Los Angeles City Employees Retirement System

Transcription

1 Los Angeles City Employees Retirement System John Hyll Vice President, Portfolio Manager Stephanie Lord, CFA, CIC Vice President, Client Portfolio Manager February 14, One Financial Center Boston, Massachusetts BOSTON DETROIT LONDON SINGAPORE LS Loomis Sayles is a trademark of Loomis, Sayles & Company, L.P. registered in the US Patent and Trademark Office.

2 loomis sayles at a glance A RICH INVESTMENT TRADITION Serving clients with integrity since 1926 $240.2 billion assets under management* WHAT DEFINES US Core attributes: integrity, transparency and a team-oriented culture Rigorous fundamental analysis complemented by robust macro and market insight Firm Ov verview Expertise across all major asset classes Portfolio managers, strategists, research analysts and traders collaborating to identify our best ideas 75% of investment professionals dedicated to research Small, accountable product teams implementing & trading; 159 CFA charterholders** portfolio decisions Global perspective: investors in Boston, San Francisco, Detroit, London and Singapore Disciplined risk awareness integrated into a high conviction investment process WHERE WE INVEST AUM BY GLOBAL ACCOUNTS US institutional ($113.0 b) $240.2 US billion US retail ($65.8 b) Non-US institutional ($56.2 b) Non-US retail ($5.2 b) As of 12/31/2016. * Includes the assets of both Loomis, Sayles & Co., LP, and Loomis Sayles Trust Company, LLC. ($18.8 billion for the Loomis Sayles Trust Company). Loomis Sayles Trust Company is a wholly owned subsidiary of Loomis, Sayles & Company, L.P. ** 283 investment professionals. 82% of CFA charterholders are investment professionals and 18% are non-investment professionals. FO0118 MALR

3 a common foundation lies at the heart of all our investment strategies A SOUND PHILOSOPHY Firm Ov verview A RIGOROUS, REPEATABLE PROCESS PROPRIETARY RESEARCH DISCIPLINED PORTFOLIO CONSTRUCTION INTEGRATED RISK MANAGEMENT FO0118 MALR

4 deep insight fuels our pursuit of alpha Firm Ov verview MACRO STRATEGIES Director 36 years experience Associate Director/ Senior Global Macro Strategist 21 years experience Senior Equity Strategist 31 years experience Economist 36 years experience Senior Commodities Analyst 8 years experience Research Analyst 5 years experience Research Assistant SOVEREIGN RESEARCH 5 Senior Sovereign Analysts 16 years average experience 3 Analysts 6 years average experience Research Associate* CREDIT RESEARCH Director 33 years experience 28 Senior Credit Analysts 19 years average experience 7 Credit Analysts 10 years average experience 10 Research Associates 7 Research Assistants Proprietary credit rating system since the 1930s SECURITIZED RESEARCH Director 19 years experience 3 Securitized Asset Strategists 15 years average experience 4 Senior Securitized Asset Analysts 17 years average experience 2 Research Analysts 4 years average experience Research Associate QUANTITATIVE RESEARCH & RISK ANALYSIS 2 Associate Directors 20 years average experience Quantitative Strategist 21 years experience Senior Strategist, LDI & Solutions 10 years experience 8 Quantitative Analysts 8 years average experience Quantitative Associate CONVERTIBLES & SPECIAL SITUATIONS Director 31 years experience 5 Senior Research Analysts* 16 years average experience Research Associate TRADING Head of Trading 28 years experience 4 Trading Directors 23 years average experience 34 Traders (incl. 4 directors above) 15 years average experience Dir. of Portfolio Implementation 10 years experience 18 Portfolio Specialists 19 years average experience Dir. of Operational Trading Risk Management 15 years experience Risk Analyst 9 years experience 10 distinct asset class teams EQUITY RESEARCH 23 Senior Analysts 19 years average experience 7 Analysts 6 years average experience As of 12/31/2016; Years experience indicates industry experience. *Includes one associate and one senior analyst with a January 9 th start date. FO0118 MALR

