overview first quarter 2016 - office of the comptroller ... · asset class index first quarter 2016...

THE CITY OF NEW YORK

OFFICE OF THE COMPTROLLER

June 15, 2016

Overview – First Quarter 2016

Asset Class IndexFirst Quarter

2016

Fourth

Quarter

2015

Three

YearFive Year Expected*

Equities - U.S. Russell 3000 0.97% 6.27% 11.15% 11.01% 7.83%

Equities - Developed Intl MSCI EAFE -3.01% 4.71% 2.23% 2.29% 8.94%

Equities - Emerging Intl MSCI EMF 5.71% 0.66% -4.50% -4.13% 11.00%

Debt - US Government NYC Treas/Agency +5 5.55% -1.29% 3.66% 6.41% 2.82%

Debt - Investment Grade NYC IG Credit 3.85% -0.44% 2.85% 4.89% 3.42%

Debt - High Yield Citigroup BB & B 3.04% -1.70% 1.71% 4.83% 6.08%

2

Market Returns: Q1-2016

Source: State Street

*Average of consultant long-term arithmetic expected returns, as of 2016

OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management

Asset Class IndexQ1 - 1st Half

(1/1/16-2/11/16)

Q1 - 2nd Half

(2/12/16-3/31/16)

Equities - U.S. Russell 3000 -11.29% 13.82%

Equities - Developed Intl MSCI EAFE -12.78% 11.21%

Equities - Emerging Intl MSCI EMF -10.15% 17.65%

Debt - US Government NYC Treas/Agency +5 6.63% -1.01%

Debt - Investment Grade NYC IG Credit 0.80% 3.04%

Debt - High Yield Citigroup BB & B -5.25% 8.74%

3

Market Returns: Q1-2016



4

A Tale of Two Quarters

1st Half Q1 (1/1 to 2/11)

- China economic and FX concerns

- US recession fears and profit margin concerns

- Lack of confidence in central banks


6

6.1

6.2

6.3

6.4

6.5

6.6

Jun-15 Sep-15 Dec-15 Mar-16

2500

3000

3500

4000

4500

5000

5500

Shanghai Stock Exchange Composite Index CNY

May-16

5

Shanghai Stock Exchange Composite Index, CNY Currency

Source: Bloomberg


0

0.2

0.4

0.6

0.8

1

1.2

1.4

-0.5

0

0.5

1

1.5

2

2.5

UST 10YR Yield Germany 10Yr Yield JPY 10YR Yield

May-16Mar-16Dec-15Sept-15Jun-15

6

Global Yield Decline

Source: Bloomberg


“The Committee is closely monitoring global economic and financial

developments and is assessing their implications for the labor market and

inflation, and for the balance of risks to the outlook”- FOMC Meeting, Press Release Date: January 27, 2016

7

Excerpts from Key Central Bank Meetings and Speeches

Source: Board of Governors of the Federal Reserves System, Bank of Japan Meeting

“Quantitative and Qualitative Monetary Easing

with a Negative Interest Rate" -Bank of Japan meeting, Press Release Date: January 29, 2016

Losing Confidence:


8

A Tale of Two Quarters

2nd Half (2/12 to 3/31)

- G20 Shanghai meeting – Currency Détente

- Central Bank response (Pboc, Fed, ECB)

- Recession fears fade


“Increased volatility in global financial markets have exacerbated concerns about

the outlook for growth” - Janet Yellen testimony at Monetary Policy Testimony, Press Release Date: February 10, 2016

9


Source: Board of Governors of the Federal Reserves System, Mario Draghi Speech, G20 Meeting Shanghai.

“ECB is ready to do its part” .. and.. If factors entail downward risks to price

stability, we will not hesitate to act. -Mario Draghi speech, Press Release Date : February 15, 2016

Regaining Confidence:

“We will refrain from the competitive devaluation…” and.. “We will carefully

calibrate and clearly communicate our macroeconomic and structural policy

actions to reduce policy uncertainty… “-Joint Communiqué from G20 Meeting in Shanghai Press Release Date : February 27, 2016


“…Balance of risks to my growth and inflation outlook may be starting to tilt slightly to the downside”

- Bill Dudley, speech following G20 meetings, Press Release Date: March 1, 2016

10


Source: Board of Governors of the Federal Reserves System, Bill Dudley G20 Meeting, ECB Meeting.

