sdcera board of trustees meeting
TRANSCRIPT
Portfolio Strategist ReportSDCERA Board of Trustees Meeting
December 2013
Lee Partridge, CFATodd Centurino, CFA
James Sivco, CFAThomas Weldin, CAIA
1
DisclosuresThe opinions expressed in these materials represent the personal views of Salient’s investment professionals and are basedon their broad investment knowledge, experience, research and analysis. However, market conditions, strategic approaches,return projections and other key factors upon which the views presented in these materials are based remain subject tofluctuation and change. Consequently, it must be noted that no one can accurately predict the future of the market withcertainty or guarantee future investment performance.
This presentation does not constitute an offering of any security, product, service or fund. No investment strategy canguarantee performance results. Past performance is no guarantee of future results. All investments are subject toinvestment risks, including loss of principal invested.
Salient research has been prepared without regard to the individual financial circumstances and objectives of persons whoreceive it. Salient recommends that investors independently evaluate particular investments and strategies, and encourageinvestors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend onan investor’s individual circumstances and objectives.
All opinions, projections, and estimates constitute the judgment of the author as of the date of the report and are subject tochange without notice. Performance estimates are subject to change and Integrity Capital LLC is under no obligation toupdate this report. The reader should therefore assume that Integrity Capital LLC will not update any fact, circumstance, oropinion contained in this report. Always refer to the most recent research report prior to making an investment decision.
Investment advisory and research services provided by Integrity Capital, LLC, a registered investment advisor. Registrationas an investment advisor does not imply a level of skill or training. Salient Partners, L.P. is the parent company of IntegrityCapital, LLC. Salient Partners, L.P. and affiliates do not provide tax or legal advice.
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Q3 Portfolio Review
3
Performance Attribution
Source: Integrity Capital, LLC December 2013Note: Portfolio and Benchmark returns provided by BNY Mellon and are net of fees and expenses. Figures have been rounded to the nearest hundredth.1: The US Bond Composite performance and market values are adjusted using a ten year futures equivalent. This calculation is performed by multiplying the actual allocation to the treasury strip portfolio by the actual modified duration of the US Treasury strips divided by the modified duration of the benchmark.Past performance does not indicate future results.
Composite Return Benchmark Excess Return
Private Equity 3.16% 2.74% 0.42%
Private Equity - Completion 5.67% 6.35% -0.68%
Total Private Equity 4.57% 4.74% -0.17%Natural Resources and ORA -1.26% 3.84% -5.10%
Natural Resources and ORA - Completion 4.24% 3.84% 0.40%
Total Natural Resources and ORA 1.63% 3.84% -2.22%
Last 3 Month Returns(through September 30, 2013) Portfolio Benchmark Portfolio Benchmark Allocation Selection Interaction Total Active
Global Developed Equity 20.10% 20.00% 8.20% 8.18% 0.00% 0.00% 0.01%
Emerging Markets Equity 5.24% 5.00% 6.59% 5.90% 0.01% 0.04% 0.04%
High Yield Fixed Income/Credit 5.22% 5.00% 2.26% 2.25% 0.00% 0.00% 0.00%
Private Equity 10.29% 10.00% 4.57% 4.74% 0.00% -0.02% -0.01%
Emerging Markets Debt 9.87% 10.00% -0.18% -0.43% 0.01% 0.03% 0.03%
US Bonds (1) 39.97% 40.00% 0.68% 0.77% 0.00% -0.03% -0.03%
Global Macro/CTA 8.45% 10.00% -0.62% -1.49% 0.08% 0.07% 0.15%
Relative Value 7.62% 10.00% -0.48% 0.50% 0.07% -0.07% -0.01%
US TIPS 4.81% 5.00% 0.68% 0.70% 0.01% 0.00% 0.00%
Real Estate 10.87% 10.00% 2.49% 2.87% 0.00% -0.04% -0.05%
Natural Resources and ORA 11.76% 10.00% 1.63% 3.84% 0.01% -0.26% -0.25%
TOTAL Portfolio 134.21% 135.00% 3.15% 3.39% 0.17% -0.29% -0.12% -0.24%
06/30/13 Weights Q3 Returns Attribution
4
Allocation & Performance
Source: Integrity Capital, LLC December 2013Note: (1) Private Equity Composite Benchmark – Invested Portion: Russell 3000+3% lagged one quarter, Uninvested portion: Russell 3000 (2) Real Estate Composite Benchmark –Invested Portion: NCREIF NPI lagged one quarter (3) Natural Resources and ORA Composite Benchmark – 1/3 GSCI + 1/3 S&P MLP + 1/6 S&P Materials Index + 1/6 S&P/TSX Materials Composite. All figures have been rounded.Past performance does not indicate future results.
*Allocations as of 09/30/2013
Composite $ Allocation (MM) % Allocation Target Min Max Compliance Return Benchmark Excess Return Stated Benchmark
Global Developed Equity 2,024 21.0% 20% 15% 25% YES 8.20% 8.18% 0.02% MSCI World Net Index
Emerging Markets Equity 503 5.2% 5% 2% 10% YES 6.59% 5.90% 0.69% MSCI Emerging Markets Index
High Yield Fixed Income/Credit 477 5.0% 5% 2% 10% YES 2.26% 2.25% 0.00% ML High Yield Master II
Private Equity 926 9.6% 10% 5% 15% YES 4.57% 4.74% -0.17% Private Equity Composite Benchmark (1)
Total Growth Oriented Portfolio 3,931 40.8% 40% 35% 45% YES 6.36% 6.30% 0.06% Target Weighted Avg of SubcomponentsEmerging Markets Debt 907 9.4% 10% 5% 15% YES -0.18% -0.43% 0.26% JPM GBI EM Global Diversified (Unhedged)
US Bonds 3,271 34.0% 40% 20% 60% YES 0.68% 0.77% -0.08% Barclays 10-Year UST Futures Index
Global Macro/CTA 612 6.4% 10% 5% 15% YES -0.62% -1.49% 0.87% 2/3 HFRI Macro + 1/3 Barclay CTA Index
Relative Value 669 6.9% 10% 5% 15% YES -0.48% 0.50% -0.98% Three-Month Treasury Bills +2%
Total Stable Value Portfolio 5,459 56.7% 70% 35% 70% YES 0.10% 0.25% -0.14% Target Weighted Avg of SubcomponentsUS TIPS 437 4.5% 5% 2% 15% YES 0.68% 0.70% -0.02% Barclays US TIPS Index
Real Estate 1,005 10.4% 10% 5% 15% YES 2.49% 2.87% -0.38% Real Estate Composite Benchmark (2)
Natural Resources and ORA 1,110 11.5% 10% 5% 15% YES 1.63% 3.84% -2.22% Nat Resources & ORA Composite Benchmark (3)
Total Inflation Sensitive Portfolio 2,552 26.5% 25% 20% 30% YES 1.79% 2.84% -1.05% Target Weighted Avg of SubcomponentsGROSS TOTAL INVESTMENTS 11,941 124.0% 135%Unequitized Cash (2,312) -24.0%
NET TOTAL INVESTMENTS 9,630 100.0% 3.15% 3.39% -0.24% Target Weighted Avg of Subcomponents
Policy Performance - 3rd Quarter 2013
Completion Portfolio
Private NAV Total
Private Equity 5.3% 4.4% 9.6%
Natural Resources and ORA 6.1% 5.4% 11.5%
Total 11.4% 9.8% 21.1%
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Total Fund Return vs. Target Return
Total Fund Return Blended Actuarial Rate Target+/- 1 Std Dev (66% Confidence level) +/- 2 Std Dev (95% Confidence level)Projected Total Fund Return Using Blended Actuarial Rate
Source: Integrity Capital, LLC December 2013Note: Volatility is calculated from January 31, 2004Past performance does not indicated future results.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
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
AU
M L
evel
(Mill
ions
)
Date
$7,227
$9,630
$11,746
$4,967
$14,007
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Activity Summary
Sources: Bank of New York Mellon, Russell Investments, Integrity Capital, LLC December 2013Note: Activity Summary data calculated using actual beginning value, ending values, and performance, which may differ from actual cash flows experienced by the Plan.Past performance does not indicate future results.
