eastern michigan university board of regents€¦ · • 2016 q4 endowment & foundation survey...

Quarter Ending March 31, 2017Investment Performance Analysis

James E. Reichert, CFA, PartnerGary A. Wyniemko, CFA, Senior ConsultantChristopher Chow, CFA, Analyst

Eastern Michigan UniversityBoard of Regents

Page

NEPC Update 3

Market Outlook 5

Q1 Market Summary 25

Q1 Executive Summary 29

Total Fund Summary 47

Appendix 66

Table of Contents

March 31, 2017

Eastern Michigan University - Board of Regents

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NEPC Update

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NEPC Insights• Will a Higher Fed Funds Rate Raise Long-Term Rates? (January 2017)• 2016 4th Quarter Market Thoughts (January 2017)• 2016 Q4 Endowment & Foundation Survey Results and Infographic

(February 2017)• The Times Are a Changin’: NEPC’s 2017 Annual Asset Allocation

Letter (February 2017)• NEPC’s 2017 Healthcare Operating Fund Universe & Infographic

(March 2017)• The Fed’s Masterful Move (March 2017)• Fossil Fuel Divestment: Considerations for Institutional Portfolios

(March 2017)• Globalization Backlash – Europe’s Political Roadmap (March 2017)• Are Loose Personal Trading Policies at Hedge Funds A Red Flag?

(March 2017)

Highlights of First Quarter Happenings at NEPCMarch 31, 2017

Upcoming EventsNEPC’s 22nd Annual Investment Conference will be held on May 9-10, 2017 at the InterContinental Hotel in Boston, MA.

This year’s conference will focus on opportunities and threats in these uncertain political and economic times. In addition to the messages delivered by our exceptional keynote speakers, attendees will learn about asset allocation and investment ideas across the market spectrum. Register today! http://info.nepc.com/nepc-22nd-annual-investment-conference

Webinar Replays• NEPC 2017 Market Outlook (January 2017)

Recent Updates• Expanded Private Wealth business with two new NEPC

Partners and three senior hires• Opened new Private Wealth office in Portland, OR • Launched updated NEPC website • Collaborated with RiskFirst’s Pension Risk Analytics

platform, Pfaroe, to improve effectiveness of asset-liability strategies and ongoing monitoring

• Named a “Greenwich Quality Leader” by Greenwich Associates. See Greenwich.com for more information.

NEPC Gives BackBasketball teams made up of Boston’s working professionals, Year Up students and alumni including two NEPC teams, participated in the Annual Year Up Basketball Tournament fundraising event. Year Up, is a nonprofit connecting low-income young adults with companies looking for talent. The program is a one-year, intensive training program providing hands-on skills development, coursework eligible for college credit, corporate internships, and wraparound support.

To download NEPC’s recent insights and webinar replays, visit: www.NEPC.com/insights

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Market Outlook

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• The US economy is experiencing an extended economic growth cycle– Eight years removed from recession, US consumers continue to drive the US economy– Continued economic gains support positive but subdued risk asset returns

• Federal Reserve monetary policy remains on a gradual normalization path– Despite the March increase, the path for rate hikes appears subdued in 2017 and beyond– As the Fed looks to reduce its $4.5 trillion balance sheet, clear messaging will be critical– Chair Yellen’s uncertain tenure may stoke market unease has her term expires in Feb. 2018

• Stimulative policies ease China’s transition to a consumption led economy– However, credit expansion and infrastructure spending risk inflating asset price bubbles– Central bank’s yuan defense has been sizable but a rapid price fall remains a global tail-risk

• Globalization backlash is disrupting the political and economic orthodoxy– Anti-establishment political sentiment fuels a wider range of potential outcomes both at the

polls (e.g. Europe) and in the actions of political leaders (e.g. US Trade Policy)– Capital market fundamentals are not materially altered but the associated risks of

globalization backlash likely lead to larger price shifts among developed market currencies

Key Market Themes

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• Trim US equity gains following a period of strong market returns– Expanding valuations have driven recent gains with soft corporate earnings growth

• Maintain overweight exposure to non-US developed market equities– We believe markets offer an elevated return that compensates for Europe’s political risk

• Emerging market equities remain attractive and offer robust total returns– Overweight small-cap and consumer focused strategies relative to broad mandates

• Allocate to TIPS from core bonds as inflation expectations remain muted– Duration exposure remains a critical asset allocation building block for a portfolio

• Reduce high yield bond exposure for other credit strategies– High yield credit spreads are less compelling but continue to benefit from high demand

• For tactical investors, look to fund emerging local debt from risk assets– Valuations for many emerging market currencies remain attractive despite the recent rally

• Add macro hedge fund strategies for portfolio diversification benefits– Systematic strategies tend to exhibit low correlation to equity markets

Current Opportunities

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Year to Date Performance: All Assets Have Moved Higher

Source: S&P, Russell, MSCI, Barclays, JPM, BloombergAs of 03/31/2017

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• US risk assets have outperformed expectations and we encourage investors to trim exposure to US equities and high yield

• We continue to recommend a strategic 50% currency hedge but US dollar gains over the last 3 years offer a rebalancing opportunity

Maintain a Disciplined Rebalance Approach

Source: S&P, MSCI, JPM, Barclays, BloombergAs of 03/31/2017

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US recession concerns are mutedThe US economy is likely to experienceslow and steady growth as excesscapacity is gradually absorbed by theeconomy

The labor market recovery has beenrobust but excess capacity remains asmany have yet to return to the workforce

Outlook for fiscal stimulus is cloudyand any potential growth benefitunlikely to be seen in 2017 or 2018

Tax cuts and infrastructure spendingmodestly improve the US growth profilebut face a prolong path through Congress

US dollar strength and corporateprofitability trends are the primarysources of concern for potential weakness

Key Market Themes

Source: FRED

Source: Congressional Budget Office, Bloomberg

Extended US Economic Cycle

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The Federal Reserve is expected toslowly increase interest rates

Expected path of Fed policy through2019 matters more than timing of thenext hike

A relatively accommodative Fed is likelyto continue, unless there is a dramaticacceleration in inflation

2017 is likely to be a year ofgreater uncertainty for Fed policy

Fed’s plan to reduce the size of itsbalance sheet will be closely watched asthey look to avoid market taper fears

Politics will intersect with Fed policy asspeculation builds whether Janet Yellenwill continue as Chair past her termexpiring in February 2018

Key Market Themes

Source: Bloomberg

Source: Fed, Bloomberg

?

Federal Reserve Gradualism

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China is the global growth enginebut faces fundamental transitions

As the rural population moves to urbancenters, fixed investment is required tosustain the production based economy

China’s economic transition is pivotingaway from manufacturing to a serviceand consumption based economy

Any disruption to these transitions willhave global repercussions due toChina’s size and role in the globaleconomy

The PBOC is balancing the risks ofa more open market with currencydeclines and capital outflows

Concerns of capital outflows have forcedgreater intervention from the centralbank to limit currency declines

Desire for a weaker currency to supportthe production based economy is offsetby fears of capital fleeing the countryand destabilizing credit markets

Key Market Themes

Source: IMF, Bloomberg

Source: SAFE, Bloomberg

China Transitions

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Uneven economic growth andwage gains have fueled politicaldiscontent in the developed world

Political uncertainty intensifies currencyvolatility but currency depreciation canstimulate local equity markets (e.g. UK)

However, a shift away from politicalorthodoxy heightens lower probabilitypolitical tail-risks such as a US-Chinatrade war or a dissolution of the euro

Have we reached “Peak Trade”?A secular transition is underway and ashift from free trade policies in the Westmay reduce long-term economic growth

A strong US pivot away from globaltrade is a tail-risk for the globaleconomy and would likely impactcapital markets negatively in theemerging world

Key Market Themes

Source: IMF, Bloomberg

Election Main Candidates Dates

FrancePresidential

Election

Marine Le PenNational Front

Emmanuel MacronEn Marche!

