i performance and asset allocation · 5/25/2018 · performance and asset allocation • asset...
TRANSCRIPT
2
I. Performance and Asset Allocation
• Asset Allocation: Current and Target Allocations (page 4)• Performance by Asset Class (page 5)
II. Public Equities• Asset Class Overview (page 7)• Portfolio Management Structure (page 8)• Allocation (pages 9-10)• Performance (pages 11-12)
III. Fixed Income• Core Fixed Income
• Asset Class Overview (page 14)• Portfolio Management Structure (page 15)• Allocation (page 16)• Performance (page 17)
• Non-Core Fixed Income• Asset Class Overview (page 18)• Portfolio Management Structure (page 19)• Allocation (page 20)• Committed Allocation (page 21)• Performance (pages 22-23)
IV. Real Estate • Asset Class Overview (page 25)• Portfolio Management Structure (page 26)• Allocation (page 27)• Performance (pages 28-30)
V. Real Return• Asset Class Overview (page 32)• Portfolio Management Structure (pages 33-34)• Allocation (page 35)• Performance (pages 36-37)
VI. Absolute Return• Asset Class Overview (page 39)• Portfolio Management Structure (page 40)• Allocation (page 41)• Performance (page 42)
VII. Private Equity • Asset Class Overview (pages 44)• Portfolio Management Structure (page 45)• Allocation (pages 46-47)• Performance (page 48)
VIII. Compliance• Compliance Overview (page 50)• Investment Guideline Compliance (page 51)• Update (page 52)• SSB’s CX Compliance Year in Review (page 53)
IX. Risk Management• Overview (page 55)• Total Fund Risk (page 56)• IPS Guideline Implied Risk Ranges (page 57)• Total Fund & Asset Class Regional Exposures (page 58)• Active Risk Due to Allocation Decisions (page 59)• Active Risk Due to Selection Decisions (page 60)• Evolution of Risk Over Time (page 61)
3
I. Performance and Asset Allocation
4Source: State Street Investment Analytics-Final
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Core FixedIncome
Non-CoreFixed
Income
US Equities Non-USEquities
Real Return Real Estate AbsoluteReturn
PrivateEquity
CashEquivalents
Perc
ent A
lloca
ted
TMRS Investment Portfolio Asset Allocation as of 3/31/2018
Current Allocation Allocation Recognizing Unfunded Commitments Target Allocation
5
*Real Estate and Private Equity return as of prior quarter end (returns are available on a quarterly basis only)
+Absolute Returns are as of prior month end.
^Non-Core Fixed Income, Absolute Return and Private Equity performance are the annualized return since inception, given their performance history are less than 5 years
Source: State Street Investment Analytics-Final
1 Year Performance 5 Year Performance
9.7%
1.5%
6.5%
13.1%
19.5%
5.4%
10.6%
8.5%
25.1%
9.0%
1.2%
5.1%
13.8%
17.1%
6.6%7.6%
5.7%
25.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%TMRS
Benchmark
6.5%
1.9%
5.0%
12.7%
7.0%
1.5%
12.3%
4.7%
14.1%
6.2%
1.8%
3.9%
13.0%
6.2%
2.0%
11.5%
2.4%
14.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%TMRS
Benchmark
6
7
US Equity Objective
Intended to provide capital appreciation and is structured using a Core-Satellite Approach with the overall objective of exceeding its benchmark performance net of fees over rolling five year periods.
Satellite strategies (Active and Rules-Based strategies with an active component) are expected to add excess return within established tracking error limits and will meet quality, diversification, and liquidity guidelines as specified in the Managers’ contracts or otherwise agreed to in writing between TMRS and the Investment Manager.
International Equity Objective
Intended to provide capital appreciation and diversification, and is structured using a Core-Satellite Approach with the overall objective of exceeding its benchmark performance net of fees over rolling five year periods.
Satellite strategies (Active and Rules-Based strategies with an active component) are expected to add excess return within established tracking error limits and will meet quality, diversification, and liquidity guidelines as specified in the Managers’ contracts or otherwise agreed to in writing between TMRS and the Investment Manager.
8
Asset Class Manager Strategy Portfolio Benchmark
Domestic EquitiesUS Core/Passive
Northern Trust Asset Management Passive Broad Market Index Russell 3000 Index
US Rules-Based State Street Global Advisors Passive Fundamental Index Russell RAFI US Index
US Rules-Based UBS Global Asset Management Passive Minimum Volatility MSCI US Min Vol Index
US Satellite/Active Epoch Investment Partners, Inc. US Traditional All Cap Russell 3000 Index
US Satellite/Active Sasco Capital, Inc. US Opportunistic All Cap Russell Mid Cap Value Index
US Satellite/Active The Boston Company US Mid Cap Opportunistic Russell Mid Cap Index
US Satellite/Active Champlain Investment Partners US Mid Cap Core Russell Mid Cap Index
US Satellite/Active The Boston Company US Small Cap Opportunistic Russell 2000 Index
US Satellite/Active Wellington Management US Small Cap Opportunities Russell 2000 Index
International Equities Non-US Core/Passive
Northern Trust Asset Management Passive Broad Market IndexAll Country World (ACW)ex US Investable Market Index (IMI)
Non-US Rules-Based State Street Global Advisors Passive Fundamental Index Russell RAFI Global ex US Index
Non-US Rules-Based UBS Global Asset Management Passive Minimum Volatility MSCI World ex US Min Vol Index
Non-US Satellite/Active Wellington ManagementNon-US Opportunistic Relative Value
MSCI ACWI ex US Index
Non-US Satellite/Active Lazard Asset Management Non-US Opportunistic Core MSCI ACWI ex US Index
Non-US Satellite/Active Acadian Asset Management Non-US Emerging Markets MSCI Emerging Markets (EM) Index
Non-US Satellite/Active William Blair & Company Non-US Emerging Markets MSCI Emerging Markets (EM) Index
Non-US Satellite/Active Wellington Management Non-US Small Cap Opportunities MSCI EAFE Small Cap Index
Non-US Satellite/Active Wasatch Advisors Non-US Small Cap Growth MSCI AC World ex. US Small Cap Index
9
% of Total Fund as of 3/31/2018
NOTE: Percentages may not be exact due to rounding
PASSIVE Portfolio Mgrs Market Value% of Total Portfolio
US PASSIVE EQUITY: NTAM Russell 3000 $ 3,239,313,597 11.4%
NON-US PASSIVE EQUITY: NTAM ACW ex. US IMI $ 2,839,578,772 10.0%
TOTAL: $ 6,078,892,369 21.4%
ACTIVE Portfolio Mgrs Market Value% of Total Portfolio
US RULES-BASED EQUITY: $ 778,272,979 2.7%US ACTIVE EQUITY: $ 1,745,823,289 6.1%NON-US RULES-BASED EQ: $ 601,472,744 2.1%NON-US ACTIVE EQUITY: $ 1,647,288,324 5.8%TOTAL: $ 4,772,857,336 16.8%
38.2%
35.0%
3.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Total Equity Portfolio
Current Allocation
Target Allocation
Difference
21.4%
16.8%17.5% 17.5%
3.9%
-0.7%-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
