Target Retirement Performance Update

Transcription

1 Target Retirement Update Q CIT Strategy Highlights As of March 31, 2017 The State Street Target Retirement Collective Trust Strategies posted quarterly returns ranging from +2.44% (Income Strategy) to +5.78% (2050 Strategy). 1 On a rolling one year basis, the suite of funds generated positive performance ranging from +6.16% (Income Strategy) to % (2055 Strategy), on average outperforming 52% of peers. 2 Since inception, performance for the funds with the longest track records 3 remains strong, with Morningstar rankings averaging in the top 7% of respective peer groups. 4 Figure 1: Q1' Asset Class Market Review: Q1' 2017 International equities delivered strong returns in the first quarter amid an upswing in global economic data. US equities advanced to all-time highs, given positive economic data and President Trump s plans to cut taxes and regulations. In bond markets, high yield corporate bonds performed particularly well, while government bonds were more mixed. Inflation expectations have held nearly unchanged so far in 2017 meaning, investors in U.S. TIPS have seen comparable returns to those on nominal U.S. bonds. Description 3 Month International Equities (%) 8.07 Large Cap Equities 6.06 Small/Mid Cap Equities 4.35 U.S. High Yield Bonds 2.39 Global Real Estate 2.13 U.S. Long Government Bonds 1.46 U.S. TIPS 1.24 U.S Year TIPS 1.04 U.S. Bonds 0.82 U.S. Short-Term Government/Credit Bonds 0.40 Commodities Source: State Street Global Advisors, as of March 31, 2017.

2 Peer Rankings The Peer Universe table in Figure 2 compares our State Street Target Retirement Collective Trust Series (net 17 bps Investment Management Fees) to their respective Morningstar Target Date Peer Universe. This review is limited to the funds on the 10's ('60,..., and '20) and the Income Strategy. State Street Target Retirement Collective Trust Strategies have average rankings in the top 37% of the Target Date fund universe for 1-, 3-, 5- and 10-year periods. Since inception, their average realized risk was lower than 72% of peers, while performance was in the top 7%. On average across our suite of funds, since inception we outperformed the universe average by 126 bps, with risk levels 45bps lower than the universe average. Figure 2: Universe Rankings Period Ending March 31, 2017 Morningstar US Peer Universe Rank (%) MRQ 1 Year 3 Years 5 Years 10 Years Since Inception Return 5 Since Inception Risk* Inception Date SSGA 2060 (Net 17bps) N/A N/A N/A /6/2015 SSGA 2050 (Net 17bps) N/A /1/2007 SSGA 2040 (Net 17bps) /1/2005 SSGA 2030 (Net 17bps) /1/2005 SSGA 2020 (Net 17bps) /1/2005 SSGA Income (Net 17bps) /1/2005 Average Ranks (1 100%) State Street fund performance provided by State Street Global Advisor (SSGA) Investment Solutions Group ( ISG ). * Risk measured using standard deviation of monthly returns. Since inception averages only includes strategies with track records longer than 5 years. This information is included in figures Figure 3: 1 Year Asset Class U.S. Small/Mid Cap Equities (%) U.S. Large Cap Equities U.S. High Yield Bonds International Equities Commodities U.S. TIPS 1.44 U.S Year TIPS 1.43 U.S. Short Term Government/Credit Bonds 0.63 U.S. Bonds 0.41 Global Real Estate 0.39 U.S. Long Government Bonds Source: State Street Global Advisors, as of March 31, Rolling 12-month Drivers Over the last twelve month period ending March 31, 2017, ten of the eleven underlying strategies within our Target Retirement Solution contributed positively to performance, driven largely by strong performance in equities. Within fixed income, U.S. High Yield Bonds led the way, comfortably outperforming U.S. Aggregate bonds. Commodities also performed well. 1 Year March 31, 2017 Our rolling twelve month average return rankings outperformed 52% of peers during the period ending March 31, Younger Participants (Ages 20 45, invested in our strategies) Younger participants in our longer-dated strategies benefited from our overweight to U.S. SMID Cap equities early on in the glidepath. Over the 1 year period ending March 31, 2017, U.S. SMID Cap equities returned % whereas U.S. Large Cap equities returned %. Older Participants (Ages 50+, invested in our 2030 Income strategies) Older participants in our shorter-dated strategies benefited from our diversified approach to Fixed Income, as U.S. High Yield bonds (+15.37%) and Short-Term Bonds (+0.63%) both outperformed U.S. Aggregate Bonds (+0.41%). Other positive contributors include our allocations to inflation protection asset classes; U.S. TIPS (+1.44%), U.S TIPS (+1.43%) and Commodities (+11.88%). State Street Global Advisors 2