5 comprehensive expertise Firm Ov verview By sector Assets ($ millions) Investment Grade Corporates 72,192 Equity/Preferred 38,774 Treasuries 35,151 High Yield Corporates 32,574 Securitized 23,328 Bank Loans 9,652 Government Related 9,139 Bank Loans 4.2% Securitized 10.1% High Yield Corporates 14.1% Government Related Other 4.0% 2.5% Convertible Bonds 1.9% Investment Grade Corporates 31.2% Other 5,797 Convertible Bonds 4,458 Treasuries 15.2% Equity/ Preferred 16.8% As of 12/31/2016. Due to rounding, pie chart total may not equal 100%. Other includes municipals, cash & equivalents, and derivatives. Includes the assets of both Loomis, Sayles & Co., LP, and Loomis Sayles Trust Company LLC. FO0118 MALR

6 our investment platform JAE PARK Chief Investment Officer DAVID WALDMAN Deputy CIO ALPHA STRATEGIES BANK LOANS DISCIPLINED ALPHA EMERGING MARKET DEBT FULL DISCRETION GLOBAL RELATIVE RETURN SECURITIZED ASSETS Firm Ov verview Credit Long/Short Credit Asset World Credit Asset Multi-Asset Income Commodities Senior Loans Senior Floating Rate and Fixed Income Credit Opportunities Core Corporate Long Corporate Global Disciplined Alpha* Corporate Local Currency Short Duration Multisector Core Plus High Yield Full Discretion Global High Yield US High Yield High Yield Conservative Strategic Alpha Global Bond Global Credit Global Debt Unconstrained Global Disciplined Alpha* Short Duration Inter. Duration Core Core Plus IG Corporate Long Corporate Long Gov t/credit Custom LDI Agency MBS Investment Grade Securitized Credit High Yield GLOBAL EQUITY OPPORTUNITIES GROWTH LARGE CAP CORE MID CAP CORE SMALL CAP GROWTH SMALL CAP VALUE VALUE Global Equity & Income Global Equity Opportunities All Cap Growth Global Growth Large Cap Growth Large Cap Core Mid Cap Core Small Cap Growth Small/Mid Cap Growth Small Cap Value Small/Mid Cap Core Dividend Income Focused Value Large Cap Value As of 12/31/2016. * Co-managed investment strategy FO0118 MALR

7 aum summary AS OF 12/31/2016 Relative Return PM Team* Firm $72.2 $13.5 $240.2 ACCOUNTS ASSETS GAINED/LOST UNDER MANAGEMENT (billio Relative Return PM Team* Firm Gains 4Q Losses 4Q Total 9 (2) 19 LACERS ACCOUNT AS A PERCENT OF STRATEGY AUM (RELATIVE RETURN) 4Q16 3Q % 0.93% *PM Team refers to assets managed by John Hyll and Neil Burke LACERS originally hired Loomis Sayles in July of 1980 for Long Duration Fixed Income. The benchmark was the Barclays Govt/Credit. In August of 1993 the benchmark was changed to the Barclays LT Gov Credit. In June of 2000 it was changed to the Barclays US Universal and remained with the management team of John Hyll and Kent Newmark. In June of 2014 it was changed to the Barclays Aggregate and become a Core mandate but remained with the same portfolio management team of John Hyll and Neil Burke. 7

8 investment team HIGHLY EXPERIENCED, SEASONED TEAM PRODUCT TEAM ANKIT AGARWAL, CFA Senior Strategist LDI & Solutions XINJIA LIU Quantitative Analyst LDI & Solutions GENE MORRISON, CFA Product Manager EJ TATEOSIAN, CFA Product Manager Yrs of industry experience: Yrs with firm: <1 CAROL EMBREE, CFA Portfolio Manager, Sr. Credit Portfolio Strategist NEIL BURKE Portfolio Manager Yrs of industry experience: Yrs with firm: SECTOR TEAMS Global Asset Allocation PRAMILA AGRAWAL, PhD, CFA Strategist PETER OBERMANN Portfolio Specialist Developed Non-US Markets JOHN HYLL Portfolio Manager DAN CONKLIN, CFA Investment Analyst ANNA WANG Investment Analyst Yrs of industry experience: Yrs with firm: FIRMWIDE RESOURCES Emerging Markets Macro Strategies Director Assoc. Director/ Senior Global Macro Strategist Senior Equity Strategist Economist Senior Commodities Analyst Research Analyst Research Assistant Sovereign Research 5 Senior Analysts 3 Analysts Research Associate* As of 12/31/2016. *Includes one associate and one senior analyst with a January 9 th start date. High Yield / Bank Loans Credit Research Director 28 Senior Analysts 7 Analysts 10 Research Associates 7 Research Assistants Securitized Research Director 3 Strategists 4 Senior Analysts 2 Research Analysts Research Associate Convertibles Securitized Assets Quant. Research & Risk Analysis 2 Associate Directors Quantitative Strategist Senior Strategist, LDI & Solutions 2 Analysts Equity 6 Analysts - Fixed Quantitative Associate Equity Research 23 Senior Analysts 7 Analysts Inv Grade / Global Credit US Yield Curve Convertibles & Special Situations Director 5 Senior Analysts* Research Associate US Government Fixed Income Trading 28 Traders/TAs Director, Portfolio Implementation 18 Portfolio Specialists Director, Operational Trading Risk Mgt. Risk Analyst 8

