eastern michigan university board of regents€¦ · – dambisa moyo, global economist and author...

Quarter ending December 31, 2015Investment Performance Analysis

James Reichert, CFA, PartnerGary Wyniemko, CFA, ConsultantChristopher Chow, Analyst

Eastern Michigan UniversityBoard of Regents

NEPC Update 2

Market Update 7

NEPC 2016 Observations and Actions 13

Capital Market Observations 16

General Client Actions 23

Q4 Executive Summary 33

Total Fund Summary 39

Manager Pages 58

Appendix 73

Page

Table of ContentsEastern Michigan University - Board of Regents

December 31, 2015

1

NEPC Update

2

Highlights of Fourth Quarter Happenings at NEPC

NEPC Updates

December 31, 2015

Professional Staff Updates New Principals: Lenia Ascenso, Principal and Director of

Discretionary Operations; Devan Dewey, Principal and Chief Technology Officer; and Matt Lombardi, Principal and Chief Financial Officer

We are also pleased to announce that Wyatt Crumpler joined NEPC in November as a Principal and Senior Consultant from American Beacon Advisors, Inc., and Sam Pollack joined NEPC as a Senior Consultant from DiMeo Schneider and Associates. Wyatt is a member of NEPC’s Corporate consulting group and Sam is a member of NEPC’s Endowment & Foundation consulting group.

After 30 Years NEPC's Founder has Transitioned to Chairman Emeritus• NEPC’s founder and chairman Richard “Dick” Charlton retired

on January 1, 2016 after overseeing a decade-long succession process that involved a change in corporate structure and a planned approach to distributing his ownership shares. Dick had the foresight to begin distributing equity to partners 25 years ago and the formal succession process began in late 2007. Dick’s vision for a client-focused organization continues to be the hallmark of NEPC and this deep-rooted culture will live on for generations to come. Mike Manning continues in his leadership role as Managing Partner with the guidance of our Partnership; a Partnership recognized throughout the industry for its depth, talent and culture. We are well positioned to lead in this increasingly competitive marketplace. NEPC has never been stronger.

Upcoming/Recent Events 2016 Market Outlook Webinar: January 26, 2016 at 2:00

PM EST.

NEPC’s 21st Annual Client Conference: May 10-11, 2016 in Boston at the Hynes Convention Center.

This year we will be offering an optional pre-conference workshop on Monday, May 9th at NEPC's Boston office.

NEPC hosted a Manager Diversity Program event at our Boston office on October 12, 2015 in an effort to continue and enhance our firm’s efforts in this area. The purpose of the gathering was to provide an opportunity for diverse managers to meet NEPC and have an open discussion about our research efforts in the arena of minority- and female-owned firms.

December 31, 2015

3

NEPC Recognitions NEPC, LLC was awarded "Best Full-Service Investment

Consulting Firm - USA" by Acquisition International for the 2016 Hedge Fund Awards 1

NEPC Client Recognitions• Congratulations to the following NEPC clients for their

nominations as Asset Owner Finalists for the 2015 CIO Industry Innovation Awards. Five NEPC clients who won awards in their categories are also highlighted below.• Foundation: Wisconsin Alumni Research

Foundation (Carrie Thome) - Category Winner; Northwest Area Foundation (Amy Jensen)

• Endowment: Fordham University (Eric Wood); Texas Tech University System (Tim Barrett)

• Public Defined Benefit Plan Below $15B: Orange County Employees Retirement System (Girard Miller) - Category Winner; MoDOT and Patrol Employees' Retirement System (Larry Krummen)

• Public Defined Benefit Plan Between $15B and $100B: Massachusetts PRIM (Michael Trotsky) - Category Winner

• Public Defined Benefit Plan Above $100B: New York City Retirement System (Scott Evans); State of Wisconsin Investment Board (David Villa)

• Health Care Organization: Baylor Scott and White Health (Mark Amiri) - Category Winner; Trinity Health (Dina Richards)

• Next Generation: Massachusetts PRIM (Sarah Samuels) - Category Winner

NEPC ResearchRecent White Papers 2015 Fourth Quarter Market Thoughts Governance: The Cornerstone of Successful

Investment Programs (January 2016) –Endowment & Foundation Practice Team

Green Bonds: An Overview (December 2015) – NEPC Impact Investing Committee

Completing the Analysis: ESG Integration (November 2015) – NEPC Impact Investing Committee

