Performance Review May 17, 2018

Transcription

1 Performance Review May 17, 2018

2 Cost-Efficiencies Initiative Update Goal: Obtain $100 million of incremental cost-efficiencies for the NCRS investment program, consistent with fiduciary requirements and investment objectives The $100 million goal would be measured on a cumulative basis over a four-year timeframe The goal is comprehensive of the Pension and Supplemental Retirement Plans Progress to date: Fully Executed Activities Approx. Annual Savings ($000) Investment-related services: renegotiations / restructuring $7,985 Investment manager terminations / renegotiations $68,653 Sub-Total $76,638 In Process Investment manager & services renegotiations / restructuring $3,372 Grand Total $80,011 2

3 US Economic Environment GDP (Q/Q annualized) Unemployment Rate Consumer Confidence Payroll Retail Sales Home Sales Private NF Payroll (in thousands) Total NF Payroll (in thousands) Retail Sales (m/m) Retail Sales x Auto/Gas (m/m ) Existing Home Sales (in millions) New Home Sales (in thousands) 65 ISM 3 CPI 2.5 PCE ISM Non-Manf. ISM CPI (y/y) Core CPI (y/y) PCE (y/y) Core PCE (y/y) Source: Bloomberg (data as of 03/31/18) 3

4 Global Economic Environment Investment Management Division Real GDP YoY Unemployment CPI YoY Real GDP YoY Unemployment CPI YoY Countries Date Value Date Value Date Value Countries Date Value Date Value Date Value U.S. 03/ / / Asia/Pacific/Latam Europe China 03/ / Germany 12/ / / India 12/ / France 03/ / / Japan 12/ / / U.K. 03/ / / Indonesia 12/ / Italy 12/ / / Brazil 12/ / Spain 03/ / / Australia 12/ / / Source: Bloomberg (data as of 03/31/18) 4

5 Market Environment UST (Constant Maturity) Curve Corporate Credit OAS (BofAML Indices) Most Recent 1 Mo. Ago 3 Mo. Ago 1 Year Ago Global Equity Markets CCC & Below B BB IG Master 35,000 32,500 30,000 27,500 25,000 22,500 20,000 17,500 15,000 12,500 10,000 4,000 3,750 3,500 3,250 3,000 2,750 2,500 2,250 2,000 1,750 1,500 US Dollar Trade Weighted Broad Index Dow Jones Nikkei 225 Hang Seng Euro Stoxx 50 (Right) Volatility Indicators VIX CS Fear MOVE (Right) Source: Federal Reserve Bank of St. Louis; Bloomberg (data as of 03/31/18) 5

6 Assets Under Management ($MM) $128.0 billion as of March 31, , , , ,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,358 2,358 1,580 2,139 2,174 10,494 11,278 8,791 9,186 9,304 16,449 16,512 12,292 12,953 15,037 90,140 89,576 87,570 94,057 97,855 June 2014 June 2015 June 2016 June 2017 March 2018 NCRS Cash Management Supplemental Retirement Other Note: The Cash Management Program does not include Assets with Fiscal Agent, which are reflected in the Bond Proceeds Fund. These funds, which may have been reported in the Cash Management Program previously, have now been removed for all years shown in this report to more accurately reflect the Cash Management Program balance. 6

7 NCRS Asset Allocation As of March 31, 2018 Investment Management Division Market Value ($MM) % Target Range Minimum Maximum Relative % Relative $ ($MM) Growth $53, % 58.00% 37.00% 71.00% -3.76% ($3,678) Public Equity 39, % 42.00% 37.00% 47.00% -2.05% (2,004) Private Equity 4, % 6.00% 0.00% 8.75% -0.96% (943) Non Core Real Estate 3, % 3.00% 0.00% 8.00% 0.56% 544 Opportunistic Fixed Income 5, % 7.00% 0.00% 7.50% -1.30% (1,276) Rates & Liquidity 31, % 29.00% 24.00% 42.00% 3.35% 3,281 IG Fixed Income & Cash 28, % 28.00% 24.00% 32.00% 0.77% 756 Pension Cash 3, % 1.00% 0.00% 10.00% 2.58% 2,525 Inflation Sensitive & Diversifiers 11, % 11.00% 4.00% 16.00% 0.45% 442 Inflation Sensitive 5, % 6.00% 2.00% 7.50% 0.13% 127 Core Real Estate 5, % 5.00% 2.00% 10.00% 0.32% 314 Multi-Strategy 1, % 2.00% 0.00% 4.00% -0.05% (45) Grand Total $97, % 7