3 3 Year March 31, 2017: Younger Participants (ages 20 45) Younger participants in our longer-dated strategies benefited in the intermediate-term from our allocation to U.S. Long Government bonds with positive 3 year performance (+5.82%). This was somewhat muted by the underperformance in international equities over that same period as we hold a slightly higher allocation to international equities (40%) versus U.S. equities when compared to some of peers (30%). During the last 3 years, for example, U.S. Large Cap Equities were up 10.36% and U.S. Small/Mid Cap Equities were up 7.20%, while International Equities (ACWI ex-us IMI) were up just 1.08%. Benchmark Relative (Tracking) The Strategies are managed within a strategic asset allocation framework and invest in a suite of proprietary commingled index funds. As in any strategic mandate that invests in passive index funds, one of the investment objectives is to limit the variance between the portfolio s return and that of the benchmark. In our suite of target retirement funds, tracking error over the past year, as defined by divergent performance relative to the index, ranged from -0.13% to 0.80%. Older Participants (ages 50+) Older participants in our shorter-dated strategies benefited in the intermediate-term from our allocation to U.S. High Yield bonds with positive 3 year performance (+3.83%). This helped with peer relative performance compared to managers more concentrated in U.S. Aggregate Bonds (+2.70%). Figure 4: Asset Allocations As of March 31, 2017 Target Retirement Fund Income Years to Retirement Large U.S. Stocks S&P 500 Index Small/Mid-cap U.S. Stocks Russell Small Cap Completeness Index International Stocks MSCI ACWI ex USA IMI Index Barclays Aggregate Barclays Capital U.S. Aggregate Bond Index LT Govt Barclays Capital U.S. Long Gov t Bond Index 1 3 gov credit Barclays Capital U.S. 1 3 Government/Credit Bond Index High Yield Bonds Barclays Capital U.S. High Yield Very Liquid Bond Index TIPS Barclays Capital U.S. Treasury Inflation Protected (TIPS) Index Intermediate TIPS Barclays Capital 1 10 Government Inflation-Linked Bond Index Real Estate (REITs) FTSE EPRA/NAREIT Developed Liquid Index Commodities Bloomberg Roll Select Commodity Index SM Source: Investment Solutions Group ( ISG ). Allocations as of close of business March 31, 2017 are subject to change, and should not be relied upon as current thereafter. State Street Global Advisors 3

4 Figure 5: 2060 Strategy Morningstar US: Target Date /2015 to 01/2017 # Managers Percentile Percentile Percentile Percentile Percentile Universe Average SSGA 2060 (Net 17bps) SSGA 2060 (Net 17bps) Figure 6: 2050 Strategy Morningstar US: Target Date /2007 to 01/2017 # Managers Percentile Percentile Percentile Percentile Percentile Universe Average SSGA 2050 (Net 17bps) SSGA 2050 (Net 17bps) State Street Global Advisors 4

5 Figure 7: 2040 Strategy Morningstar US: Target Date /2005 to 01/2017 # Managers Percentile Percentile Percentile Percentile Percentile Universe Average SSGA 2040 (Net 17bps) SSGA 2040 (Net 17bps) Figure 8: 2030 Strategy Morningstar US: Target Date /2005 to 01/2017 # Managers Percentile Percentile Percentile Percentile Percentile Universe Average SSGA 2030 (Net 17bps) SSGA 2030 (Net 17bps) State Street Global Advisors 5

6 Figure 9: 2020 Strategy Morningstar US: Target Date /2005 to 01/2017 # Managers Percentile Percentile Percentile Percentile Percentile Universe Average SSGA 2020 (Net 17bps) SSGA 2020 (Net 17bps) Figure 10: Income Strategy Morningstar US: Target Date Retirement Income 04/2005 to 01/2017 # Managers Percentile Percentile Percentile Percentile Percentile Universe Average SSGA Income (Net 17bps) SSGA Income (Net 17bps) The performance figures contained in the Peer Universe summary (Figures 5 10) are provided on a net of fees basis, reflecting the deduction of investment management fees. The Gross Returns were reduced by 17 basis points (1.417 basis points monthly) to reflect a hypothetical investment management fee. Returns are net administrative costs. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in US dollars. returns for periods of less than one year are not annualized. State Street Global Advisors 6

7 Morningstar Percentile Rankings are based on the average annual total returns of the funds in the category for the periods stated and do not include any sales charges or redemption fees, but do not include 12b-1 fees and the reinvestment of dividends and capital gains distributions. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. Rankings for each share class will vary due to different expenses. Had sales charges or redemption fees been included, total returns would be lower. We currently offer 11 funds in our off-the-shelf State Street Target Retirement Collective Trust Strategies ranging from 2055 to the Income Fund. We introduced the five-year vintages ( ) in August 2006 and the 2055 fund was launched in the first quarter of Note: The 2060 strategy launched at the end of Q at the same time that the 2010 strategy merged with the Income strategy and, as such, Q was the last performance record for the 2010 strategy. 1 Absolute performance referenced is gross investment management fees. The performance includes the reinvestment of dividends and other corporate earnings and is calculated in US dollars. quoted is based on the non-lending suite of funds. Net of fee performance for the State Street Target Retirement Collective Trust Strategies provided in figures Ibid. 3 When we initiated the Strategies in 2004, we began with target retirement dates in ten year intervals (2010 through 2040 plus a Lifetime Income Fund). The peer ranking performance tracks these original strategies with the 10-year vintages and also includes the 2050 strategy, which was added in August 2007 (first full month of performance in October 2007). 4 Peer universe is the Morningstar US Target Retirement. For return rankings, the strongest performer over any time period would be `1 whereas the weakest performer over any time period would be `100. For the standard deviation rankings, the manager with the lowest level of realized risk would be `100 while the manager with the highest level of realized risk would be `1. 5 Inception Dates: 2040, 2030, 2010 Strategies (2/05) ; 2020, Income Strategies (4/05) ; 2015, 2025, 2035, 2045 Strategies (9/06) ; 2050 Strategy (10/07) 2060 Strategy (4/15). State Street Global Advisors 7

8 ssga.com For institutional use only. State Street Global Advisors One Lincoln Street, Boston, MA T: The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA s express written consent. Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions. Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates bond prices usually fall); issuer default risk; issuer credit risk;liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. 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