May 7th

UKGeneralElection

Theresa MayConservative PartyJeremy Corbyn

Labour Party

June 8th

ItalyGeneralElection

Matteo OrfiniDemocratic PartyBeppe Grillo

5-Star Movement

Potential 2017 snap

election

Globalization Backlash

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US equities have posted strongreturns with soft earnings growth

Expanding valuations and stimulushopes have driven recent returns whilecorporate earnings weakness has beenlargely overlooked

A prolonged US economic expansioncan support a continued equity rallydespite elevated valuation levels

Look to reduce US equity exposureto fund global equity strategies

US equities remain a viable fundingsource for private market commitments

Should US equity markets declinematerially, look to rebalance to exploitmarket volatility


Source: Bloomberg, FRED

Source: S&P, NEPC, Bloomberg

Trim US Equity Gains

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Europe and Japan carry risks butoffer a meaningful return premium

Catalysts for outperformance arepresent with shareholder friendly actionsin Japan and economic conditionsimproving in Europe

Recommend a gradual shift from the USto non-US equities as Europeanelections are likely to generate volatility

Small-cap and global equity arepreferred strategy approaches

These strategies offer the bestopportunity to exploit valuationdiscrepancies among stocks acrosscountries and sectors

Hedging a portion of non-US developedcurrency exposure remains a long-termstrategic target


Source: European Central Bank, Bloomberg

Source: European Commission, Bloomberg

Overweight Non-US DevelopedMarket Equities

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Emerging equities offer the highesttotal return potential for investors

Valuation levels and long-termfundamentals suggest an overweightrelative to global market cap weights(e.g. 15% to 20%)

Growth premium relative to thedeveloped world is advancing asemerging market economic conditionsimprove off fiscal and currencyadjustments of recent years

Overweight consumer and small-cap focused strategies relative tobroad benchmark mandates

Small-cap and emerging marketconsumer strategies offer a structuralbias away from commodity exposuresand state owned enterprises


Source: IMF

Emerging Growth Higher

Developed Growth Higher

Source: MSCI, Bloomberg

Emerging Market EquitiesRemain Attractive

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Preserve US duration exposurewith a bias to TIPS over core bonds

TIPS offer safe haven exposure with anexplicit hedge for realized inflation andcan be sourced with a low cost passivestrategy

A meaningful allocation to TIPSdiversifies core bond exposure andimproves risk balance across economicenvironments

Higher inflation expectations favorTIPS over nominal bonds

Rising inflation assumptions imbeddedin fixed income markets are more likelyto negatively impact nominal interestrates

TIPS yields are based on real rates andprices are sensitive to Fed tightening

Core bond yields include real rates andinflation exposure; prices are negativelyimpacted by increases in both


Source: Bureau of Labor Statistics, Bloomberg, NEPC

Source: Barclays, Bloomberg, NEPC

Allocate to TIPS from Core Bonds

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Index aware high yield strategieshave enjoyed exceptional returns

Outsized credit spreads in 2016 havefallen below historic median levels

Credit markets continue to benefit fromhigh demand in a low rate environment,but current spread levels are lesscompelling

Make use of other credit strategiesto capture pockets of value

Security selection is critical as somecredit sub-sectors such as structuredcredit provide a better return/riskprofile

Credit focused multi-sector strategiescan effectively allocate across creditmarkets to seek pockets of opportunity


Source: Barclays, Standard & Poors, JP Morgan, Bloomberg

Source: Barclays, S&P, Bloomberg

Reduce High Yield for OtherCredit Strategies

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EM local debt offers an attractivetotal return opportunity

Above average index yield provides acushion to offset potentially highcurrency volatility

Valuations for many emerging marketcurrencies are attractive followingsignificant adjustments over the lastfive years

Shift a portion of risk assetsexposure to emerging local debt

The volatility of EM local debt is equity-like due to the volatility of emergingcurrencies

Preferred implementation approach is aEM local debt strategy benchmarked toa global diversified index

Blended EMD strategies could be moreappropriate for investors with a lowerrisk tolerance


*Earnings Yield measured as inverse of trailing 12M P/ESource: NEPC, Bloomberg

Source: JP Morgan

Fund Emerging Local Debtfrom Risk Assets

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Macro hedge fund strategies offerbroad benefits to a total portfolio

Allocations of size (e.g. 5%) help tomitigate the left-tail of a portfolioreturn distribution

Investors should be targeted in theirapproach to portfolio construction asmanager selection is paramount

Fund systematic global macro frombroad based GAA and hedge fundof fund strategies

Systematic strategies tend to exhibitlow correlation to equity markets andare strong diversifiers within a totalportfolio

Many systematic macro strategiesexhibit “crisis alpha” or excessperformance in risk-off periods


*Not intended to be an all inclusive Macro sub-strategy list

Source: eVestment, HFRI

Add Macro Hedge Fund Strategies

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Sentiment Versus Reality

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• Generally soft and hard data are directionally the same, with soft data overshooting in either direction– Soft data is typically available well before actual economic reports are released

• US Presidential election ushered in a sense of confidence bringing “animal spirits” with promises of tax reform and deregulation, with a much slower improvement in hard data– For example:

• US Consumer Confidence posted a 17-year high• The Small Business Optimism index reached a 13-year high• The ISM Factory composite index hit a post-recession high

Background

Soft Data

•Qualitative survey-based responses from US business and consumer data

•Sentiment-driven

Hard Data

•Actual employment numbers, retail sales, production, prices, etc.

•Lagged indicators

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Divergence in Soft vs. Hard Economic Data

Source: NAHB, Wells Fargo, US Census Bureau, Bloomberg

Source: University of Michigan, US Census Bureau, BloombergSource: ISM, US Census Bureau, Bloomberg

Source: NFIB, Bloomberg

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Hard and Soft Data Historically Do Not Diverge for Long…

Source: S&P, Bloomberg*Hard data index is an average of industrial, housing, personal/household, and labor subcomponents“Correction” refers to a loss of more than 5% following the reconciliation between hard and soft data

Scenario 1:

Scenario 2:

Source: Conference Board, S&P, Bloomberg

Consumer confidence and the S&P 500 have historically moved in tandem

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Q1 Market Summary

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Index Performance Summary as of 03/31/2017

Source: Bloomberg, Barclays, Alerian, Nareit, MSCI, JP Morgan, Credit Suisse

2009 2010 2011 2012 2013 2014 2015 2016 Jan Feb Mar YTDMSCI EM 78.5% 18.9% -18.4% 18.2% -2.6% -2.2% -14.9% 11.2% 5.5% 3.1% 2.5% 11.4%

MSCI EAFE 31.8% 7.8% -12.1% 17.3% 22.8% -4.9% -0.8% 1.0% 2.9% 1.4% 2.8% 7.2%

MSCI ACWI 34.6% 12.7% -7.3% 16.1% 22.8% 4.2% -2.4% 7.9% 2.7% 2.8% 1.2% 6.9%

JPM GBI-EM Global Div 22.0% 15.7% -1.8% 16.8% -9.0% -5.7% -14.9% 9.9% 2.3% 1.8% 2.3% 6.5%

S&P 500 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% 1.4% 12.0% 1.9% 4.0% 0.1% 6.1%

Russell 1000 28.4% 16.1% 1.5% 16.4% 33.1% 13.2% 0.9% 12.1% 2.0% 3.9% 0.1% 6.0%

Alerian MLP 76.4% 35.9% 13.9% 4.8% 27.6% 4.8% -32.6% 18.3% 4.9% 0.4% -1.3% 3.9%

JPM EMBI Glob Div 29.8% 12.2% 7.3% 17.4% -5.3% 7.4% 1.2% 10.2% 1.4% 2.0% 0.4% 3.9%

Russell 2500 34.4% 26.7% -2.5% 17.9% 36.8% 7.1% -2.9% 17.6% 1.4% 2.4% -0.1% 3.8%

Barclays US Corporate HY 58.2% 15.1% 5.0% 15.8% 7.4% 2.5% -4.5% 17.1% 1.5% 1.5% -0.2% 2.7%

Russell 2000 27.2% 26.9% -4.2% 16.3% 38.8% 4.9% -4.4% 21.3% 0.4% 1.9% 0.1% 2.5%

BC US STRIPS 20+ Yr -36.0% 10.9% 58.5% 3.0% -21.0% 46.4% -3.7% 1.4% 0.5% 2.3% -1.0% 1.8%

BC Global Agg -6.5% -5.3% -5.3% -4.1% 2.7% -0.6% 3.3% 2.1% 1.1% 0.5% 0.2% 1.8%

Credit Suisse Hedge Fund 18.6% 10.9% -2.5% 7.7% 9.7% 4.1% -0.7% 1.2% 0.7% 1.0% - 1.7%