8 NCRS Asset Allocation (Unaudited) As of April 26, 2018 Market Value ($MM) Range Minimum Maximum Growth $53, % 58.00% 37.00% 71.00% -3.69% ($3,602) Public Equity 39, % 42.00% 37.00% 47.00% -1.63% (1,595) Private Equity 4, % 6.00% 0.00% 8.75% -0.98% (955) Non Core Real Estate 3, % 3.00% 0.00% 8.00% 0.23% 223 Opportunistic Fixed Income 5, % 7.00% 0.00% 7.50% -1.31% (1,275) Rates & Liquidity 31, % 29.00% 24.00% 42.00% 3.25% 3,171 IG Fixed Income & Cash 27, % 28.00% 24.00% 32.00% 0.22% 215 Pension Cash 3, % 1.00% 0.00% 10.00% 3.03% 2,956 Inflation Sensitive & Diversifiers 11, % 11.00% 4.00% 16.00% 0.48% 473 Inflation Sensitive 6, % 6.00% 2.00% 7.50% 0.15% 146 Core Real Estate 5, % 5.00% 2.00% 10.00% 0.33% 327 Multi-Strategy 1, % 2.00% 0.00% 4.00% -0.04% (42) Grand Total $97, % % Target Relative % Relative $ ($000) 8

9 Percent Total Return Investment Management Division NCRS Total Net Portfolio Return vs. Benchmarks As of March 31, (1.0) (2.0) (0.6) (1.2) 3 Month 1 Year 3 Year 5 Year 10 Year 15 Year 20 Year NCRS Implementation Benchmark Long-Term Policy Benchmark Actuarial Assumed Investment Return (7.0%) Notes: Actuarial Assumed Investment Return was lowered from 7.2% to 7.0% in April 2018 Returns for periods greater than one year are annualized. Implementation Benchmark is a blend of the Asset Class Benchmarks at policy weights. It is currently weighted as follows: 58% Growth Benchmark; 29% Rates & Liquidity Benchmark; 11% Inflation Sensitive & Diversifiers Benchmark; and 2% Multi-Strategy Benchmark. Long-Term Policy Benchmark is comprised of 57% MSCI ACWI IMI Net; 33% BOAML 5+ Years U.S. Treasury Index; 6% Bloomberg Commodity Index; and 4% BOAML 1-3 Years U.S. Inflation-Linked Treasury Index. 9

10 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Growth of a Dollar Through March 31, Investment Management Division NCRS Long-Term Policy Benchmark Notes: Long-Term Policy Benchmark is comprised of 57% MSCI ACWI IMI Net; 33% BOAML 5+ Years U.S. Treasury Index; 6% Bloomberg Commodity Index; and 4% BOAML 1-3 Years U.S. Inflation-Linked Treasury Index. 10

11 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Mar-08 Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12 Nov-12 Jul-13 Mar-14 Nov-14 Jul-15 Mar-16 Nov-16 Jul-17 Mar-18 Investment Management Division Growth of a Dollar 5 Years Ending March 31, Years Ending March 31, NCRS Long-Term Policy Benchmark NCRS Alternatives NCRS Long-Term Policy Benchmark NCRS Alternatives Note: NCRS Alternatives includes the following: Core Real Estate; Inflation Sensitive Private Natural Resources; Inflation Sensitive Real Assets and Other Diversifiers; Multi-Strategy Investments; Non Core Real Estate; Opportunistic Fixed Income; Private Equity; Equity Hedge Strategies; and closedend Public Natural Resource funds. 11

12 NCRS Net of Fees Return Attribution Total Fund vs. Implementation Benchmark: 1 Year Ending Mar. 31,

13 NCRS Net of Fees Return Attribution Total Fund vs. Implementation Benchmark: 3 Years Ending Mar. 31,

14 NCRS Net of Fees Return Attribution Total Fund vs. Implementation Benchmark: 5 Years Ending Mar. 31,

15 NCRS Gross of Fees Return and Risk BNY Mellon Universe: U.S. Public Funds > $20B; Data as of Mar. 31, 2018 Returns 3 Years 5 Years 10 Years 15 Years 20 Years 25th Percentile Median Percentile th Percentile NCRS Percentile Rank (1 = highest performance) Risk 3 Years 5 Years 10 Years 15 Years 20 Years 25th Percentile Median Percentile th Percentile Total Pension Plan Percentile Rank (100 = lowest risk) Note: Data shown is gross of fees with the exception of incentive payments, which have been deducted from NAV when applicable. 15

