Board Presentation/Executive Summary Texas Municipal Retirement System. Period Ended: December 31, 2017

Transcription

1 Board Presentation/Executive Summary Texas Municipal Retirement System Period Ended: December 3, 207

2 Capital Markets Update

3 Capital Markets Review As of December 3, 207 Fourth Quarter Economic Environment Key Economic Indicators Price action across global financial markets continued to be driven by expectations of ongoing economic growth and generally accommodative central bank policies, with equity markets trading to record levels and global sovereign debt yields continuing to trade within recent ranges. The nominal Treasury curve continued to flatten over the quarter. Market participants suggest that recent and expected monetary policy actions, as well as expectations for increased Treasury issuance amidst fiscal stimulus policies, are driving short-maturity and mid-maturity yields higher. Comparatively, longer-dated yields proved stable, and reportedly continue to be heavily influenced by relatively modest expectations for sustained US economic growth and building inflation expectations. Finally, the US dollar continued to depreciate over the quarter, weakening by % against major currencies amidst continued economic improvements across developed international and emerging markets. The depreciation over the quarter contributed to a total dollar depreciation of nearly 0% for the year Unemployment Rate (%) Since CPI -over- (% change) Since 94 Key Economic Indicators US Govt Debt (% of GDP) Since VIX Index (Volatility) Since Consumer Confidence Since 967 Economic Indicators Dec-7 Sep-7 Dec-6 Dec-4 20 Yr Federal Funds Rate (%) Breakeven Infl. - Yr (%) N/A Breakeven Infl. - 0 Yr (%) N/A CPI YoY (Headline) (%) Unemployment Rate (%) Real GDP YoY (%) PMI - Manufacturing USD Total Wtd Idx WTI Crude Oil per Barrel ($) Gold Spot per Oz ($),303,280,2,8 83 Market Performance (%) QTD CYTD Yr Yr 0 Yr S&P 00 (Cap Wtd) Russell MSCI EAFE (Net) MSCI EAFE SC (Net) MSCI Emg Mkts (Net) Bloomberg US Agg Bond BofA ML 3 Mo US T-Bill NCREIF ODCE (Gross) Wilshire US REIT HFRI FOF Comp Bloomberg Cmdty (TR) Treasury Yield Curve (%) 3M 6M Y 3Y Y 7Y 0Y 20Y 30Y Dec-7 Sep-7 Dec-6 Dec- Dec-4 Treasury data courtesy of the US Department of the Treasury. Economic data courtesy of Bloomberg Professional Service. Breakeven Inflation does not have 20 years of history; therefore, its 20-year average is shown as N/A. Page 3

4 Annual Asset Class Performance As of December 3, Best Worst S&P 00 - US Large Cap R US Small Cap MSCI EAFE (Net) - Int'l Dev. MSCI EAFE SC (Net) - Int'l SC MSCI EM (Net) - Int'l Emg Mkts Bloombrg US Agg Bond - FI Bloombrg US Corp: Hi Yield - FI Bloombrg US Trsy: US TIPS - FI Bloombrg US Gov/Credit: Lng - FI NCREIF ODCE (Gross) - Real Estate Wilshire US REIT - REITs HFRI FOF Comp Index - ARS Bloombrg BofA ML 3 Cmdty (TR) Mo T-Bill - - Commod. Cash Equiv NCREIF ODCE (Gross) performance is reported quarterly; performance is shown N/A in interim-quarter months. Page 4

5 TMRS Total Fund

6 TMRS Investment Portfolio Asset Allocation and Performance Allocation Market Value ($) % Quarter CYTD 3 Performance (%) 7 0 Since Incep. Inception Total Fund Composite 28,433,78, /0/989 Actual Allocation Benchmark Performance shown is net of fees and provided by State Street. Performance is annualized for periods greater than one year. Page 6