PASSIVE Portfolio ACTIVE Portfolio
Current Allocation Target Allocation Difference
6.1% 5.8%
2.7% 2.1%8.75% 8.75%
0.1%
-0.8%-2%0%2%4%6%8%
10%
USACTIVEPortfolio
non-USACTIVEPortfolio
Current Active Current RB Target Allocation Difference
10
US Passive 11.4%
Non-US Passive 10.0%
Non-US RB Active 2.1%
Non-US Active5.8%
US Active6.1%
US RB Active2.7%
Current Allocation By Asset Category vs. Total Portfolio
Russell 3000 US Passive
30.8%
ACW ex. US IMInon-US Passive
25.9%
2.6%
2.9%
2.3%
2.2%
2.5%2.3%
2.8%2.1%2.7%2.2%
2.3%2.8%
3.0%3.0%
3.5%
3.7%
Current Allocation by Manager vs. Total Equity Portfolio
Russell 3000
ACWI ex. US IMI
SSgA Global ex. US
UBS World ex. US MV
Wellington Intl Horizons
Lazard Intl Equity Plus
Acadian EM
William Blair EM
Wasatch Intl SC
Wellington Intl SC
Epoch
Sasco
The Boston Co. MC
Champlain
The Boston Co. SC
Wellington US SC
SSgA US Fund
UBS US MV
11
Source: State Street Investment Analytics - Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD InceptDate
NGR0A02 - TMRS - TOTAL EQUITY 10,851,761,236.01 38.2 -1.11 -0.24 -0.24 15.92 9.17 10.26 8.98 6.34 5.52 01-01-08EQUITY ACTIVE WEIGHTED INDEX (DAILY) -1.85 -0.84 -0.84 15.22 8.95 10.10 8.83 6.22 5.38 01-01-08Excess 0.74 0.60 0.60 0.70 0.22 0.16 0.15 0.13 0.13NGR0A06 - TMRS - TOTAL DOMESTIC EQUITY 5,763,419,363.96 20.3 -1.45 -0.72 -0.72 13.11 9.81 12.65 12.13 9.44 8.58 01-01-08TMRS - RUSSELL 3000 DAILY -2.01 -0.64 -0.64 13.81 10.22 13.03 12.39 9.62 8.76 01-01-08Excess 0.55 -0.08 -0.08 -0.70 -0.42 -0.38 -0.27 -0.18 -0.18NGR6 - TMRS - RUSSELL 3000 INDEX FUND (NL) 3,239,313,597.12 11.4 -2.01 -0.66 -0.66 13.76 10.21 13.01 12.37 14.98 12-01-08RUSSELL 3000 (DAILY) -2.01 -0.64 -0.64 13.81 10.22 13.03 12.39 15.00 12-01-08Excess 0.00 -0.01 -0.01 -0.05 -0.02 -0.03 -0.03 -0.02NGTM - SSGA RUSSELL RAFI US 379,093,270.92 1.3 -1.68 -2.35 -2.35 10.25 8.92 11.73 12.64 02-01-13Russell RAFI U.S. Index -1.65 -2.37 -2.37 10.27 9.04 11.87 12.80 02-01-13Excess -0.02 0.03 0.03 -0.02 -0.12 -0.14 -0.15NGTN - UBS US EQUITY MIN VOL FUND NL 399,179,707.83 1.4 -0.26 -1.09 -1.09 11.05 10.29 12.03 14.14 01-01-13MSCI USA Minimum Volatility Index-Net -0.30 -1.23 -1.23 10.45 9.64 11.37 13.47 01-01-13Excess 0.04 0.14 0.14 0.61 0.65 0.66 0.67NGTY - EPOCH U.S. CHOICE 297,734,534.52 1.1 -4.07 -2.50 -2.50 12.57 7.69 9.08 01-01-14RUSSELL 3000 (DAILY) -2.01 -0.64 -0.64 13.81 10.22 10.61 01-01-14Excess -2.06 -1.86 -1.86 -1.25 -2.53 -1.53NGTZ - SASCO U.S. CONTRARIAN VALUE 242,444,093.84 0.9 -2.00 -4.62 -4.62 4.71 3.24 3.85 01-01-14Russell Midcap Value Total Return Index 0.25 -2.50 -2.50 6.50 7.23 9.13 01-01-14Excess -2.25 -2.11 -2.11 -1.80 -3.98 -5.27NGUG - THE BOSTON COMPANY OPP VALUE 246,339,890.34 0.9 -1.08 -1.44 -1.44 8.26 5.60 5.95 12-01-14RUSSELL MIDCAP (DAILY) 0.06 -0.46 -0.46 12.20 8.01 8.51 12-01-14Excess -1.14 -0.98 -0.98 -3.94 -2.41 -2.56NGUF - CHAMPLAIN MID-CAP CORE 305,488,728.29 1.1 0.70 4.57 4.57 18.98 13.66 13.16 12-01-14RUSSELL MIDCAP (DAILY) 0.06 -0.46 -0.46 12.20 8.01 8.51 12-01-14Excess 0.64 5.03 5.03 6.78 5.65 4.65NGUR - BOSTON CO US SM CAP OPPORTUNISTIC VALUE 326,234,537.93 1.2 -0.06 -1.67 -1.67 13.64 13.54 09-01-15RUSSELL 2000 (DAILY) 1.29 -0.08 -0.08 11.79 12.94 09-01-15Excess -1.35 -1.58 -1.58 1.85 0.59NGUN - WELLINGTON US SMALL CAP OPP 327,581,504.47 1.2 2.42 2.57 2.57 17.18 15.01 12-01-15RUSSELL 2000 (DAILY) 1.29 -0.08 -0.08 11.79 12.64 12-01-15Excess 1.13 2.65 2.65 5.39 2.37
12
Source: State Street Investment Analytics - Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD InceptDate
NGR0A07 - TMRS - TOTAL INTERNATIONAL EQUITY 5,088,339,839.82 17.9 -0.72 0.33 0.33 19.49 7.70 7.04 5.23 2.81 2.02 01-01-08INTL EQ ACTIVE WEIGHTED INDEX(DAILY) -1.67 -1.06 -1.06 17.10 6.75 6.24 4.61 2.32 1.53 01-01-08Excess 0.95 1.39 1.39 2.39 0.95 0.80 0.62 0.49 0.49NGTA - NTGI ACWI ex. US IMI (NL) 2,839,578,772.26 10.0 -0.64 -0.39 -0.39 17.78 7.10 6.56 4.78 7.25 09-01-10TMRS MSCI ACWI ex-US IMI NET (DAILY) -1.67 -1.06 -1.06 17.10 6.75 6.24 4.52 6.99 09-01-10Excess 1.03 0.67 0.67 0.68 0.36 0.32 0.27 0.26NGTP - SSGA RUSSELL RAFI GLOBAL EX-US 286,984,188.74 1.0 -1.67 -0.84 -0.84 15.79 7.89 7.61 6.92 02-01-13Russell RAFI Global ex-U.S. Index NET -1.69 -0.92 -0.92 15.89 8.14 7.78 7.08 02-01-13Excess 0.02 0.08 0.08 -0.10 -0.25 -0.18 -0.15NGTQ - UBS WORLD EX US MIN VOL FD NL 314,488,555.15 1.1 0.02 -0.38 -0.38 13.30 7.12 7.49 8.92 01-01-13MSCI world ex USA Minimum Volatility-Net 0.05 -0.40 -0.40 13.12 6.91 7.27 8.80 01-01-13Excess -0.03 0.02 0.02 0.17 0.21 0.23 0.12NGT9 - LAZARD INT'L EQUITY PLUS 235,956,178.54 0.8 -0.46 0.06 0.06 17.24 5.97 4.21 09-01-14MSCI AC WORLD ex US (NET) -1.76 -1.18 -1.18 16.53 6.18 3.56 09-01-14Excess 1.31 1.25 1.25 0.71 -0.21 0.65NGT8 - WELLINGTON INT'L HORIZONS 252,778,167.24 0.9 -1.13 -0.69 -0.69 16.26 7.76 6.24 09-01-14MSCI AC WORLD ex US (NET) -1.76 -1.18 -1.18 16.53 6.18 3.56 09-01-14Excess 0.64 0.49 0.49 -0.27 1.58 2.68NGUP - WILLIAM BLAIR EMERGING MARKETS 251,625,714.70 0.9 -1.45 0.82 0.82 29.17 17.00 09-01-15MSCI EMERGING MARKETS -1.86 1.42 1.42 24.93 17.36 09-01-15Excess 0.41 -0.60 -0.60 4.24 -0.36NGUQ - ACADIAN EMERGING MARKETS 272,782,935.97 1.0 -1.40 3.83 3.83 29.01 20.41 09-01-15MSCI EMERGING MARKETS IMI INDEX (NET) -1.78 1.25 1.25 24.08 16.96 09-01-15
Excess 0.38 2.58 2.58 4.93 3.45NGUX - WASATCH INT'L SMALL CAP GROWTH 308,626,724.30 1.1 0.48 4.53 4.53 27.47 12.56 01-01-16MSCI ACWI Ex US Small Cap (DAILY) -1.13 -0.35 -0.35 20.60 14.79 01-01-16Excess 1.61 4.88 4.88 6.88 -2.22NGUY - WELLINGTON INT'L SMALL CAP OPP 325,518,602.90 1.1 -1.14 2.44 2.44 29.74 15.46 01-01-16MSCI EAFE SMALL CAP NET -1.13 0.24 0.24 23.49 14.76 01-01-16Excess -0.01 2.20 2.20 6.25 0.69
13
III. Fixed Income
14
US Core Fixed Income Objective
Purpose is to diversify the risk of the overall investment portfolio with a secondary goal of capital preservation.
Performance objective is to exceed the Barclay’s US Aggregate Bond Index net of fees over rolling five-year periods and within tracking errors as specified in the Manager contracts, determined according to the specific strategies employed.
Investment Philosophy- BlackRock Top down determination of investment themes are based on bottom-up inputs. Investment
themes establish parameters for sector, sub-sector and security selection. Macro overlays for duration and volatility are viewed as a separate sector and used opportunistically.
Investment Philosophy- PIMCO PIMCO’s investment philosophy is driven by diversifying strategies and focuses on longer
term secular (3-5 year) trends. Seek to add value through top down strategies including interest rate exposures, duration,
volatility, yield curve positioning and sector rotation. Employ “bottom-up” strategies through in depth credit analysis and specific security
selection.