16 Sharpe Ratio Investment Management Division NCRS Gross of Fees Sharpe Ratio BNY Mellon Universe: U.S. Public Funds > $20B; Data as of Mar. 31, 2018 Sharpe 3 Years 5 Years 10 Years 15 Years 20 Years 25th Percentile Median Percentile th Percentile NCRS Percentile Rank Year Plot: Sharpe Ratio vs. Volatility NCRS Standard Deviation (%) Note: Data shown is gross of fees with the exception of incentive payments, which have been deducted from NAV when applicable. 16

17 Volatility Tracking Error Investment Management Division NCRS Net of Fees Risk and Return Metrics As of March 31, % 12.5% 10.0% 7.5% 5.0% 2.5% 0.0% Rolling 3-Year Total Fund Volatility & Tracking Error 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Volatility Tracking Error POSITION 36-MONTH 60-MONTH Active Active Program $ Bil % Wgt Return St. Dev Return TE IR Return St. Dev Return TE IR Total NCRS Growth Public Equity Private Equity Non-Core Real Estate Opportunistic Fixed Income Rates & Liquidity IG Fixed Income & Cash Pension Cash Inflation Sensitive & Diversifiers Inflation Sensitive Core Real Estate Multi-Strategy Note: Active Return = Net Managed less benchmark returns; TE = Tracking Error; IR = Information Ratio 17

18 NCRS Liquidity Profile As of March 31, 2018 Liquidity Allocation ($ Market Value) Global Public Equity Private Equity Non Core Real Estate Opportunistic Fixed Income Investment Grade Fixed Income Cash Inflation Sensitive Core Real Estate Multi-Strategy Total NCRS - 20,000 40,000 60,000 80, ,000 Level 1 Level 2 Level 3 Level 4 Liquidity Allocation ($ Market Value + Unfunded) Global Public Equity Private Equity Non Core Real Estate Opportunistic Fixed Income Investment Grade Fixed Income Cash Inflation Sensitive Core Real Estate Multi-Strategy Total NCRS - 20,000 40,000 60,000 80, ,000 Level 1 Level 2 Level 3 Level 4 Liquidity Allocation (% Market Value) Global Public Equity Private Equity Non Core Real Estate Opportunistic Fixed Income Investment Grade Fixed Income Cash Inflation Sensitive Core Real Estate Multi-Strategy Total NCRS Level 1 Level 2 Level 3 Level 4 Global Public Equity Private Equity Non Core Real Estate Opportunistic Fixed Income Investment Grade Fixed Income Cash Inflation Sensitive Core Real Estate Multi-Strategy Total NCRS 0% 20% 40% 60% 80% 100% Liquidity Allocation (% Market Value + Unfunded) 0% 20% 40% 60% 80% 100% Level 1 Level 2 Level 3 Level 4 Note: Level 1 Liquidity = T+3; Level 2 = T+3 to 12 Months; Level 3 = 12 to 24 Months; Level 4 = Greater than 24 Months 18

19 NCRS Liquidity Profile Net benefit payments by calendar year Investment Management Division 3, % 3, % 2, % 2, % 1, % 1, % % Total Net Benefit Payments ($MM) Annual Payments % 3% Guideline Linear (Total Net Benefit Payments ($MM)) 0.00% 19

20 NCRS Alternatives Liquidity Profile Through March 31, 2018 Prior 12-Months Total Cash Flows by Alternative Asset Class ($MM) 8,000 6,000 4,000 2,000 0 (2,000) (4,000) (6,000) 1,325 1,194 1,147 1, (262) (576) (907) (805) (886) (717) Prior 12-Months Average Monthly Cash Flows by Alternative Asset Class ($MM) 5, ,725 (75) (75) (3,966) Inflation Opp Fixed Income Private Equity Funds Real Estate - Core Real Estate - Non Core Multi-Strategy Total Alternatives Contributions Distributions Net (200) (22) (48) (76) (67) (74) (60) 0 (6) (6) (330) (400) Inflation Opp Fixed Income Private Equity Funds Real Estate - Core Real Estate - Non Core Multi-Strategy Total Alternatives Contributions Distributions Net 20