NEPC’s Survey on Hedge Fund Operations (November 2015) – Hedge Fund Operational Due Diligence team

Market Chatter: The Rise and Fall (and Rise?) of Oil Prices (October 2015 )

Highlights of Fourth Quarter Happenings at NEPC - continued

NEPC Updates

December 31, 2015

1 This award pertains to NEPC's past performance only and is not indicative of NEPC's future performance. It should not be considered an endorsement of NEPC.December 31, 2015

4

• Save the Date– Tuesday May 10, 2016 & Wednesday May 11, 2016

• *NEW* Optional Pre-Conference Sessions in the afternoon on Monday May 9, 2016– Track 1: How NEPC Works with Clients– Track 2: Investments 101

• Details– Location: Hynes Convention Center, 900 Boylston Street, Boston, MA– Hotel: Sheraton Boston Hotel, 39 Dalton Street, Boston, MA– Registration: Available on the NEPC website in early March

• Notable Speakers– Dambisa Moyo, Global Economist and Author– Michael Cembalest, Chairman of Market and Investment Strategy, J.P. Morgan– Helena Morrissey, CEO, Newton Investment Management– Kunal Ghosh, Director and Portfolio Manager, Allianz Global Investors

NEPC Annual Investment Conference

December 31, 2015

Eastern Michigan University - Board of Regents

5

2009 2010 2011 2012 2013 2014 2015 JAN

Barclays US Strips 20+ Yr -36.0% 10.9% 58.5% 3.0% -21.0% 46.4% -3.7% 6.9%

Barclays US Govt/Credit Long 1.9% 10.2% 22.5% 8.8% -8.8% 19.3% -3.3% 2.1%

Barclays US Agg Bond 5.9% 6.5% 7.8% 4.2% -2.0% 6.0% 0.5% 1.4%

Citi WGBI 2.6% 5.2% 6.4% 1.6% -4.0% -0.5% -3.6% 1.4%

Barclays US Agg Interm 6.5% 6.1% 6.0% 3.6% -1.0% 4.1% 1.2% 1.3%

Barclays Municipal 12.9% 2.4% 10.7% 6.8% -2.6% 9.1% 3.3% 1.2%

Barclays US Govt/Credit 1-3 Yr 3.8% 2.8% 1.6% 1.3% 0.6% 0.8% 0.7% 0.5%

JPM GBI-EM Global Diversified 22.0% 15.7% -1.8% 16.8% -9.0% -5.7% -14.9% 0.3%

Barclays US Long Credit 16.8% 10.7% 17.1% 12.7% -6.6% 16.4% -4.6% 0.3%

JPM EMBI Global Diversified 29.8% 12.2% 7.3% 17.4% -5.3% 7.4% 1.2% -0.2%

Credit Suisse Hedge Fund 18.6% 10.9% -2.5% 7.7% 9.7% 4.1% -0.7% N/A

Credit Suisse Leveraged Loan 44.9% 10.0% 1.8% 9.4% 6.2% 2.1% -0.4% -0.7%

Barclays US Corporate High Yield 58.2% 15.1% 5.0% 15.8% 7.4% 2.5% -4.5% -1.6%

Bloomberg Commodity 18.9% 16.8% -13.3% -1.1% -9.5% -17.0% -24.7% -1.7%

FTSE NAREIT Equity REITs 28.0% 28.0% 8.3% 18.1% 2.5% 30.1% 3.2% -3.4%

S&P 500 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% 1.4% -5.0%

Russell 1000 28.4% 16.1% 1.5% 16.4% 33.1% 13.2% 0.9% -5.4%

MSCI ACWI 34.6% 12.7% -7.3% 16.1% 22.8% 4.2% -2.4% -6.0%

MSCI EM 78.5% 18.9% -18.4% 18.2% -2.6% -2.2% -14.9% -6.5%

MSCI EAFE 31.8% 7.8% -12.1% 17.3% 22.8% -4.9% -0.8% -7.2%

Russell 2500 34.4% 26.7% -2.5% 17.9% 36.8% 7.1% -2.9% -8.0%

Russell 2000 27.2% 26.9% -4.2% 16.3% 38.8% 4.9% -4.4% -8.8%

Alerian MLP 76.4% 35.9% 13.9% 4.8% 27.6% 4.8% -32.6% -11.1%

Index Performance Summary as of 1/31/2016

Source: Morningstar Direct

December 31, 2015


6

Market Update

7

• NEPC’s 2016 Assumptions and Actions cover both an intermediate (5-7 years) and long term (30 years) forecast horizon– Similar to prior years, November 30 market data is used for all assumption inputs