15
Manager Strategy Portfolio Benchmark
BlackRock US Core (enhanced index) Bloomberg Barclays US Aggregate Bond Index
PIMCO Active Core Plus Bloomberg Barclays US Aggregate Bond Index
16
As of March 31, 2018
NOTE: Percentages may not be exact due to rounding
Core Weighting vs. Target
Based on State Street Final data
Mandate Market Value % of Total Fund
CORE FIXED INCOME
BlackRock $3,113,845,900 10.95%
PIMCO $1,365,584,217 4.80%
TOTAL $4,479,430,117 15.75%
15.8%
10.0%
5.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Actual Target Difference
17Source: State Street Investment Analytics - Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD
Incept
Date
NGR0A03 - TMRS - TOTAL CORE FIXED INCOME 4,479,430,116.64 15.8 0.64 -1.44 -1.44 1.46 1.40 1.90 3.10 3.46 7.56 01-01-89
TMRS - Total Fixed Income Index (Daily) 0.64 -1.46 -1.46 1.20 1.20 1.82 2.92 3.51 7.02 01-01-89
Excess 0.00 0.02 0.02 0.25 0.20 0.07 0.17 -0.06 0.54
NGR4 - TMRS - BLACKROCK CORE FIXED INCOME 3,113,845,900.07 11.0 0.62 -1.46 -1.46 1.42 1.41 1.99 3.11 3.36 10-01-09
TMRS-Custom Core Fixed Income Index (Daily) 0.64 -1.46 -1.46 1.20 1.20 1.82 2.92 3.24 10-01-09
Excess -0.02 0.00 0.00 0.22 0.21 0.17 0.19 0.12
NGR9 - TMRS PIMCO CORE PLUS FIXED INC 1,365,584,216.56 4.8 0.70 -1.40 -1.40 1.53 1.34 1.52 3.07 3.41 02-01-10
BBG BARC Agg (Dly) 0.64 -1.46 -1.46 1.20 1.20 1.82 2.92 3.16 02-01-10
Excess 0.05 0.06 0.06 0.33 0.14 -0.31 0.14 0.24
18
Objective The purpose is to enhance total return through income and capital appreciation and provide
diversification to the total investment portfolio. This allocation may be managed actively and/or passively through multiple managers in consideration of manager concentration risk. The overall objective is to exceed its benchmark performance net of fees over rolling five year periods.
The Performance Objective is to achieve a rate of return that exceeds the Asset Class Goal which is 50% Bank of America Merrill Lynch US High Yield Constrained Index and 50% Credit Suisse Leveraged Loan Index, net of all investment management fees.
For periods less than five years, or a full market cycle, the allocation should achieve an annual rate of return that exceeds the weighted average return of the underlying Manager benchmarks, over a complete market cycle, net of all investment management fees.
19Note: * Partially funded
** Approved. Funding pending.
Manager Strategy Allocated/Committed Portfolio Benchmark
Highland Capital Bank Loan/CLO Debt $ 375,000,000 Credit Suisse Leveraged Loan IndexGuggenheim Bank Loan/CLO Debt $ 375,000,000 Credit Suisse Leveraged Loan Index
Voya RMBS/CMBS $ 375,000,000 Benchmark equals Actual /50% CS Leveraged Loan Index and 50% BofA/ML US HY Constrained Index (Asset Class Goal) for periods equal or longer to 5 years
Ellington RMBS/CMBS $ 375,000,000 3 Month Libor + 300 basis pointsAlliance Bernstein EMD $ 365,000,000 20% JP Morgan EMBI, 40% JP Morgan CEMBI and 40% JP Morgan GBIBluebay EMD $ 365,000,000 20% JP Morgan EMBI, 40% JP Morgan CEMBI and 40% JP Morgan GBIAdams Street* Direct Lending $ 200,000,000 Credit Suisse Leveraged Loan IndexGolub* Direct Lending $ 300,000,000 Credit Suisse Leveraged Loan IndexH.I.G. Whitehorse* Direct Lending $ 150,000,000 Credit Suisse Leveraged Loan IndexTCW* Direct Lending $ 300,000,000 Credit Suisse Leveraged Loan IndexWhite Oak* Direct Lending $ 200,000,000 Credit Suisse Leveraged Loan Index
Marathon SPS* Opportunistic Credit $ 150,000,000 Benchmark equals Actual /50% CS Leveraged Loan Index and 50% BofA/ML US HY Constrained Index (Asset Class Goal) for periods equal or longer to 5 years
Marathon ECO* Opportunistic Credit $ 100,000,000 Benchmark equals Actual /50% CS Leveraged Loan Index and 50% BofA/ML US HY Constrained Index (Asset Class Goal) for periods equal or longer to 5 years
Marathon CLO* Opportunistic Credit $ 50,000,000 Benchmark equals Actual /50% CS Leveraged Loan Index and 50% BofA/ML US HY Constrained Index (Asset Class Goal) for periods equal or longer to 5 years
PIMCO COF II* Opportunistic Credit $ 200,000,000 Benchmark equals Actual /50% CS Leveraged Loan Index and 50% BofA/ML US HY Constrained Index (Asset Class Goal) for periods equal or longer to 5 years
Beach Point Opportunistic Credit $ 200,000,000 BofA Merrill Lynch US High Yield Constrained IndexColumbia High Yield $ 300,000,000 BofA Merrill Lynch US High Yield Constrained IndexNeuberger Berman High Yield $ 300,000,000 BofA Merrill Lynch US High Yield Constrained IndexBain Opportunistic Credit $ 100,000,000 BofA Merrill Lynch US High Yield Constrained IndexGoldenTree Opportunistic Credit $ 200,000,000 BofA Merrill Lynch US High Yield Constrained Index
Waterfall Opportunistic Credit $ 200,000,000 Benchmark equals Actual /50% CS Leveraged Loan Index and 50% BofA/ML US HY Constrained Index (Asset Class Goal) for periods equal or longer to 5 years
BlackRock GCO* Opportunistic Credit $ 300,000,000 Benchmark equals Actual /50% CS Leveraged Loan Index and 50% BofA/ML US HY Constrained Index (Asset Class Goal) for periods equal or longer to 5 years
20
As of March 31, 2018
Non-Core Weighting vs. Target
NOTE: Percentages may not be exact due to rounding
Based on State Street Final data
16.4%
20.0%
-3.6%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Actual Target Difference
Mandate Market Value % of Total FundNON-CORE FIXED INCOMEHighland $449,542,766 1.58%Ellington $439,614,341 1.55%Voya $435,020,549 1.53%Guggenheim $428,720,669 1.51%Alliance Bernstein $391,312,153 1.38%Bluebay $394,455,128 1.39%Columbia $310,182,000 1.09%Neuberger Berman $305,700,000 1.08%Beach Point $220,663,600 0.78%TCW $188,343,414 0.66%Waterfall $214,825,800 0.76%GoldenTree $205,846,000 0.72%White Oak $182,787,237 0.64%Marathon SPS $127,835,336 0.45%Blanco $101,421,200 0.36%H.I.G. $88,108,289 0.31%Golub $54,642,964 0.19%PIMCO COF II $57,661,981 0.20%Marathon ECO $44,882,250 0.16%Marathon RR $19,847,709 0.07%BlackRock GCO $5,080,176 0.02%Adams Street $1,711,979 0.00%TOTAL $4,668,205,541 16.41%
21
As of March 31, 2018
Non-Core Weighting vs. Target
NOTE: Percentages may not be exact due to rounding* Partially funded
Based on State Street Final data
20.9% 20.0%
0.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Committed Target Difference
Committed Mandate Committed/ Market Value % of Total Fund
NON-CORE FIXED INCOMEHighland $449,542,766 1.58%Ellington $439,614,341 1.55%Voya $435,020,549 1.53%Guggenheim $428,720,669 1.51%Bluebay $394,455,128 1.39%Alliance Bernstein $391,312,153 1.38%Columbia $310,182,000 1.09%Neuberger Berman $305,700,000 1.07%BlackRock GCO* $300,000,000 1.05%GoldenTree $300,000,000 1.05%Golub* $300,000,000 1.05%TCW* $300,000,000 1.05%Beach Point $220,663,600 0.78%Waterfall $214,825,800 0.76%Adams Street* $200,000,000 0.70%PIMCO COF II* $200,000,000 0.70%White Oak* $200,000,000 0.70%H.I.G. Whitehorse* $150,000,000 0.53%Marathon SPS* $150,000,000 0.53%Blanco $101,421,200 0.36%Marathon ECO* $100,000,000 0.35%Marathon CLO* $50,000,000 0.18%TOTAL $5,941,458,205 20.89%
