct

-17

Mar

-18

Aug

-18

Jan-

19

Jun-

19

MFS vs MSCI EAFECumulative Distribution, +/- 1 STDEV

7.50% return and 17.00% risk expectation04/30/2010 - 09/30/2019

Cumulative Selection Benchmark Return (%)

Cumulative Strategy NOF Return (%)

Lower Band

Target

Upper Band

BMV Apr 2010 = $140MNet Withdrawals = ($115M)EMV Sep 2019 = $188M

Cumulative value add76.81% or $97M

Cumulative Excess Active Return Distribution

76.81%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Oct

-13

Apr

-14

Oct

-14

Apr

-15

Oct

-15

Apr

-16

Oct

-16

Apr

-17

Oct

-17

Apr

-18

Oct

-18

Apr

-19

Cumulative Excess Active Return Distribution +/- 1 St Deviation

04/30/2010 - 9/30/2019200 bps excess return and 400 bps tracking error expectation

Cumulative NOF Excess Return (%)

Lower Band

Target

Upper Band

Annualized Ex-Ante TE as of August 2019 = 4.23%

Since Inception Fee Analysis & Excess Return Capture

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

MFS vs MSCI EAFE

Net Value Add Fees Capture Ratio

BMV Apr 2010 = $140MNet Withdrawals = ($115M)EMV Jun 2019 = $188M

Gross $107MFees ($10M)Net $97MCapture Ratio 91%

Excess Return STATs OMEGA RATIO = 1.68

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

-15.00 -10.00 -5.00 0.00 5.00 10.00 15.00

Mon

thly

Exc

ess

Ret

urns

Monthly Benchmark Returns

Excess vs Benchmark Return

y= 0.43 - .23x

R^2 = .37Excess Return Stats

Mean 0.323245614Standard Error 0.145673329Median 0.215Mode 2.3Standard Deviation 1.555365532Sample Variance 2.419161939Kurtosis -0.37411372Skewness -0.08701128Range 7.16Minimum -3.56Maximum 3.6Sum 36.85Count 114

0

2

4

6

8

10

12

14

16

18

-4 -3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3 3.5 4

Freq

uenc

y

Bin

Excess Return vs Selection

Ex-Ante Idiosyncratic Risk Contribution

N e w M e x i c o P E R A

WILSHIRE ASSOCIATES

November 2019

Thomas Toth, CFA – Managing DirectorRose Dean – Managing Director

B e n c h m a r k i n g U p d a t e


• Benchmarking provides investors and managers a realistic and achievable goal, and serves as a clear and objective means of evaluating performance.

• The purpose of benchmarking can be summarized as follows:


Purpose of Benchmark ing

Performance Attribution

Manager Evaluation

Insight on Risk/Returns

Measure against which manager performance can be evaluated to assist in retention / termination decisions

Decomposition of sources of return, such as asset allocation, active vs. passive management, manager skill, etc.

Insight into level of risk being taken to generate return and the volatility of return over time



Benchmark Se lec t ion Cons idera t ions

Does it appropriately reflect the objective of the strategy and is it consistent with the asset class objective?

Manager Benchmark

Asset Class Benchmark

Does it reflect a broad universe of investment opportunities in an asset class and offer a “target” for combining multiple managers within the asset class?

Total Fund BenchmarkDoes it appropriately match the plan sponsor’s investment philosophy and objectives and reflect the overall structure of the fund?



Se lec t ing the Appropr ia te Benchmark

• The appropriate benchmark is a function of the return and risk characteristics of the asset class or portfolio being measured.

• Benchmarks may be published market benchmarks or custom benchmarks Published benchmarks are preferable; however, custom benchmarks

may be optimal for some portfolio strategies such as Multi-Asset Risk Allocation

Generally, asset class benchmarks are published market indices which represent a broad investment opportunity set E.g., Wilshire 5000, Bloomberg Barclays Aggregate

• Objective of benchmark selection process is to minimize benchmark “misfit” risk, which is uncompensated risk “Misfit” risk is the return difference attributable to the benchmark

characteristics that are not reflected in the portfolio and vice versao E.g., All cap equity portfolio benchmarked to the S&P 500 Index

• Holdings-based risk and style attribution analyses is one way to determine the optimal portfolio benchmark.



Charac te r i s t i cs o f an Idea l Benchmark

Unambiguous

Investable

Measurable

Appropriate

Reflective of current investment

options

Pre-specified

Benchmark components and construction methodology are clearly identifiable.

It is possible to replicate and simply hold the benchmark.

The benchmark’s return is readily calculable on an on-going basis.

The benchmark is consistent with the composite’s objective or manager’s investment style.

The manager is knowledgeable of the securities or factor exposures within the benchmark.

The benchmark is agreed upon prior to the start of the monitoring period.

Source : CFA Institute



Benchmark Ad jus tments in 2019

• In 2019, Total Fund benchmark has been appropriately adjusted to dollar cost average into Multi-Risk allocation



To ta l Fund Benchmark Summary

Custom Blended Benchmark - Current Weights Custom Blended Benchmark - Target Weights

Global Equity Custom Blended Benchmark 39.7% Custom Blended Benchmark 35.5%MSCI ACWI IMI ($net) 32.7% MSCI ACWI IMI ($net) 28.5%MSCI ACWI Minimum Volatility ($net) 7.0% MSCI ACWI Minimum Volatility ($net) 7.0%

Risk Reduction & Mitigation Custom Blended Benchmark 20.6% Custom Blended Benchmark 19.5%Bloomberg Barclays U.S. Aggregate 18.1% Bloomberg Barclays U.S. Aggregate 17.0%Bloomberg Barclays Global Aggregate 2.5% Bloomberg Barclays Global Aggregate (Hedged) 2.5%

Credit Oriented Fixed Income Custom Blended Benchmark 15.0% Custom Blended Benchmark 15.0%Bloomberg Barclays Global High Yield 12.0% Bloomberg Barclays Global High Yield (Hedged) 12.0%50% JP Morgan EMBI Global Diversified ($) / 50% JP Morgan GBI ($) 3.0% 50% JP Morgan EMBI Global Diversified ($) / 50% JP

Morgan GBI ($) 3.0%

Real Assets Custom Blended Benchmark 20.0% Custom Blended Benchmark 20.0%Wilshire Global REITs 7.0% Wilshire Global REITs 7.0%Alerian - MLP Index 2.0% Alerian - MLP Index 2.0%Dow Jones - Brookfield Global Infrastructure Index 3.0% Dow Jones - Brookfield Global Infrastructure Index 3.0%Bloomberg Barclays - U.S. TIPS 3.0% Bloomberg Barclays - U.S. TIPS 3.0%Bloomberg Commodity - Commodity Index (TR) 5.0% Bloomberg Commodity - Commodity Index (TR) 5.0%

Multi Asset Risk Allocation Wilshire Risk Parity (15% Volatility) Index 4.7% Wilshire Risk Parity (15% Volatility) Index 10.0%

• No benchmark changes are being recommended in this update


• Used as a benchmark to determine if utilization of additional asset classes and/or taking on illiquidity risk provides benefit

• Reference portfolio concept meets the objectives of a good benchmark– Predefined, investable, unambiguous, measurable, and appropriate

• Serves as a clear and objective means of evaluating performance over a long-term time horizon

• Reference Portfolio targets the same total risk level as the current portfolio– Indicative of the risk tolerance of the Board– Return seeking, but cognizant of continued risk concentration


Tota l Fund Benchmark - Reference Por t fo l io

Asset Class Target Weight Appropriate Benchmark

Global Equity 58% MSCI AC World IMI

Core Fixed Income 42% Barclays U.S. Aggregate



To ta l Fund Benchmark - Look ing Ahead• Synthetic replication of market beta exposure

– Market exposure adheres to PERA’s target asset allocation, but does not hold underlying securities to generate market beta return

– Use derivative instruments such as futures, swaps, or options to replicate the return of an underlying market

• Why consider synthetic market beta replication?– Reduce rebalancing and transaction costs– Enhance liquidity– Free up capital to be deployed in higher alpha seeking strategies– Provide flexibility to improve Total Fund risk adjusted returns through

leverage • Benchmarks for synthetic market replication should align with the characteristics

of available derivatives to reduce or eliminate measured active risk– Region and country– Currency– Credit profile

• More education to come on the topic


This material contains confidential and proprietary information of Wilshire Associates Incorporated (Wilshire), and is intended for the exclusive use of the person to whom it is provided. It may not be disclosed, reproduced or redistributed, in whole or in part, to any other person or entity without prior written permission from Wilshire. Third party information contained herein has been obtained from sources believed to be reliable. Wilshire gives no representations or warranties as to the accuracy of such information, and accepts no responsibility or liability (including for indirect, consequential or incidental damages) for any error, omission or inaccuracy in such information and for results obtained from its use. Information and opinions are as of the date indicated, and are subject to change without notice.

This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice.

This report may include estimates, projections and other "forward-looking statements." Due to numerous factors, actual events may differ substantially from those presented.

Wilshire® is a registered service mark of Wilshire Associates Incorporated, Santa Monica, California. All other trade names, trademarks, and/or service marks are the property of their respective holders.

Copyright © 2019 Wilshire Associates Incorporated. All rights reserved.