21 NCRS Asset Class Net of Fees Performance As of March 31, 2018 Market Value ($MM) 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years Growth $53, Benchmark Public Equity $39, Benchmark Private Equity $4, Benchmark Non-Core Real Estate $3, Benchmark Opportunistic Fixed Income $5, Benchmark Rates & Liquidity $31, Benchmark IG Fixed Income $28, Benchmark Cash $3, Benchmark Inflation Sensitive & Diversifiers $11, Benchmark Inflation Sensitive $5, Benchmark Core Real Estate $5, Benchmark Multi-Strategy $1, Benchmark

22 New, Incremental, & Unfunded Investment Commitments Since February 15 IAC Meeting As of March 31, 2018 Fund Name Firm Name New or Incremental Commitment ($MM) Closing Date Public Equity Russell 200 Passive 1 Internal 1,575 2/28/18 Russell MidCap Passive 1 Internal 675 2/28/18 Russell MidCap Value Passive 1 Internal 390 2/28/18 Private Equity Landmark Equity Partners XVI, Landmark Partners 300 3/29/18 LP Landmark Equity Partners XVI Opportunities, LP 2 Landmark Partners 300 3/29/18 Landmark Equity Partners XVI Overflow, LP Non-Core Real Estate Harrison Street RE Partners VI Co-Investment 3, LP Inflation Sensitive Landmark Real Assets Fund II, LP Landmark Partners 200 3/29/18 Harrison Street Real Estate Capital 50 3/23/18 Landmark Partners 250 3/29/18 Landmark Real Estate Partners VIII, LP Landmark Partners 125 3/29/18 Landmark Real Estate Partners VIII Overflow Landmark Partners 75 3/29/18 DL Blue Diamond Fund Doubleline 425 5/1/18 NC Garnet Fund Blackrock 75 5/1/18 1 Incremental monies allocated to the internal public equity portfolios came from existing public equity managers. 2 The $300m commitment to Landmark Equity Partners XVI Opportunities is contingent upon NCDST approval of individual investments. Asset Class Unfunded Commitments ($MM) Public Equity 410 Private Equity 3,304 Non-Core Real Estate 1,779 Opportunistic Fixed Income 1,189 Inflation Sensitive 1,783 Core Real Estate 730 Multi Strategy 145 Total 9,341 22

23 $ Millions Investment Management Division New and Total Unfunded Private Asset Class Commitments By Calendar Year of Closing 12,000 10,000 8,000 6,000 4,000 2, *2018 data as of 3/31/2018 Richard Moore Janet Cowell Dale Folwell Ending Total Unfunded 23

24 Strategic Asset Allocation Policy History 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Public Equity IG Fixed Inc Cash Private Equity Non-Core RE Opp Fixed Inc Core RE Inflation Sens Multi-Strat 24

25 Exited Investments Since February 15 IAC Meeting Public Equity Private Equity Investment Management Division Fund Name Redemption Amount ($MM) Redemption Effective BlackRock MidCap Value Passive /28 None Non-Core Real Estate NorthCreek Fund /18 Opportunistic Fixed Income None Inflation Sensitive Blackstone Granite Fund Class A 290 1/30 Blackstone Granite Fund Class B 190 1/30 Core Real Estate Multi Strategy None None The internal public equity team took over the management of this account 2 Total distributions received during the life of the fund. Residual holdback still pending 25

26 Appendix 26

27 NCRS Public Equity Net of Fees Performance As of March 31, 2018 Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Public Equity $39,096 (0.02) Benchmark 2 (0.85) Domestic Portfolio $17,295 (0.19) Russell 3000 (0.64) Non-US Portfolio $18, Custom Benchmark (1.06) Equity Hedge $3,206 (0.22) MSCI ACWI (Beta Adjusted) (0.30) *Public Equity returns also include the global portfolio, which has been liquidated but currently contains a residual amount of roughly $1 million. 27