22Source: State Street Investment Analytics-Final
Non-Core Fixed IncomePerformance
Period ending March 31st, 2018 (Net All)
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD InceptDate
NGR0A11 - TOTAL NON-CORE FIXED INCOME 4,668,205,540.95 16.4 0.07 1.39 1.39 6.51 5.17 4.99 10-01-14TOTAL NON-CORE FI WEIGHTED INDEX -0.10 1.13 1.13 5.09 3.75 3.86 10-01-14Excess 0.17 0.26 0.26 1.42 1.42 1.12NGUB - VOYA NON CORE FIXED INCOME 435,020,548.57 1.5 0.37 0.92 0.92 6.45 4.57 4.80 01-01-15Voya Non Core FI Index 0.37 0.92 0.92 6.45 4.57 4.80 01-01-15Excess 0.00 0.00 0.00 0.00 0.00 0.00NGUD - ELLINGTON NON CORE FIXED INC 439,614,341.20 1.6 0.07 1.27 1.27 8.43 5.14 5.15 01-01-15Ellington Non Core FI Index 0.44 1.25 1.25 4.58 1.18 1.85 01-01-15Excess -0.37 0.02 0.02 3.85 3.96 3.30NGXR - WATERFALL EDEN FUND, LP 214,825,800.00 0.8 1.14 3.14 3.14 8.65 7.95 03-01-17Waterfall Eden Fd Index 1.14 3.14 3.14 8.65 7.95 03-01-17Excess 0.00 0.00 0.00 0.00 0.00NGT5 - BANDERA I - HIGHLAND 449,542,765.69 1.6 0.24 1.49 1.49 6.86 6.70 6.40 10-01-14CS Leveraged Loan Index (Month-lag) 0.18 1.65 1.65 4.31 4.36 4.11 10-01-14Excess 0.06 -0.17 -0.17 2.55 2.34 2.30NGT6 - BANDERA II - GUGGENHEIM 428,720,669.37 1.5 0.26 0.98 0.98 4.06 4.56 4.29 10-01-14CS Leveraged Loan Index (Month-lag) 0.18 1.65 1.65 4.31 4.36 4.11 10-01-14Excess 0.08 -0.67 -0.67 -0.24 0.20 0.18NGRU - WHITE OAK SUMMIT FUND, L.P 182,787,237.06 0.6 2.17 2.24 2.24 11.16 8.76 05-01-16CS Leveraged Loan Index (Quarter-lag) 1.17 1.17 1.17 2.94 5.53 05-01-16Excess 1.00 1.06 1.06 8.21 3.23NGRV - GOLUB CAPITAL PEARLS DLP LP 54,642,964.39 0.2 0.67 1.91 1.91 5.11 6.63 07-01-16CS Leveraged Loan Index (Month-lag) 0.18 1.65 1.65 4.31 6.30 07-01-16Excess 0.49 0.26 0.26 0.80 0.33NGXF - H.I.G. WHITEHORSE CAPITAL, LLC 88,108,288.70 0.3 1.01 1.01 1.01 7.67 5.90 12-01-16CS Leveraged Loan Index (Quarter-lag) 1.17 1.17 1.17 2.94 4.01 12-01-16Excess -0.16 -0.16 -0.16 4.73 1.89NGXE - TCW ASSET MANAGEMENT LLC 188,343,414.28 0.7 1.31 1.31 1.31 6.49 5.16 01-01-17CS Leveraged Loan Index (Quarter-lag) 1.17 1.17 1.17 2.94 3.34 01-01-17Excess 0.13 0.13 0.13 3.54 1.82NGXM - ADAMS STREET PRIVATE CREDIT FUND-A LP 1,711,979.02 0.0 9.63 9.63 9.63 9.63 01-01-18CS Leveraged Loan Index (Quarter-lag) 1.17 1.17 1.17 1.17 01-01-18Excess 8.46 8.46 8.46 8.46
23Source: State Street Investment Analytics- Final
Non-Core Fixed IncomePerformance
Period ending March 31st, 2018 (Net All)
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD Incept
Date
NGY2 - BlackRock Global Credit Opportunities LP 5,080,175.66 0.0 01-01-18BlackRock Global Credit Opportunities Index 0.00 01-01-18ExcessNGXN - COLUMBIA MANAGEMENT INVESTMENT ADVISORS 310,181,999.50 1.1 -0.69 -1.77 -1.77 2.80 2.80 04-01-17BofAML HYM CONSTRAINED (DAILY) -0.62 -0.91 -0.91 3.70 3.70 04-01-17Excess -0.07 -0.86 -0.86 -0.89 -0.89NGXL - NEUBERGER BERMAN HIGH INCOME TRUST 305,700,000.01 1.1 -1.07 -0.20 -0.20 1.19 06-01-17BOFAML HYM CONSTRAINED (DAILY) Custom (1-Month lag) -0.93 -0.01 -0.01 2.26 06-01-17Excess -0.14 -0.19 -0.19 -1.07NGUV - BLUEBAY ASSET MANAGEMENT EMD 394,455,127.53 1.4 -0.89 2.74 2.74 9.82 9.75 03-01-17EMD NON-CORE FIXED INC IDX (1-MONTH LAG) -1.22 1.66 1.66 7.06 7.60 03-01-17Excess 0.33 1.08 1.08 2.76 2.15NGUS - ALLIANCE BERNSTEIN EMD 391,312,153.32 1.4 -1.05 2.68 2.68 8.02 8.02 04-01-17EMD NON-CORE FIXED INC IDX (1-MONTH LAG) -1.22 1.66 1.66 7.06 7.06 04-01-17Excess 0.17 1.02 1.02 0.96 0.96NGXA - MARATHON SPS FUND, L.P. 127,835,336.26 0.5 0.16 1.91 1.91 7.19 8.92 08-01-16MARATHON SPS FUND Index (Month-lag) 0.16 1.91 1.91 7.19 8.92 08-01-16Excess 0.00 0.00 0.00 0.00 0.00NGXB - PIMCO CORP OP FD II ONSHORE LP 57,661,981.08 0.2 2.14 2.14 2.14 13.51 15.03 10-01-16PIMCO Corp Fd II Onshore Index 2.14 2.14 2.14 13.51 15.03 10-01-16Excess 0.00 0.00 0.00 0.00 0.00NGSW - MARATHON ECO FUND III, LP 44,882,250.01 0.2 0.43 3.65 3.65 10.27 6.00 10-01-16Marathon Eco Fd III Index 0.43 3.65 3.65 10.27 6.00 10-01-16Excess 0.00 0.00 0.00 0.00 0.00NGXD - BEACH POINT TOTAL RET FD II LP 220,663,600.00 0.8 -0.26 1.88 1.88 5.71 6.44 10-01-16BOFAML HYM CONSTRAINED (DAILY) Custom (1-Month lag) -0.93 -0.01 -0.01 4.34 6.04 10-01-16Excess 0.67 1.89 1.89 1.37 0.41NGSV - MARATHON CLO EQUITY FD, L.P. 19,847,709.28 0.1 0.87 3.19 3.19 9.07 7.39 11-01-16Marathon CLO Equity Fd Index 0.87 3.19 3.19 9.07 7.39 11-01-16Excess 0.00 0.00 0.00 0.00 0.00NGXV - Goldentree Guadalupe Fund LP 205,846,000.01 0.7 0.17 1.63 1.63 3.23 07-01-17BOFAML HYM CONSTRAINED (DAILY) Custom (1-Month lag) -0.93 -0.01 -0.01 2.15 07-01-17Excess 1.10 1.64 1.64 1.08
24
IV. Real Estate
25
Objective To enhance total return and provide diversification to the overall investment portfolio. Due to the illiquid and cyclical nature of the real estate asset class, Staff and the Real Estate
Investment Consultant recommend that the target allocation be invested over a multi-year period in order to avoid considerable vintage year risks.
Performance Objective Long term performance objective is a real rate of return (adjusted for inflation) of five percent
(5%) net of investment management fees. The real estate portfolio is expected to generate returns net of all fees and expenses, in excess
of their respective indices, over rolling five year investment time horizons.
26Source: TMRS Accounting
Manager Strategy Allocated/Committed Portfolio BenchmarkAbacus Core Income Fund I Core $75,000,000
NCREIF-ODCE
Harrison Street Core Property Fund Core $150,000,000 Invesco US Core Income Fund Core $150,000,000 Smart Markets Fund Core $200,000,000 Walton Street Debt Fund Core Debt $100,000,000 Tristan EPISO 4 Opportunistic $35,445,997 Abacus Multi-Family Fund II Value Add $50,000,000 Abacus Multi-Family Fund III Value Add $75,000,000 Greenfield Acquisition Partners VI Value Add $75,000,000 Greenfield Acquisition Partners VII Value Add $100,000,000 Miller Global Value Add $75,000,000 Rubenstein Properties II Value Add $75,000,000 Rubenstein Properties III Value Add $75,000,000 Stockbridge Value Fund I Value Add $75,000,000 Stockbridge Value Fund II Value Add $75,000,000 Lubert-Adler Fund VII Opportunistic $100,000,000 Moorfield Real Estate Fund III Opportunistic $66,984,998 H/2 CP Core $125,000,000 H/2 Core RE Debt Core $75,000,000 Walton Street Opportunistic $75,000,000 Alcion Value Add $50,000,000 Torchlight Debt Fund V Value Add $75,000,000 TPG Real Estate Partners II Opportunistic $100,000,000 USAA Eagle Fund Core $250,000,000 DivcoWest V Value Add $75,000,000 Blackstone Property Partners Core $300,000,000 Kildare EP II Opportunistic $100,000,000 Stockbridge Value Fund III Value Add $50,000,000 IC Berkeley IV Value Add $50,000,000 Madison Realty Capital Debt Fund IV, LP Value Add $100,000,000 TPG Real Estate Partners III, LP Opportunistic $100,000,000
TOTAL $3,068,357,000
27Source: Courtland Q4 2017 Report
Property Type Diversification Based on Market Value Geographic Diversification Based on Market Value
