Fund Structure Trustee Educational Seminar. You re a New Trustee. Now What?

Transcription

1 2017 Trustee Educational Seminar Fund Structure You re a New Trustee. Now What? Jennifer Mink Principal Investment Performance Services Philadelphia, PA

2 FOLLOW THE YELLOW BRICK ROAD

3 P Investment olicy Asset A llocation M Performance easurement

4 Policy Define Roles and Responsibilities State Goals and Objectives Identify Investments Allowed and Restricted

5 The Decision Makers Trustees Investment managers Custody bank Advisory professionals Actuary Counsel Investment Consultant Chief Investment Officer

6 Objectives Investment goal Time horizon Risk tolerance Liquidity

7 Guideline Requirements Permissible assets Quality standards Diversification Restricted assets

8 Asset Allocation Targets Ranges Rebalancing Strategy

9 Why the road matters Target Allocation of Assets of the Fund Measured at Market Value Target Allocation of Assets of the Fund Measured at Market Value Target Allocation of Assets of the Fund Measured at Market Value Asset Class Target Range Domestic Equity Domestic Equity Investment Grade Fixed Income 35% 30 40% 10% 5 15% 35% 30 40% High Yield Fixed Income 10% 5 15% Real Estate 10% 5 10% Asset Class Target Range Domestic Equity 15% 30 40% Domestic Equity 0% NA Investment Grade Fixed Income 65% 60 70% High Yield Fixed Income 10% 5 15% Real Estate 10% 5 10% Asset Class Target Range Domestic Equity 55% 50 65% Domestic Equity 0% NA Investment Grade Fixed Income 35% 30 40% High Yield Fixed Income 15% 10 20% Real Estate 0% NA Cash Equivalents Minimal Cash Equivalents Minimal Cash Equivalents Minimal December 31, 2008 March 4, 2009 November 30, 2009

10 Impact of going off road Calendar Year Returns Calendar Year Ending December 31 Total Fund Returns % % Market Timing Client 1.2% 9.9% Median DB return 13.4% 12.8% Top Quartile DB return 17.5% 14.2% Index Returns Barclays Aggregate Index 5.9% 6.5% S&P 500 Index 26.4% 15.1% NCREIF NFI ODCE Index 29.8% 16.4%

11 The Importance of Rebalancing! RE 13.5% 8.4% 10.3% 55.8% 25.6% 34.0% 32.2% 39.4% 5.2% 78.5% 26.9% RE 16.0% 18.2% 38.8% 13.7% RE 15.1% 21.3% 11.6% RE 5.7% RE 5.3% 47.3% 20.2% RE 20.2% Int'l 26.3% RE 16.1% RE 10.4% HY 57.5% 25.5% 7.8% Int'l 17.3% 34.8% 13.2% 1.4% HY 17.5% 8.3% HY 4.5% 1.0% 40.1% Int'l 20.2% Int'l 13.5% 18.4% Int'l 11.2% 14.0% 40.5% 18.9% HY 4.4% 17.3% 32.4% RE 12.4% 1.2% 13.8% 4.1% 2.8% HY 1.9% Int'l 38.6% 18.3% 12.6% RE 16.2% 10.3% 21.4% 36.1% RE 16.1% 4.4% 16.3% Int'l 22.8% 6.0% 0.6% 12.0% 3.0% 2.5% 6.2% 28.7% 13.2% 7.5% 15.8% 9.9% 25.4% Int'l 31.8% HY 15.2% 2.1% 16.1% 15.3% 4.9% 0.3% EM 11.2% HY 5.2% 2.6% 7.2% HY 28.1% RE 12.6% 4.9% 15.3% 7.0% HY 26.4% 27.2% 15.1% 0.9% HY 15.6% RE 13.3% 3.4% Int'l 0.8% RE 9.3% 8.1% 5.6% Int'l 15.9% 26.7% 10.9% 4.6% 15.1% 5.6% 33.8% 26.5% 11.7% 1.6% RE 11.0% 9.0% 3.0% 1.6% 8.5% 9.1% 10.8% 16.2% 11.6% HY 10.8% 3.6% HY 11.7% 5.5% 37.0% 20.1% 9.8% 4.2% 10.9% HY 7.4% HY 2.5% 2.4% 5.6% Int'l 14.2% 11.9% 20.5% RE 9.1% 6.9% HY 2.7% 10.4% 3.9% 41.5% 11.5% Int'l 7.8% 5.7% 10.2% 5.6% 1.9% 4.4% 2.7% 30.8% Int'l 21.5% 22.1% 4.1% 4.3% 2.4% 9.9% HY 2.2% Int'l 43.4% 5.9% 6.5% Int'l 12.1% 4.8% 2.0% 2.2% HY 4.6% Int'l 1.0% 2.4% 4.3% 1.6% 53.3% RE % 18.4% 4.2% 2.6% Int'l 4.9% 14.9% 0.7% * Equity = S&P 500 Index *Fixed Income = Barclays Aggregate Index * Equity = Russell Midcap Index *High Yield = Merrill Lynch High Yield Master II Index * Equity = Russell 2000 Index *Real Estate = NCREIF ODCE Index *International Equity = MSCI EAFE Index *Hedge Fund of Funds = HFRI ROF Index *Emerging Markets = MSCI EM Index *Global Tactical Asset Allocation = 65%MSCI World Equity/35% Citi World Gov t Bond Index *Short Duration High Yield = ML High Yield Cash Pay 1-3 Yr BB Index. Index inception date was January 1, 2005.

12 Measurement Total Fund Investment Managers Compliance

13 Program Evaluation Performance Total Fund Relative to actuarial assumption Peer universe ranking Median or above Other important factors to consider Growth of assets Liquidity needs are met Compliance with investment policy

14 Public Funds Defined Benefit Universe As of December 31, 2016 Rank 1 yr 3 yrs 5 yrs 10 yrs th Percentile 9.4% 5.7% 9.8% 6.3% 9.4% 2.2% 8.0% 20.8% 14.6% 25th Percentile 8.4% 5.0% 9.1% 5.6% 8.4% 0.9% 6.8% 18.0% 13.4% Median 7.7% 4.5% 8.3% 5.2% 7.7% 0.1% 5.8% 15.5% 12.4% 75th Percentile 6.9% 3.8% 7.4% 4.7% 6.9% 0.9% 4.6% 13.3% 10.7% 95th Percentile 5.3% 2.7% 5.4% 3.8% 5.3% 2.6% 3.2% 8.5% 7.8% InvestorForce Universe Data

15 Manager Evaluation Performance Absolute & Relative to index; consistency Peer universe ranking Median or above Risk statistics Standard deviation, capture ratios, tracking error Style drift Portfolio holdings attribution Firm stability Ownership, insurance, regulatory, investment team Compliance with investment policy Consistency; communication

16 Manager Compliance Permissible assets Communication & reporting Proxy voting Trading costs Commingled fund guidelines Liquidity Who monitors?

17 What you need to succeed Know your role Work with experienced professionals Clearly define your investment policy Establish meaningful asset allocation guidelines Monitor and measure your performance Know what is going on get educated! attend meetings go to conferences ask questions

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19 2017 Trustee Educational Seminar Fund Structure Jennifer Mink Principal Investment Performance Services Philadelphia, PA