9 investment process RISK AWARENESS TOP-DOWN Top-down evaluation of economic & investment environment PORTFOLIO CONSTRUCTION Seek to assess value of each sector & identify our best opportunities within sectors BOTTOM-UP LDI0817 MALR

10 investment process SECTOR TEAMS Deeper perspective through the collaboration of Portfolio Managers, Strategists, Research Analysts and Traders Develop top-down and bottom-up valuation frameworks and market analysis Identify where investment value may lie in various markets and/or what we view as the most attractive securities in each sector Monitor and measure sector performance and trends Research Analysts Portfolio Managers & Strategists SECTOR TEAMS Traders MACRO-ORIENTED TEAMS Global Asset Allocation US Yield Curve Developed Non-US Markets MARKET SECTOR TEAMS Bank Loans Commodities Convertibles Emerging Markets Equity Global Credit High Yield Investment Grade Corporate Municipals Securitized Assets US Government LDI0817 MALR

11 investment process OUR BEST TOP-DOWN IDEAS Portfolio Managers gain insight into macro themes and sector preferences leveraging the broader Loomis Sayles macro research effort Macro Research Team Baseline, Upside & Downside macro themes Yield Curve Team Duration/curve recommendations Sector Team Relative value of broad sectors Research PMs Traders Global Asset Allocation Team Consolidate and synthesize overall firm macro views LDI0817 MALR

12 investment process SOPHISTICATED RISK TOOLS USED TO IMPLEMENT & MONITOR TOP DOWN VIEWS Analyze sources of risk and beta sensitivity while leveraging GAAT sector forecasts GAAT Sector Return Forecasts provide base, bull and bear projections What are our views? Scenario Returns examines the impact to the portfolio of past known market events and GAAT forecasts Beta Analytics measures the sensitivities of the portfolio to changes in yield curves, spreads, and currencies What are our sensitivities? Key Rate Durations provide curve sensitivities of the portfolio Contribution to Risk provides decomposition of risk into different strategies What if scenarios? What are the sources of risk? Charts are illustrative for presentation purposes only as a sampling of risk management tool output. Some or all of this information on these charts may be dated, and, therefore, should not be the basis to purchase or sell any securities. The information is not intended to represent any actual portfolio. Scenario analysis has inherent limitations and should not be viewed as predictive of future events. It relies on opinions, assumptions and mathematical models, which can turn out to be incomplete or inaccurate. Actual results will be different. LDI0817 MALR

13 investment process PROPRIETARY RESEARCH: THE CORNERSTONE OF OUR BUSINESS Objective: Generate good investment ideas and help get them into the portfolios Integral to our investment process Rigorous fundamentally-driven credit analysis Career Analysts Team structure provides deep support to Senior Analysts Mixture of global and regional industry coverage, depending upon competitive structure and markets served Analysts cover their industries/sectors across the credit spectrum Analysts integrated into sector teams LDI0817 MALR

14 investment process OUR BEST BOTTOM-UP IDEAS Portfolio Managers gain insight into individual credits using the broader Loomis Sayles research effort Fundamental Research Solvency analysis Business outlook Management/political Sector Team Value of sector Subsector preference Preferred securities Liquidity Trading Issuer rating/volatility Specific security volatility Sector Team Each credit is viewed based on the following framework: LS Issuer Rating Industry Valuation Issuer Valuation Issuer Volatility Issuer Liquidity Quantitative Research Risk Analysis (QRRA) Fair value Portfolio construction Risk awareness Issuer Quant. Valuation Higher: aaa Overperform Undervalued: 1 Core Very Liquid: 4 Cheap: 100 aa a Market 2 3 Opportunistic 3 2 Lower: bbb Underperform Overvalued: 4 Speculative Less liquid: 1 Rich: -100 LDI0817 MALR

