I-1 Investment Performance Summary Quarter Ended March 213 Committee on Investments/ Investment Advisory Group May 21, 213
Contents Significant Events and Results Market Overview Performance Asset Allocation Total Fund Attribution Appendix May 21, 213 2
Significant Events and Results for the Quarter U.S. stocks climbed higher, surpassing 27 peak levels in the wake of an improving economic outlook, supported by the housing recovery and accommodative Central Bank policies FYTD, the UC Entity had a strong gain of 1.39%, outperforming its policy benchmark by 93 bps The Entity topped $8 billion in assets, well exceeding the pre-crisis peak of $75 billion in 27 All Plan portfolios generated positive excess returns (Alpha) in the quarter as fundamentals continued to improve The decision to modestly overweight Public Equities relative to Fixed Income and TIPS added value to plan performance Alternatives provided accretive diversified returns for the quarter but in aggregate lagged high beta asset returns May 21, 213 3
Market Overview: Equity and Fixed Income Returns U.S. Equities were the best performing asset class in this quarter while both Non-U.S. Equities and Emerging Market Equities lagged Fixed Income posted a rare quarterly loss as yields modestly rose 25 2 15 1 5 - (5) 11.1 Capital Market Returns, period ending 3/31/213 18.3 19. 14.6 4.7 1.4 Russell 3 MS World ex- US 11.9 2. (1.6) (.1) 3.8 1.7 MS Emg Mkt BC Agg Bond Q1-213 FYTD 1-Year 11.1 2.9 13.1 BC US High Yield (2.3) 7.8 1.4 JPM EMBI Global May 21, 213 4
UC Performance: Quarter and Fiscal Year to Date All Plans outperformed their policy benchmarks for the quarter and fiscal year to date (9 months) For the fiscal year, UCRP outperformed the Policy by.8%, GEP outperformed by 1.7%, and the UC Entity outperformed by.9% Gains within UCRP were primarily driven by asset allocation and manager selection 5 4 3 Returns for 3 Months ending Mar 31, 213 (%) 4.6 4.6 4.2 3.8 4. 3.6 3.5 3.6 15 1 Returns for 9 Months ending Mar 31, 213 (%) 12.4 11.6 12.2 1.5 9.8 9.5 1.4 9.5 2 1.5. UCRP GEP STIP TRIP ENTITY Plan Policy Bench 5 1.7.1 UCRP GEP STIP TRIP ENTITY Plan Policy Bench May 21, 213 5
US Eq Int'l Dev. Eq Emg Mkt Eq US Fixed Inc. US High Yld EM Debt TIPS Private Eq Abs Ret CAC Real Assets Priv. R.E. Public R.E. US Eq Int'l Dev. Eq Emg Mkt Eq US Fixed Inc. US High Yld EM Debt TIPS Private Eq Abs Ret CAC Real Assets Priv. R.E. Public R.E. UC Performance: UCRP Asset Classes Most of the asset classes performed in line with policy benchmarks for the quarter and FYTD For the quarter and FYTD, Emerging Market Equities, Absolute Return, Real Assets, Private Real Estate, US Fixed Income, High Yield and EM Debt outperformed their respective benchmarks while Cross-Asset Class and Public Real Estate trailed 12 1 8 6 UCRP Performance - 3 Months ending Mar 31, 213 (%) Portfolio Bench Val. Add 25 2 15 UCRP Performance - 9 Months ending Mar 31, 213 (%) Portfolio Bench Val. Add 4 1 2 - (2) 5 - (4) (5) May 21, 213 6