IMPORTANT INFORMATION

NM Public Employees Retirement AssociationCash Flow Projection - FY 20

Actuals

July August September October November December January February March April May June

Month Beginning Cash, BNYM $42 $24 $20 $21 $22 $23 $24 $25 $26 $27 $28 $29

Uses of Cash

Illiquid Asset Capital Calls PE, RE, RA, Credit 59 80 80 80 80 80 80 80 80 80 80 80 Private Asset Drawdowns

Asset Class PurchasesLiquid Asset Purchases 265

Total Benefit Payments 105 105 105 105 105 105 105 105 105 105 105 105Benefit Payments (BNYM) 53 60 60 60 60 60 60 60 60 60 60 60

Benefit Payments (STO) 52 45 45 45 45 45 45 45 45 45 45 45Refunds 4 4 4 4 4 4 4 4 4 4 4 4

Operational Expense 1 2 2 2 2 2 2 2 2 2 2 2 Other 0

Sources of Cash

Asset Class SalesLiquid Asset Redemptions 305 85 90 90 90 90 90 90 90 90 90 90

Illiquid Asset Distributions 49 50 50 50 50 50 50 50 50 50 50 50 Private Asset DistributionsIlliquid Asset Redemptions 2 Hedge Fund / Portable Alpha

Employee / Employer Contributions 51 50 50 50 50 50 50 50 50 50 50 50Other 2 1 1 1 1 1 1 1 1 1 1 1 Suspense Account / Corporate Action / Overlay

Month Ending Cash, BNYM $24 $20 $21 $22 $23 $24 $25 $26 $27 $28 $29 $30

Corporate Action/Suspense 3 4 4 4 4 4 4 4 4 4 4 4 Month Ending Cash, STO 22 20 20 20 20 20 20 20 20 20 20 20

Month-End Capital AllocationsActual Target Var. Range

Global Equity 6,476 6,370 6,299 6,190 6,100 6,010 5,921 5,831 5,742 5,652 5,563 5,475 (72) 41.3% 35.5% 5.8% +/-5%Risk Reduction & Mitigation 3,349 3,278 3,232 3,203 3,178 3,153 3,128 3,103 3,078 3,053 3,028 3,004 (29) 21.4% 19.5% 1.9% +/-3%Credit Oriented Fixed Income 2,286 2,343 2,340 2,337 2,333 2,330 2,326 2,322 2,319 2,315 2,312 2,308 (9) 14.6% 15.0% -0.4% +/-4%Real Assets 3,112 3,125 3,120 3,115 3,111 3,106 3,101 3,097 3,092 3,087 3,082 3,077 0 19.9% 20.0% -0.1% +/-4%Multi-Risk Allocation 421 508 608 732 832 932 1,031 1,130 1,229 1,327 1,426 1,523 106 2.7% 10.0% -7.3% +/-4%STO Cash 22 20 20 20 20 20 20 20 20 20 20 20 (6) 0.1% 0.0% 0.1%

Total (net of cash flows) $15,666 $15,643 $15,620 $15,597 $15,574 $15,551 $15,527 $15,503 $15,479 $15,455 $15,431 $15,407 (10) 100.0% 100.0%

Month-End Percentage AllocationsFund Balance (less STO) $15,644 $15,623 $15,600 $15,577 $15,554 $15,531 $15,507 $15,483 $15,459 $15,435 $15,411 $15,387Global Equity 41.4% 40.8% 40.4% 39.7% 39.2% 38.7% 38.2% 37.7% 37.1% 36.6% 36.1% 35.6%Risk Reduction & Mitigation 21.4% 21.0% 20.7% 20.6% 20.4% 20.3% 20.2% 20.0% 19.9% 19.8% 19.7% 19.5%Credit Oriented Fixed Income 14.6% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%Real Assets 19.9% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%Multi-Risk Allocation 2.7% 3.3% 3.9% 4.7% 5.4% 6.0% 6.7% 7.3% 8.0% 8.6% 9.3% 9.9%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Estimate

Current Month's Weights

Month's Activity

July Change in Value

Global Equity Liquidity Overlay: $40m Global Public Stock: $160m Core Bonds: $60m Liquid Credit: $45m

Multi-Risk: $100m Global Equity Liquidity Overlay: $120m Credit Liquidity Overlay: $45m




Uses of Cash


Asset Class PurchasesLiquid Asset Purchases 265 100



Operational Expense 1 1 2 2 2 2 2 2 2 2 2 2 Other 0 0

Sources of Cash


Illiquid Asset Distributions 49 56 50 50 50 50 50 50 50 50 50 50 Private Asset DistributionsIlliquid Asset Redemptions 2





Global Equity 6,476 6,382 6,319 6,210 6,119 6,029 5,939 5,850 5,760 5,671 5,582 5,493 (94) 40.7% 35.5% 5.2% +/-5%Risk Reduction & Mitigation 3,349 3,307 3,242 3,213 3,188 3,163 3,138 3,113 3,088 3,063 3,038 3,013 (42) 21.1% 19.5% 1.6% +/-3%Credit Oriented Fixed Income 2,286 2,298 2,347 2,344 2,340 2,337 2,333 2,330 2,326 2,323 2,319 2,316 12 14.6% 15.0% -0.4% +/-4%Real Assets 3,112 3,129 3,130 3,125 3,120 3,116 3,111 3,107 3,102 3,097 3,092 3,087 17 19.9% 20.0% -0.1% +/-4%Multi-Risk Allocation 421 539 610 734 835 935 1,034 1,134 1,233 1,332 1,430 1,528 118 3.4% 10.0% -6.6% +/-4%STO Cash 22 36 20 20 20 20 20 20 20 20 20 20 14 0.2% 0.0% 0.2%

Total (net of cash flows) $15,666 $15,691 $15,668 $15,645 $15,622 $15,599 $15,576 $15,553 $15,529 $15,505 $15,481 $15,457 25 100.0% 100.0%


100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Actuals Estimate


Month's Activity

August Change in Value

Global Equity Liquidity Overlay: $25m Real Asset Liquidity Overlay: $30m Risk Reduction Liquidity Overlay: $40m Core Bonds: $100m

Multi-Risk: $100m




Uses of Cash


Asset Class PurchasesLiquid Asset Purchases 265 100 100



Operational Expense 1 1 1 2 2 2 2 2 2 2 2 2 Other 0 0 0

Sources of Cash


Illiquid Asset Distributions 49 56 36 50 50 50 50 50 50 50 50 50 Private Asset DistributionsIlliquid Asset Redemptions 2 0 Hedge Funds / Portable Alpha





Global Equity 6,476 6,382 6,338 6,233 6,143 6,052 5,962 5,872 5,783 5,693 5,604 5,515 (44) 40.3% 35.5% 4.8% +/-5%Risk Reduction & Mitigation 3,349 3,307 3,299 3,225 3,200 3,175 3,150 3,125 3,100 3,075 3,050 3,025 (8) 21.0% 19.5% 1.5% +/-3%Credit Oriented Fixed Income 2,286 2,298 2,293 2,353 2,349 2,346 2,342 2,339 2,335 2,332 2,328 2,325 (5) 14.6% 15.0% -0.4% +/-4%Real Assets 3,112 3,129 3,128 3,137 3,132 3,128 3,123 3,119 3,114 3,109 3,105 3,100 (1) 19.9% 20.0% -0.1% +/-4%Multi-Risk Allocation 421 539 639 737 838 938 1,038 1,138 1,238 1,337 1,436 1,534 100 4.1% 10.0% -5.9% +/-4%STO Cash 22 36 30 20 20 20 20 20 20 20 20 20 (6) 0.2% 0.0% 0.2%



100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


Month's Activity

September Change in Value

Real Asset Liquidity Overlay: $65m Global Public Stock: $100m

Multi-Risk: $100m

Actuals Estimate

Manager Selection Activity ReportNovember, 2019

Overview: Manager Selection Process

Manager Selection Pipeline In Process - Liquid Allocation Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Transition Management Total Fund Completed Completed In Process Summary: Transition Management (Contract Expiration)

Schroders International Small Cap Global Equity Completed Completed Completed Completed CompletedSummary: Liquid Global Public Stock (Termination)

In Process - Illiquid Allocation Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Single-Family Rental Real Assets In Process Summary: Private Value-Add Real Estate (New Mandate)

Altaris Fund V Global Equity In Process Summary: Private Equity (Follow-On Investment)

Illiquid Farmland Real Assets Completed Completed Completed In Process Summary: Private Farmland (New Mandate)

Contingent Capital Credit Completed Completed Completed In Process Summary: Private Debt (New Mandate)

Madison Dearborn Partners VIII Global Equity Completed Completed Completed Completed CompletedSummary: Private Equity (Follow-On Investment)

IFM Global Infrastructure Real Assets Completed Completed Completed Completed CompletedSummary: Illiquid Infrastructure (Increased Mandate)

New Rock Core Real Estate Fund Real Assets Completed Completed Completed Completed CompletedSummary: Illiquid Core+ Real Estate (Increased Mandate)

Schroder International Small Cap Mandate Termination

On October 25, 2019 the Alpha team proposed the termination of Schroders, a liquid international small-cap manager within the Global Equity portfolio. This proposal is in response to the continued underperformance within the portfolio, and the significant team turnover in the last year. Staff shall provide a 30 day notice of termination to the manager, for a contract termination date effective December 08, 2019. The liquidation of this account will be managed through the utilization of a transition manager.