15 investment process SOPHISTICATED RISK TOOLS USED TO IMPLEMENT & MONITOR BOTTOM UP VIEWS Issuer exposures and attribution versus customized or standard benchmarks Security Dashboard provides measures of issue specific risk and daily attribution Issuer Decomposition provides multiple measures of issuer relative contribution to risk Heat Map provides a daily issuer attribution summary Charts are illustrative for presentation purposes only as a sampling of risk management tool output. Some or all of this information on these charts may be dated, and, therefore, should not be the basis to purchase or sell any securities. The information is not intended to represent any actual portfolio. LDI0817 MALR

16 investment results ANNUALIZED RETURNS (%) AS OF 12/31/2016 Portfolio (Net) Benchmark /30/80-12/31/16 1 year 2 years 3 years 5 years 10 years Annualized Portfolio (Net) Benchmark Excess Return The current benchmark is BBG BARC Aggregate. (1) BBG BARC Govt Credit from 6/30/1980 to 8/31/1993; BBG BARC LT Govt Credit from 8/31/1993 to 6/30/2000; BBG BARC U.S. Universal from 6/30/2000 to 6/30/2013; and BBG BARC Aggregate from 6/30/2013 to 12/31/2016. Returns over one year are annualized. Information is reported on a trade date basis. Account net return for inception to date periods are gross of fees. Data Source: Barclays Capital 16

17 investment results CALENDAR YEAR RETURNS (%) AS OF 12/31/2016 Portfolio (Net) Benchmark /30/80-12/31/16 YTD Dec 16 4Q Annualized Portfolio (Net) Benchmark Excess Return The current benchmark is BBG BARC Aggregate. (1) BBG BARC Govt Credit from 6/30/1980 to 8/31/1993; BBG BARC LT Govt Credit from 8/31/1993 to 6/30/2000; BBG BARC U.S. Universal from 6/30/2000 to 6/30/2013; and BBG BARC Aggregate from 6/30/2013 to 12/31/2016. Returns over one year are annualized. Information is reported on a trade date basis. Account net return for inception to date periods are gross of fees. Data Source: Barclays Capital 17

18 investment results ANNUALIZED RETURNS (%) AS OF 1/31/2017* Portfolio (Net) Benchmark /30/80-12/31/16 Jan 17 1 year 2 years 3 years 5 years 10 years Annualized Portfolio (Net) Benchmark Excess Return *Returns for January 2017 are preliminary The current benchmark is BBG BARC Aggregate. (1) BBG BARC Govt Credit from 6/30/1980 to 8/31/1993; BBG BARC LT Govt Credit from 8/31/1993 to 6/30/2000; BBG BARC U.S. Universal from 6/30/2000 to 6/30/2013; and BBG BARC Aggregate from 6/30/2013 to 1/31/2017. Returns over one year are annualized. Information is reported on a trade date basis. Account net return for inception to date periods are gross of fees. Data Source: Barclays Capital 18

19 investment results EVESTMENT TRAILING RETURNS AS OF 12/31/2016 evestment Alliance, LLC and its affiliated entities (collectively, evestment ) collect information directly from investment management firms and other sources believed to be reliable, however, evestment does not guarantee or warrant the accuracy, timeliness, or completeness of the information provided and is not responsible for any errors or omissions. Performance results may be provided with additional disclosures available on evestment s systems and other important considerations such as fees that may be applicable. Not for general distribution and limited distribution may only be made pursuant to client s agreement terms. * All categories not necessarily included, Totals may not equal 100%. Copyright evestment Alliance, LLC. All Rights Reserved. 19

20 performance attribution 12/31/2015 THROUGH 12/31/2016 (%) Total Returns Account Return 5.72 Benchmark Return 2.65 Excess Return 3.07 Excess Return Attribution Total Parallel Non-Parallel Yield Curve Allocation Selection Excess Return Attribution by Sector US Treasuries 0.23 US Agencies Gov Related Securitized Credit Securitized Agency 0.07 US Invest Grade 1.37 US High Yield 0.83 Emerging Markets 0.01 Non-US Dollar Bank Loans 0.10 Cash & Equivalents The Attribution benchmark is BBG BARC Aggregate. Figures on bar charts may not add up to total excess return as they exclude impact of trading and pricing differences. Excess Return by sector excludes yield curve impact. Data Source: Barclays Capital 20