• US economic cycle and US central bank policy are at the forefront of major cyclical and secular forces informing our Assumptions and Actions– These factors interact to create a supportive environment for risk assets in the near term

but ultimately push long term capital market forecasts lower relative to history

• The US economy is nearly 7 years removed from the previous recession but the health of US consumers can extend the expansion– Prolonged US economic cycle has the potential to push the US dollar higher straining

commodity markets and international borrowers with dollar based debt

• Influence of central bank policies in the developed world remain broadly supportive for risk assets but come with long term effects– US policy is diverging from Europe and Japan but slow expected pace of hikes provides a

positive backdrop for US equities and credit in the near term

• Emerging Market growth compressed yet still stronger than developed; fears of further adjustments in China remain a near-term concern– Large currency adjustments across most emerging countries healthy for future prospects– Chinese Yuan (RMB) devaluation has been incremental relative to other EM FX adjustments

Key Themes and Background for 2016

December 31, 2015


8

Corporate Profits: Mid-Late Cycle Economic Growth Levels: Mid Cycle

Wage Growth: Early Cycle Where Are We In the Economic Cycle?

Tale of Two Economies: Corporate Sector and the US Consumer

• Relative to the average length of economic cycles the US expansion is in its later stages

• Improvements in wage growth and consumer spending can potentially extend expansion

• Continued US expansion provides a positive foundation for US risk assets

0%

2%

4%

6%

8%

10%

12%

14%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

% of G

DP

US Recession

Corporate Profits

‐2%

0%

2%

4%

6%

8%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Rolling

3 Yr A

verage

US Recession

GDP Growth

0%1%2%3%4%5%6%7%8%9%

10%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

YoY Ch

ange

US RecessionAverage Hourly Earnings

Source: St. Louis Federal Reserve

Source: St. Louis Federal Reserve Source: St. Louis Federal Reserve

December 31, 2015


9

• A prolonged US economic expansion is likely to have a significant influence on the US dollar cycle– Continued growth in consumer spending and US economy have the potential to push

the US dollar to levels last seen in the late 1990’s

• US dollar strength is interconnected with US Federal Reserve policy– Fed must balance the path of future interest rate increases relative to the disruptive

effects of a strong dollar on global markets

US Dollar Cycle Characterized by Peaks of Overvaluation

Source: Bloomberg, NEPC

December 31, 2015


10

• Accommodative global monetary policies flow through to markets distorting the traditional asset return profile– QE and negative interest rates suppress income while supporting higher valuations– Provides near term support for market conditions in Europe and Japan

• Potential extended period of low cash rates beyond the market expectations pose challenges for all investors– Subdued long term cash expectations in the developed world compress long term

expected returns for both fixed income and equity

Global Central Bank Policy: “Lower for Longer”

Source: Bloomberg, NEPCSource: Bloomberg, NEPC

December 31, 2015


11

• US centric portfolios like 60/40 have worked historically but forward looking return prospects are subdued– Asset prices can be sustained but low yields portend below average expected returns

• Conventional investment approaches may fall short going forward– Index focused approaches, such as core bonds, suboptimal in current environment– Adjustments will be necessary to effectively meet and exceed long-term objectives

Low Global Cash Rates Suppress Long Term Return Expectations

Source: Shiller Data, NEPC

December 31, 2015


12

NEPC 2016 Observations and Actions

13

• US economic expansion continues as Federal Reserve begins policy shift– Economic conditions and health of US consumers remain supportive for growth– Profit margin declines and strong dollar are a challenge to corporate profitability

• Central Banks continue to dictate the global investment outlook– Path of Fed policy over next two years matters more than timing of the next Fed action– ECB and BoJ likely to maintain and extend accommodative policies– Easing in China is broadly stimulative but currency policy is unpredictable

• Persistent strength of US dollar reveals global market weakness– World economy has experienced a “dollar recession” as global output slows– Dollar strength tightens global monetary conditions and strains global growth

• Weak growth should not lead to a financial crisis in emerging markets– Negative asset returns reflect adjustments necessary for future economic success– Further political and market reforms are necessary for improved economic conditions

• Stressed credit liquidity magnifies the scale of price movements– Central bank easing and positive investor sentiment have masked deterioration in liquidity– Credit markets ability to absorb an exodus from crowded positions could be challenged