Proceeds from this liquidation (~$125m) will be reallocated as follows:

1) Reallocate to 2 high conviction small cap managers• $25 million Principal – International Small Cap• $25 million Kayne Anderson Rudnick – U.S. Small Cap

2) Fund Risk Parity with the remainder at the next tranche, approximately $75 million

Proposal:

Schroders:Performance Review

-1.85%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

May

-12

Sep-

12Ja

n-13

May

-13

Sep-

13Ja

n-14

May

-14

Sep-

14Ja

n-15

May

-15

Sep-

15Ja

n-16

May

-16

Sep-

16Ja

n-17

May

-17

Sep-

17Ja

n-18

May

-18

Sep-

18Ja

n-19

May

-19




Lower Band

Target

Upper Band

Annualized Ex-Ante TE as of July 2019 = 2.77%

Reallocation of Capital: Principal International Small Cap Equity Organization

A member of the Fortune 500, Principal Financial Group was founded in 1879 and began managing retirement assets in 1941. Principal now manages $667 billion, including $412 billion under the Principal Global Investors umbrella and $96.5 billion within Principal Global Equities.

Investment Team

Headquartered in Des Moines, Iowa, Principal Global Equities has 70 dedicated equity investment professionals with an average of 19 years of experience and 14 years of tenure at Principal. Brian Pattinson serves as lead portfolio manager for the firm's international portfolios while providing oversight to the U.S. small-cap team. Brian also leads the global small-cap team's research and development efforts. Tiffany Lavastida is a portfolio manager for Principal Global Equities. Her responsibilities include portfolio management and analysis on the int'l small-cap team and covers financials, real estate and energy sectors.

Investment Strategy

International Small Cap Equity aims to provide long-term capital growth by primarily investing in small-cap companies domiciled in developed international (ex-U.S.) markets. Principal portfolio managers are bottom-up, earnings focused investors who embrace the principles of behavioral finance. Recognizing that investors are change averse and risk averse, Principal seeks to capitalize on persistent biases, anomalies and inefficiencies by identifying companies exhibiting: (1) Fundamental Change – placing particular emphasis on sustainable earnings trends, (2) Expectation Gaps – opportunities offering the greatest potential for positive earnings surprise and (3) Relative Valuation – focusing on companies offering a valuation discount with re-rating potential. Portfolio profiles typically reflect a compelling simultaneous combination of growth and value characteristics relative to the benchmark.

Edge

With a Global Research Platform and proprietary risk management framework, Principal leverages powerful analytical tools and technology platforms to complement fundamental research, analysis, and insights in order to make well-informed, high conviction stock selection and portfolio construction decisions.

Highlights

Strategy Inception: December 2007 (PERA)

Regional Focus: Non-US small cap developed markets

Principal: Performance Review

26.12%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

Dec-

07Ju

n-08

Dec-

08Ju

n-09

Dec-

09Ju

n-10

Dec-

10Ju

n-11

Dec-

11Ju

n-12

Dec-

12Ju

n-13

Dec-

13Ju

n-14

Dec-

14Ju

n-15

Dec-

15Ju

n-16

Dec-

16Ju

n-17

Dec-

17Ju

n-18

Dec-

18Ju

n-19




Lower Band

Target

Upper Band

Annualized Ex-Ante TE as of June 2019 = 1.79%

Reallocation of Capital: Kayne Anderson Domestic Small CapOrganizationKAR is structured as a LLC and a wholly owned subsidiary of Virtus Investment Partners, Inc. The firm provides an array of investment products across equity and fixed income. The AUM for the firm is $20.5 billion., with the small cap core product being $5.7 billion and soft closed for new investors.

Investment Team The investment team as a whole equals 7 professionals based in Los Angeles, CA and the overall investment and research function is cooperative and team oriented. The portfolio managers, Todd Beiley and Jon Christensen, are ultimately responsible for portfolio construction and execution.

Investment StrategyKAR’s goal is to develop unique insight and conviction in each of the companies in the portfolio by evaluating the sustainability of the business model and assess management’s ability to manage the excess capital that the business generates. Stock selection is the most critical factor and while they are cognizant of the macro environment, they only invest in companies that meet their definition of high-quality. Regardless of the trending market cycle, KAR maintains a strict adherence to their high quality investment approach. Ultimately, the portfolio is relatively focused with approximately 20 to 40 companies. The individual holdings are diversified across economic sectors with a sector allocation discipline that allows portfolio sector weights to vary typically within +/-10% of the benchmark (utilizing the Russell sector classifications).

EdgeThe teams goal is to create an approach that results in a focused, low turnover portfolio of companies with durable competitive positions. This approach has been followed since the founding of the firm and believe it will continue to generate attractive risk-adjusted results. Their experience shows that high quality companies typically outperform lower quality companies with less risk over a complete market cycle.

Highlights

PERA Inception: September 2018

Focus: U.S. Small Cap Equity

Kayne: Performance Review

Madison Dearborn VIIIFollow-On Investment

On October 25, 2019 the Alpha Team proposed committing up to $75 million to Madison Dearborn Capital Partners VIII (“MDP VIII”) , L.P. an illiquid private equity partnership which seeks to make buyout and growth investments in established upper-middle market companies located primarily in the United States. The fund will target 15-20 transactions across five industry sectors, basic industries, business & government software and business services, financial & transaction services, healthcare and telecom, media & technology services. The fund will target mid teens net IRR’s and 2.0x MOIC with hold periods of four to five years.

This is a follow-on investment, PERA committed $25 million to MDP VI in 2008.

This recommendation is based on due diligence material and data obtained by the PERA investment division,consultant, and directly from the fund. The due diligence focuses on the strategy of the recommended fund asit fits within the current global equity portfolio. Additionally, PERA defers to the consultant’s primarydiligence on matters relating to the quality and sufficiency of the fund’s back office, compliance, and otheroperational matters.

Proposal

• Per the Strategic Asset Allocation (SAA), global equity should constituteapproximately 35.5% of the total portfolio, of which private equity is9%. This recommendation would increase the private equity committedallocation bringing the total portfolio closer to approved SAA targets.

Asset Allocation

• MDP has historically outperformed in multiple dimensions. For FundIV- VII the net excess return over MSCI ACWI IMI approximates1370bps (direct alpha) and excess wealth multiple approximates 1.75x(KS-PME ratio). The Alpha target for PE is 260 bps excess return.

Risk Budget/Alpha

• Team of 43 investment professionals in one office in Chicago, IL• Consistent strategy and deal teams with over 15 years experience• Industry focused approach with sector expertise• Trusted partner with longstanding and deep industry relationships in

the Midwest

Seasoned, Stable Management Team

• MDP has a long track record in PE investing across multiple industryverticals

• Proven ability to exit primarily to strategic buyers• Deep experience valuing managers in different market conditions• Midwest proprietary sourcing and deal flow

Edge

Reasons to Invest:

General PartnerFirm Madison Dearborn Partners, LLC Founded 1992

Locations • Chicago, IL Firm Pedigree

Madison Dearborn was formed as a spin outof First Chicago Venture Capital, the privateequity arm of First National Bank ofChicago. In the early 1980’s the founders ofthe firm worked together at First ChicagoVenture Capital.

Firm AUM Existing GP Yes; $25M in Fund VI

Ownership

Alignment

Firm Summary: MDP VIII, LP

PRIVATE AND CONFIDENTIAL

Fund

TargetSize

FundraisingStatus

Strategy Buyout and Growth EquityTargetProfile

Team Structure

TrackRecordvs.MSCIACWI(net)

Notable LPs

Fund Summary: MDP VIII, LP


ManagementFee

GPCommitment

CarriedInterest LP Advisory

CommitteePreferredReturn

InvestmentPeriod

Key Person

TermSuccessionPlanning

Terms and Governance: MDP VIII, LP


Due Diligence Performed: MDP VIIIDate Item

2008 • PERA committed $25 million to Fund VI

2008-2014 • Consultant and Staff reviewed periodically

April 16, 2015 • Met with Co-CEO Paul Finnegan to review potential allocation to Fund VII

2015 – 2018 • Continued review and update calls by Staff

November 14, 2018 • Attendance of Annual Meeting in anticipation of re-up to Fund VIII

March 3, 2019 • Update meeting regarding fundraise in Chicago, IL

September 2019• Torrey Cove conducted primary diligence on matters relating to the quality and sufficiency

of the Fund’s back office, compliance, and other operational matters

August - September 2019• PERA and TorreyCove conduct diligence calls, reference calls with service providers,

lender and limited partners

October 17, 2019 • Staff onsite due diligence

October 25, 2019 • Internal staff review for commitment of up to $75 million;

Performance Review: MDP Funds IV-VII



Net of fee data as of June 30, 2019


Performance Review: MDP Fund VI



IFM Global Infrastructure FundIncreased Mandate

On September 30, 2019 the Alpha Team proposed committing an additional $50 million to IFM GlobalInfrastructure (US), L.P. (“IFM”), an illiquid real assets partnership with a focus on investments in high qualitycore infrastructure assets. IFM seeks to acquire core infrastructure assets with strong market positions, highbarriers to entry, limited demand elasticity and long lives through direct ownership or long-term leases thathave a link to inflation through regulatory price frameworks or contacted terms. IFM is currently invested in23 infrastructure assets diversified across vintage year, geography, and sector. The fund targets a net return of8-12% over rolling three-year periods.