7 Asset Class Composite Performance (Net) Allocation Market Value ($) % Quarter CYTD 3 Performance (%) 7 0 Since Incep. Inception Total Fund Composite 28,433,78, /0/989 Actual Allocation Benchmark Global Equity Composite,004,8, N/A N/A /0/2008 Global Equity Benchmark N/A N/A 6.7 Domestic Equity Composite,933,07, N/A N/A /0/2008 Russell 3000 Index International Equity Composite,07,498, N/A N/A /0/2008 International Equity Benchmark Core Fixed Income Composite 4,8,093, /0/989 Fixed Income Benchmark Non-Core Fixed Income Composite 4,96,49, N/A N/A N/A N/A /0/204 Non-Core Fixed Income Benchmark Real Return Composite 2,92,23, N/A N/A N/A /0/20 Bloomberg Wrld Gov't Infl Lnkd Index (Unhedged) Real Estate Composite 2,347,9, N/A N/A N/A.3 0/0/202 Real Estate Benchmark Absolute Return Composite 2,72,894, N/A N/A N/A N/A /0/204 Absolute Return Benchmark Private Equity Composite 269,230, N/A N/A N/A N/A N/A /0/206 Russell 3000 Index+3% ( Qtr Lag) TMRS Unallocated Cash 23,609, N/A N/A /0/2008 FTSE 30 Day T-Bill Index Performance shown is net of fees and provided by State Street. Performance is annualized for periods greater than one year. Market value for the Global Equity Composite includes assets held in the Transition Account. Real Estate and Private Equity fund returns are calculated by Private Edge. Private Real Estate fund returns are lagged quarter. Inception dates shown for Real Estate and Private Equity composite represent the first full quarter following initial funding. Inception dates for all other composites represents the first full month following initial funding. Page 7

8 Total Fund Performance vs. Peers While performance relative to other systems is not an objective of the TMRS fund given the wide range in investment objectives and different benefit plan structures, it is generally of interest to be aware of the performance of other public pension systems. Return (%) Quarter To To Total Fund Composite 3.33 (9) 4.27 (83) 4.27 (83) 7.9 (82) 7.46 (88) 7.08 (92) 6.7 () 6.69 (00) Actual Allocation Benchmark 3.07 (94) 3.30 (90) 3.30 (90) 6.0 (9) 6.97 (9) 6.6 (94) 6.40 (3) 6.20 (00) Policy Index 2.97 (94) 3.76 (88) 3.76 (88) 7.28 (76) 7.70 (87) 7.39 (90) 6.79 (4) 6.46 (00) Median Population The Total Fund is ranked against a universe of Public Plans > $0B. Please see Supplemental Information for custom benchmark definitions. Performance shown is gross of fees, as of December 3, 207 Page 8

9 Total Fund Composite vs. All Public Funds > $0B-Total Fund Peer Group Scattergram - Up/Down Markets - Return Standard Deviation Total Fund Composite Actual Allocation Benchmark Policy Index Median Plan Sponsor Peer Group Analysis - Multi-Statistics (Beta vs. S&P 00) Total Fund Composite 4.04 (8).78 (72) 7.07 (88).79 (72) 0.4 (80) Actual Allocation Benchmark 4.09 (83).64 (83) 6.6 (9).9 (62) 0.42 (7) Median Population Performance shown is gross of fees. Calculations based on quarterly periodicity. Parenthesis contain percentile ranks. Page 9

10 TMRS Asset Class Composites

11 Domestic Equity Composite Performance & Allocation Asset Allocation by Manager $,933,048,0 Market Value ($) Allocation (%) NT Collective Russell 3000 Index NL (CF) 3,388,470,3 7. UBS US Equity Min Volatility Index (CF) 403,87, State Street Russell Fndmtl US Index NL (CF) 388,209, The Boston Company Small Cap Opp Value (SA) 33,766,709.9 Wellington US Small Cap Opp (SA) 39,38, Epoch U.S. Choice (SA) 30,372,07. Champlain Mid-Cap Core (SA) 292,3, Sasco U.S. Contrarian Value (SA) 24,8, The Boston Company Mid Cap Opp Value (SA) 249,947, Quarter To 3 Comparative Performance Since Incep. Inception Domestic Equity Composite N/A /0/2008 Russell 3000 Index Difference N/A Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. Total Domestic Equity market value excludes Citigroup Global Markets, Inc. Page

12 Domestic Equity Composite vs. IM U.S. Equity Peer Group Scattergram - Up/Down Markets - Return Standard Deviation Domestic Equity Composite Russell 3000 Index Median Peer Group Analysis - Multi Statistics Domestic Equity Composite.90 (20) 0.32 (00) -0.6 (9) 3.38 (67) (8) (7) Russell 3000 Index.9 (6) 0.00 (00) N/A 3.24 (7) (4) (62) Median Population 2,4 2,4 2,4 2,4 2,4 2,4 Performance shown is gross of fees. Calculations based on quarterly periodicity. Parenthesis contain percentile ranks. Page 2