28 NCRS Public Equity Portfolio Characteristics As of March 31, 2018 Portfolio Characteristics Portfolio MSCI ACWI IMI Price / Earnings Dividend Yield Price / Book Debt / Equity Market Cap ($B Weighted Median) Return on Equity - 1 Year Financials Cons. Disc. Technology Health Care Prod Durables Cons. Staples Utilities Energy Materials Other Total Equity Sector Allocation 20.97% 23.29% 15.87% 13.71% 17.11% 16.12% 10.96% 10.27% 11.27% 11.09% 6.56% 7.12% 5.51% 5.49% 5.38% 6.12% 5.69% 6.44% 0.68% 0.35% 0% 5% 10% 15% 20% 25% Portfolio MSCI ACWI IMI 60% 50% 40% 30% 20% 10% 0% 54.1% 50.7% 16.9% 14.1% 12.1% 11.5% Total Equity Regional Allocation 8.7% 8.1% 5.6% 5.5% 4.1% 3.7% 1.8% 2.8% 0.1% 0.2% United States Europe ex UK Emerging Markets Japan United Kingdom Asia / Pacific Basin ex Japan Americas ex US Portfolio Public Equity Blended Benchmark Africa / Middle East Developed 28

29 NCRS Private Equity Portfolio As of March 31, 2018 Investment Management Division Net of Fees Performance Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Private Equity $4, Benchmark Buyout $2, Growth $1, Special Situations $ Fund of Funds $ IRR by Vintage Year Pre Total NCRS N/A 8.09 # of Funds Strategy Allocation (Based on Valuation) Fund of Funds 18.2% Special Situations 14.4% Growth Equity 22.7% Buyout 44.7% *Private Equity returns include a stock distribution account, in the amount of roughly $30 million, which does not fall under any specific sub-section. 29

30 NCRS Non-Core Real Estate Portfolio As of March 31, 2018 Net of Fees Performance Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Non-Core Real Estate $3, Benchmark Opportunistic $2, Value Add $ IRR by Vintage Year Pre Total NCRS N/A N/A N/A 6.52 # of Funds N/A N/A Strategy Allocation (Based on Valuation) Value Add 27.6% Opportunistic 72.4% 30

31 NCRS Opportunistic Fixed Income Portfolio As of March 31, 2018 Net of Fees Performance Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Opportunistic Fixed Income $5, Benchmark 5 (2.43) (0.03) Traditional Corporate Credit $ Distressed Credit $ Special Situations $1, Hedged Fixed Income $2, IRR by Vintage Year Total NCRS 2.87 N/A N/A 6.27 # of Funds 1 N/A N/A 42 Strategy Allocation (Based on Valuation) Hedged Fixed Income 47.7% Traditional Corporate Credit 15.4% Distressed Credit 8.7% Special Situations 28.1% 31

32 NCRS Rates & Liquidity Portfolio As of March 31, 2018 Net of Fees Performance Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Rates & Liquidity $31,659 (1.54) Benchmark 6 (1.91) IG Fixed Income $28,155 (1.74) Core Fixed Income $25,145 (1.98) IG Fixed Income Cash $3, Pension Cash $3, Core Fixed Income Portfolio Characteristics Avg. Coupon Yield to Maturity Duration (Years) Government (Treasury & Agency) 4.16% 2.79% 9.8 Corporate 4.52% 3.92% 9.1 Mortgage 3.71% 3.30% 4.7 Total 4.13% 3.38%

33 NCRS Core Fixed Income Portfolio Characteristics As of March 31, % Sector Allocation 35.6% 35.0% 35.7% 35.0% 30% 27.3% 30.0% 20% 10% 0% Gov't (UST & Agency) 1.4% 0.0% 0.0% 0.0% Corporate RMBS Asset-backed CMBS Cash Portfolio Benchmark 50% Quality Allocation 40% 39.1% 35.7% 30% 20% 10% 0% 29.3% 24.7% 1.1% 1.2% 3.2% 3.6% 17.4% 21.5% 13.4% 8.7% 1.1% 0.0% Treasury Agency (Debt & MBS) AAA AA A BBB High Yield Portfolio Benchmark 33

34 NCRS Inflation Sensitive Portfolio As of March 31, 2018 Net of Fees Performance Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Inflation Sensitive $5, (1.28) Benchmark (0.89) (0.23) Private Natural Resources $2, Public Natural Resources $228 (1.13) (1.61) (4.68) (7.92) - Inflation Linked Bonds $ Real Assets & Other Diversifiers $2, IRR by Vintage Year Total NCRS N/A N/A N/A 0.56 # of Funds N/A N/A 3 60 Strategy Allocation (Based on Valuation) Real Assets & Other Diversifiers 41.3% Private Natural Resources 43.3% Inflation Linked Bonds 11.6% Public Natural Resources 3.8% 34