Asset ClassBeginning Value
(06/30/2013)Net Cash Flows
Market Value Change
Ending Value (09/30/2013)
Quarterly Return
Quarterly Return
ContributionGlobal Developed Equity 1,812,559,411 62,752,238 148,548,475 2,023,860,124 8.2% 1.65%Emerging Markets Equity 472,256,925 9 31,106,694 503,363,628 6.6% 0.34%High Yield Fixed Income/Credit 471,048,933 (4,607,178) 10,634,397 477,076,153 2.3% 0.12%Private Equity 928,293,372 (44,273,081) 42,407,834 926,428,125 4.6% 0.47%Emerging Markets Debt 889,705,173 19,210,213 (1,584,104) 907,331,282 -0.2% -0.02%US Bonds 3,112,942,807 144,721,962 13,450,842 3,271,115,611 0.4% 0.15%Global Macro/CTA 762,081,438 (145,425,505) (4,706,886) 611,949,047 -0.6% -0.05%Relative Value 687,437,793 (15,346,898) (3,284,217) 668,806,679 -0.5% -0.04%US TIPS 433,843,572 30,583 2,968,656 436,842,811 0.7% 0.03%Real Estate 980,615,378 87,006 24,421,245 1,005,123,629 2.5% 0.27%Natural Resources and ORA 1,060,833,691 31,458,933 17,257,251 1,109,549,875 1.6% 0.19%
GROSS TOTAL INVESTMENTS 11,611,618,492 48,608,284 281,220,188 11,941,446,964Pimco Cash 2,327,018,178 480,754,309 14,384,116 2,822,156,604 0.3% 0.16%Operational Cash and Other 418,075,663 146,936,929 113,822 565,126,413 0.0% 0.00%Total Exposure 14,356,712,334 676,299,522 295,718,125 15,328,729,980Less: Swap Notional (1,425,345,903) (110,728,570) 0 (1,536,074,472)Less: Futures Notional (3,913,552,209) (249,225,772) 0 (4,162,777,982)Interaction Effect -0.13%
NET TOTAL INVESTMENTS 9,017,814,222 316,345,180 295,718,125 9,629,877,527 3.15%
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Ex-Ante Tracking Error Summary
*Total Tracking Error in the table above assumes no correlation between security and allocation risk.
Policy Summary. Annualized tracking error policy limits are included in the table above. Tracking error is measured as the standard deviation of differences between the returns of an actual portfolio and its respectivebenchmark(s). The tracking error of the Plan will be measured using no less than the most recent three trailing years of monthly returns and will be calculated as one standard deviation of return differences between (1) thecomposite returns for each asset class and (2) the stated benchmark for that asset class composite.
The risk associated with asset allocation deviations will be calculated using the percentage differences between the target and actual weights and the covariance of each of the asset classes with all other asset classes, as measuredby the stated benchmarks identified in the table above. The total tracking error emanating from asset allocation differences may not exceed 150 basis points using a 36 month trailing history of returns ending at the latest period forwhich the asset allocation risk is being measured.
If the actual tracking error exceeds the targets established, the Advisor, Staff, and Consultant will bring such deviations to the Board’s attention on a quarterly basis and provide a plan and timeframe to remedy such deviations.
Source: Integrity Capital, LLC December 2013Note: (1) Due to the passive implementation of equity overlays, US TIPS, as well as certain components of the Natural Resources and ORA portfolio, Security Selection Tracking error is assumed to be zero betweenthese underlying assets and their benchmarks. (2) Salient calculates tracking error using an ex-ante measure of risk. (3) Categories were established 7/1/2010. In some cases composite information is not availableprior to that date. (4) For calculation, allocation is normalized to sum to 100% and excludes all private investments.Past performance does not indicate future results.
% MV
Total Tracking
Error*Asset Allocation
Tracking Error
Security Selection
Tracking Error Policy Limit ComplianceGlobal Developed Equity 21.33% 2.66% 2.64% 0.30% 2.00% YesEmerging Market Equity 5.30% 4.15% 3.50% 2.22% 8.00% YesHigh Yield Fixed Income/Credit 5.03% 1.27% 0.78% 1.00% 8.00% YesEmerging Market Debt 9.56% 1.71% 0.82% 1.50% 4.00% YesUS Treasuries 34.47% 1.35% 0.20% 1.33% 4.00% YesGlobal Macro/CTA 6.45% 4.34% 1.33% 4.13% 8.00% YesRelative Value 7.05% 3.32% 0.00% 3.32% 4.00% YesUS TIPS 4.60% 0.14% 0.14% 0.03% 2.00% Yes
Natural Resources and ORA 6.22% 1.54% 1.40% 0.62% 2.00% Yes
TOTAL Public Portfolio 100.00% 1.08% 0.77% 0.76% 4.00% Yes
Ex-Ante Tracking Error Policy Table
8
200 bps
400 bps
Total Fund (Public Markets) Risk
Source: Integrity Capital, LLC December 2013Note: Assumes no correlation between security and allocation risk. Look back period is 36 months. Past performance does not indicate future results.
Current Quarter: 108 bpsLast Quarter: 84 bps
50 bps
A B A2 B2 (A2+B2)
SS Risk AA Risk SS2 AA2 Total Risk Total Fund Risk 0.76% 5.91% 0.01% 0.35% 5.96%
Total Active Risk 0.76% 0.77% 0.01% 0.01% 1.08%
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Market Overview
10
Developed vs. Emerging Markets Company ValuationsRelative Price-to-Earnings
Source: MSCI, Datastream – September 2013
0
10
20
30
40
50
Dec‐95 Dec‐97 Dec‐99 Dec‐01 Dec‐03 Dec‐05 Dec‐07 Dec‐09 Dec‐11
Trailin
g P/E (12 mon
ths)
MSCI World ex Japan P/E
MSCI Emerging Markets P/E
17.6x
12.2x
11
‐2
0
2
4
6
Mar‐07 Mar‐08 Mar‐09 Mar‐10 Mar‐11 Mar‐12 Mar‐13
Real Yield (%
)
Domestic vs. Emerging Markets – Real YieldsUS TIPS and Emerging Markets Inflation-Linked Bonds
Source : Barclays, Bloomberg – September 2013
Barclays US TIPS 1-10 Yr Index Barclays EM TIL Yield Spread
12
Labor’s Share of Income is at Historic Lows
Corporate profits are grabbing an ever increasing share of the economic pie
Employees are losing barging power to cheaper overseas labor in many sectors
Shares of US Gross Domestic Income (GDI)
Sources: St. Louis Federal Reserve FRED Database. U.S. Department of Commerce: Bureau of Economic Analysis. Data series are: Corporate profits with inventory valuation and capital consumption adjustments, domestic industries: Profits after tax with inventory valuation and capital consumption adjustments divided by Gross Domestic Income. Compensation of employees, paid: Wage and salary accruals divided by Gross Domestic Income
40
42
44
46
48
50
52
54
3
4
5
6
7
8
48 52 56 60 64 68 72 76 80 84 88 92 96 00 04 08 12Year
Corporate Profits/GDI (LHS)
Wages/GDI (RHS)
% GDI % GDI
13
Low Inflation is Supporting Low Interest Rates
Over long periods of time, rates are reflective of the current rate of inflation
The current very low inflation regime is supportive of low interest ratesSource: Bloomberg – December 2013
-5
0
5
10
15
20
1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010
Y-o-
Y %
Cha
nge
Difference
Core PCE Deflator
US 10 Year Govt. Yield
14
A Look at Forward Rates
Source: Bloomberg – December 2013
1 2 5 10 30Now 0.13% 0.32% 1.52% 2.87% 3.88%1 0.50% 0.92% 2.23% 3.24% 4.10%2 1.34% 1.87% 3.04% 3.60% 4.31%3 2.41% 2.86% 3.62% 3.89% 4.49%5 3.80% 4.19% 4.47% 4.17% 4.69%
Years F
orward
Years to MaturityUS Coupon Implied Forward Treasury Rates
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
1 2 5 10 30
Forw
ard Yield
Years to Maturity
Now
1 yr. forward
2 yrs. forward
3 yrs. forward
5 yrs. forward
15
10.87 11.00
6.35
11.31
2.11 2.23
0.57
2.54
0.28 0.64
(0.43)
4.78
15.09
7.37 7.27
3.99
2.88
1.60
0.43 0.00
(0.26)(0.65) (0.99)
(2.21)
-4
-2
0
2
4
6
8
10
12
14
16
Listed Venture Listed PrivateEquity
DomesticEquity
Foreign Equity High Yield Hedge FundsComposite
Core FixedIncome
CommercialReal Estate (1Q
lag)
CPI Inflation-Linked Bonds
EM Debt Commodities
Perc
enta
ge (%
)
Asset Class
Major Asset Class Returns
Source: Integrity Capital, LLC December 2013Domestic Equity is Russell 3000 Total Return Index; Foreign Equity is MSCI Daily TR Net World Ex USA; Core Fixed Income is Barclays US Agg Total Return Index; Inflation Linked Bonds are Barclays US Inflation Linked Bond Index; CPI is US CPI Urban Consumers NSA; EM Debt is JPMorgan EMBI Global Diversified Index; Commodities are S&P GSCI Tot Return Index; High Yield is Citigroup HY Cash Pay Local Currency Index; Commercial Real Estate is NCREIF Property Index; Listed Venture is LPX Vent Listed PE Total Return Index; Hedge Funds are HFRI Fund Weighted Composite Index; Listed Private Equity is Red Rocks Global Listed Private.For illustrative purposes only. Past performance is not indicative of how the index will perform in the future. Index performance does not reflect the deduction of fees or expenses. Note that an investor can not invest directly in an index.