Sector Diversification Based on Market Value
28Source: State Street Investment Analytics-Final
MKT VAL % of plan 1
Month 3
Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD Incept
DateNGR0A09 - TMRS - TOTAL REAL ESTATE 2,445,656,424.39 8.6 2.57 2.58 2.58 10.56 11.64 12.27 11.19 11-01-11TOTAL REAL ESTATE INDEX 2.07 2.07 2.07 7.63 10.40 11.52 11.76 11-01-11Excess 0.49 0.51 0.51 2.93 1.24 0.75 -0.57NGR0A10 - PRIVATE REAL ESTATE EX LIQUID FUNDS 2,361,748,770.85 8.3 2.39 2.35 2.35 10.65 12.20 12.99 11.67 11-01-11NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.76 11-01-11Excess 0.32 0.28 0.28 3.04 1.78 1.46 -0.10NGTD - SMART MARKETS FUND LP 337,558,428.44 1.2 1.94 1.94 1.94 7.83 10.11 11.03 10.58 01-01-12NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.48 01-01-12Excess -0.12 -0.12 -0.12 0.22 -0.31 -0.51 -0.90NGTE - HARRISON ST REAL ESTATE - CORE OPEN END 251,248,805.77 0.9 2.34 2.34 2.34 11.75 10.32 10.09 9.68 01-01-12NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.48 01-01-12Excess 0.27 0.27 0.27 4.14 -0.10 -1.44 -1.80NGTF - GREENFIELD ACQUISITION PTRS VI 15,163,096.87 0.1 -12.28 -12.28 -12.28 -8.69 1.60 7.26 8.02 07-01-12NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.42 07-01-12Excess -14.35 -14.35 -14.35 -16.31 -8.82 -4.27 -3.40NGTG - STOCKBRIDGE VALUE FUND 10,366,273.27 0.0 5.93 5.93 5.93 17.70 20.18 19.67 21.77 10-01-12NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.45 10-01-12Excess 3.87 3.87 3.87 10.09 9.76 8.13 10.32NGTH - WALTON ST REAL ESTATE FUND VII 45,888,184.99 0.2 2.16 2.16 2.16 10.18 11.98 15.73 07-01-13NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.55 07-01-13Excess 0.09 0.09 0.09 2.57 1.56 4.18NGTI - ABACUS MULTI-FAMILY PTRS II 1,251,357.85 0.0 -23.43 -23.43 -23.43 -26.32 -2.83 9.40 9.04 08-01-12NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.60 08-01-12Excess -25.50 -25.50 -25.50 -33.94 -13.25 -2.13 -2.55NGTJ - RUBENSTEIN PROPERTIES FUND II 58,809,867.46 0.2 3.21 3.21 3.21 15.71 6.83 13.94 13.94 04-01-13NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.53 04-01-13Excess 1.14 1.14 1.14 8.09 -3.59 2.41 2.41NGTL - MILLER GLOBAL FUND VII 7,757,804.86 0.0 -8.01 -8.01 -8.01 8.18 10.46 14.18 11.84 10-01-12NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.53 11.45 10-01-12Excess -10.08 -10.08 -10.08 0.56 0.04 2.65 0.39
29Source: State Street Investment Analytics-Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD InceptDate
NGTV - LUBERT-ADLER FUND VII 98,890,924.82 0.4 1.41 1.41 1.41 8.90 5.57 3.92 01-01-14NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.08 01-01-14Excess -0.66 -0.66 -0.66 1.29 -4.85 -7.16NGTX - ABACUS CORE INCOME FUND I LP 73,744,375.59 0.3 2.67 2.67 2.67 7.18 10.03 9.13 01-01-14NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.08 01-01-14Excess 0.60 0.60 0.60 -0.43 -0.39 -1.95NGTW - INVESCO ADVISERS, INC. 211,827,779.43 0.7 2.52 2.52 2.52 11.11 13.55 11.48 01-01-14NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 11.08 01-01-14Excess 0.45 0.45 0.45 3.49 3.13 0.39NGT3 - GREENFIELD ACQ PART VII LP 100,341,088.35 0.4 6.47 6.47 6.47 17.68 15.70 15.39 01-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 10.68 01-01-15Excess 4.41 4.41 4.41 10.06 5.28 4.71NGT4 - STOCKBRIDGE VALUE FD II LP 62,955,698.51 0.2 3.32 3.32 3.32 17.56 14.48 13.69 02-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 10.98 02-01-15Excess 1.25 1.25 1.25 9.94 4.05 2.70NGUJ - ABACUS MULTI-FAMILY III 73,408,926.71 0.3 10.51 10.51 10.51 30.03 16.46 15.56 02-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 10.98 02-01-15Excess 8.44 8.44 8.44 22.42 6.04 4.57NGUL - MOORFIELD REAL ESTATE III 55,712,430.65 0.2 4.74 4.74 4.74 37.56 22.31 21.06 02-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.42 10.98 02-01-15Excess 2.67 2.67 2.67 29.94 11.89 10.07NGUH - WALTON STREET REAL ESTATE DEBT FUND 48,379,151.14 0.2 2.24 2.24 2.24 9.84 7.85 12-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.21 12-01-15Excess 0.17 0.17 0.17 2.23 -2.36NGAS - TORCHLIGHT DEBT OPP FUND V,LP 49,457,475.00 0.2 3.34 3.34 3.34 15.58 13.39 12-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.21 12-01-15Excess 1.27 1.27 1.27 7.96 3.19NGAR - TPG REAL ESTATE PART II, LP 52,160,176.22 0.2 0.72 0.72 0.72 16.41 36.58 12-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.21 12-01-15Excess -1.34 -1.34 -1.34 8.79 26.37
30Source: State Street Investment Analytics- Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD
Incept
Date
NGAP - ALCION RE PART FD III-B,LP 29,631,942.35 0.1 5.88 5.88 5.88 4.73 2.52 11-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 9.84 11-01-15Excess 3.81 3.81 3.81 -2.89 -7.32NGAM - EUROPEAN PROPERTY INV SPECIAL 16,197,914.17 0.1 7.66 7.66 7.66 17.83 4.68 12-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.21 12-01-15Excess 5.59 5.59 5.59 10.22 -5.53NGAQ - USAA EAGLE REAL ESTATE FD 238,894,427.25 0.8 1.25 1.25 1.25 6.24 7.99 12-01-15NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 10.21 12-01-15Excess -0.82 -0.82 -0.82 -1.38 -2.22NGAV - H/2 CP CORE RE DEBT FUND,LP 79,934,175.00 0.3 1.41 1.41 1.41 6.66 7.00 04-01-16NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 8.19 04-01-16Excess -0.65 -0.65 -0.65 -0.96 -1.19NGRY - DIVCOWEST FUND V 22,342,738.87 0.1 0.53 0.53 0.53 2.27 0.87 01-01-17NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 7.86 01-01-17Excess -1.54 -1.54 -1.54 -5.35 -6.99NGRZ - BLACKSTONE PROPERTY PARTNERS 330,462,892.28 1.2 1.84 1.84 1.84 8.53 7.53 12-01-16NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 9.00 12-01-16Excess -0.23 -0.23 -0.23 0.92 -1.47NGAN - RUBENSTEIN PROP FD III LP 26,229,488.33 0.1 0.93 0.93 0.93 9.13 1.09 10-01-16NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 7.96 10-01-16Excess -1.14 -1.14 -1.14 1.51 -6.86NGXQ - IC BERKELEY PARTNERS IV, L.P. 13,707,426.19 0.1 0.88 0.88 0.88 -23.88 06-01-17NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 7.62 06-01-17Excess -1.19 -1.19 -1.19 -31.50NGYX - MADISON DEBT FUND IV 49,425,920.47 0.2 0.00 0.00 02-01-18NCREIF ODCE 1 QTR LAG 2.07 2.07 02-01-18Excess -2.07 -2.07NGAU - H/2 CP, LP 83,907,653.54 0.3 -1.52 -0.03 -0.03 3.34 6.74 11-01-15
31
V. Real Return
32
Objective Purpose is to enhance total return and provide diversification and hedge against inflation risks
to the overall investment portfolio. Due to the varied nature of the Real Return space, the portfolio will include strategies across a
variety of real asset types, as well as a number of investment vehicle types in order to maintain a diversified approach.
Performance Objective Long term performance objective over a period 5 and greater years or a full market cycle is a
rate of return of CPI + 400 basis points, net of all investment management fees. On a short term basis, the real return portfolio should achieve an annual rate of return that
exceeds the weighted average return of the underlying Manager benchmarks over a complete market cycle, net of all investment management fees.
