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Quarter Ending December 31, 2009
Endowment Portfolio Review
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 2
Table of Contents
Asset Allocation……………………………….…………………………………………………………………………………………………………………
Asset & Risk Allocation …………………………………………..………………………………………………………..……………………………….…
Marginal VaR Decomposition ……………………………………..………………………………………………………………….…………………………
Asset Allocation Summary as of December 31, 2009 based on Asset Allocation Policy Adopted December 2007……….…………………………
Current vs. Phased-In Asset Allocation Targets………………………………………………………………………………………………………………
Phased-In Asset Allocation Targets…………………………………………………………………………………………………………………….……
Asset Allocation Evolution (Target)…………………………………………………………………………………………………………………….……
Asset Allocation Evolution (Actual )…………………………………………………………………………………………………..………………………
Stable Return Summary …………………………..…………………………………………………………………………………………………………...
Global Fixed Income …………………………..…………………….……………………………………………………………………………………….…
Absolute Return Quantitative Analysis / Performance History / Strategy Allocations……………………………………………………………..…
Market Return Summary…………………………..……………………………………………………………………………………………………………
Global Equity …………….…………………………………………..………………………………………………………..……………………………….
Hedged Equity Quantitative Analysis / Performance History / Strategy Allocations.…………………………..………………………………………
Enhanced Return Summary……………………………………………………………………………………………………………………………………
Inflation Protection Summary………………………………………………………………………………………………………………………………….
3
4
5
6
7
8
9
10
11
12-13
14-16
17
18
19-21
22
23
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 3
Asset Allocation as of December 31, 2009
Total: $3,005,988,106
Non-US Developed Equity
2%
Non-US Equity All Markets
4%
Domestic Equity
19%Absolute Return
17%
Emerging Markets Equity
4%
Hedged Equity
10%
Private Equity
7%
RE – Enhanced
2%RE – Stable
2%
Commodities
3%
Global Fixed All Sectors
7%
Global Investment Grade
Fixed
9%
Global High Yield Fixed
11%
Emerging Markets
Fixed Income
3%
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 4
Asset & Risk Allocation "as of December 31, 2009
Risk Allocation (Marginal Contribution to VaR)
1Enhanced return investments risk is estimated using a levered public markets proxy Source: Riskdata
Asset Allocation
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 5
Marginal VaR Decompositionas of December 31, 2009
Source: Riskdata
0% 5% 10% 15% 20% 25% 30% 35%
Global Investment Grade Fixed Income
Global Fixed Income - All Sectors
Fixed Income High Yield
Emerging Market Fixed Income
Absolute Return
Domestic Equity
Non-US Equity All Markets
Non-US Developed Equity
Emerging Market Equity
Hedged Equity
Private Equity
Real Estate - Enhanced
Real Estate - Stable
Commodities
MVaR 95
Asset Weight
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 6
Asset Allocation Summaryas of December 31, 2009 based on Asset Allocation Policy Adopted December 2007
STABLE RETURN (Low Beta) $1,364,226,677 3.7 45.4% 39.0 29 - 49 39.0
Global Fixed Income 853,314,653 28.4% 19.0 19.0Global Fixed Income – All Sectors 220,607,064 7 3%
Global Investment Grade Fixed Income 280,996,279 9 4% 11 0 11 0Global High Yield Fixed Income 351,711,310 11 7% 8 0 8 0
Absolute Return 510,912,024 17.0% 20.0 20.0
MARKET RETURN (Beta) $1,201,772,552 9.8 40.0% 38.0 28 - 48 42.0Global Equity 902,470,888 30.0% 28.0 32.0
US Equity 596,738,209 19 9% 14 0 18 0Non-US Developed/All Markets 175,113,923 5 8% 9 0 9 0
Emerging Markets 130,618,756 4 3% 5 0 5 0
Hedged Equity 299,301,664 10.0% 10.0 10.0
ENHANCED RETURN $286,203,774 14.8 9.5% 15.0 7 - 23 12.0X Private Equity 217,624,431 1 7.2% 10.0 8.0X Real Estate 68,579,343 1 2.3% 5.0 4.0
INFLATION PROTECTION (Real Assets) $153,785,103 8.6 5.1% 8.0 3 - 13 7.0X Stable Value Real Estate 56,963,178 1.9% 4.0 3.0
Commodities/ILB's 96,821,925 3.2% 4.0 4.0
TOTAL $3,005,988,106 7.1 100.0% 100.01Adjusted Reported Value is equal to the last actual reported capital account value plus subsequent capital calls less subsequent distributions through the indicated date,with no valuation changes.2Phase-in target as of January 1, 2010XInternally maintained valuations may slightly differ from externally maintained valuations due to timing differences in systems.
VaR WEIGHT (%)
LONG-TERM TARGET (%)
POLICY RANGE
(%)
PHASE-IN2
TARGETASSET CLASS STRATEGY STYLE MARKET VALUE
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 7
Current vs. Phased-In Target Allocationsas of December 31, 2009
-6 -3 0 3 6 9
Stable Return
Global Fixed
Global Invest Grd
Global High Yield
Abs Return
Market Return
Global Equity
US Equity
Non-US Equity
EM Equity
Hedged Equity
Enhanced Return
Private Equity
Real Estate
Inflation Protection
Stable Value RE
Commodities/ILB's
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 8
Strategy Benchmark Phase 4 Phase 5 Phase 61/1/2009 1/1/2010 1/1/2011
Stable Return 39.0 39.0 39.0Global Investment Grade Fixed Income Blend (65% US Agg, 35% Global Agg ex US) 11.0 11.0 11.0Global High Yield Fixed Income Barclays Global High Yield 8.0 8.0 8.0Absolute Return 90 day Tbill 20.0 20.0 20.0
Market Return 45.5 42.0 38.0US All Cap Equity S&P 1500 21.5 18.0 14.0Non-US Developed Equity MSCI World ex US 9.0 9.0 9.0Emerging Market Equity MSCI EM 5.0 5.0 5.0Hedged Equity HFRI FOF: Strategic 10.0 10.0 10.0
Enhanced Return 9.0 12.0 15.0Private Equity MSCI ACWI 6.0 8.0 10.0Enhanced Real Estate NCREIF NPI 3.0 4.0 5.0
Inflation Protection 6.5 7.0 8.0Stable Real Estate CPI 2.5 3.0 4.0Global Inflation Protected Securities Barclays Global Inflation 1.0 1.0 1.0Commodities DJ UBS Commodity 3.0 3.0 3.0
100.0 100.0 100.0
Figures underlined signify long-term target allocation achieved.
Phased-In Asset Allocation Targets
Texas Treasury Safekeeping Trust Company – Endowment Portfolio Review for Quarter Ending December 31, 2009 9
Asset Allocation Evolution (Target)
0
10
20
30
40
50
60
70
80
90
100
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0% Inflation Protection Strategies
Investment Grade Fixed Income
High Yield Fixed Income
Absolute Return Strategies
US Equity
Non-US Developed Equity
Emerging Market Equity
Hedged Equity
Private Equity
Enhanced Real Estate
Stable Real Estate Global Inflation Protected Securities Commodities
Stable Return
Market Return
Enhanced Return
x