13 International Equity Composite Performance and Allocation Asset Allocation by Manager $,07,498,889 Market Value ($) Allocation (%) NT Daily Collective ACW Ex US IMI Non-Lending (CF) 2,80,726, Wellington International Small Cap Opp (SA) 37,772, UBS World Ex US Min Volatility NL (CF) 3,69, Wasatch International Small Cap Growth (SA) 29,263,62.82 State Street Russell Fndmtl Gbl ex-us Index NL (CF) 289,43,760.7 Acadian Emerging Markets (SA) 262,709,92.8 Wellington International Horizons (SA) 24,34, William Blair Emerging Markets (SA) 249,76, Lazard International Equity Plus (SA) 23,807, Quarter To 3 Comparative Performance Since Incep. Inception International Equity Composite N/A /0/2008 International Equity Benchmark Difference N/A Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. Page 3

14 International Equity Composite vs. IM International Equity Peer Group Scattergram - Up/Down Markets - Return Standard Deviation International Equity Composite International Equity Benchmark Median Peer Group Analysis - Multi Statistics International Equity Composite 0.78 (8) 0.90 (00) 0.69 (27).98 () 02.6 (62) (40) International Equity Benchmark 0.7 (66) 0.00 (00) N/A 6.32 (47) (68) (30) Median Population Performance shown is gross of fees. Calculations based on quarterly periodicity. Parenthesis contain percentile ranks. Page 4

15 Core Fixed Income Composite Performance and Allocation Asset Allocation by Manager $4,8,093,283 Market Value ($) Allocation (%) BlackRock, Inc. Core (SA) 3,9,986, PIMCO Core Plus Fixed Income (SA),398,06, Quarter To 3 Comparative Performance Since Incep. Inception Core Fixed Income Composite /0/989 Fixed Income Benchmark Difference Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. Page

16 Core Fixed Income Composite vs. IM U.S. Broad Market Core Fixed Income Peer Group Scattergram - Up/Down Markets - Return Standard Deviation Core Fixed Income Composite Fixed Income Benchmark Median Peer Group Analysis - Multi Statistics Tracking Error Info Ratio Downside Risk Up Mkt Capture Core Fixed Income Composite 0.69 (63) 0.28 (78) 0.9 (6).8 (4) (69) 9.3 (39) Fixed Income Benchmark 0.62 (84) 0.00 (00) N/A.87 (4) (8) (8) Median Population Performance shown is gross of fees. Calculations based on quarterly periodicity. Parenthesis contain percentile ranks. Page 6

17 Non-Core Fixed Income Composite Performance & Allocation Asset Allocation by Manager $4,96,49,62 Market Value Allocation ($) (%) Highland Bandera Strategic Credit Partners I, LP 44,82, Ellington RMBS/CMBS (SA) 434,8, Voya RMBS/CMBS (SA) 43,04, Guggenheim Bandera Strategic Credit Partners II, LP 424,386, BlueBay Emerging Mkt Debt (SA) 383,929, Alliance Bernstein Emerging Mkt Debt (SA) 38,, Columbia Management Investment Advisers, LLC 3,784, Neuberger Berman Investment Advisors, LLC 306,300, Beach Point Total Ret Fd II, LP 26,88, TCW Brazos Fund, LLC 2,68, Waterfall Eden Fund, LP 208,280, GoldenTree Asset Management, LP 77,38, White Oak Summit Fund, LP 72,70, Marathon SPS Fund, LP 40,399, Bain Capital Credit, LP 0,09, H.I.G. Whitehorse Capital, LLC 76,004,79.6 Golub Capital Pearls DLP, LP 62,830, PIMCO Corp Op Fd II Onshore, LP 46,4,32.0 Marathon European Credit Opportunity Fund III, LP 43,300, Marathon CLO Equity Fund, LP,339, Adams Street Private Credit Fund-A LP 6,38, *Global Credit Opportunities Fund, LP Quarter To Comparative Performance Since Incep. Inception Non-Core Fixed Income Composite N/A N/A N/A N/A N/A.47 0/0/204 Non-Core Fixed Income Benchmark Difference N/A N/A N/A N/A N/A 0.7 Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. *Represents approved investments that have not been funded and/or are pending legal documents. Page 7