33
Manager Strategy Portfolio BenchmarkColchester Active Global Linkers Barclays World Govt Infl-Linked Bond Index
Nuveen Real Asset Income – Public Securities
28% S&P Global Infrastructure Index, 21% FTSE EPRA/NAREIT Developed Index, 18% Wells Fargo Hybrid and Preferred Securities REIT Index, 15% Barclays Global Capital Securities Index, 18% Barclays U.S. Corporate High Yield Index
Cohen & Steers Real Asset Multi-Strategy
27.5% Bloomberg Commodity Index, 27.5% FTSE NAREIT Developed Real Estate Index (Net), 15% Dow Jones Brookfield Global Infrastructure Index, 15% S&P Global Natural Resources Index—Net), 10% BAML US Corporate Index, 1–3 Years and 5% Gold Index
Chickasaw MLPs Alerian MLP index
34Source: TMRS Accounting
Manager Strategy Allocated Portfolio BenchmarkMTP Energy Opportunities Fund II (Magnetar) Energy Finance $100,000,000
Benchmark equals Actual /Barclays World Govt Infl-
Linked Bond Index(Asset Class Goal) for
periods equal or longer to 5 years
Orion ($100mm) + Orion Co-Invest ($25mm) Mining Finance $125,000,000 Amerra Agriculture Finance $100,000,000
Brookfield Infrastructure $150,000,000 Actis Power $75,000,000
Sprott Mining Finance $70,000,000 Blue Sky Agriculture AUD$66,000,000
Stonepeak Infrastructure Fund III LP Infrastructure $150,000,000 MTP Energy Opportunities Fund III LLC Energy Finance $125,000,000
ISquared Infrastructure $150,000,000
35
Diversified Liquid65.30%
Inflation Linked Debt22.71%
Agriculture4.02%
Infrastructure3.01%
Mining2.64%
Energy2.14%
Private Real Return0.16%
36Source: State Street Investment Analytics- Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD InceptDate
NGR0A08 - TMRS - TOTAL REAL RETURN 2,855,551,403.73 10.0 -1.14 -1.85 -1.85 5.37 2.34 1.51 3.10 3.32 02-01-11TOTAL REAL RETURN INDEX -1.09 -1.76 -1.76 6.56 3.82 1.99 3.27 3.61 02-01-11Excess -0.05 -0.08 -0.08 -1.19 -1.47 -0.48 -0.17 -0.29NGR0A020 - REAL RETURN PUBLIC MARKETS 2,544,591,508.34 9.0 -1.31 -2.14 -2.14 4.32 2.30 1.48 3.08 3.30 02-01-11REAL RETURN PUBLIC MARKETS INDEX -1.25 -2.05 -2.05 5.52 3.63 1.88 3.19 3.53 02-01-11Excess -0.06 -0.09 -0.09 -1.20 -1.33 -0.40 -0.11 -0.23NGTB - COLCHEST GLBL INFLTN-LINK BNDS 704,306,234.51 2.5 1.81 1.21 1.21 7.46 1.77 1.17 2.85 3.08 02-01-11BBG BARC Wld Inf-Lk Bd TR 2.22 1.47 1.47 8.62 3.35 1.72 3.07 3.41 02-01-11Excess -0.41 -0.26 -0.26 -1.17 -1.58 -0.55 -0.22 -0.33NGRQ - NUVEEN REAL ASSET INCOME 810,040,298.39 2.9 0.48 -2.97 -2.97 4.40 7.35 04-01-16Nuveen Custom Benchmark 0.52 -3.37 -3.37 5.52 6.94 04-01-16Excess -0.04 0.41 0.41 -1.13 0.41NGRS - COHEN & STEERS REAL ASSET 796,679,126.21 2.8 -4.26 -0.28 -0.28 3.75 5.08 06-01-16Cohen & Steers Custom (Month-lag) -4.14 -0.81 -0.81 4.76 5.32 06-01-16Excess -0.12 0.54 0.54 -1.01 -0.24NGY0 - CHICKASAW CAPITAL MANAGEMENT 233,565,849.24 0.8 -5.88 -13.71 -13.71 -7.49 12-01-17Alerian MLP Daily -6.94 -11.12 -11.12 -6.90 12-01-17Excess 1.06 -2.59 -2.59 -0.58NGR0A019 - REAL RETURN PRIVATE MARKETS 310,959,895.38 1.1 0.22 0.64 0.64 16.81 3.97 02-01-16REAL RETURN PRIVATE MARKETS INDEX 0.22 0.64 0.64 16.81 3.97 02-01-16Excess 0.00 0.00 0.00 0.00 0.00NGRP - MTP ENERGY OPPORTUNITIES FD II 58,492,506.47 0.2 3.61 3.61 3.61 9.24 11.72 02-01-16MTP ENERGY OPPORTUNITIES FD II Index 3.61 3.61 3.61 9.24 11.72 02-01-16Excess 0.00 0.00 0.00 0.00 0.00NGSH - ORION MINE FINANCE FD II 47,076,536.30 0.2 -2.15 -0.93 -0.93 38.03 4.97 06-01-16ORION MINE FINANCE FD II Index -2.15 -0.93 -0.93 38.03 4.97 06-01-16Excess 0.00 0.00 0.00 0.00 0.00NGSR - BROOKFIELD INFRA PRTNR FD III 58,834,319.74 0.2 6.38 6.38 6.38 14.86 13.77 08-01-16Brookfield Infra Prtnr Fd Index 6.38 6.38 6.38 14.86 13.77 08-01-16Excess 0.00 0.00 0.00 0.00 0.00
37Source: State Street Investment Analytics- Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD
Incept
Date
NGRW - AMERRA AGRI FUND III 66,149,920.37 0.2 -3.17 -3.62 -3.62 -0.48 -4.37 08-01-16
Amerra Agri Fund III Index -3.17 -3.62 -3.62 -0.48 -4.37 08-01-16
Excess 0.00 0.00 0.00 0.00 0.00
NGXI - SPROTT PRIVATE RESOURCE LENDING FUND 23,611,325.58 0.1 -3.73 1.12 1.12 6.03 05-01-17
Sprott Private Resource Lending Fd Index -3.73 1.12 1.12 6.03 05-01-17
Excess 0.00 0.00 0.00 0.00
NGXJ - ACTIVE ENERGY IV 20,569,607.22 0.1 8.76 8.76 8.76 -23.88 05-01-17
Active Energy IV Index 8.76 8.76 8.76 -23.88 05-01-17
Excess 0.00 0.00 0.00 0.00
NGX0 - STONEPEAK INFRASTRUCTURE FUND II LP 3,714,540.28 0.00 0.00 03-01-18
STONEPEAK INFRASTRUCTURE FD II INDEX 0.00 0.00 03-01-18
Excess 0.00 0.00
38
VI. Absolute Return
39
Objective Purpose is to diversify equity and credit market risk by targeting hedge fund return streams
that are independent of the directionality of the broad stock and bond markets. The ARS portfolio will be invested in a wide variety of hedge fund strategies, with specific constraints on overall portfolio risk and individual manager exposure.
Performance objective is to exceed the benchmark, defined as the HFRI Fund of Funds Diversified Index, net of all investment management fees, and to achieve in excess of the appropriate long-term benchmark (3-month LIBOR + 500 basis points) on an ongoing rolling 5-year period.
Investment Philosophy Predicated on manager skill in:
Rotating (long/short trading) market factors based on valuation Navigating less liquid, non public and opaque markets Navigating special situations Predicting and capturing market trends
Accordingly, ARS is not an “asset class” (or market sector)
40
Manager Strategy Committed Capital Portfolio Benchmark
Blackstone Customized Fund of One $ 587,645,503
HFRI Fund of Funds Diversified Index
Alyeska Fund Direct Manager $ 115,000,000 Graticule Asia Macro Fund Direct Manager $ 125,000,000 Varde Investment Partners Direct Manager $ 115,000,000 Myriad Opportunities Fund Direct Manager $ 100,000,000 Roystone Capital Fund Direct Manager $ 60,000,000 Southpoint Fund Direct Manager $ 90,000,000 Man AHL Hydrogen LLC Direct Manager $ 150,000,000 PDT Mosaic Fund Direct Manager $ 150,000,000 DSAM Long/Short Equity Fund Direct Manager $ 110,000,000 East Lodge Capital Credit Opportunities Fund Direct Manager $ 120,000,000 River Birch Partners Direct Manager $ 120,000,000 Field Street Partners Direct Manager $ 100,000,000 Pharo Gaia Fund Direct Manager $ 100,000,000 D.E. Shaw Valence Fund, L.L.C. Direct Manager $ 73,000,000 Redmile Capital Fund, LP Direct Manager $ 80,000,000 BG Umbrella Fund Plc – BG Fund Direct Manager $ 100,000,000 H2O Alpha 10 Feeder Fund (U.S.) L.P. Direct Manager $ 90,000,000 Red Cliff Asia Fund Direct Manager $ 90,000,000
41Source: BAAM; State Street
Equity, 16%
Credit, 20%
Relative Value, 26%
Event Driven, 3%
Multi-Strat, 10%
Macro/CTA, 25%
Direct Portfolio Aggregated Manager Exposures
Equity, 19%
Credit, 41%
Relative Value, 3%
Event Driven, 0.1%
Multi-Strat, 11%
Macro/CTA, 26%
BAAM Aggregated Manager Exposures
42Source: State Street Investment Analytics - Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD
Incept
Date
NGR0A012 - TMRS - TOTAL ABSOLUTE RETURN 2,760,234,648.18 9.7 -0.39 1.41 1.41 8.50 4.93 4.73 08-01-14
HFRI FOF DIVERSIFIED INDEX (1-Month Lag) -1.80 1.43 1.43 5.73 1.84 2.44 08-01-14
Excess 1.42 -0.03 -0.03 2.77 3.08 2.29
NGUA - TMRS - BLACKSTONE 610,209,343.80 2.2 -0.28 0.87 0.87 5.07 3.75 3.77 08-01-14
HFRI FOF DIVERSIFIED INDEX (1-Month Lag) -1.80 1.43 1.43 5.73 1.84 2.44 08-01-14
Excess 1.52 -0.56 -0.56 -0.66 1.91 1.33
NGR0A013 - TMRS - ABSOLUTE RETURN DIRECT 2,150,025,304.38 7.6 -0.42 1.56 1.56 9.54 6.31 01-01-16
HFRI FOF DIVERSIFIED INDEX (1-Month Lag) -1.80 1.43 1.43 5.73 3.14 01-01-16
Excess 1.38 0.13 0.13 3.81 3.17
43
VII. Private Equity
44
Objective The primary objective is to enhance the total return of the overall investment portfolio,
and secondarily to provide diversification. Private Equity investments are commingled funds structured as limited partnerships with capital commitments that are drawn down over time based on manager discretion. Potential distributions are made as a fund matures and investments are typically realized over an 8-12 year horizon.