An additional commitment to IFM would constitute an increase to the December 2012 initial commitment of$25 million, and the subsequent September 2016 increased commitment of $75million, resulting in a totalcommitment of $150 million to this open-end core infrastructure fund.

This presentation is based on due diligence material and data obtained by the investment division and consultant, directly from the manager, and focuseson the strategy of the recommended manager as it fits within the current portfolio. Additionally, PERA defers to the consultant’s primary diligence onmatters relating to the quality and sufficiency of the fund’s back office, compliance, and other operational matters.

Proposal

• PERA and IFM maintain a successful relationship, dating back to 2012,which has contributed to favorable strategy diversification and meaningfuloutperformance, as compared to the portfolio’s policy index; 8.55% directalpha and 1.17 KS PME, net of fees performance for PERA’s currentposition in the fund.

Existing Relationship

• Access to a large scale and highly capable manager that capitalizes on themarket opportunities available due to the substantial imbalance betweenthe capital required to effectively address infrastructure needs and theplanned investment opportunities in the market

Market Opportunity

• An open-end fund structure presents a strategic advantage to PERA,providing the opportunity for vintage year diversification, j-curvemitigation, efficient and prudent capital deployment, and a favorablematching of assets to long-term liabilities

Fund Structure

• Continued utilization of one of the largest infrastructure managers in theworld, with $23.9 billion (at June 30, 2019) in infrastructure investmentsglobally

Firm Pedigree

Reasons to Invest

Firm Summary: IFM Global Infrastructure (US), L.P.

Firm IFM Investors Founded 2004

HeadquartersMelbourneAdditional offices in: Sydney, New York,London, Berlin, Tokyo and Hong Kong

Firm Pedigree

• One of the earliest investors inAustralian infrastructure

• Contributed significantly to theevolution of the infrastructure market

• One of the largest infrastructuremanagers in the world, with $23.9billion (at June 30, 2019) ininfrastructure investments globally

Firm AUM Existing GP• Yes• $100 million• 100% called and invested

Ownership

Alignment


Fund Summary: IFM Global Infrastructure (US), L.P.

Target size Fundraising Status

Strategy

• Construct and maintain a portfolio with long-term, core infrastructure asset that display thefollowing characteristics: monopoly-like,strong market position, consistent regulatoryenvironment, high barriers to entry, limiteddemand-elasticity, exposure to inflation andeconomic growth, and long lives

• Active ownership approach, seeking boardrepresentation for every asset, and utilizingIFM executives within asset managementteams

• Secure and support exceptional managementteams whose compensation is aligned with theasset’s long-term objectives

Target Profile

Team Structure

Track Record

Notable LPs


Terms and Governance: IFM Global Infrastructure (US), L.P.

Management Fee GPCommitment

Carried Interest InvestmentCommittee

Preferred Return LP Advisory Committee

Investment Period/Term

Key Person

Liquidity SuccessionPlanning


Due Diligence Performed: IFM Global Infrastructure (US), L.P.

Date Item

June 2012 – December 2012• Initial fund diligence, resulting in a $25 million commitment, as approved by the Board of

Trustees

January 2015 • 100% of PERA commitment called and invested

July 2016• PERA receipt of notification of 2016 investor priority period for additional $3 billion

fundraise

July – September 2016• Updated fund diligence, resulting in $75 million additional commitment, as approved by the

Board of Trustees

October 2017 • 100% of PERA commitment called and invested

May 2019• PERA on-site with IFM - visited the Manhattan office and met with Head of

Infrastructure and sector focused team members for an investor update and a review ofindividual responsibilities within the fund

July 2019 • PERA receipt of notification of 2019 investor priority period, expiring September 30, 2019

July – September 2019• PERA and Albourne complete updated diligence on existing portfolio and IFM team for

proposal of increased allocation during priority investor period

Ongoing • Oversight and monitoring of existing investment


Performance Review: IFM Global Infrastructure (US), L.P.

New Rock Core Real Estate FundIncreased Mandate

On October 25, 2019 the Alpha Team proposed committing an additional $150 million to the New Rock Core RealEstate Fund, an illiquid real estate partnership that will continue their focus on acquiring and managing a portfolio ofhigh-quality, well-located CORE and CORE+ real estate assets that will generate a durable long-term income stream,exclusively for NM PERA through a separate account structure. New Rock will continue to invest across the UnitedStates, with a primary investment objective that will target boutique office and creative workspace in high-qualitycoastal markets. Additionally, New Rock will maintain a secondary investment objective targeting mixed-use real estatewith multi-family exposure.

New Rock’s investment strategy will target a net IRR of 6%-7%, half of which is expected to be comprised of currentincome. Rockwood will seek to expand committed capital to an additional 5-10 properties over the next two to threeyears. Anticipated equity investments will be between $10-$50 million, over the life of the account. This increasedcommitment is an expansion of the current relationship between PERA and the managing member, Rockwood. Todate, PERA has previously committed $20 million to Rockwood Real Estate Partners VIII in 2008, $35 million toRockwood Real Estate Partners Fund IX in 2011, $60 million to Rockwood Real Estate Partners X in 2014, $150million to the initial phase in of the New Rock Core Real Estate Fund in 2017, and $50 million to Rockwood RealEstate Partners Fund XI in 2019.

This presentation is based on due diligence material and data obtained by the investment division and consultant, directly from the manager, and focuses on the strategy ofthe recommended manager as it fits within the current portfolio. Additionally, PERA defers to the consultant’s primary diligence on matters relating to the quality andsufficiency of the fund’s back office, compliance, and other operational matters.

Proposal

• PERA and Rockwood maintain a successful relationship, dating back to2008, which has contributed to favorable strategy diversification andmeaningful outperformance, as compared to the portfolio’s policy index;10.66% direct alpha and 1.06 KS PME, net of fees performance for PERA’scurrent position in the New Rock Fund. Additionally, PERA’s aggregatedperformance in Rockwood’s value add series has generated a 3.40% directalpha and 1.07 KS PME for the PERA portfolio over the life of therelationship.


• PERA continues to seek diversification within the real assets portfolio,with an emphasis on risk-reduction through CORE assets. Thisrecommendation would assist in meeting illiquid core real estate allocationtargets and bringing the portfolio closer to budgeted risk targets.Additionally, this sector focused strategy will further align the Real Estateportfolio more closely with the policy index, as PERA is currentlyunderweight in office properties.

Asset Allocation

• Unique and appropriately designed structure that allows PERA access tooptimal opportunities given current market conditions and currentexposures within the existing PERA real estate portfolio

• Flexibility to redefine execution parameters around changing economic,political and real estate fundamentals

Optimal Investment Structure

• Rockwood’s strong sponsorship and reputation for integrity presents astrategic advantage to PERA, who can leverage Rockwood’s reputation andextensive professional network to gain access to favorable investmentopportunities through proprietary deal flow and creative deal structuring

Firm Pedigree

Reasons to Invest

Firm Summary: New Rock Core Real Estate Fund

Firm Rockwood Capital, LLC Founded 1995

Locations• Headquartered in New York, NY• Additional locations: San Francisco, CA,

Los Angeles, CA, and Seoul, KoreaFirm Pedigree

• Rockwood’s real estate professionals havediverse skill sets and experience that spanseveral real estate and capital marketscycles

• Rockwood is led by a senior team with anaverage tenure of 23 years of real estateexperience

Firm AUM Existing GP

• Yes• $20 million to Fund VIII in 2008• $35 million to Fund IX in 2011• $60 million to Fund X in 2014• $150 million to New Rock in 2017• $50 million to Fund XI in 2019

Ownership

Alignment


Target Size

Fundraising Status

Strategy

• PERA customized separate account focused on theacquisition and management of office and mixed-useresidential properties

• Employ active asset management to reposition, re-lease,rehabilitate, and/or develop real estate assets

• Focus on growing and evolving neighborhoods,especially those driven by a concentration ofknowledge, education, and wealth or population-basedsocioeconomic trends

• Targeted markets will have a combination of growth,government sponsored infrastructure, regulatorysupport for business interests, and supply constraints

• Pursue a mix of assets, some with income in place andothers where the business plan will require some timeto put income in place, in order to construct a diverseand balanced portfolio that has a combination ofcurrent return and value creation upside

Target Profile

Team Structure

Track Record

Notable LPs

Fund Summary: New Rock Core Real Estate Fund


Management Fee

GPCommitment

CarriedInterest

GovernanceCommittees

Preferred Return

LP Advisory Committee

Investment Period

Key Person


Terms and Governance: New Rock Core Real Estate Fund


Date Item

December 2008 – Ongoing• PERA and Rockwood partnership begins with an initial investment in Rockwood Fund

VIII. PERA and consultant conduct ongoing diligence calls, annual meeting attendance,and periodic onsite meetings with Rockwood to monitor current funds

Early 2016 (and Ongoing)• PERA increases its focus on risk reduction within the real estate portfolio, primarily

focusing on core real estate investment opportunities

May 2016 • Launch of diligence on Rockwood Capital SMA opportunity

May 2016 – March 2017• PERA and consultant conduct ongoing diligence calls with Rockwood, reference calls with

service providers, lender, and limited partners

March 2017• Initial investment of $150m approved by the Board of Trustees and first capital allocation

to California office property

November 2018 • Annual meeting and onsite visits to properties within the Fund

July – October 2019• PERA and Albourne complete updated diligence on existing portfolio and Rockwood team

for proposal of increased allocation

Ongoing • Oversight and monitoring of all existing investments; SMA and flagship funds XIII – XI.