3rd Quarter 2013
4th Quarter 2013 thru November 2013
16
Global Equities
Source: Integrity Capital, LLC December 2013Global Equity is MSCI World and Sub indices; US Equity is Russell 3000 and Sub indices; Emerging Markets Equity is MSCI Emerging Markets and Sub Indices; US Equity Sectors are S&P 500 Sub indices.For illustrative purposes only. Past performance is not indicative of how the index will perform in the future. Index performance does not reflect the deduction of fees or expenses. Note that an investor can not invest directly in an index.
3rd Quarter 2013
4th Quarter 2013 thru November 2013
8.18
5.58
11.31
5.77 5.76
7.31
3.99 3.33
0
2
4
6
8
10
12
All World US World ex US EmergingMarkets
Perc
enta
ge (%
)
Region
Global Equity
5.77 5.33
9.64
3.33
4.98
1.09
0123456789
1011
All EM Asia Europe
Perc
enta
ge (%
)
Region
Emerging Markets Equity
6.35
8.11
6.02
3.94
7.27 7.37 7.33 7.29
- 1 2 3 4 5 6 7 8 9
Core Growth Large Value
Perc
enta
ge (%
)
Style
US Equity Style
6.32 8.31
6.14 7.38
2.41
0.11
9.68
4.55
(5.45)
(0.81)
8.88 8.54 8.30 8.09 7.66 7.64
5.23 4.60 4.52
1.23
-8-6-4-202468
1012
Perc
enta
ge (%
)
Sector
US Equity Sectors
17
0.75
0.57
2.28
0.82
1.02
3.81
0.33 0.40
0.17 0.10
1.03
0.66
0.43
3.03
1.28
0.82
0.64 0.62 0.62 0.54
0.15 0.05
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Universal Aggregate HighYield
Corporate CMBS Inflation-Linked
Govt.-related
Mortgage-Hybrid
ARM
ABS USTreasuries
Mortgage-FixedRate
Perc
enta
ge (%
)
Sector
Global Rates and Credit
Source: Integrity Capital, LLC December 2013Returns data is Barclays US Aggregate Index and Related Sub indices; Emerging Market Returns are JPMorgan GBI-EM Global Diversified Index. For illustrative purposes only. Past performance is not indicative of how the index will perform in the future. Index performance does not reflect the deduction of fees or expenses. Note that an investor can not invest directly in an index
3rd Quarter 2013
4th Quarter 2013 thru November 2013
18
2.23
4.15
2.71
1.54
(1.21)
1.60
2.16
1.50
1.08 0.94
-2
-1
0
1
2
3
4
5
Composite Equity Hedge Event Driven Relative Value Macro
Perc
enta
ge (%
)
Strategy
Source: Integrity Capital, LLC December 2013Return data is HFRI Fund Weighted Composite Index and Sub indices. For illustrative purposes only. Past performance is not indicative of how the index will perform in the future. Note that an investor can not invest directly in an index.
Hedge Fund Strategies
3rd Quarter 2013
4th Quarter 2013 thru November 2013
19
Global Currencies (vs. USD) 3rd Quarter 2013
4th Quarter 2013 thru November 2013
Source: Integrity Capital, LLC December 2013Spot Returns; Source: BloombergPast performance does not indicate future results.
(3.51)
6.40
3.97 4.44 4.20
2.04
0.93 0.57 1.12
0.47
(0.14)
(1.71)
(2.88)
(4.11)
-6
-4
-2
0
2
4
6
8
DXY British Pound Euro Swiss Franc Swedish Krona Canadian Dollar Japanese Yen
Perc
enta
ge (%
)
Currency
Developed Currencies
6.19
0.28
(4.58)
0.96
(4.51)
(1.11)
1.59
(1.47)
(13.83)
0.51 1.66
0.47 0.12 0.04
(0.02) (0.12) (0.18)(1.42) (2.02)
(4.93)
-15
-10
-5
0
5
10
KoreanWon
ChineseRenminbi
IndianRupee
SingaporeDollar
TurkishLira
MexicanPeso
TaiwanDollar
South AfricanRand
IndonesianRupiah
BrazilianReal
Perc
enta
ge (%
)
Currency
Emerging Currencies
20
Real Assets
Source: Integrity Capital, LLC December 2013Income : Alerian Master Limited Partnership Index; EPRA Global ex-US REIT; Dow Jones US REITsCommodities : S&P GSCI Total Return Index and Sub indices.For illustrative purposes only. Past performance is not indicative of how the index will perform in the future. Index performance does not reflect the deduction of fees or expenses. Note that an investor can not invest directly in an index
3rd Quarter 2013 4th Quarter 2013 thru November 2013
(0.73)
5.81
(2.61)
3.58
(0.16)(0.74)
‐4
‐3
‐2
‐1
0
1
2
3
4
5
6
7
Alerian MLP REITS ‐ Global Ex‐US REITS ‐ US
Percen
tage
(%)
Sector
Income
4.78
3.02
6.36
(3.39)
4.43
8.63
(2.21)
0.24
(1.85)(3.33)
(4.23)
(6.11)‐8
‐6
‐4
‐2
0
2
4
6
8
10
GSCI Livestock Energy Agriculture IndustrialMetals
PreciousMetals
Percen
tage
(%)
Sector
Commodities
21
Valuation Levels: Earnings Yields / Current Yields
Gro
wth
-Ori
ente
dSt
able
-Val
ueRe
al A
sset
s
11/30/13 1 Yr Ago Diff.