The long term policy objective is to exceed the Russell 3000 + 3.00% for periods of five years or greater, net of all investment management fees.
Investment Philosophy Manager selection is critical, and managers add value through:
Reducing agency conflicts and aligning equity holder/executive incentives Investment structuring and balance sheet management Deep sector experience and creating operating efficiencies Navigating non-public information and capturing illiquidity premia
Note: Due to the illiquid nature of the Private Equity asset class, the target allocation will be invested over a multi-year period in order to avoid considerable vintage year risks.
45
Manager Strategy Commitment Portfolio BenchmarkGTCR Buy-out $50,000,000
Benchmark equals Actual /Russell 3000 + 3% (Asset Class Goal) for periods equal or longer to 5 years
Capital Partners Buy-out $58,000,000 Marlin Equity Buy-out $57,000,000 Tritium Buy-out $50,000,000 Altaris Health Partners Buy-out $50,000,000 Searchlight Buy-out $47,000,000 One Rock Buy-out $45,000,000 Incline Buy-out $40,000,000 Kainos Buy-out $35,000,000 Harvest Buy-out $20,000,000 Marlin Heritage Buy-out $14,250,000 Altaris Constellation Buy-out $12,500,000 Dunes Point Buy-out $50,000,000 Providence Strategic Growth Growth $60,000,000 Updata Growth $50,000,000 FTV Growth $46,000,000 Mercato Growth $40,000,000 TPG Special Situations $75,000,000 GSO Special Situations $75,000,000 Carlyle Special Situations $65,000,000 H.I.G. Bayside Special Situations $60,000,000 GSO Co-Investment Fund Special Situations $18,750,000 Foundry Venture-Growth $30,000,000 Providence Strategic Growth III L.P. Venture-Growth $70,000,000 LightBay Investment Partners, L.P. Special Situations $40,000,000 Foundry Group Next 2018 Venture-Growth $45,000,000 Providence VIII Buy-out $55,000,000 TPG Opportunities Partners IV L.P. Special Situations $50,000,000 TSSP Adjacent Opportunities Partners (D), L.P. Special Situations $50,000,000
46
Policy Strategy Range
Control/Buy-out 40.0% to 75.0%Venture/Growth/Minority 5.0% to 25.0%Special Situations/Opportunistic 10.0% to 35.0%
NOTE: Percentages may not be exact due to rounding
43.0%
25.1%
31.9%
Figure 1 : Private Equity Strategy Diversification by Commitment
Buy-out (40% to75%)
Growth/Venture(10% to 40%)
Special Situations(5% to 35%)
41.1%
24.0%
30.5%
4.3%
Figure 2 : Private Equity Target Diversification by Strategy
Buy-out (40% to75%)Growth/Venture(10% to 40%)Special Situations(5% to 35%)Un-Allocated
47NOTE: Percentages may not be exact due to rounding
Policy Guidelines
No more than 35% with any one investment managerNo more than 25% in any one investment vehicle
Figure 4: Private Equity Manager Diversification by Commitment
BO 1 BO 2
BO 3 BO 4
BO 5 BO 6
BO 7 BO 8
BO 9 BO 10
BO 11 BO 12
GE 1 GE 2
GE 3 GE 4
GE 5 SS 1
SS 2 SS 3
SS 4 SS 5
Figure 5: Private Equity Target Diversification by Manager
BO 1 BO 2BO 3 BO 4BO 5 BO 6BO 7 BO 8BO 9 BO 10BO 11 BO 12GE 1 GE 2GE 3 GE 4GE 5 SS 1SS 2 SS 3SS 4 SS 5UA
48Source: State Street Investment Analytics- Final
MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD
Incept
Date
NGR0A014 - TMRS TOTAL PRIVATE EQUITY 334,959,911.19 1.2 11.51 11.77 11.77 25.08 14.11 12-01-15
NGR0A016 - BUY-OUT TOTAL 100,355,618.17 0.4 13.65 13.65 13.65 10.06 19.27 12-01-15
NGRNBO2 - SEARCHLIGHT CAPITAL II 25,703,563.96 0.1 14.47 14.47 14.47 35.22 35.96 02-01-16
NGRNBO10 - HARVEST PARTNERS VII 6,247,714.36 0.0 9.21 9.21 9.21 -4.05 -2.72 10-01-16NGRNBO12 - KAINOS CAPITAL PARTNERS II LP 5,533,513.04 0.0 -2.16 -2.16 -2.16 -33.61 -28.01 01-01-17
NGYB - MARLIN EQUITY V 4,747,485.97 0.00 0.00 03-01-18
NGYF - ONE ROCK CAPITAL PARTNERS II LP 13,168,901.91 0.1 -3.31 -3.31 -3.31 -3.31 11-01-17
NGYD - MARLIN HERITAGE II 1,757,688.70 0.0 -12.11 -12.11 -12.11 -12.11 11-01-17
NGYE - INCLINE EQUITY PARTNERS IV 2,926,795.80 0.0 1000.11 1000.11 1000.11 0.00 09-01-17
NGRNBO1 - TRITIUM I, L.P. 40,269,954.37 0.1 20.24 20.24 20.24 10.87 18.72 12-01-15
Altaris-Health
Altaris-Constellation
Capital Partners
NGR0A021 - VENTURE-GROWTH TOTAL 133,640,991.37 0.5 10.58 11.39 11.39 46.08 15.09 07-01-16
NGRNBO8 - FOUNDRY GROUP NEXT FUND LP 14,869,998.96 0.1 -0.99 -0.99 -0.99 11.45 4.02 08-01-16
NGRNBO6 - MERCATO PARTNERS GROWTH III LP 20,758,849.20 0.1 35.51 35.51 35.51 28.13 -3.55 07-01-16
NGRNBO7 - UPDATE PARTNERS V LP 36,308,511.50 0.1 12.31 15.41 15.41 34.68 15.62 07-01-16
NGRNBO11 - PROVIDENCE STRATEGIC GROWTH II LP 51,352,849.68 0.2 10.88 10.88 10.88 62.48 46.22 01-01-17
NGRNBO13 - FTV V, L.P. 10,350,782.00 0.0 -20.39 -20.39 -20.39 -27.33 05-01-17
NGR0A018 - SPECIAL SITUATIONS SUB TOTAL 100,963,301.52 0.4 7.26 7.10 7.10 14.28 9.29 03-01-16
NGRNBO3 - H.I.G. BAYSIDE FUND IV 14,555,108.71 0.1 12.93 12.93 12.93 13.84 12.96 03-01-16
NGRNBO4 - CARLYLE ENERGY MEZZANINE FUND II 21,965,331.51 0.1 4.76 4.76 4.76 7.87 -6.45 03-01-16
NGRNBO5 - TSSP ADJACENT OPPORTUNITIES FUND III 43,281,572.46 0.2 6.03 6.03 6.03 14.43 10.78 03-01-16
NGRNBO9 - GSO Capital Opportunities Fund III LP 19,432,767.00 0.1 5.03 4.21 4.21 19.62 14.07 10-01-16
NGYA - GSO COF CO-INVEST FUND 1,728,521.81 0.0 9.44 9.44 9.44 9.57 09-01-17
Benchmark equals actual for all periods.
49
VIII. Compliance
50
• IPS Objectives• The primary objective of Compliance is to implement a detailed compliance program which
uses a combination of daily, weekly and monthly testing of all testable parameters of the Investment Policy Statement and all Manager guidelines at the Manager, asset class and total fund level, as appropriate.
• Testing may be completed either through systematic resources (automated custodial compliance) or manually if necessary.
• Compliance personnel shall create and present a quarterly report to the Board with the results of the testing performed during each period.
51
Policy Guidelines
Core Fixed Income
Non-Core Fixed Income
Real ReturnDomestic Equities
GlobalEquities
Credit Quality
Liquidity/Cash Management
Permissible/Prohibited Investments
Concentration Risk
Country/Region & Currency
Issue/Issuer
Sector & Asset Type
Interest Rate Risk N/A N/A
Spread Risk N/A N/A
SSB’s automated weekly GX Compliance tests completed through March 2018. SSB’s automated monthly GX Compliance tests completed through March 2018.
457 manual monthly guideline compliance tests conducted on 22 TMRS separately managed account portfolios and TMRS total fund portfolio through March 2018.
There were no material violations of TMRS investment management guidelines.
52
Topic Update
State Street Bank’s GX Compliance -Updates
Public Equity: Acadian Emerging Markets, The Boston Company Small Cap Opp Value, Champlain Mid-Cap Core, Wasatch International Small Cap Growth, Wellington International Small Cap Opp, Wellington US Small Cap Opp, and William Blair Emerging Markets’ investment management guidelines were updated and amended in February and March 2018.
TMRS Compliance worked with State Street Bank to revise GX Compliance’s weekly and monthly automated guideline tests accordingly.
TMRS Compliance –Next Steps
Real Return: Colchester Global Inflation Linked Bonds’ investment management guidelines updated and amended in May 2018.
Non-Core Fixed Income: Highland Bandera Strategic Credit Partners I, LP and Guggenheim Bandera Strategic Credit Partners II, LP to be replaced by GSO Capital Partners, LP and Octagon Credit Investors, LLC.
TMRS Compliance to work with State Street Bank to update GX Compliance’s weekly and monthly automated guideline tests accordingly.