Due Diligence Performed: Rockwood Capital


Performance Review: New Rock Core Real Estate Fund


PME vs. Policy Index: New Rock Core Real Estate Fund


PME vs. Sector Specific Index: New Rock Core Real Estate Fund

INVESTMENT COMMITTEE MEETING SENATOR FABIAN CHAVEZ JR. BOARD ROOM

PERA BUILDING

November 12, 2019 at 9:00am MT

COMMITTEE MEMBERS John Melia, Chair Steve Neel, Vice Chair Dan Mayfield Loretta Naranjo-Lopez Shirley Ragin

AGENDA

1. Roll Call2. Approval of Agenda3. Approval of Consent Agenda4. Current Business

ITEM PRESENTER

A Information Item: Performance Update

1. CIO Update2. Quarterly Market Review3. Quarterly Performance Review

Dominic Garcia Chief Investment Officer

Thomas Toth Managing Director, Wilshire

B Information Item: Quarterly Staff Consultant Report (Real Assets)

Kristin Varela Deputy Chief Investment Officer

Heather Christopher, Head of Real Estate, Albourne

Mark White, Head of Real Assets, Albourne

C Information Item: Internal Investment Process Enhancement- Monitoring

LeAnn Larranaga-Ruffy, Co-Head Alpha

Joaquin Lujan, Co-Head Alpha

Frank Mihail, Jr. Portfolio Manager

D Information Item: Benchmarks Review Thomas Toth Managing Director, Wilshire

E Information Item: Investment Division Updates

1. Cash Plan & Rebalance Update(July, August, September 2019)

2. Manager Selection Activity Report3. Securities Lending Update (Q3 2019)

Kristin Varela

5. Adjournment

Consent Agenda

Approval of minutes of August 29, 2019 Investments Committee meeting.

Any person with a disability who is in need of a reader, amplifier, qualified sign language interpreter, or any other form of auxiliary aid or service to attend or participate in the hearing or meeting, please contact Trish Winter at (505) 476-9305 at least one week prior to the meeting, or as soon as possible. Public documents, including the agenda and minutes, can be provided in various accessible formats. Please contact Trish Winter if a summary or other type of accessible format is needed.

Chief Investment Officer’s Update

November 12, 2019

Dominic Garcia, Chief Investment Officer

PERA Long-Term Investment Objectives Scorecard

PERA Investment Objectives Actual Results

Maintain appropriate strategic asset allocation to meet the actuarial discount rate assumption over the long run

Exceeded actuarial hurdle rates for 3 years, 10 years, 30 years, and since data inception (1985)

Meet 10-Year annualized returns to equal or exceed benchmarks

Exceeded Passive “Reference” Portfolio & Internal Benchmarks for 3, 10, 20, 30 years, and since data inception (1985)

For 10 years, PERA produced approximately $1.5 billion in value add over Passive “Reference” Portfolio

Achieve a total investment cost at or below a benchmark cost relative to peers adjusted for fund size and asset mix.

Compared to 317 Global funds (162 U.S. Pension funds, 74 Canadian funds, 70 European funds, 8 Asia-Pacific funds), PERA is low cost and saved approximately $1.7m in fees and costs.

As of 9/30/2019

Stra

tegi

c Dir

ectio

n1. Reference Portfolio

Set Risk Tolerance@ 10.5% Risk

2. Strategic Asset Allocation

Diversified Systematic (“Beta”) Risk/Return

3. Risk Budget

Illiquid Active Implementation

Liquid Active Structure Allocation

Liquid Active Manager Selection

4. Benchmarks Evaluate Results

IC and Board Investment Strategic Governance: Four Main Decision Points

PERA Current Total Risk Budget

Reference Portfolio

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

9.00 9.50 10.00 10.50 11.00

Expe

cted

Ret

urn

Expected Risk

10 Year Portfolio Expectations Comparison

Source: Wilshire 10 Year capital market expectations as of 3/31/2019

Total Expected Value Add

1.4%

Expected Value Add Over the Reference Portfolio

Market Beta Risk

AllocationSelection

• Risk and Return Coming from Passive Asset Allocation

• Risk and Return Coming from Active Allocation to Private Assets


• Risk and Return Coming from Active Allocation to Liquid Strategies


Active Risk = 1.5%, +/- 0.5%

Passive Risk = 9.90%

Total Risk = 10.5%

Risk Budget 2019

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Passive + Risk Balance + Private Assets + Active = Total

5.60% 5.60%

0.40% 0.40%

0.60% 0.60%

0.40% 0.40%

10 Year Targeted Expected Returns

Passive Reference Portfolio Risk Balance Diversified Private Assets Active Management

7.00%

Strategy #1:Improved Risk Diversification

Beta Risk Budget

Strategy #2: Private Asset Allocation

Allocation RiskBudget

Strategy #3:Selective ActiveManagement

Selection RiskBudget

ValueAdd

Bridging the Return Gap

Reference Portfolio & Total Risk Budget Active Risk

Absolute Risk Tolerance: Beta + Active Risk = 10.5% Tracking Error 1.5% +/- 0.50%

1 year 6.9% 3.14%

3 year 4.82% 2.09%

5 year 5.56% 1.91%

10 year 7.59% 1.52%

• Realized total risk has been well below 10.5% risk tolerance.

• Why is TE over 2% in short time frames? A: lagging effect in private markets vs. public market benchmarks

Are We Staying Within Our Risk Tolerance?

TE = 1.52%

Active Return

Tracking Error and Active Return Over Time

What’s Ahead?


WILSHIRE ASSOCIATES

November 2019

Thomas Toth, CFA

Q u a r t e r l y M a r k e t R e v i e w


Designed to review the current market environment, propose thought-leading investment strategies, and provide networking opportunities for our clients.


YOU’RE INVITED!

The Ritz-CarltonMarina del Rey, California

38th Annual Client ConferenceS u n d a y, A p r i l 5 t h – Tu e s d a y, A p r i l 7 t h


• Weighted average of 85 monthly indicators including 1) production and income, 2) employment, 3) consumption and housing and 4) sales, orders, and inventories (all inflation adjusted)

• Aims to identify when a recession may begin (during periods of growth) or end (when already experiencing a recession)


NATIONAL ACTIVITY INDEX

Data sources: Federal Reserve

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50CHICAGO FED NATIONAL ACTIVITY INDEX (3M MA)

Increasing likelihood that a recession has begun

Significant likelihood that a recession has ended


Text


RISK MONITOR

Data sources: Federal Reserve, Bloomberg Barclays

Text

Text Text

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

10-Y

ear

Trea

sury

-3-

Mon

th T

Bill

(%)

YIELD CURVE SLOPE VS RECESSIONS (IN GRAY)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Opt

ions

Adj

uste

d Sp

read

(%

)

BLOOMBERG BARCLAYS CREDIT INDEXES

Investment Grade

High Yield

< — Investment Grade High Yield — >

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Mar

ket

Stre

ss R

elat

ive

to A

vera

ge (

Zero

)

ST. LOUIS FED FINANCIAL STRESS INDEX

Constructed from seven interest rate series, six yield spreads and five other financial stress indicators.0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

30-D

ay E

xpec

ted

Vola

tility

(%

)

CBOE VOLATILITY INDEX


Wi l s h i r e C o n s u l t i n g

GROWTH

• Globally, economic growth has slowed as trade concerns have impacted manufacturing

investment.

• U.S consumption is healthy, though the most recent read on consumer spending

unexpectedly fell.

• Wage growth has improved while inflation remains contained and unemployment is

low.


• Earnings growth in the U.S. has moderated for calendar year 2019 after two strong years in 2017-2018.

• Earnings slowdown combined with elevated valuations represents a risk to equity prices.