“Risk of CNY currency devaluation has been “greatly, greatly reduced” -Jack Lew, speech following G20 meetings, Press Release Date : March 1, 2016

Regaining Confidence (continued):

ECB announced significant monetary policy easing, including…. 1) Rate cut from

-30bp to -40bp 2) Increased monthly purchases from Euro 60B/Month to

Euro 80B/month 3) Broadened asset purchases to include non-financial corporate

bonds 4) Launched a new series of four long term refinancing operations, with a

maturity of four years, with fixed interest rate of -40bp-ECB meeting, Press Release Date: March 10, 2016


0

20

40

60

80

100

120

140

160

2016 2017 2018

56

109

145

18

38

60

Bp

s o

f T

igh

ten

ing

Amount of Tightening 12/31/15 Amount of Tightening 3/31/16

11

Market Based Expectations Fed Rate Hikes

Source: Bloomberg


110

112

114

116

118

120

122

124

126

128

130


12

US Trade Weighted DollarU

SD

May-16

Source: Bloomberg


6.1

6.2

6.3

6.4

6.5

6.6

6.7


350

360

370

380

390

400

410

420

430

440

450

MSCI ACWI Index CNY

May-16

13

MSCI AC World Index, Chinese Yuan

Source: Bloomberg


350

360

370

380

390

400

410

420

1/1/2016 1/16/2016 1/31/2016 2/15/2016 3/1/2016 3/16/2016 3/31/2016

6.1

6.15

6.2

6.25

6.3

6.35

6.4

6.45

6.5

6.55

6.6

CNY MSCI ACWI Index

1/27/16 FOMC

Meeting

1/29/16 BOJ

Meeting

2/10/16

J. Yellen Speech

2/15/16 Draghi Speech

2/27/16

G20 Shanghai Meeting

14

MSCI AC World Index, Chinese Yuan 1st Quarter 2016

Source: Bloomberg

1/27/16 FOMC Meeting

1/29/16 BOJ Meeting

2/10/16 J. Yellen Speech

2/15/16 Draghi Speech

2/27/16 G20 Shanghai Meeting


15

Brexit

Vote on June 23, remain or leave "Should the United

Kingdom remain a member of the European Union or

leave the European Union?"

- Polls Vs. Betting Markets

- Implications


* Gross of fees in public asset classes

(SSB N, F p.17; T, P p.18; B p.21)

NYC Pension SystemPortfolio Std

Dev - 1 yrFirst Quarter Three Year* Five Year*

BERS 10.2% 1.3% 6.6% 6.8%

TRS 9.0% 2.1% 6.3% 6.9%

POLICE 8.5% 1.7% 6.8% 6.9%

FIRE 8.2% 1.7% 6.6% 6.7%

NYCERS 8.2% 2.2% 6.4% 6.8%

Median Fund - TUCS 1.1% 6.7% 6.9%

16

Total NYC Pension Fund Performance: 3/31/16



17

Asset Allocation First Quarter 2016 - Equity


Relative Mix to Adjusted New Policy Weights (SSB F, N p.8; P, T p.9; B p.12 )


18

Asset Allocation First Quarter 2016 - Fixed Income

Relative Mix to Adjusted New Policy Weights (SSB F, N p.8; P, T p.9; B p.12 )



19

FY Return – Total Portfolio

-600

-400

-200

0

200

400

600

FYTD Benchmark FYTD Portfolio FYTD Excess

bp

s

TRS

NYCERS

Police

Fire

BERS

FISCAL YEAR TO DATE First Quarter 2016 (SSB F, N p.23; T, P p.24; B p.27)



20

Return – Total Portfolio

-600

-400

-200

0

200

400

600

1st Qtr Benchmark 1st Qtr Portfolio 1st Qtr Excess

bp

s

TRS

NYCERS

Police

Fire

BERS

First Quarter CY2016 (SSB F, N p.23; T, P p.24; B p.27)



21

Excess Return – Total Portfolio

-200

-150

-100

-50

0

50

100

150

200

1st Qtr Total Excess Return 1st Qtr Asset Allocation 1st Qtr Manager Value Added

bp

s

TRS

NYCERS

Police

Fire

BERS


First Quarter CY 2016 Basis Points of Excess Return (SSB N, F p.10; P, T p.11; B p.14)


22

Manager Value Added- Total Portfolio

-600

-400

-200

0

200

400

600

First Quarter YTD CY2016 CY2015

TRS

NYCERS

Police

Fire

BERS

bp

sBasis Points of Excess Return (SSB N, F p.13; P, T p.14; B p.17)



23

Value Added – U.S. Equities

-600

-400

-200

0

200

400

600


TRS - 33.88%

NYCERS - 33.87%

Police - 35.46%

Fire - 30.67%

BERS - 37.71%


Weights as of

3/31/2016

bp

sBasis Points of Excess Return (SSB F, N p.23; T, P p.24; B p.27)