53
• Summary of Improvements• 10 additional separately managed accounts monitored on a weekly and monthly basis• Approximately 100 additional guidelines monitored on a weekly and monthly basis• Dedicated customer support and service
• Accessible • Responsive• Reliable
• Delivers prompt implementation of new accounts and amended guidelines
• Conclusion• Resulting in a more comprehensive, accurate, and up-to-date compliance monitoring program
54
IX. Risk Management
Risk Management Objective:• Management of the risk of not achieving TMRS
investment objectivesRisk Management Responsibilities:• Defining investment risk management policy • Building a risk aware culture • Analytical tools for investment risk management• Reporting on investment risk to the Board
55
Risk Report Highlights: Comments have been added to the reports to
highlight some important points
No significant changes on IPS Guideline Implied Risk Range chart. There was a slight increase in the Current Strategy Mix for Real Return due to continuing policy implementation
Current market volatility: Declined further (recent volatility in the markets had not
yet happened as of this report)
Portfolio current volatility = 6.1%, down 0.4% from Q3
Dramatically lower than Benchmark Long Term Volatility Assumption = 11.5%
Forward looking Tracking Error increased to 1.0% (from 0.8%) due to Asset Class Benchmark changes adopted in December and small improvements in portfolio risk modeling
Activity Update
Data
First parts of internally developed Data Warehouse, covering account related information and daily holdings and transactions, is in production mode. Continuing work on the Data Warehouse to expand breadth of account related data and add output generated by our analytical systems.
Research
Monitoring industry advances in investment risk analysis and quantitative investment strategies for opportunities to improve TMRS risk adjusted returns
Analysis and Reporting
Performance attribution analysis (Separately Managed Accounts) is in production mode. US Equity internal report completed. Expect to run analysis quarterly going forward.
56
Holdings-Based Risk Model: Short-term outlook based on recent volatility of actual holdings1 IPS Guideline Implied Risk Ranges
TMRS Long Term OutlookRVK Long-
term outlookPortfolio Policy Benchmark
Weight (%) Risk Contribution
to Total RiskWeight
(%) Risk Contribution to Total Risk
Minimum Risk Implied
by IPS
Current Portfolio
Risk
Maximum Risk Implied
by IPSBenchmark
Risk
Total 100.0% 6.1 100.0% 100.0% 6.4 100.0% 8.5 9.9 12.5 11.5Cash Assets 0.1% 0.0 0.0% 0.0% 0.0 0.0% -- 0.0 -- 3.0Equity - US 21.1% 10.1 31.1% 17.5% 9.8 24.0% 17.7 17.7 18.1 17.8Equity - Non US 18.1% 12.0 33.0% 17.5% 12.5 31.3% 16.7 18.9 21.1 20.7Core Fixed Income 16.2% 3.8 0.7% 10.0% 3.8 -0.1% 3.5 3.5 4.6 6.0Non-Core Fixed Income 15.6% 4.7 9.8% 20.0% 5.8 13.9% 5.4 7.2 11.6 12.5Real Estate 8.1% 9.6 8.7% 10.0% 9.6 9.2% 12.5 13.2 16.6 14.0Real Return 10.3% 7.0 10.7% 10.0% 7.1 9.7% 9.6 11.8 20.0 10.7Absolute Return 9.7% 3.2 4.5% 10.0% 3.0 3.5% 4.7 5.4 8.6 9.5Private Equity 0.9% 15.3 1.4% 5.0% 15.1 8.5% 16.6 18.9 25.6 25.5
Comparing Recent Volatility to Long-Term Assumptions
Total Fund Risk by Asset ClassDecember 2017
Different asset classes contribute more/less to risk than their weight in the portfolio (e.g. Equity)
Portfolio risk should be similar to benchmark risk
Risk ranges relative to assumptions used in Asset Allocation can vary substantially; more details on the next page
The current strategic positioning is indicative of where we see the best risk/return trade off
1. Short-term risk numbers are based on the recent past and can be significantly different than long-term averages
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Core FixedIncome
AbsoluteReturn
Non-CoreFixed
Income
RealReturn
RealEstate
Non-USEquity
US Equity PrivateEquity
Total Plan
Risk
Series1Current TMRS Risk EstimateRVK Long-Term AssumptionSeries2Risk range implied by IPS Rebalancing Policy
Minimum risk implied by IPS
Maximum risk implied by IPS
1
IPS Guideline Implied Risk Ranges December 2017
57
Based on current (and approved but unfunded) Asset Class strategy allocations and Investment Department long-term assumptions regarding each strategy
1. Real Return range includes 0-30% limit on Inflation Linked Bonds to align with the IPS's Asset Class Goal of CPI+4%
Total Fund & Asset Class Regional ExposuresDecember 2017
58
NOTES: 1. Developed Americas consists almost entirely of the USA. Canada is a very small allocation.2. The Absolute Return regional breakdown is based on manager and ARS consultant estimates.
Developed Americas
Developed Europe
Developed Asia & Pacific Rim
Emerging Americas
Emerging Europe
Emerging Asia & Pacific
RimMiddle East
& Africa
Cash Assets 100% 0% 0% 0% 0% 0% 0%Equity - US 100% 0% 0% 0% 0% 0% 0%Equity - Non US 8% 40% 27% 3% 1% 18% 3%Core Fixed Income 91% 5% 1% 1% 0% 0% 1%Non-Core Fixed Income 66% 9% 2% 8% 4% 6% 5%Real Estate 95% 5% 0% 0% 0% 0% 0%Real Return 67% 17% 8% 3% 1% 3% 0%Absolute Return 56% 22% 6% 4% 4% 9% 0%Private Equity 91% 7% 0% 0% 0% 2% 1%Total Fund 68% 14% 7% 3% 1% 5% 1%
Many asset classes are currently concentrated in the US
Some asset classes are exposed to emerging markets
Several asset classes are exposed to non-US developed markets
59
Active Risk Due to: Allocation DecisionsDecember 2017
StrategicTarget
Allocation(%)
Portfolio Allocation
(%)
Allocation Difference
(%)
Pending Policy
Allocations
Active Risk from Allocation Decisions:
Asset Class Policy Benchmark
Contribution of Pending Policy
Allocation Decisions1
Contribution of Investment Allocation Decisions2
Cash Assets 30 Day T- Bill 0.00% 0.10% 0.10% 0.00 0.00Equity - US Russell 3000 17.50% 21.11% 3.61% -4.00% -0.04 0.00
Equity - Non US MSCI ACWI ex USA IMI 17.50% 18.05% 0.55% 0.00 0.00
Core Fixed Income
BB Barclays U.S. Agg 10.00% 16.22% 6.22% -6.00% 0.26 0.01
Non-Core Fixed Income
50% High Yield, 50% Levered Loan
20.00% 15.55% -4.45% 4.00% 0.03 0.00
Real Estate NCREIF ODCE 10.00% 8.11% -1.89% 2.00% 0.01 0.00
Real ReturnManager Benchmark Rollup
10.00% 10.32% 0.32% 0.00 0.00
Absolute Return HFRI FOF Diversified Index 10.00% 9.68% -0.32% 0.00 0.00
Private EquityManager Benchmark Rollup
5.00% 0.85% -4.15% 4.00% 0.27 0.01
Total Active Allocation Risk 100.00% 100.00% 0.00% 0.52 0.03
0.55
0.42
Active Risk fromAllocation
Active Risk fromSelection
Total Active Risk = 0.97
Total Active Risk (the risk of being different from the benchmark) can be divided into Allocation and Selection decisions
A very small part of our risk is due to active allocation decisions to deviate from our Strategic Target Allocation
A large part of our active risk is due to not yet fully implementing our Strategic Target Allocation
60
Active Risk Due to: Selection DecisionsDecember 2017
Portfolio Allocation
(%)
Active Risk from Selection Decisions
Asset Class Policy Benchmark Contribution of Strategy Benchmark Decisions
Contribution of Active Manager Decisions
Public/Traditional InvestmentsCash Assets 30 Day T- Bill 0.10% 0.00 0.00Equity - US Russell 3000 21.11% -0.01 0.02Equity - Non US MSCI ACWI ex USA IMI 18.05% 0.02 0.04
Core Fixed Income BB Barclays U.S. Agg 16.22% 0.00 -0.01
Public Non-Core Fixed Income
50% High Yield, 50% Levered 10.99% 0.09 0.15Loan
Public Real Return Manager Benchmark Rollup 8.26% 0.00 0.00
Private/Alternative Investments
Private Non-Core Fixed Income Manager Benchmark Rollup 4.56% 0.00 -0.05
Private Real Return Manager Benchmark Rollup 2.06% 0.00 0.01
Real Estate NCREIF ODCE 8.11% 0.00 0.02Absolute Return HFRI FOF Diversified Index 9.68% 0.00 0.11Private Equity Manager Benchmark Rollup 0.85% 0.00 0.02Total Active Selection Risk 100.00% 0.10 0.32
Total Active Risk = 0.97
0.55
0.42
Active Risk fromAllocation
Active Risk fromSelection
For alternatives, the best available benchmarks do not satisfy all of TMRS’s benchmarking criteria, so active risk measurements are less precise
Most of our active risk is due to managers holding portfolios different from their benchmarks
Some of our active risk is due to choosing manager benchmarks different from policy benchmarks
61
Evolution of Risk Over TimeDecember 2017
62