LC Equity 5.88% 7.07% -1.19%
SC Equity 3.02% 3.84% -0.82%
EM Equity 8.43% 8.20% +0.23%
High Yield 5.60% 6.45% -0.85%
11/30/13 1 Yr Ago Diff.
UST 2.74% 1.62% +1.13%
EMD 6.78% 5.52% +1.26%
11/30/13 1 Yr Ago Diff.
MLPs 5.78% 5.96% -0.18%
REITs 3.42% 3.01% +0.42%
Source : Bloomberg, Integrity Capital, LLC December 2013;Data from 1/1/2008 – 11/30/2013.US Large Cap Equity – S&P 500, US Small Cap Equity – Russell 2000, Emerging Market Equity – MSCI Emerging Market Equity, High Yield – BarCap US Corporate High Yield Average OAS, US Treasuries – 10 year US Treasuries Futures, Emerging Market Debt – JP Morgan GBI-EM Diversified Composite Yield to Maturity, Master Limited Partnerships – Alerian, REITS – S&P 500 REITS. All indices are net of fees and inclusive of dividends .
-2%
2%
6%
10%
14%
18%
22%
26%
2008 2009 2010 2011 2012 2013
Impl
ied
Yiel
d
Date
US Large Cap EquityUS Small Cap EquityEmerging Market EquityHigh Yield
0%
2%
4%
6%
8%
10%
2008 2009 2010 2011 2012 2013
Impl
ied
Yiel
d
Date
US TreasuriesEmerging Market Debt
0%
2%
4%
6%
8%
10%
12%
2008 2009 2010 2011 2012 2013
Impl
ied
Yiel
d
Date
MLPs REITs
22
Appendix AQ3 2013 External Manager Performance
23
DisclosuresThe opinions expressed in these materials represent the personal views of Salient’s investment professionals and are basedon their broad investment knowledge, experience, research and analysis. However, market conditions, strategic approaches,return projections and other key factors upon which the views presented in these materials are based remain subject tofluctuation and change. Consequently, it must be noted that no one can accurately predict the future of the market withcertainty or guarantee future investment performance.
This presentation does not constitute an offering of any security, product, service or fund. No investment strategy canguarantee performance results. Past performance is no guarantee of future results. All investments are subject toinvestment risks, including loss of principal invested.
Investment advisory and research services provided by Integrity Capital, LLC, a registered investment advisor. Registrationof an investment advisor does not imply a level of skill or training. Salient Partners, L.P. is the parent company of IntegrityCapital, LLC. Salient Partners, L.P. and affiliates do not provide tax or legal advice.
Contains confidential information exempt from disclosure under California Public Records Act.
24
SDCERA Public External Manager Performance SummaryAs of September 30, 2013
Source: Integrity Capital, LLC December 2013Note: Factor calculations based upon look back periods of entire available fund history with data through 09/30/2013.Past performance does not indicate future results. For illustrative purposes only.Past performance is no guarantee of future index results. The index does not bear fees and expenses. Note that an investor cannot invest directly into an index.
Policy Benchmark Returns Modeled Returns
Manager / CompositeInception
DateCash
Invested MV (MM) WeightQ3 Cash
Flows (MM) 1YR 3YR IncQ3 Actual
ReturnExcess vs.
Benchmark
Tracking Error vs.
Benchmark
Benchmark Z-Score
Q3 Predicted
ReturnR2 Excess vs
Predicted
Tracking Error vs.
Predicted
Predicted Z-Score
Allianz Global (NACM Conv) 2/1/1991 60.00 105.81 1.1% 24.9% 14.7% 12.1% 8.1% -0.1% 8.7% -0.01 5.0% 85.2% 3.1% 2.9% 1.06
Global Equity Derivatives (Salient) 7/1/2010 1,917.52 1,918.03 19.9% 18.7% 12.0% 17.9% 8.2%MSCI World Net Index 20.2% 11.8% 8.2%
Genesis 12/1/2011 175.00 244.71 2.5% 4.3% 3.5% 9.4% 6.0% 0.2% 5.4% 0.05 9.4% 93.9% -3.4% 2.8% -1.19
DFA EM Value 12/1/1996 240.00 258.65 2.7% 2.0% 0.0% 5.0% 7.1% 1.4% 6.2% 0.22 10.9% 95.7% -3.7% 3.2% -1.18
MSCI Emerging Markets Index 1.0% -0.3% 5.8%Blackrock Credit Investors 10/1/2007 - 8.02 0.1% (4.12) 5.7% 5.1% 3.3% 2.3% 0.1% 12.4% 0.00 2.1% 79.1% 0.2% 3.7% 0.05
Hotchkis & Wiley Capital 8/1/2010 144.00 226.25 2.3% 10.4% 11.1% 11.0% 2.3% 0.1% 2.4% 0.02 2.0% 97.0% 0.3% 0.7% 0.40
Oaktree HY 5/1/1995 175.00 226.83 2.3% 7.3% 9.3% 8.0% 2.1% -0.1% 3.6% -0.04 1.5% 91.0% 0.7% 1.3% 0.49
ML High Yield Master II 7.1% 8.9% 2.3%Russell 3000 Replication (Salient) 7/1/2010 506.21 506.21 5.3% 19.5% 15.4% 6.3%
Russell 3000 21.6% 16.8% 6.3%Wellington EMD 6/1/2010 750.00 907.33 9.4% 20.00 -1.7% 2.9% 5.7% -0.1% 0.3% 1.7% 0.19 7.7% 90.4% -7.8% 2.3% -3.38
JPM GBI EM Global Diversified (Unhedged) -3.7% 1.8% -0.4%Hoisington 9/1/2010 150.00 183.43 1.9% -20.0% 4.7% 1.8% -5.6% -6.4% 30.2% -0.21 -4.5% 47.5% -1.1% 11.4% -0.10
Barclays 10-Year UST Futures Index -2.5% 3.1% 0.8%Brevan Howard, Series B 6/1/2009 161.00 192.36 2.0% 3.5% 5.0% 4.8% -2.3% -0.9% 7.5% -0.12 -1.6% 30.2% -0.7% 3.0% -0.24
Bridgewater Pure Alpha II 5/1/2009 30.00 72.71 0.8% 7.3% 17.0% 19.9% 5.7% 7.1% 10.4% 0.68 -1.0% 31.1% 6.6% 4.8% 1.38
Bridgewater Pure Alpha Major Markets 12/1/2010 35.00 54.72 0.6% 5.7% 13.7% 13.3% 5.4% 6.8% 14.8% 0.46 -0.8% 29.6% 6.2% 6.0% 1.03
DE Shaw - Heliant 8/1/2011 100.00 121.49 1.3% 5.4% 11.4% 10.8% -2.7% -1.3% 13.8% -0.09 3.7% 37.1% -6.4% 5.3% -1.20
Trend (Salient) 5/1/2013 50.00 49.40 0.5% N/A N/A -1.2% 7.3% 8.7% 5.3% 1.65 8.4% 93.5% -1.1% 3.1% -0.36
Kenmar 11/1/1999 155.00 121.27 1.3% -16.2% -6.5% 8.4% -6.3% -4.9% 4.2% -1.17 -2.8% 80.1% -3.5% 1.8% -1.95
2/3 HFRI Macro + 1/3 Barclays CTA Index -3.6% -0.8% -1.4%Blue Mountain Capital Credit Alt 2/1/2013 128.00 132.57 1.4% 7.7% 9.3% 4.4% 1.0% 2.3% 9.4% 0.25 -0.5% 44.9% 1.5% 2.8% 0.53
Moon Capital 5/1/2009 35.00 60.24 0.6% (14.80) 10.4% 3.8% 6.1% 1.8% 1.3% 6.8% 0.19 0.1% 42.1% 1.7% 2.4% 0.72
Saba Capital Partners, L.P. 8/1/2011 100.00 98.69 1.0% -2.3% 2.8% -0.4% -2.7% -3.2% 4.9% -0.66 -1.2% 11.5% -1.5% 2.5% -0.62
AQR Delta 6/1/2010 300.00 354.15 3.7% 5.5% 3.6% 5.1% -1.4% -1.9% 6.3% -0.29 -0.3% 43.3% -1.1% 2.5% -0.43
Three-Month Treasury Bills +2% 2.1% 2.1% 0.5%GSCI Commodity Index Swaps (Salient) 7/1/2010 187.73 187.73 1.9% -4.1% 3.6% 4.8%
Goldman Sachs Commodity Index -4.1% 3.6% 4.8%Pimco Cash Collateral 9/1/2010 2,821.22 2,822.16 29.2% 484.00 0.8% 1.0% 1.0% 0.3% -0.2% 0.7% -0.24 -0.1% 59.4% 0.4% 0.2% 1.97
Operational Cash and Other 12/1/2004 608.27 608.27 6.3% (268.00) 0.2% 0.2% -0.2% 0.0%Private Market Lagged Cash Flows 29.00
3 Month Libor 0.3% 0.3% 0.1%
25
Factor Analysis Notes
StatsR2: measure of goodness of fit
Actual Return: return reported by manager, BNY Mellon, etc.