Asset Allocation: UCRP and GEP at Quarter-End The primary exposures for UCRP were: Overweights in U.S. Equity, HY Bond, CAC Strategies, and Real Estate Underweights in TIPS and Core Fixed Income The primary exposures for GEP were: Overweights in CAC Strategies, U.S. Equity, and Real Estate Underweights in TIPS, Emerging Market Debt, and Core Fixed Income Actual % UCRP Asset Allocation Current Policy Allocation* Variance from Current Policy Range % Actual % GEP Asset Allocation Current Policy Allocation Variance from Current Policy Range % U.S. Equity 26.5 25. 1.5 2. 3. 17. 16. 1. 11. 21. Non-U.S. Equity-Dev. 18.6 18.75 -.2 14. 24. 12.9 13. -.1 8. 18. Emerging Markets Equity 7.1 6.75.4 4.75 8.75 6.3 6..3 4. 8. Core Fixed Income 11.2 12. -.8 9. 15. 4.6 5.5 -.9 2.5 8.5 High Yield Bond 3. 2.5.5 1.5 3.5 2.5 2.5. 1.5 3.5 Emerging Market Debt 2.5 2.5. 1.5 3.5 2.5 3. -.5 2. 4. TIPS 6.5 8. -1.5 6. 1. 2.3 4. -1.7 2. 6. Private Equity 7.4 7.75 -.3 4.75 1.75 8.9 9. -.1 6. 12. Absolute Return Strategies 5.6 6. -.4 1. 11. 23.3 23.5 -.2 18.5 28.5 Cross-Asset Class Strategies 2.5 2..5. 5. 3.2 2. 1.2. 7. Opportunistic Equity 1.6 2. -.4. 3. 7.2 7..2. 12. Real Assets 1.8 2. -.25.75 2.75 2. 1.75.25.8 2.8 Real Estate 5.3 4.75.6 1.75 7.75 7.2 6.75.5 3.8 9.8 Liquidity Portfolio.3..3. 1..1..1. 1. Total Assets 1.% 1.% 1.% 1.% * UCRP Current Policy Allocation is Pro-Forma based on 4/1/13 Policy Allocation May 21, 213 7
US Eq Non-US Eq EM Eq Global Eq Core Bonds HY Debt EM Debt TIPS Private Eq Abs Return CAC Strategies Real Assets RE - Private RE - Public Cash Total Performance Attribution: UCRP Fiscal Year to Date Asset selection within nearly all asset classes contributed most to the 85 bp of outperformance 9 8 7 6 5 4 3 2 1-1 12 () UCRP Attribution for 9 mo. ending Mar-31-13 (basis points) 8 1 3 1 1 Total impact 13 27 (4) 1 (2) (1) (1) 85 Values in basis points (bp) US Eq Non-US Eq EM Eq Global Eq Core Bonds HY Debt EM Debt TIPS Private Eq Abs Ret CAC Strategies Allocation* 6 2 (1) 1 9 (1) 11 () (1) (2) (1) 26 Selection ** 5 (3) 9 21 1 1 2 () 27 (4) 2 (1) - 59 Total impact 12 () 8 1 3 1 1 13 27 (4) 1 (2) (1) (1) 85 *Allocation measures the impact of over/under weighting an asset class relative to its policy target **Selection measures the impact of each asset class performing above/below its respective policy benchmark The numbers may not add due to rounding. Real Assets RE - Private RE - Public Cash Total May 21, 213 8
US Eq Non-US Eq EM Eq Core Bonds HY Debt EM Debt TIPS Private Eq Abs Return CAC Strategies Opp Equity Real Assets RE - Private RE - Public Cash Total Performance Attribution: GEP Fiscal Year to Date Asset selection across all asset classes contributed most to the 166 bp of outperformance 18 16 14 12 1 8 6 4 2-2 3 (2) GEP Attribution for 9 mo. ending Mar-31-13 (basis points) 1 17 1 4 12 Total impact (2) 17 (4) 19 2 3 (2) 1 166 Values in basis points (bp) US Eq Non-US Eq EM Eq Core Bonds HY Debt EM Debt TIPS Private Eq Abs Ret CAC Strategies Allocation* 1 (1) 3 1 11 (2) () (2) (1) (2) (1) 1 9 Selection** 2 (3) 11 13 1 2 1 () 17 (2) 18 2 5 (1) - 157 Total impact 3 (2) 1 17 1 4 12 (2) 17 (4) 19 2 3 (2) 1 165 *Allocation measures the impact of over/under weighting an asset class relative to its policy target **Selection measures the impact of each asset class performing above/below its respective policy benchmark The numbers may not add due to rounding. Opp Equity Real Assets RE - Private RE - Public Cash Total May 21, 213 9
Appendix May 21, 213 1
9/28/27 12/28/27 3/28/28 6/28/28 9/28/28 12/28/28 3/28/29 6/28/29 9/28/29 12/28/29 3/28/21 6/28/21 9/28/21 12/28/21 3/28/211 6/28/211 9/28/211 12/28/211 3/28/212 6/28/212 9/28/212 12/28/212 3/28/213 Market Overview: Equity and Fixed Income Returns U.S. Equity markets have reached new highs, exceeding pre-financial crisis peak levels while non-u.s. Equities are still below but trending toward pre-crisis levels 2% 175% 15% 125% 1% 75% 5% 25% Global Markets Cumulative Return from September 27 Russell 3 MS World ex-us MS Emg Mkt BC Agg Bond BC US High Yield JPM EMBI Global May 21, 213 11