18 Non-Core Fixed Income Composite vs. Non-Core Fixed Income Benchmark Portfolio Characteristics Portfolio Benchmark Spread Duration 3.87 N/A Avg. Maturity Avg. Quality Ba3 Ba3 Yield To Maturity (%)..77 Coupon Rate (%) Sector Distribution (%) Cash Equiv Non-Agency MBS ABS CMBS Inv Grade Corp Non-Inv Grade Corp Dvl'd Non-US EMD Bank Loans Other Bond characteristics exclude Private and Opportunistic Credit. Allocation to "Other" consists of derivative offsets, private placements, and miscellaneous differences between the account's net asset value and its trade date based clean holdings. Page 8

19 Real Return Composite Performance and Allocation Asset Allocation by Manager $2,92,23,476 Market Value ($) Allocation (%) Nuveen Real Asset Income 834,792, Cohen & Steers Real Asset 798,894, Colchester Global Inflation Linked Bond (SA) 69,898, Chickasaw Capital Management, LLC 270,689, Amerra Agriculture Fund III 74,442, MTP Energy Opportunities Fund II 67,66, Brookfield Infrastructure Partner Fund III 49,93,79.7 Orion Mine Finance Fund II 47,777,79.64 Blue Sky Strategic Australian Agriculture Fund 33,26,69.4 Actis Energy IV, LP 20,934, Sprott Resource Lending Fund, LP 7,989, *I Squared Global Infrastructure Fund II *MTP Energy Opportunities Fund III *Orion Mine Finance Co-Fund II *Stonepeak Infrastructure Fund III, LP Quarter To Comparative Performance Since Incep. Inception Real Return Composite N/A /0/20 Bloomberg Wrld Gov't Infl Lnkd Index (Unhedged) Difference N/A Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. *Represents approved investments that have not been funded and/or are pending legal documents. Page 9

20 Real Return Portfolio Diversification Portfolio Exposure by Geography TMRS Portfolio Exposure by Sector Portfolio Exposure by Asset Type Allocations may not sum up to 00% exactly due to rounding. Allocations are by adjusted commitments. Allocation information is as of December 3, 207 and provided by TMRS. Page 20

21 Real Estate Composite Allocation Quarter Asset Allocation by Manager $2,347,9,673 Market Value ($) Allocation (%) Abacus Core Income Fund, LP 72,067, BlackStone Property Partners 324,49, H/2 CP, LP 0,39, H/2 CP Core RE Debt Fund, LP 78,82, Harrison St. Real Estate 24,499, INVESCO Advisers, Inc. 206,620, Stockbridge Smart Markets Fund, LP 33,20, USAA Eagle Real Estate Fund, LP 226,83, Walton St Real Estate Debt Fund 2,3, Abacus Multi-Family Partners II, LP 637, Abacus Multi-Family Partners III, LP 67,080, Alcion RE Part Fund III-B, LP 27,8,036.6 DivcoWest V 22,247, Greenfield Acquisition Partners VI, LP 8,6, Greenfield Acquisition Partners VII, LP 87,737, IC Berkeley Partners IV, LP 3,88, *Madison Realty Capital Debt Fund IV, LP Miller Global Fund VII 6,69, Rubenstein Properties Fund II 7,034, Rubenstein Properties Fund III 2,96, Stockbridge Value Fund, LLC 4,663, Stockbridge Value Fund II, LP 6,7, *Stockbridge Value Fund III, LP Torchlight Debt Opp Fund V, LP 47,842, European Property Inv Special,3, *Kildare European Partners II Lubert-Adler Fund VII 00,468, Moorfield Real Estate III 60,98, TPG Real Estate Part II, LP 47,40, *TPG Real Estate Partners III, LP Walton St Real Estate Fund VII 47,409, To 3 Comparative Performance Since Incep. Inception Real Estate Composite N/A /0/202 Real Estate Benchmark Difference N/A *Represents approved investments that have not been funded and/or are pending legal documents. Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. Page 2

22 Real Estate Portfolio Diversification Property Type Diversification Based on Market Value Geographic Diversification Based on Market Value Sector Diversification Based on Market Value Allocations may not sum up to 00% exactly due to rounding. Allocation information is as of September 30, 207 and provided by TMRS. Page 22