35 NCRS Core Real Estate Portfolio As of March 31, 2018 Net of Fees Performance Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Core Real Estate $5, Benchmark Public Equity Real Estate $693 (3.30) Private Equity Core Real Estate $4, IRR by Vintage Year Pre Total NCRS N/A N/A N/A N/A N/A 7.25 # of Funds N/A 1 N/A N/A N/A 1 34 Strategy Allocation (Based on Valuation) Public Equity Real Estate 13.3% Private Equity Core Real Estate 86.7% 35

36 NCRS Multi-Strategy Portfolio As of March 31, 2018 Investment Management Division Net of Fees Performance Market Value ($MM) 3 Month 1 Year 3 Years 5 Years 10 Years Multi-Strategy $1,912 (0.70) Benchmark 12 (0.96) Hedge Funds $1 (14.14) (33.43) (17.85) (9.64) (5.31) Rebalance Strategy $1,536 (0.98) Event Driven $ Risk Mitigation $144 (1.86) (3.89) Volatility Trading $ (14.64) Volatility Trading 1.8% Risk Mitigation 7.5% Strategy Allocation (Based on Valuation) Hedge Funds 0.1% Event Driven 10.3% Rebalance Strategy 80.3% 36

37 Notes: All data presented are based on currently available information at time of publication and may be revised subsequently. 1. The Growth Benchmark is a blend of the Public Equity Benchmark, Private Equity Benchmark, Non-Core Real Estate Benchmark, and Opportunistic FI Benchmark at policy weights. 2. The Public Equity Benchmark is the dynamically-weighted combination of the MSCI ACWI IMI Net (Long-Only) and a beta-adjusted MSCI ACWI IMI Net (Hedged Equity). 3. The Private Equity Benchmark is comprised of the following Burgiss Group Private iq indices: 50% Buyout, 20% Venture Capital, and 30% Distressed. 4. The Non-Core Real Estate Benchmark is comprised of the following Burgiss Group Private iq indices: 80% U.S. Non-Core Real Estate (Opportunistic and Value-Added) and 20% Non-U.S. Non-Core Real Estate (Opportunistic and Value-Added). 5. The Opportunistic Fixed Income Benchmark is a comprised of 50% HFRX Distressed Securities Index, 20% HFRX Relative Value Index, 15% Credit Suisse Leveraged Loan Index, and 15% BOAML High Yield Index*. 6. The Rates & Liquidity Benchmark is a blend of the IG Fixed Income Benchmark and the Cash Benchmark at policy weights. 7. The IG Fixed Income Benchmark is comprised 10% imoneynet First Tier Institutional Money Market Funds Net Index and 90% custom BOAML Core Investment Grade Index*. The custom BOAML core index comprised of the following weightings: 30% BOAML 5+ Years Governments, 35% BOAML 5+ Years Investment Grade Corporates, and 35% BOAML Mortgage Master. 8. The Cash Benchmark is the imoneynet First Tier Institutional Money Market Funds Net Index. 9. The Inflation Sensitive & Diversifiers Benchmark is a blend of the Inflation Sensitive Benchmark and the Core Real Estate Benchmark at policy weights. 10. The Inflation Sensitive Benchmark is the dynamically weighted combination of the Bank of America Merrill Lynch 1-3 Years U.S. Inflation-Linked Treasury Index (TIPS)*, the Bloomberg Commodities Index (Commodities), and a combination of the benchmarks of investments classified within Private Natural Resources or Other Real Assets and Diversifiers. 11. The Core Real Estate Benchmark is comprised of 80% NCREIF ODCE Net and 20% FTSE EPRA NAREIT Global Index. 12. The Multi-Strategy Benchmark is comprised of a dynamically-weighted combination of the HFRX ED: Multi-Strategy Index, net of fees, and the market value weighted benchmarks for any other total fund strategies within the Portfolio. *Source: BofA Merrill Lynch, used with permission. See disclaimer on next page. 37

38 Disclaimer BOFA MERRILL LYNCH IS LICENSING THE BOFA MERRILL LYNCH INDICES AS IS, MAKES NO WARRANTIES REGARDING SAME, DOES NOT GUARANTEE THE SUITABILITY, QUALITY, ACCURACY, TIMELINESS, AND/OR COMPLETENESS OF THE BOFAML INDICES OR ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM, ASSUMES NO LIABILITY IN CONNECTION WITH THEIR USE, AND DOES NOT SPONSOR, ENDORSE, OR RECOMMEND THE DEPARTMENT OF STATE TREASURER, OR ANY OF ITS PRODUCTS OR SERVICES. 38

39