UC Performance: Longer Periods Diversification and Asset Allocation are important to long-term performance All UC Plans outperformed their benchmarks across all periods 12 1 8 6 Returns for 1 Year ending Mar 31, 213 (%) 1.6 1.3 9.9 1. 9.3 8.2 8.9 7.8 12 1 8 6 Returns for 3 Years ending Mar 31, 213 (%) 9.1 8.5 9.1 8.2 8.7 7.9 6.6 6.7 4 2 5 4 3 2 1 2.3.2 UCRP GEP STIP TRIP ENTITY Returns for 5 Years ending Mar 31, 213 (%) 4.5 3.8 4.1 4.2 3.6 3.4 2.8.8 UCRP GEP STIP ENTITY Plan 4 2 9 8 7 6 5 4 3 2 2.5.3 UCRP GEP STIP TRIP ENTITY Returns for 1 Years ending Mar 31, 213 (%) 7.9 8.6 8.2 7.5 7.1 6.6 3.5 2.1 1 UCRP GEP STIP ENTITY Policy Benchmark May 21, 213 12
Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun- Jun-1 Jun-2 Jun-3 Jun-4 Jun-5 Jun-6 Jun-7 Jun-8 Jun-9 Jun-1 Jun-11 Jun-12 UCRP: 2-Year Performance UCRP outperformed its policy benchmark in 15 out of 2 years during the last 2 fiscal-year (FY) periods Compound 2-year return of 8.59% outperformed the benchmark by 33 bp annualized 3 2 1-1 UCRP and Policy Benchmark Annual Returns (FY) -2 UCRP Policy May 21, 213 13
US Equity Non US Eq Emg Mkt Eq Global / Opp Eq US Fixed Inc. US High Yld Emg Mkt Debt TIPS Private Eq Abs Ret CAC RE - Private RE - Public Real Assets Percent Contribution to Risk (Volatility): UCRP UCRP s forecast total systematic risk (blue bars) is 13.94% annualized standard deviation;* 73% stems from Public Equity Forecast active systematic risk (red bars) is small at.32% annualized standard deviation; 64% is from Public Equity and 24% from Alternatives 1 UCRP Forecast Contrib. to Systematic Risk at Mar 31, 213 (%) 8 6 4 2-2 -4 Contrib. to Total Risk Contrib. to Active Risk * Standard deviation (measured in percentage) is a measure of the variability of investment returns and, thus, an estimate of downside risk. A standard deviation of 14% means that, in normal market conditions, a portfolio s return would fall between +(-) 14% above (below) its average return in 2 out of 3 years, and +(-) 28% above (below) its average return in 19 out of 2 years. Source: UC Treasurer s Office calculations May 21, 213 14
US Equity Non US Eq Emg Mkt Eq Glob Eq / Opp Eq US Fixed Inc. US High Yld Emg Mkt Debt TIPS Private Eq Abs Ret CAC Real Assets RE - Private RE - Public Cash Percent Contribution to Risk (Volatility): GEP GEP s forecast total systematic risk (dark blue bars) is 14.42% annualized standard deviation;* 57% is from Public Equity and 2% Absolute Return Forecast active systematic risk (light blue bars) is small at.42% annualized standard deviation; 92% is from overweights in U.S. Equity, Emerging Market, and Cross-Asset Class 5 4 3 GEP Forecast Contrib. to Active Risk at Mar 31, 213 (%) 2 1 - (1) Contrib. to Total Risk Contrib. to Active Risk * Standard deviation (measured in percentage) is a measure of the variability of investment returns and, thus, an estimate of downside risk. A standard deviation of 14% means that, in normal market conditions, a portfolio s return would fall between +(-) 14% above (below) its average return in 2 out of 3 years, and +(-) 28% above (below) its average return in 19 out of 2 years. Source: UC Treasurer s Office calculations May 21, 213 15