23 Absolute Return Performance and Allocation December 3, 207 : $2,72,894,70 Asset Allocation by Manager Market Value ($) Allocation (%) Blackstone Treaty Oak Fund, LP 604,943, L/S Equity Manager 22,330, L/S Equity Manager 2 06,44, L/S Equity Manager 3 00,430, Credit Manager 43,662, Credit Manager 2 27,99, Credit Manager 3 47,779, Relative Value Manager 7,67, Relative Value Manager 2 04,868, Relative Value Manager 3 6,839,00.76 Relative Value Manager 4 83,774, Relative Value Manager 96,370, Event Driven Manager 66,43, Global Macro Manager 39,6,00.3 Global Macro Manager 2 60,424, Global Macro Manager 3 29,479, Global Macro Manager 4 9,393, Multi Strat Manager 7,4, Multi Strat Manager 2 00,8, Quarter To Comparative Performance Since Incep. Inception Absolute Return Composite N/A N/A N/A N/A N/A.37 08/0/204 Absolute Return Benchmark Difference N/A N/A N/A N/A N/A 3.04 Blackstone Treaty Oak Fund, LP N/A N/A N/A N/A N/A /0/204 Absolute Return Benchmark Difference N/A N/A N/A N/A N/A.8 Absolute Return Direct Composite N/A N/A N/A 2.6 N/A N/A N/A N/A /0/206 Absolute Return Benchmark Difference N/A N/A N/A 2.20 N/A N/A N/A N/A 4.6 Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. Page 23

24 Absolute Return Strategy Exposures BAAM Allocation Direct Portfolio Manager Exposures Allocations shown may not sum up to 00% exactly due to rounding. Allocation information is as of December 3, 207 and provided by TMRS. Page 24

25 Private Equity Performance and Allocation Asset Allocation by Manager $269,230,20 Market Value ($) Quarter To 3 Comparative Performance Allocation (%) *Altaris Constellation Partners IV, LP *Altaris Health Partners IV, LP *Capital Partners Private Equity Income Fund III, LP *Dunes Point Capital Fund II, LP *GTCR Fund XII, LP Harvest Partners VII,777,22 2. Incline Equity IV 202, Kainos Capital Partners II,46, Marlin Heritage II, LP,28, *Marlin Equity V, LP One Rock Capital Partners II, LP 6,693, Searchlight Capital II 2,6, Tritium I, LP 29,404, Foundry Group Next Fund, LP 4,869,999.2 FTV V,22,03.94 Mercato Partners Growth III, LP 3,038, Providence Strategic Growth II 42,688,03.86 *Providence Strategic Growth III, LP Updata Partners V, LP 29,726, Carlyle Energy Mezzanine Fund II 2,278, GSO COF III Co-investment Fund, LP,64,3 0.6 GSO Capital Opportunities Fund III, LP 9,34,2 7.8 H.I.G. Bayside Fund IV,944, *LightBay Investment Partners, LP TSSP Adjacent Opportunities Fund III 39,409, Since Incep. Inception Private Equity Composite N/A N/A N/A.68 N/A N/A N/A N/A /0/206 Russell 3000 Index+3% ( Qtr Lag) Difference N/A N/A N/A N/A N/A N/A N/A Private Equity - Buy Out N/A N/A N/A 23.9 N/A N/A N/A N/A.9 0/0/206 Russell 3000 Index+3% ( Qtr Lag) Difference N/A N/A N/A.0 N/A N/A N/A N/A -.3 Private Equity - Venture/Growth N/A N/A N/A N/A N/A N/A N/A N/A /0/206 Russell 3000 Index+3% ( Qtr Lag) Difference N/A N/A N/A N/A N/A N/A N/A N/A -.26 Private Equity - Special Situations N/A N/A N/A N/A N/A N/A N/A N/A /0/206 Russell 3000 Index+3% ( Qtr Lag) Difference N/A N/A N/A N/A N/A N/A N/A N/A -.0 *Represents approved investments that have not been funded and/or are pending legal documents. Performance shown is gross of fees. Allocations shown may not sum up to 00% exactly due to rounding. Page 2

26 Private Equity Strategic Allocation Private Equity Manager Diversification by Commitment Private Equity Target Manager Diversification Policy Strategy Ranges No more than 3% with any one investment manager No more than 2% in any one investment vehicle Allocations may not sum up to 00% exactly due to rounding. Allocation information is by adjusted commitment as of December 3, 207 and is provided by TMRS. *Represents investments awaiting board approval. Page 26

27 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.