2017 Annual Performance Review

Transcription

1 Omaha Public Power District 2017 Annual Performance Review Retirement Plan March 13, 2018 Jeffrey C. Boucek, CFA Senior Vice President Copyright 2018 by The Segal Group, Inc. All rights reserved.

2 Presenters Today Jeffrey C. Boucek, CFA Senior Vice President, Public Fund Market Leader 400 Galleria Parkway, Suite 1700 Atlanta, GA T

3 Agenda I. Market Environment II. Total Fund Results Review of Retirement Fund Financial Objectives III. Individual Manager Results Domestic Equity International Equity Domestic Fixed Income Global Fixed Income/Emerging Market Debt Private Real Estate IV. Total Fund Summary 3

4 I. Market Environment 4

5 U.S. Unemployment 5

6 Consumer Sentiment Source: University of Michigan Index of Consumer Sentiment 6

7 2017 Market Environment It Was Very Different Unprecedented Low Volatility Dow Sets 70 new highs Wakeup Call 7

8 2017 Market Environment Real GDP increased 2.3 percent in 2017 compared with an increase of 1.5 percent in FOMC members project GDP growth in the % annualized range over the next few years, both of which are lower from the quarter prior. 8

9 2017 Investment Performance: U.S. Equities 35.0% 30.0% 30.2% 25.0% 20.0% 15.0% 21.7% 13.7% 14.7% 22.2% 21.1% 10.0% 7.8% 5.0% 0.0% Russell 1000 Russell 1000 Growth Russell 1000 Value Russell 2000 Russell 2000 Growth Russell 2000 Value Russell 3000 Amid low volatility the over entire year, the U.S. equity markets posted positive results. The year ending 2017 marked the ninth straight year of positive returns for stocks. Growth stocks, in particular large-cap growth stocks, dominated their value counterparts. Small Cap Value was the only single digit area of the market 9

10 2017 Investment Performance: Non-US Equities 40.0% 35.0% 33.5% 30.0% 25.0% 25.6% 29.3% 22.1% 20.0% 15.0% 10.0% 5.0% 0.0% MSCI EAFE MSCI EAFE Growth MSCI EAFE Value MSCI EAFE Small Cap Equity markets in the developed countries also posted strong results. In a reversal from last year, growth stocks provided the strongest results while value provided the poorest. 10

11 2017 Investment Performance: Global/Emerging Markets 40.0% 37.8% 35.0% 30.0% 28.5% 25.0% 23.1% 20.0% 18.0% 15.0% 10.0% 5.0% 0.0% MSCI World MSCI World Growth MSCI World Value MSCI Emerging Markets The global equity markets posted positive results for the year. Here too, growth stocks provided the strongest results while value the poorest. The emerging markets posted the most robust returns for the year outpacing U.S. and non U.S. equities. 11

12 2017 Investment Performance: Fixed Income 12.0% 10.0% 10.7% 10.3% 9.3% 8.0% 7.1% 6.0% 4.0% 2.0% 3.5% 2.3% 3.0% 0.0% BC Aggregate BC US Treasury Blmbg. BC US TIPS BC Long US Govt/Credit Citigroup US High Yield Citi Non US WGBI JPM EMBI Global In general, bond markets were positive for 2017 with the BC Long US Gov t/credit Index and Citi Non US WGBI Index posting double digit returns. 12

13 II. Total Fund Results 13

14 Background 2017 During 2017, the following new asset classes were funded as a result of the modifications to the Investment Policy Statement in 2016: U.S. Small-Cap Growth Equities U.S. Small-Cap Value Equities International Small-Cap Equities Private Real Estate Net of fee calculations began in Harrison Street Core Property Fund was funded during the first quarter

15 2017 Asset Growth *OPPD and employee contributions less benefit payments and Plan expenses. 15

16 Review of Retirement Fund Financial Objective #1 The District s Retirement Fund Objective #1 is to exceed its benchmark index net of management fees. 1 Yr 3 Yrs 5 Yrs 7 Yrs 10 Yrs 15 Yrs TOTAL PLAN Policy Index Difference Note: Net of fee performance calculation started on 1/1/2017. Longer time periods are gross of fees. 16

17 Fund Return Review of Retirement Fund Financial Objective #2 The District s Retirement Fund Objective #2 is to earn 4.0% above the rate of inflation. For the current 10 year period ( ) the Retirement Fund has earned 6.0% which is above the Objective of 5.7%. For the current 20 year period ( ) the Retirement Fund has earned 6.2% which equals the Objective of 6.2% Rolling Ten Year Periods TOTAL PLAN CPI + 4% 17

18 III. Individual Manager Results 18

19 Domestic Equity as of 12/31/17 SSgA Russell 1000 Index Fund posted expected results with minimal tracking error. Wellington posted a strong return in 2017 versus both its benchmark and peer group median. Voya was funded in June 2017 with $25 million. LSV was funded in May 2017 with $25 million. Note: Returns are gross of fees. 19

20 International Equity as of 12/31/17 AQR outpaced both its benchmark and peer group median in OFI and Wells both posted strong absolute results, but lagged relative to their benchmark and peer group median during Lord Abbett was funded in May 2017 with $35 million. Note: Returns are gross of fees. 20

21 Domestic Fixed Income as of 12/31/17 Both passive SSgA strategies produced expected results with minimal tracking error. Both JP Morgan and Reams posted returns below their peer group median, but above benchmark in Neuberger Berman underperformed versus its benchmark and peer group median. Note: Returns are gross of fees. 21

22 Global Fixed Income/Emerging Market Debt as of 12/31/17 Both Colchester and Stone Harbor outperformed their respective benchmarks during 2017, but provided very different longer term results relative to peers. Note: Returns are gross of fees. 22

23 Private Real Estate as of 12/31/17 PGIM Real Estate was funded in October 2017 with $25 million. 23

24 IV. Total Fund Summary 24

25 Total Fund Summary The Total Fund returned 16.07% during 2017 net of fees. Assets increased by approximately $116 million. Year-end market value was $1,020.8 million. The Total Fund outperformed its Policy Index by 88 basis points in 2017 net of fees. The results were driven from numerous active managers that added value versus the policy index. In addition, the Total Fund has outperformed versus its policy index over the longer three, five, seven, and ten-year periods ended December 31,