EARNINGS EXPECTATIONS


• Federal Reserve decreased their short-term rate twice during the 3rd quarter

• Markets are far more dovish, expecting additional decreases this year and next


SHORT-TERM RATES

Data sources: Federal Reserve, Bloomberg

0.00

0.50

1.00

1.50

2.00

2.50

3.00FEDERAL FUNDS RATE (%)

Effective Rate FOMC year-end est. Market expectations



ASSET CLASS PERFORMANCE

Data sources: Wilshire Compass Note: Developed asset class is developed equity markets ex-U.S., ex-Canada

ANNUALIZED5-YEAR

2014 2015 2016 2017 2018 2019 YTD AS OF 9/2019REITs REITs MLPs Emrg Mrkts T-Bills REITs U.S. Equity31.8% 4.2% 18.3% 37.7% 1.9% 27.2% 10.6%

U.S. Equity U.S. Equity High Yield Developed Core Bond U.S. Equity REITs12.7% 0.7% 17.1% 25.6% 0.0% 20.1% 10.2%

Core Bond Core Bond U.S. Equity U.S. Equity U.S. TIPS Developed High Yield6.0% 0.6% 13.4% 21.0% -1.3% 13.4% 5.4%MLPs T-Bills Commodities High Yield High Yield High Yield Developed4.8% 0.1% 11.8% 7.5% -2.1% 11.4% 3.8%

U.S. TIPS Developed Emrg Mrkts REITs REITs MLPs Core Bond3.6% -0.4% 11.6% 4.2% -4.8% 11.1% 3.4%

High Yield U.S. TIPS REITs Core Bond U.S. Equity Core Bond Emrg Mrkts2.5% -1.4% 7.2% 3.6% -5.3% 8.5% 2.7%T-Bills High Yield U.S. TIPS U.S. TIPS Commodities U.S. TIPS U.S. TIPS0.0% -4.5% 4.7% 3.0% -11.2% 7.6% 2.4%

Emrg Mrkts Emrg Mrkts Core Bond Commodities MLPs Emrg Mrkts T-Bills-1.8% -14.6% 2.6% 1.7% -12.4% 6.2% 1.0%

Developed Commodities Developed T-Bills Developed Commodities Commodities-4.5% -24.7% 1.5% 0.8% -13.4% 3.1% -7.2%

Commodities MLPs T-Bills MLPs Emrg Mrkts T-Bills MLPs-17.0% -32.6% 0.3% -6.5% -14.2% 1.8% -8.6%

ASSET CLASS RETURNS - BEST TO WORST



SEPTEMBER 2019 ASSET CLASS ASSUMPTIONS

Dev Global LT Dev ex-US ex-US Emg ex-US Global Private Core Core High US Bond US Global Private Real US

Stock Stock Stock Stock Stock Equity Cash Bond Bond TIPS Yield (Hdg) RES RES RE Cmdty Assets CPICOMPOUND RETURN (%) 6.00 6.50 6.50 6.75 6.45 8.05 1.60 2.70 3.25 1.90 4.20 0.75 4.70 4.90 6.60 3.15 5.70 1.55ARITHMETIC RETURN (%) 7.30 7.95 9.45 8.35 7.75 11.40 1.60 2.85 3.70 2.10 4.65 0.80 6.05 6.05 7.50 4.20 6.05 1.55EXPECTED RISK (%) 17.00 18.00 26.00 18.80 17.05 28.00 1.25 5.15 9.85 6.00 10.00 3.50 17.00 15.80 14.00 15.00 8.75 1.75CASH YIELD (%) 2.00 3.50 2.50 3.25 2.55 0.00 1.60 2.80 4.05 2.10 7.55 1.35 3.55 3.55 2.60 1.60 2.35 0.00

CORRELATIONSUS Stock 1.00Dev ex-US Stock (USD) 0.81 1.00Emerging Mkt Stock 0.74 0.74 1.00Global ex-US Stock 0.83 0.96 0.86 1.00Global Stock 0.94 0.92 0.82 0.94 1.00Private Equity 0.74 0.64 0.62 0.67 0.74 1.00Cash Equivalents -0.05 -0.09 -0.05 -0.08 -0.07 0.00 1.00Core Bond 0.28 0.13 0.00 0.09 0.20 0.31 0.19 1.00LT Core Bond 0.31 0.16 0.01 0.12 0.23 0.32 0.11 0.93 1.00TIPS -0.05 0.00 0.15 0.05 0.00 -0.03 0.20 0.60 0.47 1.00High Yield Bond 0.54 0.39 0.49 0.45 0.51 0.34 -0.10 0.25 0.32 0.05 1.00Dev ex-US Bond (Hdg) 0.16 0.25 -0.01 0.18 0.18 0.26 0.10 0.67 0.66 0.39 0.26 1.00US RE Securities 0.59 0.47 0.44 0.49 0.56 0.50 -0.05 0.17 0.23 0.10 0.56 0.05 1.00Global RE Securities 0.65 0.59 0.56 0.62 0.66 0.58 -0.05 0.17 0.22 0.11 0.62 0.03 0.94 1.00Private Real Estate 0.54 0.44 0.44 0.47 0.52 0.51 -0.05 0.19 0.25 0.09 0.57 0.05 0.77 0.76 1.00Commodities 0.25 0.34 0.39 0.38 0.32 0.27 0.00 -0.02 -0.02 0.25 0.29 -0.10 0.25 0.28 0.25 1.00Real Assets 0.42 0.43 0.50 0.48 0.47 0.43 0.01 0.24 0.25 0.41 0.53 0.06 0.65 0.69 0.69 0.59 1.00Inflation (CPI) -0.10 -0.15 -0.13 -0.15 -0.13 -0.10 0.10 -0.12 -0.12 0.15 -0.08 -0.08 0.05 0.03 0.05 0.44 0.26 1.00

EQUITY FIXED INCOME REAL ASSETSReal Estate

APPENDIX



U.S. EQUITY MARKET

Data sources: Wilshire Compass, Wilshire Atlas


WILSHIRE 5000 INDEX 1.2 20.1 3.0 12.9 10.6 13.1WILSHIRE U.S. LARGE CAP 1.5 20.6 4.0 13.4 10.9 13.2WILSHIRE U.S. SMALL CAP -1.8 15.8 -7.0 8.2 8.0 12.1WILSHIRE U.S. LARGE GROWTH 0.8 22.1 1.5 16.0 12.3 14.1WILSHIRE U.S. LARGE VALUE 2.2 19.2 6.4 10.8 9.4 12.3WILSHIRE U.S. SMALL GROWTH -2.7 17.6 -6.6 11.0 8.5 12.7WILSHIRE U.S. SMALL VALUE -0.9 13.9 -7.4 5.5 7.4 11.4WILSHIRE REIT INDEX 7.9 27.2 18.4 7.2 10.2 13.1MSCI USA MIN. VOL. INDEX 4.1 23.5 14.0 13.8 12.9 13.7FTSE RAFI U.S. 1000 INDEX 1.7 18.1 1.8 10.6 8.7 12.2

20.1

15.4

24.7

4.0

28.6

21.9

22.0

22.8

20.2

5.8

18.8

30.9

1.2

-0.2

8.1

-7.1

7.6

5.9

2.4

0.7

0.2

-3.8

1.7

2.7

Wilshire 5000

Materials

Utilities

Energy

Real Estate

Consumer Staples

Communication Services

Industrials

Consumer Discretionary

Health Care

Financials

Information Technology

2.5%

3.5%

4.2%

4.6%

7.1%

9.4%

10.1%

10.5%

12.9%

13.9%

21.3%

WILSHIRE 5000 SECTOR WEIGHT & RETURN (%)


-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Larg

e C

ap in

exc

ess

of S

mal

l C

ap

LARGE CAP VS SMALL CAP


-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Gro

wth

in e

xces

s of

Val

ue

GROWTH VS VALUE



Higher quality names continue to lead the market during the third quarter


RETURNS BY QUALITY SEGMENT

Data sources: Wilshire Atlas

(10.00)

(5.00)

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

3Q 19 YTD 2019

Tota

l Ret

urn

(%)

RETURN BY S&P QUALITY RATING

A+ A A- B+ B B- C / D

A+ 6%A 9%A‐ 15%B+ 30%B 16%B‐ 8%C / D 2%N.A. 13%

Segment Weightsas of June 30



NON-U.S. EQUITY MARKET



MSCI ACWI EX-US ($G) -1.7 12.1 -0.7 6.8 3.4 4.9MSCI EAFE ($G) -1.0 13.4 -0.8 7.0 3.8 5.4MSCI EMERGING MARKETS ($G) -4.1 6.2 -1.6 6.4 2.7 3.7MSCI FRONTIER MARKETS ($G) -1.0 11.0 6.2 7.4 -0.9 4.0MSCI ACWI EX-US GROWTH ($G) -0.8 16.6 2.4 7.8 5.2 6.2MSCI ACWI EX-US VALUE ($G) -2.7 7.5 -3.9 5.9 1.5 3.6MSCI ACWI EX-US SMALL ($G) -1.1 10.7 -5.2 5.0 4.5 6.8MSCI ACWI MINIMUM VOLATILITY 2.9 18.2 10.5 10.5 10.1 10.9MSCI EAFE MINIMUM VOLATILITY 0.9 12.4 4.1 6.7 6.8 7.7FTSE RAFI DEVELOPED EX-US -1.3 9.9 -4.2 7.0 2.8 4.2MSCI EAFE LC (G) 1.8 16.2 2.1 8.8 6.5 7.5

13.4

19.9

10.7

24.0

16.9

10.2

11.6

-1.0

-0.9

-4.0

0.3

-1.6

-2.5

3.3

MSCI EAFE

Australia

Germany

Switzerland

France

United Kingdom

Japan

7.0%

8.5%

9.4%

11.4%

16.4%

24.6%

MSCI EAFE: LARGEST COUNTRIES & RETURN (USD)


6.2

-1.5

10.5

2.2

16.7

-0.7

8.1

-4.1

-11.8

-4.6

-5.2

5.9

-4.5

-4.6

MSCI Emrg Mrkts

South Africa

Brazil

India

Taiwan

South Korea

China

4.7%

7.6%

8.9%

11.5%

12.2%

31.9%

MSCI EM: LARGEST COUNTRIES & RETURN (USD)




U.S. FIXED INCOME

Data sources: Wilshire Compass, Bloomberg Barclays, U.S. Treasury

0

100

200

300

400

500

600

700

800

900

Opt

ion

Adju

sted

Spr

ead

(bps

)