BC US Long Credit 16.8% 10.7% 17.1% 12.7% -6.6% 16.4% -4.6% 10.2% 0.2% 2.0% -0.6% 1.7%

BC Municipal 12.9% 2.4% 10.7% 6.8% -2.6% 9.1% 3.3% 0.2% 0.7% 0.7% 0.2% 1.6%

BC US Govt/Credit Long 1.9% 10.2% 22.5% 8.8% -8.8% 19.3% -3.3% 6.7% 0.3% 1.8% -0.6% 1.6%

BC TIPS 11.4% 6.3% 13.6% 7.0% -8.6% 3.6% -1.4% 4.7% 0.8% 0.5% -0.1% 1.3%

CS Leveraged Loan 44.9% 10.0% 1.8% 9.4% 6.2% 2.1% -0.4% 9.9% 0.5% 0.6% 0.1% 1.2%

FTSE NAREIT Equity REITs 28.0% 28.0% 8.3% 18.1% 2.5% 30.1% 3.2% 8.5% 0.1% 3.4% -2.3% 1.2%

BC US Agg Bond 5.9% 6.5% 7.8% 4.2% -2.0% 6.0% 0.5% 2.6% 0.2% 0.7% -0.1% 0.8%

BC US Agg Interm 6.5% 6.1% 6.0% 3.6% -1.0% 4.1% 1.2% 2.0% 0.2% 0.5% 0.0% 0.7%

BC US Govt/Credit 1-3 Yr 3.8% 2.8% 1.6% 1.3% 0.6% 0.8% 0.7% 1.3% 0.2% 0.2% 0.1% 0.4%

Bloomberg Commodity 18.9% 16.8% -13.3% -1.1% -9.5% -17.0% -24.7% 11.8% 0.1% 0.2% -2.7% -2.3%

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Near Term Broad Market Performance Summary as of 03/31/20172015

Source: Bloomberg, Standard and Poors, Russell, MSCI, Barclays, JP Morgan *1 Yr Range: Represents range of cumulative high/low daily index returns for an investment made one year ago

‐15%

‐10%

‐5%

0%

5%

10%

15%

20%

25%

S&P 500 Russell 2500 MSCI EAFE MSCI EM Barclays Agg BarclaysLong

Treasury

BarclaysHigh Yield

BarclaysGlobal Agg

GBI‐EM GlobDiv

BloombergCommodity

1 Yr Range1 Year Return3 Month Return

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Long Term Broad Market Performance Summary as of 03/31/2017

Source: Bloomberg, Standard and Poors, Russell, MSCI, Barclays, JP Morgan

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Q1 Executive Summary

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Market Value 3 Mo Rank FiscalYTD Rank 1 Yr Rank 3 Yrs Rank 5 Yrs Rank

_

Long Term Investment Pool $20,917,813 4.5% 50 7.3% 80 9.4% 76 3.7% 56 5.3% 77Long Term Allocation Index 4.4% 54 6.2% 87 8.0% 87 4.3% 38 -- --Long Term Balanced Index 4.3% 59 6.5% 86 8.3% 86 4.3% 39 5.2% 79

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Market Value 3 Mo Rank FiscalYTD Rank 1 Yr Rank 3 Yrs Rank 5 Yrs Rank

_

Total Composite $44,156,593 2.6% 22 5.6% 5 7.4% 9 2.7% 58 3.8% 48Allocation Index 2.7% 19 4.1% 19 5.5% 30 2.3% 69 -- --

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Eastern Michigan University - Board of RegentsTotal Fund Performance Summary

Year to Date

AnlzdRet Rank Anlzd

Std Dev Rank SharpeRatio Rank

SortinoRatioRF

Rank

_

Total Composite 2.56% 22 1.81% 80 1.33 51 -- -- Allocation Index 2.71% 19 1.51% 70 1.69 33 -- --

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Composite Performance - The Total Composite returned 2.6% for the first quarter of 2017, while the Long Term Investment Pool returned 4.5%, outperforming the Allocation Index by 10 basis points. - The Total Composite ranked in the 22nd percentile of the peer group in the first quarter. Allocation Index - The sub-composite over/underweights relative to policy had little impact during the quarter. Active Management - Artisan outperformed the benchmark by 350 basis points for the quarter. Top contributors were concentrated among technology, industrials, healthcare and financial holdings. - PIMCO outperformed the benchmark by 320 basis points for the quarter. Positions in Emerging Markets Equities and Bonds and exposure to developed ex-US equities were significant contributors to performance.

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The Long Term Investment Pool is ranked in the Investorforce Endowments and Foundations < 50 Million Net Universe

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The Total Composite is ranked in the Investorforce Trust funds > 60% Fixed Income Net Universe

Asset Allocation vs. Target

Current Policy Current Net AssetAllocation Policy Range

_

Domestic Equity $2,212,634 10.0% 10.6% 21.0% 5.0% - 20.0%International Equity $933,951 5.0% 4.5% 15.1% 0.0% - 10.0%Emerging Markets Equity $1,274,351 5.0% 6.1% 8.3% 0.0% - 8.0%Global Equity $3,407,313 15.0% 16.3% -- 10.0% - 20.0%Core Fixed Income $1,146,503 5.0% 5.5% 20.2% 0.0% - 10.0%High Yield -- -- -- 2.0% --Multi-sector Fixed Income $1,154,843 5.0% 5.5% -- 0.0% - 10.0%Non-US Developed Bonds -- -- -- 6.1% --Emerging Market Debt $775,113 5.0% 3.7% 7.3% 0.0% - 8.0%GAA/Risk Parity $4,393,200 20.0% 21.0% -- 10.0% - 30.0%Hedge Funds $1,013,981 10.0% 4.8% 10.9% 0.0% - 20.0%Absolute Return $2,349,072 10.0% 11.2% -- 5.0% - 15.0%Real Assets $2,256,852 10.0% 10.8% 4.8% 5.0% - 15.0%Cash -- -- -- 4.3% --Total $20,917,813 100.0% 100.0% 100.0%

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Eastern Michigan University - Board of RegentsLong Term Investment Pool Asset Allocation vs. Policy Targets

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cchow

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Net Asset Allocation breaks multi-asset investments like GAA and Global Equity into their underlying asset classes providing a look through to your actual asset allocation

Eastern Michigan University - Board of RegentsTotal Fund Performance Summary

March 31, 2017

Intermediate Term Balanced Index comprised of 50.0% Barclays Intermediate U.S. GV/CR Index and 50.0% BofA ML 1-3 Year Treasury Index.Allocation Index: Used to measure the value add from active management. Calculated as the asset weight from the prior month end mulitiplied by the

specified market index.

Market Value($)

3 Mo(%) Rank

FiscalYTD(%)

Rank 1 Yr(%) Rank 3 Yrs

(%) Rank 5 Yrs(%) Rank

_

Total Composite 44,156,593 2.6 22 5.6 5 7.4 9 2.7 58 3.8 48Allocation Index 2.7 19 4.1 19 5.5 30 2.3 69 -- --

InvestorForce Trust Funds >60% Fixed Income Net Median 1.8 2.2 4.0 3.0 3.7 Short Term Investment Pool 23,238,780 0.0 -- 0.1 -- 0.1 -- 0.0 -- 0.1 --

91 Day T-Bills 0.1 -- 0.3 -- 0.4 -- 0.2 -- 0.1 --Long Term Investment Pool 20,917,813 4.5 50 7.3 80 9.4 76 3.7 56 5.3 77

Long Term Allocation Index 4.4 54 6.2 87 8.0 87 4.3 38 -- --Long Term Balanced Index 4.3 59 6.5 86 8.3 86 4.3 39 5.2 79

InvestorForce All E&F < $50mm Net Median 4.5 9.1 11.0 3.9 6.5 Total Equity 7,828,249 7.8 27 11.8 50 13.4 47 6.7 25 -- --

MSCI ACWI 6.9 42 13.9 36 15.0 32 5.1 51 8.4 65eA All Global Equity Net Median 6.4 11.8 13.0 5.1 8.9

