real return analysis...2018/12/12 · comparative performance portfolio allocation qtd/ fytd cytd 1...

Real Return AnalysisWater and Power Employees’ Retirement Plan

Period Ended: September 30, 2018

Performance shown is net of fees.

Capital Markets Review

Nearly all DIS managers posted negative returns in the third quarter, with only a moderate divergence in performance. Headline CPI decreased over the quarter from 2.80% in June to 2.30% at the end of Q3, which coincided with headwinds across several inflation sensitive asset classes. Managers with larger exposure to TIPS, commodities and emerging markets currencies performed least favorably among the peer group as all three asset classes were simultaneously negative amid rising yields in the US and a stronger US dollar. Other detracting factors included meaningful declines in non-energy subcomponents of the commodities complex including agriculture, industrial metals and precious metals. Managers with a larger emphasis on energy in their commodity and natural resource equity holdings provided moderately stronger performance than peers. The strongest performers of the group generally held more concentrated exposures to global listed infrastructure equities, hybrid securities and spread sensitive fixed income alongside REIT equities, REIT hybrid securities and fixed income securities issued by REITs.

Real Return Composite As of September 30, 2018, the Real Return Composite held ~$646 million in assets between the Retirement and Health Plans, or ~4.4% of Plan assets. This compares to the target allocation of 5.0%.

The Real Return Composite underperformed the Consumer Price Index+3% by 236 basis points during the third quarter. Invesco Commodity was the largest driver of underperformance, returning -3.29%. Hancock Timberland, Molpus IV, and WAMCO also contributed to underperformance, returning -0.63%, 0.55%, and -0.49%, respectively.

COMMODITIES The Commodities Composite underperformed the Bloomberg Commodity Index for the quarter, returning -3.29% versus -2.02%. Invesco is the sole underlying manager in the Commodities Composite.

TIMBERLAND The Timberland Composite underperformed the NCREIF Timberland Index for the quarter, returning 0.05% versus 0.48%. Hancock Timberland drove underperformance, returning -0.63% for the quarter.

GLOBAL INFLATION-LINKED The Global Inflation-Linked Composite outperformed the Bloomberg World Government Inflation Linked Index (Hedged) for the quarter, returning -0.49% versus -0.84%. WAMCO is the sole underlying manager in the GILS Composite.

Executive Summary

Page 2

Comparative Performance

Portfolio Allocation

QTD/FYTD

CYTD 1 Year3

Years5

Years7

Years2017 2016 2015

SinceIncep.

InceptionDate

Real Return Composite -1.16 -1.41 1.97 3.41 1.93 1.95 3.76 9.59 -2.76 2.43 02/01/2007

CPI+3% (Blended) 1.20 3.93 5.34 5.06 4.58 4.22 5.17 5.15 3.68 4.35Difference -2.36 -5.34 -3.37 -1.65 -2.65 -2.27 -1.41 4.44 -6.44 -1.92

Invesco Commodity (CF) -3.29 -4.16 3.22 2.97 -4.76 N/A 5.40 13.87 -16.32 -5.26 09/01/2013

Bloomberg Cmdty Index (TR) -2.02 -2.03 2.59 -0.11 -7.18 -6.48 1.70 11.77 -24.66 -7.54Difference -1.27 -2.13 0.63 3.08 2.42 N/A 3.70 2.10 8.34 2.28

Hancock Timberland (CF) (Lagged-1 Qtr) -0.63 0.73 0.33 3.10 N/A N/A 4.65 4.81 -0.34 1.73 04/01/2014

NCREIF Timberland Index (Lagged-1 Qtr) 0.48 2.95 3.57 3.43 6.00 5.76 3.28 3.28 9.26 5.09Difference -1.11 -2.22 -3.24 -0.33 N/A N/A 1.37 1.53 -9.60 -3.36

Molpus IV (CF) (Lagged-1 Qtr) 0.55 1.94 2.17 1.69 N/A N/A 4.52 -1.91 N/A -3.94 09/01/2015

NCREIF Timberland Index (Lagged-1 Qtr) 0.48 2.95 3.57 3.43 6.00 5.76 3.28 3.28 9.26 3.51Difference 0.07 -1.01 -1.40 -1.74 N/A N/A 1.24 -5.19 N/A -7.45

WAMCO (SA) -0.49 -0.63 1.59 3.72 3.66 3.10 3.15 9.18 -0.39 3.61 05/01/2010

Bloomberg Wrld Gov't Infl Lnkd Index (Hedged) -0.84 -0.44 2.06 3.93 3.80 3.33 3.32 10.22 -1.12 4.02Difference 0.35 -0.19 -0.47 -0.21 -0.14 -0.23 -0.17 -1.04 0.73 -0.41

September 30, 2018 : $551,887,239

Water and Power Employees' Retirement PlanReal Return Portfolio Summary

As of September 30, 2018

Market values and performance shown are representative of the Retirement Plan. Performance shown is net of fees and is annualized for periods greater than one year. Inception dates shown represent the first full month following initial funding. Fiscal year ends 06/30. Allocations shown may not sum up to 100% exactly due to rounding.