Securitized IG Corporate Aa Corporate High Yield

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

0 5 10 15 20 25 30

Yiel

d (%

)

Maturity (yrs)

TREASURY YIELD CURVE

Current Quarter Previous Quarter One Year Ago

AS OF SEPT 30, 2019 YTM DURATION QTR YTD 1 YR 3 YR 5 YR 10 YR

BLOOMBERG BARCLAYS AGGREGATE 2.3 5.8 2.3 8.5 10.3 2.9 3.4 3.7BLOOMBERG BARCLAYS TREASURY 1.7 6.6 2.4 7.7 10.5 2.2 2.9 3.1BLOOMBERG BARCLAYS GOV'T-REL. 2.4 5.8 2.4 8.8 10.1 3.2 3.4 3.5BLOOMBERG BARCLAYS SECURITIZED 2.4 2.9 1.4 5.8 7.9 2.4 2.8 3.3BLOOMBERG BARCLAYS CORPORATE 2.9 7.8 3.1 13.2 13.0 4.5 4.7 5.6BLOOMBERG BARCLAYS LT G/C 3.0 15.9 6.6 20.9 21.9 5.6 6.8 7.4BLOOMBERG BARCLAYS LT TREASURY 2.1 18.3 7.9 19.8 24.8 4.1 6.8 6.9BLOOMBERG BARCLAYS LT GOV't-REL. 3.5 12.7 5.6 18.8 18.8 6.0 6.5 7.3BLOOMBERG BARCLAYS LT CORP. 3.6 14.4 5.6 22.3 20.1 6.5 7.0 7.8BLOOMBERG BARCLAYS U.S. TIPS * 1.6 7.6 1.4 7.6 7.1 2.2 2.4 3.5BLOOMBERG BARCLAYS HIGH YIELD 6.3 3.1 1.3 11.4 6.4 6.1 5.4 7.9TREASURY BILLS 1.9 0.25 0.6 1.8 2.4 1.5 1.0 0.5

* Yield and Duration statistics are for a proxy index based on similar maturity, the Bloomberg Barclays U.S. Treasury 7-10 Year Index



NON-U.S. FIXED INCOME

Data sources: Wilshire Compass, Bloomberg Barclays, Federal Reserve Bank of St. Louis


DEVELOPED MARKETSBLMBRG BRCLYS GLBL AGGREGATE xUS -0.6 4.4 5.3 0.4 0.9 1.3BLMBRG BRCLYS GLBL AGGREGATE xUS * 2.8 8.8 10.8 4.1 4.6 4.4BLMBRG BRCLYS GLOBAL INF LNKD xUS 2.0 8.4 7.2 2.1 1.9 3.3BLMBRG BRCLYS GLOBAL INF LNKD xUS * 6.0 13.9 15.4 5.5 7.3 6.5EMERGING MARKETS (HARD CURRENCY)BLMBRG BRCLYS EM USD AGGREGATE 1.3 10.8 10.6 4.4 5.0 6.7EMERGING MARKETS (FOREIGN CURRENCY)BLMBRG BRCLYS EM LOCAL CURR. GOV'T -0.6 5.3 7.9 2.4 1.1 3.3BLMBRG BRCLYS EM LOCAL CURR. GOV'T * 2.8 7.9 10.7 3.7 3.8 3.8EURO vs. DOLLAR -4.3 -4.6 -6.1 -1.0 -2.9 -2.9YEN vs. DOLLAR -0.3 1.5 5.1 -2.1 0.3 -1.9POUND vs. DOLLAR -3.2 -3.2 -5.5 -1.7 -5.3 -2.6* Returns are reported in terms of local market investors, w hich removes currency effects.

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Yiel

d to

Wor

st (

%)


U.S. Treasury Global xUS Gov't EM USD Sovereign EM Foreign Gov't

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0

10

20

30

40

50

60

70

80

90

100

Rolli

ng 1

-Yea

r Re

turn

Inde

x Le

vel

U.S. DOLLAR INDEX: MAJOR CURRENCIES

Index Level Rolling 1-Year Return



GLOBAL INTEREST RATES

Data sources: Bloomberg

Much of Europe and Japan exhibit negative rates; Long rates are down globally during the past six months

United States

Germany

FranceUnited Kingdom

Japan

AustraliaCanada

China

South Korea

India Russia

Brazil

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

-2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00

10-Y

ear

Yiel

ds (

%)

3-Month Yields (%)

GOVERNMENT BOND YIELDS


• Pricing in some markets is such that short-term rates are discounted to remain negative

• Main concern with negative rates is that market participants hold cash rather than bank deposits

– Minimum deposit rates and tiered bank reserves partially protect against negative interest

– However, this limits the effectiveness of rate cuts below zero

• Markets with negative rates are thought to provide less diversification benefits to a diversified portfolio, although low but positive yields can still lower overall portfolio risk


NEGATIVE RATES

Data sources: Bridgewater

Expected 1‐Year Cash Rate (Years Forward) 0 1 2 3Switzerland ‐0.97% ‐0.99% ‐1.06% ‐1.10%Denmark ‐0.86% ‐0.91% ‐0.94% ‐0.93%Germany ‐0.71% ‐0.91% ‐1.00% ‐0.98%France ‐0.65% ‐0.79% ‐0.80% ‐0.72%Sweden ‐0.64% ‐0.83% ‐0.87% ‐0.81%Japan ‐0.29% ‐0.44% ‐0.56% ‐0.62%United Kingdom 0.49% 0.16% ‐0.01% ‐0.07%Australia 0.69% 0.47% 0.39% 0.44%Canada 1.61% 1.29% 1.10% 1.00%United Stated 1.69% 1.34% 1.21% 1.20%China 2.76% 3.24% 3.10% 3.68%



HIGH YIELD BOND MARKET

Data sources: Wilshire Compass, Bloomberg Barclays


BLOOMBERG BARCLAYS HIGH YIELD 1.3 11.4 6.4 6.1 5.4 7.9CREDIT SUISSE LEVERAGED LOAN 0.9 6.4 3.1 4.7 4.1 5.4HIGH YIELD QUALITY DISTRIBUTION WEIGHTBa U.S. HIGH YIELD 47.8% 2.0 12.8 9.5 5.8 5.9 7.9B U.S. HIGH YIELD 38.7% 1.7 11.9 7.0 6.2 5.0 7.5Caa U.S. HIGH YIELD 12.7% -1.8 5.6 -4.2 5.5 4.5 8.2Ca to D U.S. HIGH YIELD 0.6% -6.7 7.6 -18.3 10.7 -5.8 0.7Non-Rated U.S. HIGH YIELD 0.2% -0.5 4.3 2.5 5.3 -1.0 5.6

0

200

400

600

800

1,000

1,200

1,400

1,600

Opt

ion

Adju

sted

Spr

ead

(bps

)

BLOOMBERG BARCLAYS HIGH YIELD INDEXES

HY Index Ba B Caa



REAL ASSETS

Data sources: Wilshire Compass, National Council of Real Estate Investment Fiduciaries


BLOOMBERG BARCLAYS U.S. TIPS 1.4 7.6 7.1 2.2 2.4 3.5BLOOMBERG COMMODITY INDEX -1.8 3.1 -6.6 -1.5 -7.2 -4.3WILSHIRE GLOBAL RESI INDEX 5.2 22.8 15.3 7.1 8.4 10.9NCREIF ODCE FUND INDEX 1.3 3.8 5.6 7.3 9.3 10.9NCREIF TIMBERLAND INDEX 0.2 1.3 2.1 3.1 4.4 4.0ALERIAN MLP INDEX (OIL & GAS) -5.0 11.1 -8.1 -2.5 -8.6 6.3

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Cur

rent

Yie

ld

Cur

rent

Cap

Rat

e

REAL ESTATE VALUATION

NPI Current Value Cap Rate Wilshire RESI Current Yield 10-Year Treasury Yield

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Retu

rn (

%)

NCREIF ODCE FUND INDEX RETURN

Appreciation Income Total Return



PRIVATE EQUITY – FUNDRAISING & INVESTMENT ACTIVITY


0100200300400500600700800

$0

$50

$100

$150

$200

$250


2014 2015 2016 2017 2018 2019

No.

of F

unds

Agg

rega

te C

apita

l Rai

sed

($B

)

Global Quarterly Private Equity Fundraising (Q1 2014 - Q3 2019)


02004006008001,0001,2001,4001,6001,800

$0$20$40$60$80

$100$120$140$160$180


2014 2015 2016 2017 2018 2019

No.

of D

eals

Agg

rega

te D

eal V

alue

($B

) Global Quarterly Private Equity-Backed Buyout Deals (Q1 2014 - Q3 2019)

Aggregate Deal Value ($bn) No. of Deals



PRIVATE EQUITY – PRICING & VALUATIONS

Source: S&P LBO; PitchBook, *as of September 30, 2019.