Total Fixed 5,425,531 2.7 35 5.5 30 7.9 26 2.9 26 -- --BBgBarc US Aggregate TR 0.8 97 -1.7 68 0.4 64 2.7 30 2.3 50

eA Global Fixed Inc Unhedged Net Median 2.3 0.3 2.3 0.9 2.0 GAA/ Risk Parity 4,393,200 1.5 94 1.7 88 4.3 84 -- -- -- --

60% MSCI World (Net) / 40% CITI WGBI 4.4 36 5.0 60 7.1 55 2.9 41 5.4 24eA Global TAA Net Median 3.5 5.4 7.7 2.3 3.9

Real Assets 2,256,852 5.1 3 8.7 17 13.2 53 -- -- -- --PIMCO All Asset Index 1.9 28 1.9 77 4.6 88 3.6 16 3.7 21Bloomberg Commodity Index -2.3 92 -3.6 99 8.7 75 -13.9 88 -9.5 92

InvestorForce All E&F Real Assets/Commodities Net Median 0.3 4.6 13.6 -4.5 -1.1 Hedge Funds 1,013,981 2.1 55 5.7 56 4.9 72 -- -- -- --

HFRI Fund of Funds Composite Index 2.4 47 5.6 57 6.2 59 1.8 51 3.2 75eV Alt Fund of Funds - Multi-Strategy Median 2.3 6.0 6.9 1.8 4.4

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• We recommend replacing two managers in the Long Term Portfolio

• In the International Equity Composite, we propose replacing CopperRock International Small Cap with SEG Baxter Street Ltd– Baxter Street is an international long only strategy that invests in companies across

the market cap spectrum– Represents a concentrated, benchmark agnostic strategy that has a bias to mid and

small cap names– Value-added comes from Select Equity’s proprietary fundamental research and

stringent stock selection process that marries high-quality companies with an absolute valuation discipline

• In the Global Asset Allocation Composite, we propose replacing Standard Life GARS with the William Blair Macro Allocation Fund (WMCIX)– Model based approach, the Strategy has broad flexibility to invest across global asset

classes and currency markets while capturing mispriced valuation opportunities and minimizing uncompensated risks

– Targets CPI+6% with a long-term volatility target of 10%. The target risk budget is dynamic and will shift from low levels to as high as 20% depending on the opportunities available in the market

– The Strategy’s average beta to global equities is expected to be 0.3 over time

New Manager Recommendations

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Firm DescriptionSelect Equity Group ("Select Equity" or "SEG" or the "Firm") was founded in January 1990 by George Loening. The Firm started as an investment research business that sold its research to mutual funds and other institutional investors. Select Equity Group is 100% employee-owned. There are no outside shareholders. At inception, only the founding partners were owners but over the years ownership has been distributed to the principals.

Select Equity manages 5 long only funds and 3 long/short funds. The Firm also manages a number of separately managed accounts with customized mandates:

Long Only:

1. Small-Mid Cap Fund

2. Great Jones Fund

3. Blackwall Fund

4. Baxter Street

5. Vandam Street

Select Equity Group, L.P.Baxter Street Fund

Investment Firm/Product ProfileEastern Michigan University - Board of Regents

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Investment Firm/Product Profile


Long/Short

1. Lafayette Street

2. SEG Partners

3. Cooper Square

The Firm also has a foundation (Select Equity Group Foundation) that is used to donate employee gifts to local and international charities. The foundation was launched as a way to coordinate the charitable giving of the employees, provide a format for the Firm to match employee contributions, and to apply the Firm’s research and due diligence process to identify excellent charitable organizations.

NEPC Investment ThesisThe value-added comes from Select Equity’s proprietary fundamental research and stringent stock selection process that marries high-quality companies with an absolute valuation discipline. They define high quality so specifically that generated ideas are relatively static, allowing them to do deeper dives into the same roster of names. Fundamental analysis entails an iterative process of meeting directly with company management as well as companies along the supply chain to verify the sustainability, with particular emphasis on identifying whether the company has intangible assets.

PeopleThe team is led by Chad Clark and split between the Chicago and New York offices of Select Equity. Research on the team is structured in a generalist format and divided by the 5 investment professionals on the team. Additionally research is leveraged across the firm and shared across all portfolio management teams.


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PhilosophySelect Equity seeks to identify great businesses those with steady predictable growth, high returns on capital, and well-established barriers to competition. They consider themselves investors, not speculators. There are many businesses that they would not be interested in owning at any price.

Investment StrategyThe firm focuses on companies that have significant barriers to entry, that have strong and growing free cash flow, and that can be bought at a meaningful discount to intrinsic value. As a firm, Select Equity is knowledgeable on 400 companies, but there are about 250 that have been fully vetted and meet their criteria for investment.

The firm has built a deep database of company research. The depth of the individual stock research depends on how active the firm is in a position. Of the 250 companies that have been fully vetted, the firm conducts financial analysis and qualitative field work on them throughout the year. Of the subset of the 250 positions that are active in the portfolios, an additional layer of research is conducted. These active positions have their financials models updated at least every quarter, have federal filings processed within 24 hours of publication, and have company management meetings at least once per year. In addition, throughout the year the analysts conduct company meetings and conference calls with key employees and have channel checks with suppliers, distributers, and customers.

The results of all this research is shared with the entire research team so that the firm can debate the merits of a company as new information is found. This information is shared at the firm’s daily 8:30 am meeting. At this meeting, existing positions as well as new research ideas are reviewed. Opportunities or concerns raised on the call are typically reviewed in detail in small group meetings later in the day. These small group meetings are made up of the analyst(s) and pm(s) working on the position and are designed to dig deeper into the research done by the analyst(s).


March 31, 2017

36



The final portfolio consists of a small number of companies that have been through a lengthy collaborative research process between the portfolio manager and the analysts.

PortfolioThe final portfolio will consist of roughly 45 names. All of the companies will be high quality businesses that have substantial market share and pricing power. Roughly 70% of the portfolio will be focused down the cap spectrum in mid and small cap names. The top 15 holdings in the fund will constitute roughly half of the portfolio. The Select portfolio has the ability to defensively hedge currencies.

Performance ExpectationsThe portfolio is benchmark agnostic and highly concentrated. As such the portfolio track record may be volatile, but the high quality focus concentration of the portfolio should protect capital in declining markets.


March 31, 2017

37

Qtr YTD 1 Year 3 Year 5 Year 7 Year 10 Year

International Core - ACWI ex US

SEG - Baxter Street Fund -3.0% 2.4% 2.4% 1.8% 11.5% NA NA

MSCI EAFE-ND Hedged (USD) 7.3% 6.1% 6.1% 5.6% 11.9% 7.2% 2.6%

MSCI ACWI ex-US-ND -1.3% 4.5% 4.5% -1.8% 5.0% 2.9% 1.0%

SEG Baxter StreetEastern Michigan University - Board of Regents

Firm/Product Firm/Team Comments Investment Style/Strategy Performance Expectations Portfolio Positioning Other Comments

International Equity

SEG - Baxter Street Fund

Select Equity Group was founded in January

1990 by George Loening. The firm

started as an investment research business that sold its research to mutual

funds and other institutional investors. Select Equity Group is

100% employee-owned. There are no outside shareholders.

The Baxter Street Strategy is an international long only strategy that invests in companies across the market cap spectrum. The portfolio generally has 30-60 positions with weightings that

range from 1%-10%.

The portfolio is benchmark agnostic and highly

concentrated. As such the portfolio track record may be volatile, but the high

quality focus should protect capital in declining

markets.

This is a highly concentrated portfolio of roughly 45 names. The

top 15 names will comprise almost 50% of the portfolio and 70% of

the will be skewed towards mid and small

cap positions. The Select portfolio has the ability to defensively hedge

currencies.

Select Equity will aggregate all NEPC client

accounts and offer tiered fee pricing based on the total AUM of all NEPC

clients invested in either the fund or separate accounts. This fund also has

the ability to hedge currency

exposure.