21 attribution analysis 12/31/2015 THROUGH 12/31/2016 (%) Maturity Distribution Account Final Weight Benchmark Final Weight Account Average Weight Benchmark Average Weight Portfolio Return Benchmark Return Total Effect Under 1 year years years years years years Sector Distribution Account Final Weight Benchmark Final Weight Account Average Weight Benchmark Average Weight Portfolio Return Benchmark Return Total Effect US Treasuries US Agencies Gov Related Securitized Credit ABS Non-Agency RMBS CMBS Covered Securitized Agency US Invest Grade IG - Financial IG - Industrial IG - Utility US High Yield Emerging Markets Non-US Dollar Bank Loans Other* Cash & Equivalents The Attribution benchmark is BBG BARC Aggregate. Total Effects are impacted by sector returns, allocation shifts and market timing. *Returns reflect the entire period whereas weights reflect only the end of period. Total Effect excludes yield curve impact. Data Source: Barclays Capital 21

22 attribution analysis 12/31/2015 THROUGH 12/31/2016 (%) Quality Distribution Account Final Weight Benchmark Final Weight Account Average Weight Benchmark Average Weight Portfolio Return Benchmark Return Total Effect Aaa Aa A Baa Ba B Caa & Lower Not Rated Currency Distribution Account Final Weight Benchmark Final Weight Account Average Weight Benchmark Average Weight Portfolio Return Benchmark Return Total Effect US Dollar Argentine Peso* Mexican Peso The Attribution benchmark is BBG BARC Aggregate. For split rated securities in the quality distribution, the higher of Moody and S&P is used. Total Effects are impacted by sector returns, allocation shifts and market timing. Total Effect excludes yield curve impact. Data Source: Barclays Capital 22

23 historical characteristics summary Portfolio 12/31/2015 Portfolio 12/31/2016 Benchmark 12/31/2016 Yield 3.39% 2.78% 2.59% Average Maturity 8.44 years 8.33 years 8.06 years Average Duration 5.87 years 5.91 years 5.84 years Average Coupon Rate 3.33% 2.81% 3.07% Average Quality A2 A1 Aa2 Current Yield (MKT) 3.39% 2.82% 3.00% OAS 146 bps 81 bps 41 bps The current benchmark is BBG BARC Aggregate. Duration used is Effective. Equity securities are deemed to have a duration and maturity value of zero. Yield is Yield to Effective Maturity Data Source: Barclays Capital 23

24 characteristics summary SECTOR DISTRIBUTION (%) AS OF 12/31/2016 Los Angeles City Employees Retirement System US Treasuries US Agencies Gov Related Securitized Credit ABS Non-Agency RMBS CMBS Covered Securitized Agency US Invest Grade IG - Financial IG - Industrial IG - Utility BBG BARC Aggregate US High Yield Bank Loans (IG & HY) Cash & Equivalents Data Source: Barclays Capital 24

25 sector allocation change 12/31/2015 TO 12/31/2016 (%) US Treasuries US Agencies 5.40 Gov Related Securitized Credit ABS Non-Agency RMBS CMBS Covered 0.00 Securitized Agency US Invest Grade IG - Financial 0.72 IG - Industrial IG - Utility US High Yield Emerging Markets 0.00 Non USD (IG & HY) Bank Loans (IG & HY) 0.17 Other 0.00 Cash & Equivalents Account Final Weight Over/Under Weight US Treasuries (4.23) US Agencies Gov Related 1.56 (3.87) Securitized Credit ABS Non-Agency RMBS CMBS Covered 0.00 (0.08) Securitized Agency 9.67 (19.12) US Invest Grade IG - Financial IG - Industrial IG - Utility 1.16 (0.83) US High Yield Emerging Markets Non-US Dollar Bank Loans Cash & Equivalents The current benchmark is BBG BARC Aggregate. Data Source: Barclays Capital 25