7.1x 7.3x8.4x 8.4x

9.7x 9.1x7.7x

8.5x 8.8x 8.7x 8.8x9.7x 10.3x 10.0x 10.6x 10.6x

11.5x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

LBO Purchase Price Multiples (2003 - Q3 2019)

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Venture Capital Pre-Money Valuations ($M) (2009 – Q3 2019)

Angel & seed Early VC Late VC



U.S. INVESTMENT ACTIVITY BY DEAL SIZE

• Deal volume continues to be dominated by lower middle market deals with investment sizes below$100 million through the third quarter of 2019

• However, deals with below $100 million check sizes comprised only 15% of all deal volume byamount of capital invested in the third quarter of 2019

Source: PitchBook, *as of September 30, 2019.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017 2018 2019*

Percentage of Deal Volume by Deal Size (by Dollars)*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017 2018 2019*

Percentage of Deal Volume by Deal Size (by Count)*

$2.5B+

$1B-$2.5B

$500M-$1B

$100M-$500M

$25M-$100M

Under $25M



PRIVATE CAPITAL DRY POWDER

Source: Preqin, *as of October 23, 2019.

• Global private capital dry powder continues to increase, topping $2.5 trillion across all fund types

• Private equity comprises just over 60% of total dry powder in the market as of Q3 2019

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Agg

rega

te D

ry P

owde

r ($B

)

Private Capital Drty Powder by Fund Type (2010 - Q3 2019)

Private Equity Private Debt Private Real Estate Unlisted Infrastructure Unlisted Natural Resources



PRIVATE EQUITY - U.S. DEBT MARKETS


• 2019 has generated approximately $110 billion in loan volume and is on pace to once againincrease year-over-year through the fourth quarter of 2019

• As debt capital becomes less available, the percentage of debt used to finance leveraged buyoutsof less than $50 million of EBITDA through the third quarter of 2019 has dropped from 2018 marks

$0

$50

$100

$150

$200

$250

Total U.S. LBO Loan Volume ($B) (2003 - Q3 2019)

Pro Rata Institutional

0%

10%

20%

30%

40%

50%

60%

70%

80%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Percentage of Debt Used in LBOs (2007 - Q3 2019)

Less than $50M of EBITDA $50M or more of EBITDA



PRIVATE EQUITY - U.S. LBO PURCHASE PRICE MULTIPLES

• Due to the amount of equity that is readily available, purchase price multiples for U.S. LBOs havecontinued to rise through Q3 2019, relative to 2018 levels


9.7x9.1x

7.7x

8.5x8.8x 8.7x 8.8x

9.7x10.3x 10.0x

10.6x 10.6x

11.5x

0x

2x

4x

6x

8x

10x

12x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Purchase Price Multiples of U.S. LBO Transactions (2007 - Q3 2019)

Equity/EBITDA Debt/EBITDA



PRIVATE REAL ESTATE –FUNDRAISING ACTIVITY


0

20

40

60

80

100

120

140

160

$0$5

$10$15$20$25$30$35$40$45$50


2014 2015 2016 2017 2018 2019

No.

of F

unds

Agg

rega

te C

apita

l Rai

sed

($B

)

Global Quarterly Closed-End Private Real Estate Fundraising (Q1 2014 - Q3 2019)


566

211

72 36

$144$79

$21 $80

100

200

300

400

500

600

North America Europe Asia Rest of World

Closed-End Private Real Estate Fund Actively in Market in Q3 2019 by Primary Geographic Focus

No. of Funds Raising Aggregate Capital Targeted ($B)



UNLISTED INFRASTRUCTURE –FUNDRAISING & INVESTMENT ACTIVITY


0

50

100

150

200

250

$0

$50

$100

$150

$200

$250

Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Oct-19

No.

of F

unds

Agg

rega

te C

apita

l Tar

gete

d ($

B)

Unlisted Infrastructure Funds in Market over Time (Jan 2015 - Oct 2019)

Aggregate Capital Targeted ($bn) No. of Funds Raising

0510152025303540

$0$5

$10$15$20$25$30$35$40$45


2014 2015 2016 2017 2018 2019

No.

of F

unds

Aggr

egat

e C

apita

l Rai

sed

($B)

Global Quarterly Unlisted Infrastructure Fundraising (Q1 2014 - Q3 2019)




TIMBER

Data sources: Forest Investment Associates



HEDGE FUND PERFORMANCE


AS OF SEPTEMBER 30, 2019 QTR YTD 1 YR 3 YR 5 YR 10 YR

DJ CS HEDGE FUND INDEX 0.3 6.7 2.1 3.8 2.3 4.3EVENT DRIVEN -1.5 5.9 -0.7 3.4 0.4 3.8GLOBAL MACRO 2.1 9.6 7.7 5.3 3.1 4.9LONG/SHORT EQUITY 0.1 6.8 -0.4 4.9 3.4 4.9MULTI-STRATEGY 0.7 5.9 1.9 4.2 4.2 6.2WILSHIRE 5000 1.2 20.1 3.0 12.9 10.6 13.1MSCI ACWI EX-US ($G) -1.7 12.1 -0.7 6.8 3.4 4.9BLOOMBERG BARCLAYS AGGREGATE 2.3 8.5 10.3 2.9 3.4 3.7DOW JONES UBS COMMODITY -1.8 3.1 -6.6 -1.5 -7.2 -4.3

DJ CS Hedge Fund Index

Wilshire 5000 Index

Barclays Aggregate Bond Index

Dow Jones UBS Commodity Index

MSCI ACWI ex-US ($g)0.83

0.96

1.03

(0.34)

0.31

-8.00%

-4.00%

0.00%

4.00%

8.00%

12.00%

16.00%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Annu

aliz

ed R

etur

n

Annualized Risk

HEDGE FUND 10-YEAR RISK/RETURN

Note: Sharpe Ratio included to the left of each marker.

Performance and Risk Update: Q1 FY20

November 2019

Thomas Toth, Managing Director – Wilshire AssociatesKristin Varela, Deputy CIO

Total Fund versus Reference Portfolio – 10 Years

Expectations based on PERA target asset allocation and Wilshire asset class assumptions as of 2009

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Oct

-13

Apr

-14

Oct

-14

Apr

-15

Oct

-15

Apr

-16

Oct

-16

Apr

-17

Oct

-17

Apr

-18

Oct

-18

Apr

-19





Lower Band

Target

Upper Band

Total Fund versus Policy Index – 10 Years

-50.00%

0.00%

50.00%

100.00%

150.00%

200.00%

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Oct

-13

Apr

-14

Oct

-14

Apr

-15

Oct

-15

Apr

-16

Oct

-16

Apr

-17

Oct

-17

Apr

-18

Oct

-18

Apr

-19





Lower Band

Target

Upper Band

Total Fund Active versus Policy Index – 10 Years

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Oct

-13

Apr

-14

Oct

-14

Apr

-15

Oct

-15

Apr

-16

Oct

-16

Apr

-17

Oct

-17

Apr

-18

Oct

-18

Apr

-19




Lower Band

Target

Upper Band

Selection

Allocation

Market Beta Risk

(Passive)Expected Risk of 9.90% (Expected Return of 6.35%)

Expected Active Risk of 1.4% (Expected Return of 0.6%)

Expected Active Risk of 0.6% (Expected Active Return of 0.4%)

2019 Total Fund Risk BudgetTarget Return= 7.35%Target Risk = 10.2%

Total Fund versus Reference Portfolio

Cumulative Reference Portfolio Return, 6.52%


-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%





Lower Band

Target

Upper Band



Reference Portfolio volatility (FYTD) = 2.37%

Total Fund versus Policy Portfolio

Cumulative Policy Index Return, 7.79%


-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%





Lower Band

Target

Upper Band



PERA Policy volatility (FYTD) = 2.18%

Active Risk versus Expectations – Cumulative Months

Total Fund One-Year Tracking Error as of September 30, 2019 = 3.05%

Cumulative Excess NOF Total Fund Return, 0.65%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%




Lower Band

Target

Upper Band

As of 9/30/2019

MarketValue

% MarketValue

% Target

Total Fund Performance

Q1FY20

FYTD 1-yr 3-yr 5-yr 10-yr

Global Equity $6.3b 40.4% 40.8%NOF Return 0.97% 0.97% 3.65% 10.77% 7.71%

Value Add v. 0.67% 0.67% 2.00% 0.76% 0.02%

Risk Reduction $3.3b 21.0% 21.0%

NOF Return 2.43% 2.43% 10.51% 3.25% 3.65%

Value Add v. 0.12% 0.12% 0.20% 0.22% 0.20%

Credit $2.3b 14.6% 15.0%NOF Return 0.66% 0.66% 4.04% 5.00% 3.25%

Value Add v. 0.47% 0.47% -3.06% -0.53% -1.41%

Real Assets $3.1b 19.9% 20.0%NOF Return 0.67% 0.67% 3.70% 4.75% 3.13%

Value Add v. -1.14% -1.14% -2.97% -1.11% 0.35%

Risk Parity $0.6b 4.1% 3.25%NOF Return 6.11% 6.11%

Value Add v. -0.30% -0.30%

Performance Detail – Asset Class

FYTD Performance Attribution:Active Risk Budget Framework

-0.25% -0.25%

-0.04%

0.15%

-0.84%

0.39%

0.92%

0.16%

0.32%

-0.30%

-1.00%

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%



Real Assets


Presenter

Presentation Notes



-0.63%

0.61%

-0.12%

-3.12%

-1.00%

0.26%

1.38%

0.32%0.06%

-1.97%

-3.50%

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%



Real Assets


Presenter

Presentation Notes