Policy Return: return on the asset class benchmark
Predicted Return: return forecasted using regression analysis
Excess vs. Policy = Actual – Policy
Excess vs. Predicted = Actual – Predicted
Z-score = standardized score of the Excess vs. Predicted value
Annualized Regression α = annualized regression constant divided by expected return
Factors 1. Interest Rates: BXIIUS10 Index
2. Equities: S&P 500 Index
3. Commodities: Continuous Commodity Index
4. US Dollar: US Dollar Index (DXY)
5. High Yield Spread: Barclays High Yield Index
6. Small Cap Premium: Russell 2000 Index
7. Dev Ex-US: MSCI World Ex Us Index
8. Emerging Markets: MSCI EMFW Index
9. Macro Hedge: HFRI Macro (Total) Index
10. Relative Value Hedge: HFRI Relative Value (Total) Index
11. Event Hedge: HFRI Event-Driven (Total) Index
12. CTA: Barclay CTA Index
This Factor Analysis uses a linear stepwise regression model to identify the underlying exposure to each manager and composite. It uses 12 factors, both traditional and alternative, to produce a predicted value, z score of the actual value relative to the predicted, and an annualized alpha. Positive betas correspond to long exposure and negative betas correspond to negative exposure.
Source: Integrity Capital, LLC December 2013Note: Betas on factors 5-8 are in excess of their exposure to factors 1-4 and Betas on factors 9-12 are in excess of their exposure to 1-8. HFRI and CTA indices are not investable.
26
SDCERA Private External Manager PerformancePrivate Equity – as of 6/30/2013
Source: BNY Mellon/The Burgiss Group, Integrity Capital, LLC December 2013Past performance does not indicate future results.
Buy Out & Growth Vintage NAV (MM) Multiple IRR as ofTPG Asia VI, L.P. 2012 5.95 0.84x -16.5 6/30/2013Fountainvest China Growth FountainVest II 2012 5.55 0.84x -55.3 6/30/2013EQT VI 2011 15.77 0.87x -16.0 6/30/2013Blackstone Capital Partners VI, L.P. 2010 28.06 1.11x 9.2 6/30/2013Baring Asia Private Equity Fund V 2010 19.26 1.03x 2.3 6/30/2013Capital International Private Equity Fund VI, L.P. 2010 8.54 0.84x -21.3 6/30/2013Hellman & Friedman Capital Partners VII, L.P. 2009 4.20 1.01x 0.8 6/30/2013Bain Capital Fund X, L.P. 2008 13.30 1.17x 6.5 6/30/2013Emerging Europe Growth Fund II 2008 6.97 0.99x -0.4 6/30/2013Greenbriar Equity Fund II, L.P. 2007 6.71 1.12x 5.3 6/30/2013Capital International Private Equity Fund V, L.P. 2007 5.46 1.15x 5.1 6/30/2013Hellman & Friedman Capital Partners VI, L.P. 2006 9.64 1.35x 8.4 6/30/2013Bain Capital Fund IX Coinvestment Fund, L.P. 2006 1.16 1.41x 7.9 6/30/2013Bain Capital Fund IX, L.P. 2006 5.30 1.44x 7.5 6/30/2013TA Subordinated Debt Fund II, L.P. 2006 1.69 1.21x 6.8 6/30/2013Blackstone Capital Partners V, L.P. 2006 13.86 1.26x 5.1 6/30/2013Northgate Private Equity Partners III, L.P. 2006 10.91 1.16x 4.1 6/30/2013TA X, L.P. 2006 7.51 1.16x 3.6 6/30/2013Charterhouse Capital Partners VIII, L.P. 2006 8.97 0.93x -1.3 6/30/2013Northgate Private Equity Partners II, L.P. 2005 9.21 1.34x 7.3 6/30/2013Graham Partners II, L.P. 2004 7.83 1.61x 11.8 6/30/2013Providence Equity Partners V, L.P. 2004 4.22 1.16x 3.4 6/30/2013TPG Partners IV, L.P. 2003 5.76 1.94x 21.1 6/30/2013Blackstone Capital Partners IV, L.P. 2001 8.79 2.44x 54.9 6/30/2013TA IX, L.P. 2000 0.67 2.41x 22.2 6/30/2013TA Subordinated Debt Fund, L.P. 2000 0.05 1.44x 14.2 6/30/2013Thomas H. Lee Equity Fund V, L.P. 2000 1.59 1.52x 13.0 6/30/2013Code, Hennessy & Simmons IV, L.P. 1999 0.68 1.61x 12.5 6/30/2013Oak Hill Capital Partners (Bermuda) 1998 0.14 1.71x 10.6 6/30/2013HarbourVest Int'l Priv Eq Prtnrs III - Prtnrship 1997 2.82 1.57x 9.0 6/30/2013
Distress & Special Situations Vintage NAV (MM) Multiple IRR as ofGSO Capital Solutions Fund II, LP 2012 - N/A N/A N/AGores Small Capital Partners 2011 5.92 0.90x -13.7 6/30/2013OCM European Principal Fund III, L.P. 2010 33.45 1.06x 5.0 6/30/2013Gores Capital Partners III, L.P. 2010 38.25 0.98x -1.2 6/30/2013GSO Capital Solutions Fund 2009 46.08 1.18x 14.8 6/30/2013Onex Partners III, L.P. 2008 12.62 1.11x 7.0 6/30/2013OCM Opportunities Fund VIIb, L.P. 2007 3.62 1.74x 18.2 6/30/2013OCM Opportunities Fund VII, L.P. 2007 1.79 1.38x 8.3 6/30/2013Cerberus Institutional Partners, L.P. Series Four 2006 12.50 1.45x 8.0 6/30/2013Coller International Partners V-A, L.P. 2006 6.28 1.25x 7.0 6/30/2013Paul Capital Partners IX, L.P. 2006 8.82 1.14x 5.0 6/30/2013OCM Opportunities Fund VI, L.P. 2005 1.38 1.58x 9.1 6/30/2013Lexington Capital Partners VI-B, L.P. 2005 6.31 1.24x 6.2 6/30/2013Paul Capital Partners VIII-B 2004 5.67 1.34x 9.3 6/30/2013OCM Opportunities Fund IV, L.P. 2001 0.04 1.65x 28.6 6/30/2013Cerberus Institutional Partners, L.P. Series Two 2001 2.39 3.00x 26.6 6/30/2013Lexington Capital Partners V, L.P. 2001 1.96 1.59x 18.4 6/30/2013OCM Opportunities Fund III, L.P. 1999 0.16 1.50x 11.8 6/30/2013OCM Opportunities Fund II, L.P. 1997 0.00 1.51x 8.4 6/30/2013
Niche and Other Vintage NAV (MM) Multiple IRR as ofDrug Royalty III, L.P. 2012 - N/A N/A 6/30/2013Drug Royalty II, L.P. 2010 9.70 1.09x 10.2 6/30/2013RMF 2 Co-Investment Fund, L.P. 2010 3.00 0.75x -40.4 6/30/2013
27
SDCERA Private External Manager PerformanceReal Estate, Natural Resources and Other Real Assets – as of 6/30/2013
Real Estate Vintage NAV (MM) Multiple IRR as ofJPMBC Strategic Property Fund 2011 247.65 1.25x 12.5 6/30/2013Amstar SD Partners 2011 135.39 1.04x 6.9 6/30/2013CB Richard Ellis Strategic Partners US V, L.P. 2008 14.24 1.45x 17.7 6/30/2013Trophy Property Development, L.P. 2008 6.52 0.47x -15.2 6/30/2013Blackstone Real Estate Partners VI 2007 62.22 1.51x 12.1 6/30/2013Cornerstone Apartment Venture III 2007 13.77 1.24x 5.7 6/30/2013PRISA III, L.P. 2007 54.77 1.20x 4.7 6/30/2013PRISA II 2007 30.58 0.99x -0.1 6/30/2013Allegis Value Trust 2006 24.76 0.99x -0.2 6/30/2013California Smart Growth Fund IV 2006 15.35 0.93x -1.8 6/30/2013Cornerstone Hotel Income Equity Fund 2006 1.93 0.91x -2.0 6/30/2013Prologis Japan Fund I, L.P. 2005 35.05 1.27x 4.6 6/30/2013RREEF Rio San Diego Plaza II 2005 22.75 1.19x 2.7 6/30/2013LaSalle Asia Opportunity Fund II, L.P. 2005 4.55 1.02x 0.4 6/30/2013Canyon-Johnson Urban Fund II, L.P. 2005 15.08 0.56x -10.1 6/30/2013Southern California Smart Growth Fund 2004 7.61 0.84x -8.5 6/30/2013RREEF I.M.A. 2000 312.89 1.38x 8.6 6/30/2013