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12-Month Rolling Beta vs. S&P 500 Index (Cap Wtd)

Risk/Return - 3 Years

Real Return Composite

-0.40

-0.20

0.00

0.20

0.40

0.60

1/08 10/08 7/09 4/10 1/11 10/11 7/12 4/13 1/14 10/14 7/15 4/16 1/17 10/17 9/18

Real Return Composite Invesco Commodity (CF) Hancock Timberland (CF) (Lagged-1 Qtr)

Molpus IV (CF) (Lagged-1 Qtr) WAMCO (SA) ICE BofAML 3 Mo US T-Bill Index

0.00

0.80

1.60

2.40

3.20

4.00

4.80

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00Risk (Standard Deviation %)



Performance shown is net of fees and representative of the Retirement Plan. Funds with less history than the specific time period will not appear in the chart.

Page 4

Quarterly Returns

Relative Performance vs. CPI+3% (Blended)

Growth of $100



Performance shown is net of fees and representative of the Retirement Plan.

Page 5


Quarterly Returns

Strategy Allocation

QTD/FYTD

CYTD 1 Year3

Years5

Years7

Years2017 2016 2015

SinceIncep.

InceptionDate

Commodities Composite -3.29 -4.16 3.22 2.97 -4.77 N/A 5.40 13.87 -16.32 -5.26 09/01/2013


Invesco Commodity (CF) -3.29 -4.16 3.22 2.97 -4.76 N/A 5.40 13.87 -16.32 -5.26 09/01/2013


Water and Power Employees' Retirement PlanCommodities Portfolio Summary


Performance shown is net of fees and representative of the Retirement Plan. Performance shown is annualized for periods greater than one year. Inception dates shown represent the first full month following initial funding. Fiscal year ends 06/30. Allocations shown may not sum up to 100% exactly due to rounding.

Page 6


Portfolio Allocation by Manager

QTD/FYTD

CYTD 1 Year3

Years5

Years7

Years2017 2016 2015

SinceIncep.

InceptionDate

Timberland Composite 0.05 1.42 1.37 1.87 N/A N/A 4.53 -0.58 -2.08 0.28 04/01/2014

NCREIF Timberland Index (Lagged-1 Qtr) 0.48 2.95 3.57 3.43 6.00 5.76 3.28 3.28 9.26 5.09Difference -0.43 -1.53 -2.20 -1.56 N/A N/A 1.25 -3.86 -11.34 -4.81

Hancock Timberland (CF) (Lagged-1 Qtr) -0.63 0.73 0.33 3.10 N/A N/A 4.65 4.81 -0.34 1.73 04/01/2014

NCREIF Timberland Index (Lagged-1 Qtr) 0.48 2.95 3.57 3.43 6.00 5.76 3.28 3.28 9.26 5.09Difference -1.11 -2.22 -3.24 -0.33 N/A N/A 1.37 1.53 -9.60 -3.36

Molpus IV (CF) (Lagged-1 Qtr) 0.55 1.94 2.17 1.69 N/A N/A 4.52 -1.91 N/A -3.94 09/01/2015

NCREIF Timberland Index (Lagged-1 Qtr) 0.48 2.95 3.57 3.43 6.00 5.76 3.28 3.28 9.26 3.51Difference 0.07 -1.01 -1.40 -1.74 N/A N/A 1.24 -5.19 N/A -7.45

September 30, 2018 : $31,634,305

Water and Power Employees' Retirement PlanTimberland Portfolio Summary


Market values and performance shown are representative of the Retirement Plan. Performance shown is net of fees and is annualized for periods greater than one year. Inception dates shown represent the first month following initial funding. Fiscal year ends 06/30. Allocations shown may not sum up to 100% exactly due to rounding.

Page 7


Sector Allocation

Country Allocation

QTD/FYTD

CYTD 1 Year3

Years5

Years7

Years2017 2016 2015

SinceIncep.

InceptionDate

GILS Composite -0.49 -0.63 1.59 3.72 3.66 3.10 3.15 9.18 -0.39 3.61 05/01/2010


WAMCO (SA) -0.49 -0.63 1.59 3.72 3.66 3.10 3.15 9.18 -0.39 3.61 05/01/2010


Water and Power Employees' Retirement PlanGILS Portfolio Summary


Performance shown is net of fees and representative of the Retirement Plan. Performance shown is annualized for periods greater than one year. Inception dates shown represent the first month following initial funding. Fiscal year ends 06/30. Allocations shown may not add up to 100% exactly due to rounding.

Page 8

Quarterly Returns

Relative Performance vs. Barclays Wrld Gov't Infl Lnkd Index (Hedged)

Growth of $100

Water and Power Employees' Retirement PlanGILS Portfolio Summary


Performance shown is net of fees and representative of the Retirement Plan.

Page 9

Disclaimer of Warranties and Limitation of Liability - This document was prepared by RVK, Inc. (RVK) and may include information and data from some or all of the following sources: client staff; custodian banks; investment managers; specialty investment consultants; actuaries; plan administrators/record-keepers; index providers; as well as other third-party sources as directed by the client or as we believe necessary or appropriate. RVK has taken reasonable care to ensure the accuracy of the information or data, but makes no warranties and disclaims responsibility for the accuracy or completeness of information or data provided or methodologies employed by any external source. This document is provided for the client’s internal use only and does not constitute a recommendation by RVK or an offer of, or a solicitation for, any particular security and it is not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets.

real return analysis...2018/12/12 · comparative performance portfolio allocation qtd/ fytd cytd 1...

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