Firm/Product NEPC Investment Thesis

International Equity

SEG - Baxter Street Fund

The value-added comes from Select Equity’s proprietary fundamental research and stringent stock selection process that marries high-quality companies with an absolute valuation discipline. They define high quality so specifically that generated ideas are relatively static, allowing them to do deeper dives into the same roster of names. Fundamental analysis entails an iterative process of meeting directly with company management as well as companies along the supply chain to verify the sustainability, with particular emphasis on identifying whether the company has intangible assets.

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

International Core - ACWI ex US

SEG - Baxter Street Fund 2.4% 3.7% -0.7% 24.9% 31.0% -5.9% NA NA NA NA

MSCI EAFE-ND Hedged (USD) 6.1% 5.0% 5.7% 26.7% 17.5% -12.1% 5.6% 25.7% -39.9% 5.3%

MSCI ACWI ex-US-ND 4.5% -5.7% -3.9% 15.3% 16.8% -13.7% 11.2% 41.4% -45.5% 16.7%

Performance as of December 31, 2016Past performance is no guarantee of future results

38


William Blair Investment Management, LLCMacro Allocation

Firm DescriptionWilliam Blair & Company, LLC (William Blair) was founded in 1935 by William McCormick Blair. The firm is dually registered as a broker-dealer and investment adviser. The company has multiple business divisions including Investment Management, Investment Banking, Equity Research, Institutional and Private Brokerage, and Private Capital. Investment Management generates the predominant portion of overall revenues. William Blair is 100% owned by over 170 active employees; approximately one third of the principals are from Investment Management.

NEPC Investment ThesisThe Macro Allocation Strategy is led by Brian Singer and Thomas Clarke, who have designed a dynamic risk based allocation approach that expresses top down macro views across the spectrum of global markets and currencies. The Strategy is benchmark agnostic and targets a return of CPI plus 6% with a volatility of 10% over a full market cycle. The Macro Allocation Strategy is an unconstrained global asset allocation approach that allocates capital based on risk exposures while identifying asset classes with discrepancies between fundamental value and current price. The Strategy has the freedom to express long or short positions in equity, debt, and currency markets based on the investment team’s valuation and risk outlook. In addition, to a degree greater than peers, the Strategy actively expresses currency views across both developed and emerging market countries. The Macro Allocation Strategy offers a top-down fundamental oriented approach that dynamically exploits opportunities in both global equity and fixed income markets while mitigating drawdowns with the use of a dynamic risk budget.

PeopleWilliam Blair’s Dynamic Allocation Strategies team has worked together for over a decade. The investment team led by Brian Singer, who oversees the risk allocation, joined William Blair in 2011 from Singer Partners and previously from UBS Asset Management. Working with Mr. Singer is portfolio manager, Thomas Clarke, who is based in London and leads currency strategy. Primarily based in Chicago, the investment team is supported by a group of experienced analysts focused on valuation and risk metrics.


March 31, 2017

39



PhilosophyWilliam Blair’s Macro Allocation Strategy has broad flexibility to invest across global asset classes and currency markets while capturing mispriced valuation opportunities and minimizing uncompensated risks. The Strategy is centered on a series of core beliefs which drive the top-down macro process. The investment team believes markets and currencies are macro-inefficient and over time fundamental valuation opportunities are rewarded. The Strategy looks to exploit these valuation opportunities but within the construct of a dynamic risk allocation process that targets risk exposure as opposed to market value weights.

Investment StrategyThe Macro Allocation Strategy is grounded in a set of core beliefs, which drive the top-down macro approach and dynamic views of risk. The investment team believes markets and currencies are macro-inefficient and over time fundamental valuation opportunities are well compensated. Fundamental value is then determined by the present value of cash flows for global equity and fixed income assets and the relative purchasing power of currencies. At its simplest, the discrepancy or gap between the identified fundamental value of global asset classes and their current price reveals the potential investment opportunity.

The investment process begins with an evaluation of the current market pricing for global equities and fixed income, relative to their fundamental value based on a discounted cash flow analysis. The investment team focuses on these pricing anomalies while adjusting for the forward projected path of real risk-free interest rates, an inflation premium, and a risk premium. These projections are the core of the capital market inputs and are utilized to construct a long-term return horizon over 8 years. The investment team also relies on a fundamental based approach for currency, utilizing a purchasing power parity (PPP) approach adjusted for projected relative real interest rates. The investment team then incorporates specific macro themes to normalize long-term market pricing anomalies associated with global equities, fixed income, and currencies. These macro views incorporate broad economic themes, structural imbalances, and geopolitical risks while allowing the investment team to expand or dampen risk exposures supported by fundamental value and price discrepancies.


March 31, 2017

40



The global perspective on the macro investment risk regime provides an investment framework and risk budget that informs the top-down asset allocation and scaling of active risk exposures. Top-down risk exposures also incorporate short-term forward looking risk forecasts to balance return and risk opportunities. The investment team then dynamically allocates across global equities, fixed income, and currencies while also adjusting the total portfolio risk exposure. The total risk allocation will then adjust higher when opportunities are abundant and price discrepancies are wide and compressing when opportunities are more limited.

The investment universe for the Macro Allocation Strategy can be generally classified amongst global equities, global fixed income, currency, and volatility. Allocation and risk exposures are top-down driven and do not include bottom-up security selection. Within global equities, exposures include developed and emerging countries, sectors, value and growth, large and small-caps with implementation across a broad range of securities, including index futures, swaps, ETFs, and options. Within global fixed income, exposures include developed market nominal bonds, US TIPS, investment grade and high yield credit, dollar denominated emerging market debt, and local currency emerging market debt. Global fixed income implementation includes futures, swaps, ETFs, credit-default swaps, and options. Within currencies, the investment team looks to all tradable and liquid global currency markets with implementation across forwards, swaps, options, and non-deliverable forwards.


March 31, 2017

41



PortfolioThe Macro Allocation Strategy focuses on the risk contribution of global equities, fixed income, and currencies and dynamically adjusts exposures according to their valuation outlook and the broad macro risk environment. The Strategy has a maximum risk budget of 20% and will utilize leverage but generally no greater than a notional exposure of 150%. Specific asset classes may have negative exposures but within the confines of the broad strategy risk budget. In addition, the Macro Allocation Strategy actively manages currency exposures. The Strategy’s neutral currency allocation is 100% US dollar but active exposures will generally range between -50% and 150% USD. Asset exposures are unconstrained across global markets and currencies but risk exposures are closely monitored to manage liquidity and drawdowns. Exposures for the Macro Allocation Strategy will vary greatly and tactical adjustments will be executed based on both the valuation opportunity and risk outlook. However, unique to many peers, the Strategy generally allocates half of its active risk to currency exposures.

Performance ExpectationsThe Macro Allocation Strategy looks to exceed the return of CPI plus 6% with a long-term volatility target of 10%. The Strategy is expected to have a beta to global equities of 0.3 to 0.4 and is designed to generate consistent risk-adjusted returns with a dynamic risk budgeting approach. The investment team seeks to add value by identifying fundamental valuation opportunities across global equity, fixed income, and currency markets while incorporating specific macro themes and a broad risk outlook. The Macro Allocation Strategy is intended to offer a dynamic macro approach that can equally exploit price discrepancies in currencies and global asset classes while mitigating drawdown risks with an active risk assessment of macro themes and valuation opportunities.


March 31, 2017

42

William Blair Macro AllocationEastern Michigan University - Board of Regents

Firm/Product Firm/Team Comments Investment Style/Strategy Performance Expectations Portfolio Positioning Other Comments

Global Asset Allocation

William Blair -MACAL

Led by Brian Singer, the experienced multi-asset team has worked

together for over a decade on dynamic

allocation strategies.

Model based approach, the Strategy has broad flexibility to

invest across global asset classes and currency markets

while capturing mispriced valuation opportunities and minimizing uncompensated

risks.

Targets CPI+6% with a long-term volatility target of 10%. The target risk

budget is dynamic and will shift from low levels to as high as 20% depending on the opportunities available

in the market.

A benchmark agnostic approach, the Strategy tactically allocates risk

across liquid global markets and currency. The Strategy’s average beta to global equities is expected to be 0.3 over time. Unique relative to peers, generally half of the active risk budget is allocated to currency.

