market & portfolio update - colorado pera · portfolio monitor asset class strategy global...
TRANSCRIPT
Amy C. McGarrity
Chief Investment Officer
January 17, 2020
MARKET &
PORTFOLIO
UPDATE
5
Market Performance
2019 vs. 2018
All returns are presented in unhedged USD terms
2019 Highest
Performers
“Risk assets” rebounded in 2019
2
3.2%
-2.5%
-2.1%
-2.5%
-15.4%
-14.8%
-14.3%
-15.5%
-10.1%
-4.4%
-20.5%
-0.9%
13.1%
14.3%
14.5%
16.5%
17.8%
18.1%
24.4%
26.4%
31.5%
34.4%
-30% -20% -10% 0% 10% 20% 30% 40%
US Dollar Index
Emerging U.S. Dollar Debt
U.S. Corporate High Yield Debt
U.S. Corporate Investment Grade Debt
Broad Commodities
Emerging Market Equities
Japanese Equities
European Equities
Global Equities
U.S. Equities
WTI Crude Oil
Return
2019 Return
2018 Return
2020 Policy Benchmark Weights
New Asset Allocation effective January 1, 2020
No “interim” allocation, Policy Benchmark weights will reset
yearly based on actual Alternatives allocation
Asset Class
2020 Policy
Benchmark
Weight
Actual Weight*(December 31, 2019)
(preliminary and
unaudited)
Long-
Term
Target
Target Range
Global Equity 56.0% 57.3% 54.0% 48%–60%
Fixed Income 23.5% 22.2% 23.0% 18%–28%
Private Equity 8.5% 7.8% 8.5% 4%–13%
Real Estate 8.5% 8.8% 8.5% 4%–13%
Alternatives 3.5% 3.4% 6.0% 0%–12%
Cash and Short Term** 0.0% 0.5% 0.0% 0%–3%
Total 100.0% 100.0% 100.0%
*Transitional cash remains within respective asset classes
**Includes Cash Overlay
3
5 4
2020 Strategic Initiative Projects
Project Status
Updated Proxy
Voting Statement
Planning stages – analysis of existing policy and potential enhancements;
expected completion 1Q2021
Direct investment in
private asset classes
Exploratory stages – initial presentation to Investment Committee in
November 2019
Participation on
Secure Savings
Board
In progress – currently receiving and reviewing studies from chosen
consultants; expect report release to Legislature late February 2020
Refreshed
technology roadmap
In progress – currently analyzing private market software vendors and
service providers; expected completion of this phase in late 2020
DC plan: improved
alignment of
preferences and
product offerings
In progress – member research, evaluation of current and proposed options
by Defined Contribution committee; expected completion 2021
Liquidation of BlackRock Fixed Income passive account – assets
being brought in-house
Onboarding work with Callan, the new CAP Investment
Consultant
Representatives from Investments, IT, and Accounting, in concert
with an external consultant, have completed an investment
systems infrastructure review; the team is evaluating next steps
PERAdvantage SRI Fund transition complete
DC Fund Fact Sheets will be produced by Investment staff instead
of Morningstar – beginning with 4Q19
Investment Activities
5
5 6
Investment Stewardship Awareness
2019 campaign increased awareness and engagement around PERA’s
Investment Stewardship
Collaboration between Investments, Communications, and Creative Services
Results tracked following July release of Stewardship report
Surpassed targets for both Awareness and Engagement metrics
2018 Baseline 2019 Target 2019 Results
Awareness 1,383 5,532 379,981
Impressions 1,383 5,532 379,981
Engagement 231 562 3,908
Infographic Views 95 190 2,298
Report Views 136 272 1,610
APPENDIX
7
Portfolio Monitor
Asset Class Strategy
Global Equity Portfolio retains higher quality bias. No material sector or geographic
overweights or underweights relative to the benchmark.
Fixed Income Current environment is uncertain and valuations are high. Portfolio is
positioned conservatively with no significant overweight or underweight by
asset class or duration versus the benchmark.
Private Equity Initiating work on budget and plan for 2020 vintage. PE market and
fundraising continues to be robust with no shortage of investment
opportunities. Re-up opportunities expected to drive commitment activity in
2020.
Real Estate In an uncertain interest rate and asset valuation environment, difficulties
exist in pursuit of new acquisitions. Team is focusing efforts on existing
strategic partner relationships to expand long term, core, income oriented
strategies and investment vehicles.
Alternatives Allocating to opportunistic and special situations funds, which can tactically
invest across multiple asset classes. Also focused on diversifying strategies
such as healthcare credit, specialty crops/agriculture and Asia private credit
opportunities.