Agriculture Vintage NAV (MM) Multiple IRR as ofHancock Agricultural Investment Group-Separate A 2012 14.34 0.99x -1.1 6/30/2013Brookfield Brazil Agriland 2011 40.98 0.89x -9.9 6/30/2013
Energy Vintage NAV (MM) Multiple IRR as ofDenham Commodity Partners Fund VI, L.P. 2011 7.15 0.81x -26.6 6/30/2013Falcon E&P 2010 34.52 1.13x 10.9 6/30/2013Kayne Anderson Energy Fund V, L.P. 2008 12.77 1.22x 14.7 6/30/2013EnCap Energy Capital Fund VII, L.P. 2007 2.90 1.47x 21.1 6/30/2013EnerVest Energy Institutional Fund XI-B, L.P. 2007 9.36 0.98x -0.6 6/30/2013EnCap Energy Capital Fund VI, L.P. 2006 2.50 1.86x 28.7 6/30/2013EnerVest Energy Institutional Fund X-B, L.P. 2005 3.82 1.25x 5.5 6/30/2013Merit Energy Partners F, L.P. 2005 3.34 1.05x 1.4 6/30/2013
Infrastructure Vintage NAV (MM) Multiple IRR as ofActis Energy 3 2013 1.98 0.89x -24.0 N/ABrookfield Americas Infrastructure Fund, L.P. 2010 75.53 1.13x 10.0 6/30/2013J.P.M. Global Maritime Investment Fund 2010 7.27 0.55x -40.8 6/30/2013Global Infrastructure Partners A, L.P. 2008 51.73 1.46x 13.7 6/30/2013Macquarie Infrastructure Partners II 2008 94.46 1.36x 11.2 6/30/2013
Mining Vintage NAV (MM) Multiple IRR as ofRed Kite Mine Finance Fund 2011 33.91 1.16x 11.8 6/30/2013Taurus Resources Fund II Ltd. 2011 23.27 0.66x -37.2 6/30/2013
Timber Vintage NAV (MM) Multiple IRR as ofMolpus Woodlands Fund III 2011 41.87 1.08x 5.7 6/30/2013
Source: BNY Mellon/The Burgiss Group, Integrity Capital, LLC December 2013Past performance does not indicate future results.
28
SDCERA Private External Manager PerformanceAverage Multiples by Vintage – as of 6/30/2013
Source: BNY Mellon/The Burgiss Group, Private i, Integrity Capital, LLC December 2013Note: Average multiples weighted by funded amountPast performance is not indicative of future results.
0.00x
0.50x
1.00x
1.50x
2.00x
2.50x
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Multip
le
Year
29
SDCERA Historical & Estimated Run Rate Fees
Source: SDCERA CAFR: FY 2009 – 2012 and SDCERA unaudited accounting data for FY 2013 Run Rate Estimate fees are based on the base fee structure of the current SDCERA manager list multiplied by Commitment amounts for Private Equity and Natural Resources and by the AUM for Real Estate, Hedge Funds and Public Markets. Where incentive fees were estimated, Wurtz & Associates 10 yr asset class returns estimates were used: 9.9% for Private Equity, 5.4% for Hedge funds, 4.3% for Commodities, and 5.6% for Real EstatePrivate Markets consists of Private Equity, Real Estate, and Natural Resources & ORA. Public Markets consists of Global Equities, Emerging Market Equities and Debt (Local), Core Bonds, High Yield Bonds, US Treasuries, and derivatives collateral cash. Hedge Funds/Overlays of FX and Policy Overlay, Global Macro/CTA, and Relative Value. Other consists of SDCERA consultants and overhead.
Historical Fees & Run Rate Estimate2009 2010 2011 2012 2013 Run Rate Estimate
Private Markets 11,021 11,804 21,977 28,706 35,823 51,490
Hedge Funds/Overlays - Base Fees 17,143 10,342 16,198 24,200 21,779 18,865
Public Markets 19,353 20,447 10,934 11,786 11,727 8,613
Hedge Funds/Overlays - Incentive Fees 4,286 6,418 27,134 12,633 12,097 6,753
Salient Partners 762 940 1,676 4,717 7,827
Other 9,454 9,427 11,490 7,091 6,134 6,134
Total Fund 61,257 59,199 88,673 86,092 92,277 99,683
0
25,000
50,000
75,000
100,000
125,000
2009 2010 2011 2012 2013 Run RateEstimate
Annu
al Fees (millions)
Fiscal Year
Other Salient Partners Hedge Funds/Overlays ‐ Incentive FeesPublic Markets Hedge Funds/Overlays ‐ Base Fees Private Markets
30
SDCERA Estimated Run Rate Base Management FeesBasis Points as a Percentage of Total Fund Assets
Source: Integrity Capital, LLC. Run Rate Estimate is based on the base fee structure of the current SDCERA manager list multiplied by their 10/31 AUM. Estimated fees are based on the base fee structure of the current SDCERA manager list multiplied by Commitment amounts for Private Equity and Natural Resources and by the AUM for Real Estate, Hedge Funds and Public Markets. Where incentive fees were estimated, Wurtz & Associates 10 yr asset class returns estimates were used: 9.9% for Private Equity, 5.4% for Hedge funds, 4.3% for Commodities, and 5.6% for Real Estate
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0% 10% 20% 30% 40% 50%
Ann
ual B
ase
Fee
% of SDERA Assets
Salient
PIMCO
Public Markets
Real EstateNatural Resources
Private Equity
Hedge Funds
Estimated Run Rate Base Management Fees
PortfolioAnnual Base
Fee% of SDCERA
AssetsHedge Funds 0.19% 8.3%Private Equity 0.16% 2.9%Natural Resources 0.14% 3.6%Real Estate 0.13% 6.5%Public Markets 0.09% 20.3%Salient 0.08% 39.1%PIMCO 0.04% 19.2%
Total Fees 0.83% 100.0%
31
Appendix B – Monthly Flash ReportNovember 2013 Performance Estimates
32
Trailing Performance EstimatesFor the Period Ended November 30, 2013
Performance is preliminary and unaudited. Such estimates are not guaranteed to be accurate and do not guarantee future performance. Allocations are subject to change. October 2013 is an estimate; all other performance is net of fees. Past performance is no guarantee of future index results. The index does not bear fees and expenses. Integrity Capital Inception is October 2009. Note that an investor cannot invest directly into an index. The Traditional is composed of 45% MSCI World Net, 35% Barclays Aggregate, 5% DJ US REIT, 5% HFRIMI, 5% GSCI, 5% MCSI USA levered 30%.