Firm/Product NEPC Investment Thesis


William Blair - MACAL

The Macro Allocation Strategy is led by Brian Singer and Thomas Clarke, who have designed a dynamic risk based allocation approach that expresses top down macro views across the spectrum of global markets and currencies. The Strategy is benchmark agnostic and targets a return of CPI plus 6% with a volatility of 10% over a full market cycle. The Macro Allocation Strategy is an unconstrained global asset allocation approach that allocates capital based on risk exposures while identifying asset classes with discrepancies between fundamental value and current price. The Strategy has the freedom to express long or short positions in equity, debt, and currency markets based on the investment team’s valuation and risk outlook. In addition, to a degree greater than peers, the Strategy actively expresses currency views across both developed and emerging market countries. The Macro Allocation Strategy offers a top-down fundamental oriented approach that dynamically exploits opportunities in both global equity and fixed income markets while mitigating drawdowns with the use of a dynamic risk budget.

Qtr YTD 1 Year 3 Year 5 Year 7 Year 10 Year


William Blair - MACAL 0.8% 2.6% 2.6% 0.0% 5.6% NA NA60% MSCI ACWI/40% Citi WGBI -2.8% 5.5% 5.5% 1.7% 5.4% 5.0% 3.7%

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007


William Blair - MACAL 2.6% -5.7% 3.5% 14.0% 14.8% NA NA NA NA NA

60% MSCI ACWI/40% Citi WGBI 5.5% -2.6% 2.3% 11.4% 10.8% -1.8% 10.0% 21.3% -24.1% 11.6%

Performance as of December 31, 2016Past performance is no guarantee of future results

43

Diligence Monitor

March 31, 2017


Manager Changes/ NEPC DueInvestment Options Announcements Diligence Committee

(Recent Quarter) Recommendations

Prisma Capital Partners LPChange of Firm Ownership: PAAMCO and KKR

Prisma Combination On HoldPrisma Spectrum Fund Ltd

Standard Life Investments Limited Other: Proposed Merger No ActionGlobal Absolute Return Strategy (GARS) GTAA

44

Diligence Monitor

March 31, 2017


Investment Option Commentary NEPC Rating

Prisma Capital Partners LP

KKR and Pacific Alternative Asset Management Company, LLC announced on February 6, 2017, that they have entered into a strategic partnership by combining their respective liquid alternative businesses (distinct from KKR’s traditional private equity business), KKR Prisma and PAAMCO. From all initial accounts, the proposed partnership aims to preserve the current respective investment philosophies, processes, teams and client solutions of the combining firms. Therefore, current products and solutions of both firms are unlikely to be significantly impacted by this event. Going forward, it appears that the partnership is mutually desired and aimed at capitalizing on cultural compatibility and complementary strengths while developing investment solutions to enhance the value proposition for clients. However, any business combination of this scale warrants caution until the integrating firms are officially combined. Therefore, we are exercising caution and have placed the legacy firms and their respective products on “HOLD” until the combination is completed and NEPC has evaluated the combined entity. NEPC will continue to monitor the evolution of the partnership, any team changes, asset flows and any back office integration to reassess our current stance.

Preferred

Prisma Spectrum Fund Ltd

45

Diligence Monitor

March 31, 2017


Investment Option Commentary NEPC Rating

Standard Life Investments Limited

Standard Life and Aberdeen have agreed to an all stock merger valued around $4.7B. The merger is subject to both shareholder and regulatory approval, which are expected to be completed by Q3 2017. The merger would result in equal representation at the Board level, but Aberdeen shareholders will own roughly one-third of the new group while Standard Life shareholder will own roughly two-thirds. It has been reported that Martin Gilbert (Aberdeen) and Keith Skeoch (Standard Life) will be co-chief executives under the new structure. Our initial assessment is that this appears to be a move by both firms to consolidate assets, and therefore bring down operating costs in the face of a challenging environment for active managers. It is possible over time that, where there are competing teams or products at both firms, there could be consolidation, but we do not have any insight into that right now. Related to the GARS and the multi‐asset team at Standard Life, we do not believe the proposed merger will have a material impact given the team’s prominence, large AUM, and that Aberdeen’s focus is primarily in the emerging markets equity space. At this time, we are not recommending any client action as a result of the proposed merger.

Preferred

Global Absolute Return Strategy (GARS) GTAA

46

Total Fund Summary

47

Intermediate Term Balanced Index: 50.0% Barclays Intermediate U.S. GV/CR Index and 50.0% BofA ML 1-3 Year Treasury Index.

Allocation Index: Used to measure the value add from active management. Calculated as the asset weight from the prior month end mulitiplied by the specified market index.

Long-Term Balanced Index: (10% - Russell 3000)(5% - MSCI EAFE Small Cap)(5% - MSCI Emerging Markets)(15% - MSCI ACWI)(15% - Barclays Aggregate)(5% - 50%JPM EMBI GD/ 25% JPM ELMI+/ 25% JPM GBI EM GD)(5% - Barclays Multi-verse)(20% - 60% MSCI World (Net)/ 40% CITI WGBI)(10% - HFRI Fund of Funds Composite)(10% - PIMCO All Asset Index).

March 31, 2017

Eastern Michigan University - Board of RegentsTotal Fund Performance Detail

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)


(%) Rank 5 Yrs(%) Rank 10 Yrs

(%) Rank Return(%) Since

_

Total Composite 44,156,593 100.0 2.6 22 5.6 5 7.4 9 2.7 58 3.8 48 -- -- 5.2 Apr-09Allocation Index 2.7 19 4.1 19 5.5 30 2.3 69 -- -- -- -- -- Apr-09

InvestorForce Trust Funds >60% Fixed Income Net Median 1.8 2.2 4.0 3.0 3.7 4.1 5.7 Apr-09Short Term Investment Pool 23,238,780 52.6 0.0 -- 0.1 -- 0.1 -- 0.0 -- 0.1 -- -- -- 0.1 Apr-09

91 Day T-Bills 0.1 -- 0.3 -- 0.4 -- 0.2 -- 0.1 -- 0.5 -- 0.1 Apr-09Northern Inst Govt Select MMKT 23,168,051 52.5 0.0 99 0.0 99 0.0 99 0.0 99 0.0 99 -- -- 0.0 Nov-09

91 Day T-Bills 0.1 87 0.3 90 0.4 93 0.2 95 0.1 94 0.5 99 0.1 Nov-09Bank of Ann Arbor Trust Cash 70,729 0.2 0.0 99 0.0 99 0.0 99 0.0 99 0.0 99 -- -- 0.0 Nov-09

91 Day T-Bills 0.1 87 0.3 90 0.4 93 0.2 95 0.1 94 0.5 99 0.1 Nov-09eA US Cash Management Net Median 0.2 0.5 0.7 0.4 0.3 0.9 0.2 Nov-09

Long Term Investment Pool 20,917,813 47.4 4.5 50 7.3 80 9.4 76 3.7 56 5.3 77 -- -- 5.5 Apr-09Long Term Allocation Index 4.4 54 6.2 87 8.0 87 4.3 38 -- -- -- -- -- Apr-09Long Term Balanced Index 4.3 59 6.5 86 8.3 86 4.3 39 5.2 79 -- -- 5.3 Apr-09

InvestorForce All E&F < $50mm Net Median 4.5 9.1 11.0 3.9 6.5 4.8 10.1 Apr-09Total Equity 7,828,249 17.7 7.8 27 11.8 50 13.4 47 6.7 25 -- -- -- -- 6.7 Jan-14

MSCI ACWI 6.9 42 13.9 36 15.0 32 5.1 51 8.4 65 4.0 55 5.0 Jan-14eA All Global Equity Net Median 6.4 11.8 13.0 5.1 8.9 4.2 5.0 Jan-14

CopperRock International Small Cap 933,951 2.1 6.7 87 3.9 99 1.2 99 -- -- -- -- -- -- 3.1 Dec-14MSCI EAFE Small Cap 8.0 65 13.9 60 11.0 60 3.6 59 9.2 67 3.0 73 8.2 Dec-14

eA EAFE Small Cap Equity Net Median 8.6 15.4 12.3 4.2 10.0 3.6 8.2 Dec-14Acadian Emerging Markets Equity 1,274,351 2.9 13.6 19 22.5 7 23.2 14 -- -- -- -- -- -- 1.8 Oct-14