26 characteristics summary QUALITY DISTRIBUTION (%) AS OF 12/31/2016 Aaa 5.42 Aa A Baa Ba B Caa & Lower Los Angeles City Employees Retirement System BBG BARC Aggregate For split rated securities in the quality distribution, the higher of Moody and S&P is used. The account's split rating treatment is based on client guidelines. The benchmark follows the vendor's methodology. Data Source: Barclays Capital 26

27 quality allocation change 12/31/2015 TO 12/31/2016 (%) Aa A Baa Ba B Aaa Account Final Over/Under Weight Weight Aaa (17.11) Aa A Baa Ba B Caa & Lower Caa & Lower The current benchmark is BBG BARC Aggregate. For split rated securities in the quality distribution, the higher of Moody and S&P is used. The account's split rating treatment is based on client guidelines. The benchmark follows the vendor's methodology. Data Source: Barclays Capital 27

28 characteristics summary AS OF 12/31/2016 (%) Maturity Distribution Los Angeles City Employees Retirement System BBG BARC Aggregate Under 1 year 1-3 years 3-5 years 5-7 years 7-10 years 10+ years Duration Distribution Los Angeles City Employees Retirement System BBG BARC Aggregate Under 1 year 1-3 years 3-5 years 5-7 years 7-10 years 10+ years The current benchmark is BBG BARC Aggregate. Equity securities are deemed to have a duration and maturity value of zero. Data Source: Barclays Capital 28

29 macroeconomic environment and outlook Year-end Forecast U.S. Domestic Global Western Europe Asia Pacific Latin America Real GDP Growth 1.6% 2.2% 3.0% 3.3% 1.6% 1.3% 5.4% 5.3% -0.5% 1.6% Headline CPI Inflation 1.3% 2.4% 2.7% 3.1% 0.6% 1.5% 2.2% 2.8% 9.9% 7.1% Current Account Balance (% GDP) -2.6% -2.9% % 2.7% 1.9% 1.5% -2.6% -2.4% Interest Rates (10-Year); end of year 2.4% 2.8% On a year over year basis real economic growth in the United States is expected to remain decent albeit at slower rates than past expansions. Single family housing starts should rise steadily throughout next year. The unemployment rate should stabilize around the historical NAIRU, non accelerating inflation rate of unemployment, which is between 4% and 5%. The labor force participation rate has risen a bit, but is likely to level off over the coming quarters as nonfarm payroll growth begins to moderate. Annual productivity growth, measured by output per hour worked, is expected to improve marginally over the next twelve months. Headline inflation is expected to rise this year but declines to 2.1% in The ECB, BoJ and BoE are still purchasing assets A widely expected twenty five basis point Fed Funds rate hike took place in mid-december, future hikes are expected in June and December The Fed indicated an expectation for three rate hikes in 2017, but in our view economic conditions would have to surprise on the upside for that to occur. The ECB will continue with the expanded asset purchase program until Dec. 2017, the pace of purchases will decline from 80B to 60B per month in April. Central bank balance sheets continue to expand at the BoJ (Bank of Japan) and BoE (Bank of England), providing further monetary easing to those economies. The economic execution we have been looking for isu.s. nownominal occurring and real The US corporate profits recession ended last quarter and profits are estimated to grow throughout 2017, providing an important tailwind to credit markets. A corporate tax cut, regulation rollbacks and slightly better nominal GDP would likely provide an additional boost to corporate profits in Late cycle leverage trends persist but the overall credit trend is largely stable as most corporates inch further along within the expansion phase of this cycle. Three commodity centric industries, independent energy, metals & mining, and pipelines/mlp s, are now firmly in the credit repair phase. With the global economy on more sure footing, optimism remains high Global manufacturing PMI indicators in developed and emerging markets have turned up and remain at levels consistent with economic expansion. GDP growth and inflation measures have improved modestly around the world, but economic fundamentals do not suggest a sharp rate rise in For the first time in quite a while, Washington could prove to be a positive source of corporate earnings catalysts in the quarters ahead. Although business sentiment and consumer confidence have improved, it is unlikely that new fiscal policies will meaningfully enhance bottom line U.S. GDP until The opinions expressed are based upon subjective judgments and will evolve as future events unfold. Data as of 1/19/2017: Loomis Sayles Macro Strategies Group 29

30 bond market environment BARCLAYS LONG CORPORATE OAS Data source: Bloomberg 30

31 bond market environment 10 YEAR UST Data source: Bloomberg 31

32 bond market environment 10 YEAR UST TIPS Data source: Bloomberg 32

33 bond market environment UST YIELD CURVE 12/31/ /31/2016 Data source: Bloomberg 33