24

Value Added - Developed Equities

-600

-400

-200

0

200

400

600


TRS - 8.61%

NYCERS - 9.75%

Police - 9.70%

Fire - 9.58%

BERS - 16.42%


Weights as of

3/31/2016

bp

sBasis Points of Excess Return (SSB F, N p.25 T, P p.26 B p.29)


25

Value Added - Emerging Equities

-600

-400

-200

0

200

400

600


TRS - 8.7%

NYCERS - 7.01%

Police - 6%

Fire - 6.48%

BERS - 5.14%


Weights as of

3/31/2016

bp

sBasis Points of Excess Return (SSB F, N p.26 P, T p.27 B p.29)


26

Value Added – Core 5+ Fixed Income

-600

-400

-200

0

200

400

600


TRS - 18.7%

NYCERS - 18.5%

Police - 18.4%

Fire - 20.1%

BERS - 15.2%


bp

s

Basis Points of Excess Return (SSB T, N, F p.29; P p.30; B p.31)

Weights as of

3/31/2016


27

Value Added - TIPS

-600

-400

-200

0

200

400

600


TRS - 2.38%

NYCERS - 3.39%

Police - 2.96%

Fire - 2.86%

BERS - 4.22%


bp

sBasis Points of Excess Return (SSB T, N, F p.29; P p.30; B p.31)

Weights as of

3/31/2016


28

Value Added – Economically Targeted Investments

-600

-400

-200

0

200

400

600


TRS - 0.96%

NYCERS - 1.4%

Police - 1.12%

Fire - 0.81%

BERS - 0.66%


bp

sBasis Points of Excess Return (SSB T, N, F p.30; P, B p.31)

Weights as of

3/31/2016


29

Value Added – Bank Loans

-600

-400

-200

0

200

400

600


TRS - 2.56%

NYCERS - 1.87%

Police - 1.71%

Fire - 1.68%

BERS - 2.37%


bp

sBasis Points of Excess Return (SSB T, N p.29; F p.30; P, B p.31)

Weights as of

3/31/2016


30

Value Added – Fixed Income – High Yield

-600

-400

-200

0

200

400

600


TRS - 4.89%

NYCERS - 3.72%

Police - 3.88%

Fire - 3.66%

BERS - 5.16%


Weights as of

3/31/2016

bp

sBasis Points of Excess Return (SSB T, N, F p.29; P p.30; B p.31)


31

Value Added – Convertible Bonds

-600

-400

-200

0

200

400

600


TRS - 1.64%

NYCERS - 0.97%

Police - 0.65%

Fire - 0.48%

BERS - N/A


Weights as of

3/31/2016

bp

sBasis Points of Excess Return (SSB T, N, F p.30; P p.31)


Value Added- Hedge FundsBasis Points of Excess Return

-600

-400

-200

0

200

400

600


TRS - N/A

NYCERS - 2.66%

Police - 3.18%

Fire - 3.15%

BERS - N/A


Value Added - Hedge FundsBasis Points of Excess Return (SSB N, F p.27; P p.28)

Weights as of

3/31/2016

32

bp

s


PRIVATE MARKET DATA

34

Value Added – Private Equity

-600

-400

-200

0

200

400

600

Excess Return Since Inception PME Benchmark: PME is the Russell 3000 Total Return Index as of 12/31/15

TRS - 07/08/99

NYCERS - 03/29/99

Police - 03/29/99

Fire - 03/29/99

BERS - 07/20/06

Inception Date

300bps Target

Basis Points of Cumulative IRR above Public Market Equivalent

bp

s

The PME Spread is the difference between the IRR and the PME Benchmark for each respective partnership.


35

Value Added - Infrastructure

0

200

400

600

800

1000

1200

Excess Return Since Inception; PME Benchmark: 50% R3000 & 50% Barclays Agg. as of 12/31/15

TRS - 11/19/2013

NYCERS - 11/19/2013

Police - 11/19/2013

Fire - 11/19/2013

BERS - 11/19/2013

Inception Date

Basis Points of Cumulative IRR above Public Market Equivalentb

ps



36

Value Added – Private Real Estate

-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

600

Excess Return Since Inception; PME Benchmark: 50% R3000 & 50% Barclays Agg. as of 12/31/15

TRS - 12/6/2002

NYCERS - 12/6/2002

Police - 12/6/2002

Fire - 12/6/2002

BERS - 12/13/2010

Inception Date


ps



37

Value Added – Opportunistic Fixed Income (OFI)

-600

-400

-200

0

200

400

600

Excess Return Since Inception; PME Benchmark: JP Morgan Global High Yield as of 3/31/16

TRS - 10/24/2007

NYCERS -

10/24/2007

Police - 10/24/2007

Fire - 10/24/2007

BERS - N/A

Inception Date


ps



overview first quarter 2016 - office of the comptroller ... · asset class index first quarter 2016...

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