MSCI Emerging Markets 11.4 68 16.4 41 17.2 51 1.2 65 0.8 80 2.7 67 0.3 Oct-14eA Emg Mkts Equity Net Median 12.2 15.2 17.2 2.1 2.1 3.4 0.9 Oct-14

Artisan Global Opportunities 1,697,674 3.8 10.4 7 14.9 31 16.1 25 -- -- -- -- -- -- 9.1 Dec-14MSCI ACWI 6.9 42 13.9 36 15.0 32 5.1 51 8.4 65 4.0 55 4.3 Dec-14

eA All Global Equity Net Median 6.4 11.8 13.0 5.1 8.9 4.2 4.3 Dec-14Hexavest GE 1,709,640 3.9 4.8 79 8.0 76 12.5 56 -- -- -- -- -- -- 6.1 Dec-14

MSCI ACWI 6.9 42 13.9 36 15.0 32 5.1 51 8.4 65 4.0 55 4.3 Dec-14eA All Global Equity Net Median 6.4 11.8 13.0 5.1 8.9 4.2 4.3 Dec-14

Vanguard Total Stock Market VIPERs 2,212,634 5.0 5.7 39 -- -- -- -- -- -- -- -- -- -- 7.8 Nov-16Russell 3000 5.7 38 15.0 53 18.1 45 9.8 21 13.2 29 7.5 48 7.8 Nov-16

eA All US Equity Net Median 4.8 15.3 17.4 7.9 12.1 7.5 6.6 Nov-16

48

March 31, 2017


Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Total Fixed 5,425,531 12.3 2.7 35 5.5 30 7.9 26 2.9 26 -- -- -- -- 3.2 Jan-14BBgBarc US Aggregate TR 0.8 97 -1.7 68 0.4 64 2.7 30 2.3 50 4.3 39 3.1 Jan-14

eA Global Fixed Inc Unhedged Net Median 2.3 0.3 2.3 0.9 2.0 3.8 1.7 Jan-14Franklin Templeton- Global Multi-Sector Plus 1,154,843 2.6 4.6 2 12.8 1 13.3 1 -- -- -- -- -- -- 2.5 Oct-14

BBgBarc Multiverse 1.9 53 -3.9 70 -1.0 62 -0.2 58 0.7 67 3.5 77 0.1 Oct-14eA Global Agg Fixed Inc Net Median 1.9 -2.5 -0.3 0.0 1.2 3.9 0.0 Oct-14

BlackRock- SIO 2,349,072 5.3 1.4 34 4.2 7 5.6 18 -- -- -- -- -- -- 2.1 Oct-14BBgBarc US Aggregate TR 0.8 97 -1.7 99 0.4 99 2.7 73 2.3 97 4.3 90 2.3 Oct-14

eA US Core Plus Fixed Inc Net Median 1.3 0.3 3.0 3.0 3.4 5.1 2.7 Oct-14Baird - Core Bond 1,058,655 2.4 1.0 28 -1.0 37 1.5 34 -- -- -- -- -- -- 2.2 Dec-14

BBgBarc US Aggregate TR 0.8 66 -1.7 74 0.4 74 2.7 60 2.3 73 4.3 77 1.8 Dec-14eA US Core Fixed Inc Net Median 0.9 -1.3 1.1 2.8 2.6 4.5 2.0 Dec-14

Ashmore EM Blended Debt Strategy 775,113 1.8 6.1 34 8.6 7 15.5 5 -- -- -- -- -- -- 4.6 Nov-1450% JPM EMBI GD/ 25% JPM ELMI+/ 25% JPM GBI EM GD 4.9 53 3.3 79 6.7 79 1.8 60 2.2 59 5.1 68 1.7 Nov-14

eA All Emg Mkts Fixed Inc Net Median 5.2 4.8 9.2 3.6 3.7 6.1 3.3 Nov-14Treasury Strips 87,848 0.2 0.7 99 -4.0 62 -1.6 96 3.9 94 3.1 99 -- -- 4.9 Apr-09

BBgBarc US Treasury Long TR 1.4 85 -10.8 98 -5.0 99 5.8 25 4.0 93 6.7 82 5.2 Apr-09eA US Long Duration Fixed Inc Net Median 1.8 -3.4 2.6 5.5 5.4 7.9 9.3 Apr-09

GAA/ Risk Parity 4,393,200 9.9 1.5 94 1.7 88 4.3 84 -- -- -- -- -- -- 0.1 Dec-1460% MSCI World (Net) / 40% CITI WGBI 4.4 36 5.0 60 7.1 55 2.9 41 5.4 24 4.1 57 2.8 Dec-14

eA Global TAA Net Median 3.5 5.4 7.7 2.3 3.9 4.3 1.5 Dec-14AQR GRP EL 2,127,190 4.8 2.4 86 0.9 91 6.8 56 -- -- -- -- -- -- -0.1 Dec-14

60% MSCI World (Gross) / 40% CITI WGBI 4.5 35 5.3 51 7.5 54 3.3 34 5.8 22 4.4 43 3.2 Dec-14eA Global TAA Net Median 3.5 5.4 7.7 2.3 3.9 4.3 1.5 Dec-14

Standard Life GARS 2,266,010 5.1 0.6 98 2.8 82 1.9 91 -- -- -- -- -- -- 0.2 Dec-1460% MSCI World (Gross) / 40% CITI WGBI 4.5 35 5.3 51 7.5 54 3.3 34 5.8 22 4.4 43 3.2 Dec-14

eA Global TAA Net Median 3.5 5.4 7.7 2.3 3.9 4.3 1.5 Dec-14

49


March 31, 2017

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Real Assets 2,256,852 5.1 5.1 3 8.7 17 13.2 53 -- -- -- -- -- -- 2.3 Dec-14PIMCO All Asset Index 1.9 28 1.9 77 4.6 88 3.6 16 3.7 21 5.1 4 3.0 Dec-14Bloomberg Commodity Index -2.3 92 -3.6 99 8.7 75 -13.9 88 -9.5 92 -6.2 95 -11.1 Dec-14

InvestorForce All E&F Real Assets/Commodities Net Median 0.3 4.6 13.6 -4.5 -1.1 -0.2 -3.6 Dec-14PIMCO All Asset 2,256,852 5.1 5.1 27 8.7 21 13.2 17 -- -- -- -- -- -- 2.3 Dec-14

PIMCO All Asset Index 1.9 93 1.9 88 4.6 84 3.6 28 3.7 59 5.1 12 3.0 Dec-14Bloomberg Commodity Index -2.3 99 -3.6 99 8.7 39 -13.9 99 -9.5 99 -6.2 99 -11.1 Dec-14

eA Global TAA Net Median 3.5 5.4 7.7 2.3 3.9 4.3 1.5 Dec-14Hedge Funds 1,013,981 2.3 2.1 55 5.7 56 4.9 72 -- -- -- -- -- -- -0.2 Dec-14

HFRI Fund of Funds Composite Index 2.4 47 5.6 57 6.2 59 1.8 51 3.2 75 1.2 87 1.3 Dec-14eV Alt Fund of Funds - Multi-Strategy Median 2.3 6.0 6.9 1.8 4.4 2.9 1.7 Dec-14

Prisma Spectrum Fund Ltd 1,013,981 2.3 2.1 55 5.7 56 4.9 72 -- -- -- -- -- -- 0.6 Dec-14HFRI Fund of Funds Composite Index 2.4 47 5.6 57 6.2 59 1.8 51 3.2 75 1.2 87 1.3 Dec-14

eV Alt Fund of Funds - Multi-Strategy Median 2.3 6.0 6.9 1.8 4.4 2.9 1.7 Dec-14XXXXX