34 bond market environment FIXED INCOME MARKET RETURNS BY SECTOR 2015 VS 2016 YTD s (%) Return US Treasuries US TIPS US Municipal US Agencies MBS Global Agg - ex. US ABS CMBS Bank Loans US IG Corporate US High Yield Emerging Markets Convertible Bonds Data source: Barclays Capital, S&P. Data through 12/30/2016. US Agencies is referring to the Agencies component of the US Aggregate: Government-Related index. 34

35 bond market environment US INVESTMENT GRADE CREDIT QUALITY TRENDS Downgrades Upgrades Downgrade/Upgrade Ratio # of Upgrades & Downgrades Eac ch Year Downgrade/Upgrade Ratio Yearly Data. Source: Moodys, history through November 30,

36 contacts Los Angeles City Employe ees Retirement System RELATIONSHIP MANAGEMENT Stephanie S. Lord, CFA, CIC Client Portfolio Manager Chad Gross Institutional Services Albert Wong Client Portfolio Analyst Risa Y. Sampson Portfolio Assistant INVESTMENT MANAGEMENT John Hyll Portfolio Manager Neil Burke Portfolio Manager Gene Morrison, CFA Product Manager This report is a service provided to customers of Loomis Sayles for informational purposes and is not a recommendation to purchase or sell securities. Unless otherwise noted, the performance shown is gross of management fees. Past performance is not a guarantee of future results. Loomis Sayles believes the information contained in this report is reliable but we do not guarantee its accuracy. Additional information on portfolio holdings, portfolio attribution and portfolio transactions are available to all investors upon request. 36

37 guideline summary Benchmark Barclays Aggregate Index. Los Angeles City Employe ees Retirement System Diversification & Limitations Minimum Credit Quality: Account may not hold securities rated below B3/B- by Moody or S&P. Spread duration less than or equal to 130% of the benchmark 10% out of benchmark securities allowed Split Rated Securities: Higher rating will govern split-rated securities. Issuer: Account may not hold more than 5% MV in any one issuer at time of purchase, excluding U.S. Gov't and Agencies. Account may hold no more than 10% MV in cash & cash equivalents. Bank Loans: Account may invest up to 12.5% MV in the Loomis Sayles Senior Loan Fund, LLC at the time of purchase Private Placements: Account may not hold Private Placement Securities (non-144a) Non-dollar: Non-U.S. sovereign debt and non-dollar investment grade corporate bonds are authorized. Guideline summary is not a complete restatement of guidelines. The slide is intended to be a summary to aid in the review process. 37

38 Loomis, Sayles & Company, LP ETHNIC COMPOSITION OF ALL OFFICES OF LOOMIS, SAYLES & COMPANY, LP As of December 31, 2016 Occupation Total Employees Total Males MALE EMPLOYEES Black Hispanic Asian Pacific Islander Native American Two or More Races Total Females FEMALE EMPLOYEES Black Hispanic Asian Pacific Islander Native American Two or More Races Total Minority % Minority % Female Officers % 34.17% Associates % 50.00% Total % 40.22%

39 John Hyll John Hyll is a vice president of Loomis, Sayles & Company and portfolio manager for the Loomis Sayles fixed income group. John co-manages long duration portfolios, including the Loomis Sayles Long Duration Corporate Bond strategy, Long Duration Government/Credit strategy, and customized LDI mandates. John is also a voting member of the yield curve team which provides the firm s interest rate forecast. He is a member of the US Government Sector team. He joined Loomis Sayles in 1987 and has 33 years of investment industry experience. Previously, John worked for National City Bank as an investment officer. He was responsible for managing a $200 million US Treasury, agency and corporate bond portfolio as well as a co-managing a $1.9 billion taxable bank holding company portfolio. John earned a BBA and an MBA from Baldwin Wallace College. One Financial Center Boston, MA

40 Stephanie S. Lord, CFA, CIC Stephanie Lord is a vice president and client portfolio manager at Loomis, Sayles & Company. Stephanie began her investment industry career in 1987 when she joined Loomis Sayles as a fixed income trader. She was later promoted to fixed income portfolio manager. Stephanie earned a BBA from the University of Iowa. One Financial Center Boston, MA