MTD QTD CYTD 1 Yr 3 Yr 5 Yr IC IncSDCERA (0.12) 2.18 6.20 7.76 9.71 12.17 9.89
Benchmark (0.11) 2.10 6.34 7.69 9.27 11.34 9.44Actuarial Rate 0.62 1.25 7.08 7.75 7.88 7.96 7.91
Traditional 0.59 3.09 11.39 12.51 8.86 11.06 8.68S&P 500 3.05 7.78 29.12 30.30 17.73 17.60 16.88
Barclays Aggregate (0.37) 0.43 (1.47) (1.61) 3.09 5.33 5.33
FYTD 2014 2013 2012 2011 2010 2009 2008SDCERA 5.39 7.73 5.89 20.72 13.08 (24.57) 0.17
Benchmark 5.56 6.98 5.20 21.20 10.76 (18.01) 1.66Actuarial Rate 3.16 7.75 8.00 8.00 8.00 8.25 8.25
Traditional 7.48 9.66 0.80 19.63 10.93 (19.63) (0.50)S&P 500 13.44 20.60 5.45 30.69 14.43 (26.21) (13.12)
Barclays Aggregate 1.00 (0.69) 7.47 3.90 9.50 6.05 7.12
Trailing Performance
Fiscal Year Performance
33
Notable November ActivityReduced/Rebalanced Growth Oriented Strategies overweight $41MM decrease of Global Equity futures $146MM decrease of US Equity futures $77MM funding of Vanguard Emerging Markets Equity ETF
Rebalanced to policy $79MM decrease to SSGA Materials and MLP $30MM increase in GSCI swap notional $131MM increase in 10 year Treasury future notional
Distributions Private Equity (lagged): $11MM Real Estate (lagged): $2.8MM Real Assets: $400K
Capital Calls Private Equity (lagged): $2MM Real Estate (lagged): $227K Real Assets: $3MM
Source: SDCERA Operational Cash Register. For illustrative purposes only. Lagged Distributions and Capital Calls that will be recorded on a quarter end in the asset class composite but in the cash composite on an unlagged basis.
34
Composite/ManagerBeginning Value
10/31/2013MTD
PerformanceBenchmark
PerformanceMarket Value
Change Net Cash FlowsEnding Value
11/30/2013Allianz Global 107,124,696 2.16% 2,316,234 - 109,440,930
U.S. Equity 107,124,696 2.16% 2,316,234 - 109,440,930 Global Market Futures 593,769,278 1.58% 8,734,703 (41,723,710) 560,780,271 Global Equity Swap 1,400,673,485 1.78% 24,892,153 - 1,425,565,638
Global Equity 1,994,442,763 1.72% 1.78% 33,626,856 (41,723,710) 1,986,345,909 Public Developed Equity 2,101,567,460 1.75% 1.78% 35,943,090 (41,723,710) 2,095,786,839
DFA EM Value 270,379,732 -2.42% (6,556,339) - 263,823,393 VWO - -0.14% (107,258) 77,000,000 76,892,742 Genesis 257,022,705 -2.58% (6,620,434) - 250,402,271
Emerging Market Equity 527,402,437 -2.20% -1.46% (13,284,031) 77,000,000 591,118,406 Blackrock Credit Investors 8,079,183 0.51% 41,204 - 8,120,387 Hotchkis & Wiley Capital 230,823,244 0.51% 1,177,199 - 232,000,443 Oaktree HY 232,475,198 0.51% 1,185,624 - 233,660,822 WAMCO High Yield 977,407 -0.67% (6,563) - 970,845 Zazove - In Liquidation 3,039,523 2.62% 79,573 - 3,119,096
High Yield Fixed Income/Credit 475,394,556 0.52% 0.51% 2,477,036 - 477,871,592 Private Equity 420,222,210 0.00% - - 420,222,210 Russell 3000 Futures Replication 527,309,620 3.38% 12,895,685 (146,016,420) 394,188,884
Private Equity 947,531,830 1.61% 1.60% 12,895,685 (146,016,420) 814,411,094 Total Growth Oriented Portfolio 4,051,896,282 0.97% 1.17% 38,031,780 (110,740,130) 3,979,187,931
Wellington EMD 924,430,501 -3.25% (30,043,991) - 894,386,510 Emerging Market Debt 924,430,501 -3.25% -3.64% (30,043,991) - 894,386,510
Hoisington 186,879,064 -4.61% (8,609,887) - 178,269,177 10YR US Treasury Futures 3,110,625,375 -0.56% (17,720,597) 130,987,972 3,223,892,750
US Bonds 3,297,504,439 -0.78% -0.55% (26,330,483) 130,987,972 3,402,161,927 Brevan Howard, Series B 191,390,232 1.24% 2,373,239 - 193,763,471 Bridgewater Pure Alpha II 76,074,711 0.25% 190,187 - 76,264,898 Bridgewater Pure Alpha Major Markets 56,433,587 0.25% 141,084 - 56,574,671 DE Shaw - Heliant 128,989,276 0.30% 386,968 - 129,376,243 Cantab 101,863,485 1.85% 1,884,474 - 103,747,960 Trend Strategy 51,688,795 3.06% 1,580,874 - 53,269,669 Kenmar 11,000,000 0.00% - - 11,000,000
Global Macro/CTA 617,440,085 1.06% 0.25% 6,556,826 - 623,996,912 Blue Mountain Credit Alternative 132,952,378 0.48% 638,171 - 133,590,550 Moon Capital 44,878,552 0.20% 89,757 - 44,968,309 Saba Capital Partners, L.P. 97,285,902 -1.34% (1,303,631) - 95,982,271 AQR Delta 361,373,541 1.82% 6,576,998 - 367,950,539
Relative Value 636,490,373 0.94% 0.16% 6,001,296 - 642,491,669 Total Stable Value Portfolio 5,475,865,398 -0.79% -0.78% (43,816,352) 130,987,972 5,563,037,018
SSGA - TIPS 439,149,612 -1.08% (4,742,816) - 434,406,796 US TIPS 439,149,612 -1.08% -1.08% (4,742,816) - 434,406,796
Real Estate 1,005,123,630 0.00% - - 1,005,123,630 Real Estate 1,005,123,630 0.00% 0.00% - - 1,005,123,630
GSCI Swap Notional 138,764,211 -0.56% (951,997) 30,000,000 167,812,215 Actis Energy III 672,025 0.00% - - 672,025 AMERRA Agricultural Fund II 34,593,124 0.00% - - 34,593,124 Brookfield Brazil Agriland 46,602,936 0.00% - - 46,602,936 Denham Commodity Partners Fund VI 9,960,995 0.00% - - 9,960,995 Falcon E&P Opportunities Fund 33,752,790 0.00% - 2,022,059 35,774,849 HAIG 29,408,062 0.00% - - 29,408,062 Private Equity - Energy 34,704,130 0.00% - - 34,704,130
Total Commodities 328,458,273 -0.26% (951,997) 32,022,059 359,528,336 Global Infrastructure Partners 51,058,419 0.00% - (411,783) 50,646,636 Brookfield Asset Management 74,087,092 0.00% - - 74,087,092 Macquarie Infrastructure Partners II 53,442,530 0.00% - - 53,442,530 Molpus Woodlands 38,802,720 0.00% - - 38,802,720 JPM Maritime Fund 13,058,359 0.00% - - 13,058,359 Red Kite Mine Finance Fund 34,056,559 0.00% - - 34,056,559 Taurus Resources Fund II 26,031,499 -1.06% (281,250) 959,319 26,709,568 SSGA S&P MLP Index 207,631,003 1.24% 2,325,350 (40,000,000) 169,956,352 SSGA S&P 500 Materials 109,680,104 1.11% 1,076,677 (26,000,000) 84,756,781 SSGA S&P TSX Materials 95,277,633 -6.54% (5,808,502) (13,000,000) 76,469,131
Real Assets (less commodities) 703,125,918 -0.40% (2,687,725) (78,452,465) 621,985,729