8
Active Risk Policy
PolicyActive risk within marketable securities asset classes (i.e.,
Global Equity and Fixed Income) and total marketable
securities portfolios will not exceed maximums
Active Risk
Portfolio
Three-Year Historical
Tracking Error in Basis
Points
December 31, 2019
(preliminary)
Active Risk Policy
Maximum in
Basis Points
Global Equity 100 225
Fixed Income 16 100
Total Marketable
Securities
86 150
StatusActive risk levels are within policy limits
9
Asset Allocation Policy
PolicyAsset class weights will be within permissible ranges
StatusAll asset class weights within permissible ranges
Asset Class
Target
Weight (12/31/19)
Actual Weight*(December 31, 2019)
(preliminary and
unaudited)
RangeRisk Weight
(September 30, 2019)
Global Equity 53.5% 57.3% 47%–59% 72.2%
Fixed Income 23.5% 22.2% 18%–28% -0.8%
Private Equity 8.5% 7.8% 5%–12% 17.4%
Real Estate 8.5% 8.8% 5%–12% 8.7%
Alternatives 5.0% 3.4% 0%–9% 2.0%
Cash and Short Term** 1.0% 0.5% 0%–3% 0.5%
Total 100.0% 100.0% 100.0%
*Transitional cash remains within respective asset classes
**Includes Cash Overlay 10
*Large Growth – Russell 1000 Growth; Large Value – Russell 1000 Value; Small Growth – Russell 2000 Growth; Small Value – Russell 2000 Value; ACWI – MSCI
ACWI; EAFE – MSCI EAFE; EM – MSCI EM; REITs – FTSE NAREIT All Equity REITs; Bonds – Bloomberg Barclays Aggregate; High Yield – Bloomberg Barclays
U.S.Corporate High Yield; Cmdty – S&P GSCI Composite Index; HFOF – HFRI FOF Composite Index; NCREIF – NCREIF ODCE Index
**2019 Returns are through December 31, 2019. HFRI FOF Composite Index returns are through November 30, 2019. NCREIF ODCE Returns are through September
30, 2019.
Calendar Year Returns
11
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019**
EM Sm Growth NCREIF REITs Sm Growth REITs NCREIF Sm Value EM NCREIF Lg Growth
78.5 29.1 15.0 19.7 43.3 28.0 14.0 31.7 37.3 7.4 36.4
High Yield REITs REITs EM Sm Value Lg Value Lg Growth Lg Value Lg Growth Bonds REITs
58.2 27.9 8.3 18.2 34.5 13.5 5.7 17.3 30.2 0.0 28.7
Lg Growth Sm Value Bonds Sm Value Lg Growth Lg Growth REITs High Yield EAFE Lg Growth Sm Growth
37.2 24.5 7.8 18.1 33.5 13.1 2.8 17.1 25.0 -1.5 28.5
ACWI EM High Yield Lg Value Lg Value NCREIF Total Fund Cmdty ACWI High Yield ACWI
34.6 18.9 5.0 17.5 32.5 11.5 1.5 11.4 24.0 -2.1 26.6
Sm Growth Lg Growth Lg Growth EAFE ACWI Bonds Bonds Sm Growth Sm Growth Total Fund Lg Value
34.5 16.7 2.6 17.3 22.8 6.0 0.5 11.3 22.2 -3.5 26.5
EAFE Lg Value Total Fund ACWI EAFE Total Fund HFOF EM Total Fund REITs EAFE
31.8 15.5 1.9 16.1 22.8 5.7 -0.3 11.2 18.1 -4.0 22.0
REITs NCREIF Lg Value High Yield Total Fund Sm Growth EAFE REITs Lg Value HFOF EM
28.0 15.3 0.4 15.8 15.6 5.6 -0.8 8.6 13.7 -4.1 18.4
Sm Value High Yield Cmdty Lg Growth NCREIF ACWI Sm Growth ACWI REITs Lg Value Cmdty
20.6 15.1 -1.2 15.3 12.9 4.2 -1.4 7.9 8.7 -8.3 17.6
Lg Value Total Fund Sm Growth Sm Growth HFOF Sm Value ACWI NCREIF Sm Value ACWI Sm Value
19.7 14.0 -2.9 14.6 9.0 4.2 -2.4 7.8 7.8 -9.4 15.5
Total Fund ACWI Sm Value Total Fund High Yield HFOF Lg Value Total Fund HFOF Sm Growth High Yield
17.4 12.7 -5.5 12.9 7.4 3.4 -3.8 7.3 7.7 -11.7 14.3
Cmdty Cmdty HFOF NCREIF REITs High Yield High Yield Lg Growth High Yield Sm Value Bonds
13.5 9.0 -5.7 9.8 2.9 2.5 -4.5 7.1 7.5 -12.9 8.7
HFOF EAFE ACWI HFOF Cmdty EM Sm Value Bonds NCREIF EAFE HFOF
11.5 7.8 -7.3 4.8 -1.2 -2.2 -7.5 2.6 6.7 -13.8 6.4
Bonds Bonds EAFE Bonds Bonds EAFE EM EAFE Cmdty Cmdty NCREIF
5.9 6.5 -12.1 4.2 -2.0 -4.9 -14.9 1.0 5.8 -13.8 3.1
NCREIF HFOF EM Cmdty EM Cmdty Cmdty HFOF Bonds EM
-30.4 5.7 -18.4 0.1 -2.6 -33.1 -32.9 0.5 3.5 -14.6