50

Quarter Ending March 31, 2017

BeginningMarket Value Contributions Withdrawals Net Cash Flow Net Investment

ChangeEnding

Market Value_

Acadian Emerging Markets Equity $1,122,263 $0 $0 $0 $152,088 $1,274,351AQR GRP EL $2,076,323 $0 $0 $0 $50,868 $2,127,190Artisan Global Opportunities $1,537,093 $0 $0 $0 $160,581 $1,697,674Ashmore EM Blended Debt Strategy $730,886 $0 $0 $0 $44,227 $775,113Baird - Core Bond $1,047,770 $0 $0 $0 $10,885 $1,058,655Bank of Ann Arbor Trust Cash $50,702 $20,027 $0 $20,027 $0 $70,729BlackRock- SIO $2,315,563 $0 $0 $0 $33,509 $2,349,072CopperRock International Small Cap $875,063 $0 $0 $0 $58,887 $933,951Dreyfus Institutional Preferred $0 $0 $0 $0 $0 $0Franklin Templeton- Global Multi-Sector Plus $1,103,929 $0 $0 $0 $50,913 $1,154,843Hexavest GE $1,631,241 $0 $0 $0 $78,399 $1,709,640Northern Inst Govt Select MMKT $24,366,700 $15,000,000 -$16,200,000 -$1,200,000 $1,351 $23,168,051PIMCO All Asset $2,147,649 $0 $0 $0 $109,203 $2,256,852Prisma Spectrum Fund Ltd $992,881 $0 $0 $0 $21,100 $1,013,981Standard Life GARS $2,253,006 $0 $0 $0 $13,003 $2,266,010Treasury Strips $87,210 $0 $0 $0 $638 $87,848Vanguard Prime MMKT Fund- Admiral $0 $0 $0 $0 $0 $0Vanguard Total Stock Market VIPERs $2,103,206 $0 -$9,885 -$9,885 $119,313 $2,212,634Total $44,441,487 $15,020,027 -$16,209,885 -$1,189,858 $904,964 $44,156,593

XXXXX

Eastern Michigan University - Board of RegentsTotal Fund Asset Growth Summary by Manager

March 31, 2017

51

Attribution Summary3 Months Ending March 31, 2017

Wtd.ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects

Total Equity 7.8% 7.4% 0.5% 0.2% 0.1% 0.0% 0.2%Total Fixed 2.7% 1.8% 0.8% 0.2% 0.0% 0.0% 0.2%GAA/ Risk Parity 1.5% 4.4% -3.0% -0.6% 0.0% 0.0% -0.6%Real Assets 5.1% 1.9% 3.2% 0.3% 0.0% 0.0% 0.3%Hedge Funds 2.1% 2.4% -0.3% 0.0% 0.1% 0.0% 0.1%Total 4.5% 4.3% 0.2% 0.1% 0.1% 0.0% 0.2%

March 31, 2017

Eastern Michigan University - Board of RegentsLong Term Investment Pool

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The Real Assets Composite contributed positively to performance for the quarter. This was driven by PIMCO's relative outperformance.

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Note: Plan attribution is a static, return based calculation and the results reflect the composites shown. As a result, the total returns shown may vary from the calculated returns shown on the performance summary

Attribution Summary1 Year Ending March 31, 2017

Wtd.ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects

Total Equity 13.4% 15.8% -2.3% -0.8% 0.0% 0.0% -0.7%Total Fixed 7.9% 1.4% 6.5% 1.7% -0.1% 0.1% 1.6%GAA/ Risk Parity 4.3% 7.1% -2.9% -0.6% 0.0% -0.1% -0.7%Real Assets 13.2% 4.6% 8.6% 0.9% -0.1% 0.0% 0.8%Hedge Funds 4.8% 6.2% -1.4% -0.1% 0.1% 0.1% 0.0%Total 9.3% 8.3% 1.0% 1.0% -0.1% 0.1% 1.0%

March 31, 2017

Eastern Michigan University - Board of RegentsLong Term Investment Pool

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The Fixed Income Composite contributed positively to performance for the trailing year. This was driven by Franklin Templeton's and Ashmore's relative outperformance.

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Note: This page details attribution for the trailing year

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3 Years Ending March 31, 2017

Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank_

Long Term Investment Pool 3.71% 56 5.77% 23 0.62 40Long Term Allocation Index 4.30% 38 5.99% 27 0.69 26Long Term Balanced Index 4.25% 39 5.94% 26 0.69 26

March 31, 2017

Eastern Michigan University - Board of RegentsLong Term Investment Pool Risk/Return


Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank_

Long Term Investment Pool 5.31% 77 5.26% 14 0.99 39Long Term Allocation Index -- -- -- -- -- --Long Term Balanced Index 5.16% 79 5.08% 13 0.99 38

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Anlzd Ret Rank Anlzd StdDev Rank

_

Total Composite 3.79% 48 3.50% 48 Allocation Index -- -- -- --

XXXXX


Anlzd Ret Rank Anlzd StdDev Rank

_

Total Composite 2.74% 58 3.52% 58 Allocation Index 2.32% 69 3.68% 69

XXXXX

Eastern Michigan University - Board of RegentsTotal Fund Risk/Return

March 31, 2017

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March 31, 2017

Eastern Michigan University - Board of RegentsTotal Fund Asset Allocation History

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Last ThreeMonths Fiscal Year-To-Date One Year Three Years

_

Beginning Market Value $44,441,487 $19,097,941 $37,332,966 $61,241,254Contributions $15,020,027 $76,890,371 $76,890,404 $219,160,944Withdrawals -$16,247,929 -$53,292,748 -$72,051,106 -$239,743,390Net Cash Flow -$1,227,903 $23,597,623 $4,839,298 -$20,582,446Net Investment Change $943,009 $1,461,028 $1,984,329 $3,497,785Ending Market Value $44,156,593 $44,156,593 $44,156,593 $44,156,593

_

March 31, 2017

Eastern Michigan University - Board of RegentsTotal Fund Asset Growth Summary

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Eastern Michigan University - Board of RegentsLong Term Investment Pool Return Summary vs. Peer Universe

March 31, 2017

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Eastern Michigan University - Board of RegentsLong Term Investment Pool Return Summary vs. Peer Universe

March 31, 2017

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Long Term Investment Pool vs. InvestorForce All E&F < $50mm Net3 Years

Eastern Michigan University - Board of RegentsLong Term Investment Pool Risk Statistics vs. Peer Universe

March 31, 2017

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Long Term Investment Pool vs. InvestorForce All E&F < $50mm Net5 Years

Eastern Michigan University - Board of RegentsLong Term Investment Pool Risk Statistics vs. Peer Universe

March 31, 2017

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March 31, 2017

Eastern Michigan University - Board of RegentsTotal Fund Return Summary vs. Peer Universe

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Eastern Michigan University - Board of RegentsTotal Fund Return Summary vs. Peer Universe

March 31, 2017

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Eastern Michigan University - Board of RegentsTotal Fund Risk Statistics vs. Peer Universe

Total Composite vs. InvestorForce Trust Funds >60% Fixed Income Net 3 Years

March 31, 2017

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Eastern Michigan University - Board of RegentsTotal Fund Risk Statistics vs. Peer Universe

Total Composite vs. InvestorForce Trust Funds >60% Fixed Income Net 5 Years

March 31, 2017

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Appendix

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Information Disclaimer

• Past performance is no guarantee of future results.

• The goal of this report is to provide a basis for substantiating asset allocation recommendations. The opinions presented herein represent the good faith views of NEPC as of the date of this report and are subject to change at any time.

• Information on market indices was provided by sources external to NEPC. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within.

• All investments carry some level of risk. Diversification and other asset allocation techniques do not ensure profit or protect against losses.

• This report is provided as a management aid for the client’s internal use only. This report may contain confidential or proprietary information and may not be copied or redistributed to any party not legally entitled to receive it.

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It is important that investors understand the following characteristics of non-traditional investment strategies including hedge funds and private equity:

1. Performance can be volatile and investors could lose all or a substantial portion of their investment

2. Leverage and other speculative practices may increase the risk of loss3. Past performance may be revised due to the revaluation of investments 4. These investments can be illiquid, and investors may be subject to lock-ups

or lengthy redemption terms5. A secondary market may not be available for all funds, and any sales that

occur may take place at a discount to value6. These funds are not subject to the same regulatory requirements as

registered investment vehicles7. Managers may not be required to provide periodic pricing or valuation

information to investors8. These funds may have complex tax structures and delays in distributing

important tax information9. These funds often charge high fees10.Investment agreements often give the manager authority to trade in

securities, markets or currencies that are not within the manager’s realm of expertise or contemplated investment strategy

Alternative Investment Disclosures

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eastern michigan university board of regents€¦ · • 2016 q4 endowment & foundation survey...

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