Natural Resources and ORA 1,031,584,191 -0.36% -0.41% (3,639,721) (46,430,406) 981,514,064 Total Inflation Sensitive Portfolio 2,475,857,432 -0.34% -0.38% (8,382,537) (46,430,406) 2,421,044,490 Oaktree European Dislocation Fund 3,500,000 0.00% - - 3,500,000
Total Opportunistic 3,500,000 0.00% - - 3,500,000 GROSS TOTAL INVESTMENTS 12,007,119,113 (14,167,110) (26,182,565) 11,966,769,438
Pimco Cash 2,975,147,756 0.09% 0.02% 2,599,368 30,235,605 3,007,982,730 Operational Cash and Other 598,108,781 0.01% 40,666 (30,273,845) 567,834,936 Total Exposure 15,580,375,650 15,542,587,103 Less: Swap Notional (1,539,437,696) (53,940,156) (1,593,377,852) Less: Futures Notional (4,231,704,273) 52,842,368 (4,178,861,906)
NET TOTAL INVESTMENTS 9,809,233,680 -0.12% -0.11% (11,527,076) (27,359,259) 9,770,347,345
SDCERAActivity Summary
November 30, 2013
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Attribution Analysis
For illustrative purposes only. Past performance is not indicative of future results.Sources: SDCERA Operational Cash Register, BNY Mellon Workbench, Salient Partners Reporting.
Monthly as of November 30, 2013
Actual Policy Diff Actual Policy Diff Allocation SelectionTiming &
InteractionTotal
Global Equities 21.46 20.00 1.46 1.75 1.78 -0.03 0.03 -0.01 0.02 Emerging Market Equities 5.39 5.00 0.39 -2.20 -1.46 -0.74 -0.01 -0.04 -0.05 High Yield 4.70 5.00 -0.30 0.52 0.51 0.01 -0.00 0.00 -0.00 Private Equity 9.83 10.00 -0.17 1.61 1.60 0.01 -0.00 0.00 -0.00 Emerging Market Debt 9.48 10.00 -0.52 -3.25 -3.64 0.39 0.02 0.04 0.06 US Treasuries 38.60 40.00 -1.40 -0.78 -0.55 -0.23 0.01 -0.09 -0.08 Global Macro 6.33 10.00 -3.67 1.06 0.25 0.81 -0.01 0.05 0.04 Relative Value 6.52 10.00 -3.48 0.94 0.16 0.78 -0.01 0.05 0.05 U.S. TIPS 4.49 5.00 -0.51 -1.08 -1.08 -0.00 0.01 -0.00 0.01 Real Estate 9.91 10.00 -0.09 0.00 0.00 0.00 0.00 0.00 0.00 Natural Resources and ORA 9.71 10.00 -0.29 -0.36 -0.41 0.06 0.00 0.01 0.01 Opportunistic 0.03 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 Cash, Timing and Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.06 -0.06Total Fund 126.45 135.00 -8.55 -0.12 -0.11 -0.01 0.03 0.01 -0.06 -0.01
Asset Classes10/31/13 Weights Month to Date Returns Attribution
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Return Contribution
For illustrative purposes only. Past performance is not indicative of future results.Sources: SDCERA Operational Cash Register, BNY Mellon Workbench, Salient Partners Reporting.
Monthly as of November 30, 2013
Asset Classes October Weights (%) November Returns (%) Contribution (%) Growth Oriented Portfolio 41.38 0.97 0.40 Stable Value Portfolio 60.93 -0.79 -0.48 Inflation Sensitve Portfolio 24.11 -0.34 -0.08 PIMCO Cash 30.33 0.09 0.03 Interaction Effect 0.02Total Fund 156.75 -0.12 -0.12
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Growth of a DollarIntegrity Capital Inception through November 30, 2013
$1.47
$1.45
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
SDCERA Net Benchmark
Performance is preliminary and unaudited. Such estimates are not guaranteed to be accurate and do not guarantee future performance. Allocations are subject to change. October 2013 is an estimate; all other performance is net of fees. Past performance is no guarantee of future index results. The index does not bear fees and expenses. Integrity Capital Inception is October 2009. Note that an investor cannot invest directly into an index.
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Disclosures
For illustrative purposes only. Past performance is not indicative of future results.
Prior to June 2010, the Total Fund Benchmark is composed of 23% Russell 3000, 24% MSCI All-Country World ex-U.S. Investable Market Index (IMI), 4% JP Morgan Global EMBI, 3% Citigroup High Yield Cash Pay Index, 10% Real Estate Custom Benchmark, 4% S&P Goldman Sachs Commodity Index (GSCI), 5% U.S. CPI (Inflation) + 5%, 5% Private Equity Custom Benchmark, 17% Barclays Capital Aggregate Bond Index, and 5% Barclays US Inflation Linked Bond Index. Custom Benchmark from July 2010 to present is 20% MSCI World Net Index, 5% MSCI Emerging Markets Index, 5% ML High Yield Master II , 3.3% Russell 3000 + 3%, 6.7% Russell 3000, 10% JP Morgan GBI--EM Global Diversified (Unhedged), 6.7% HFRI Macro (HFRX), 3.3% Barclays CTA Index, 10% Three-Month Treasury Bills + 2%, 5% Three-Month Treasury Bills, 40% Barclay's 10-year UST Futures Index, 10% NCREIF NPI, 2.98% GSCI, .36% GSCI (Lagged), 3.3% S&P MLP, 1.67% S&P Materials Index, 1.67% S&P/TSX Materials Composite Index, 5% Barclay's Capital US TIPS.
The Global Equity and Public Developed Benchmark is the MSCI World Net. The Emerging Market Equity Benchmark is the MSCI EM Equity. The High Yield Fixed Income/Credit Benchmark is the ML High Yield Master II. The Private Equity Benchmark is 67% Russell 3000 and 33% Russell 3000 + 3% lagged three months but 0% for intra quarterly months. The Total Growth Oriented Benchmark is a blended composite of the sub categories.
The Emerging Market Debt benchmark is the JP Morgan GBI – EM Global Diversified (unhedged). The US Bonds benchmarkis the Barclays 10 yr Treasury Futures index + 12.5% times the Citibank Three Months Treasury index. The Global CTA Index is33% Barclays Global CTA and 67% HFRI Macro. The Relative Value benchmark is the Citibank Three Month Treasury Bills +2%. The Total Stable Value Portfolio Benchmark is a blended composite of the sub categories.
The US Tips benchmark is Barclays Capital US Tips Index. The Natural Resources and ORA Benchmark is 30% GSCI, 4% GSCILagged 3 months, 33% S&P MLP index, 17% S&P Materials Index, 17% S&P/TSX Materials Index. The Total Inflation SensitivePortfolio Benchmark is a blended composite of the sub categories.
Custom Benchmarks
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