2016 Capital Market Observations Eastern Michigan University - Board of Regents

December 31, 2015

14

• Maintain exposure to US risk assets in a low return environment– Lower returns expected but risk premia can still be harvested as cycle extends– Economic cycle is in the advanced stages but macro policy remains supportive– Low core bond returns warrant a more positive tilt to equity, especially after sell-offs

• Overweight non-US developed market equities – Central bank support and dollar strength provide a positive economic backdrop– Corporate earnings remain well below 2007 levels despite recent earnings recovery– EAFE equity markets offer the potential for outsized returns relative to US equities

• Reaffirm commitment to emerging market equities– Valuations and long-term fundamentals suggest an overweight– China uncertainty, dollar pressure and idiosyncratic country risks temper excitement– Overweight small-cap and consumer focused strategies relative to broad mandates

• Seek tactical fixed income strategies but preserve duration exposure– Spreads have widened but credit selection is critical as credit cycle matures– US duration continues to have a role in a diversified and risk-aware portfolio– TIPS offer an attractive duration profile with inflation expectations at secular lows

• Explore positive yielding assets revealed from energy market distress– Private strategy returns are compelling but suggest patience– Focus on segments of the public markets that offer a yield

NEPC 2016 General Actions for ClientsEastern Michigan University - Board of Regents

December 31, 2015

15

Capital Market Observations

16

• US GDP continues to strengthen modestly– Consumer spending supported by

healthy balance sheets– Low energy prices and debt service

have provided stimulation

• US economy shows resilience against headwinds – Fed support through quantitative

easing has been removed– Dollar strength pressures profit

margins of global companies– Subdued global growth and

challenges in certain emerging markets

• Corporate profits begin to lag from secular highs – Buybacks and financial engineering

have buttressed earnings per share – Profitability has begun to slow from

rising dollar and wage pressures

Slow and Steady for US Economy as Cycle Extends




December 31, 2015

17

• Next steps in Fed policy closely watched but path is a bigger (and more important) unknown– 25 basis point increase unlikely to

cause economic slowdown– Rate increases beyond market

expectations could prove challenging for asset prices

– Long-term terminal Fed Funds rate determines pricing for all assets

• Monetary stimulation in Europe and Japan has been effective– Both regions require further

accommodation to continue gradual economic recovery

– Effectiveness of easing may be challenged with bond yields and credit spreads relatively low

– However, zero interest rate bound has been broken, offering room for further easing

Follow The Money – Central Banks Continue to Drive Capital Market Results

Source: European Central Bank, Bank of Japan, Bloomberg

Source: FOMC, Bloomberg


December 31, 2015

18

• Positive global GDP growth masks challenges of a strong dollar

• World economy has suffered a “dollar recession” as global GDP in USD terms has declined by nearly $4 trillion– Appreciation in US dollar strains

global liquidity and reveals underlying market weakness

– Pressures commodity markets and credit growth for international borrowers holding dollar based debt

• Dollar strength impacts global economy in meaningful ways– Improves competitiveness for

countries and companies heavily reliant on exports to the US

– Represents a headwind to US corporate earnings and exports

– Fed is forced to balance slower interest rate increases or pushing the dollar higher

Sustained US Dollar Appreciation is Globally Disruptive

Source: IMF



December 31, 2015

19

• Emerging market growth premium relative to developed world remains but is subdued– Per Capita GDP continues to rise,

pushing standard of living higher and supporting consumer growth

• Initiative to reform reflects the distinct and varied outlook across countries– Political challenges and commodity

market distress are material risks for both Russia and Brazil

– Reform minded countries are realizing economic adjustments necessary for sustainable growth and economic success

• Economic conditions across emerging world are distinct but China is the focus– China remains the growth engine

for the world but is transitioning to a new economic model

Emerging Market Growth Dependent on China and Rising Consumer Spending

Source: Bloomberg

Source: IMF


December 31, 2015

20

• Decline in fixed investment is lowering China’s growth rate– Broad implications for many

emerging economies and commodity producers

• Shift is underway from an export and investment led economy to a consumer focus– Adjustment is paired with ongoing

market reforms to liberalize currency and financial markets

– Continued strength of the US dollar may force a more aggressive currency adjustment from China

• Consumer spending likely to be the economic growth engine– Retail sales have been immune to

the extreme stock market volatility– Significant capacity for long-term

credit growth among households

Structural Economic Change in China has Global Implications

Source: Bank for International Settlements

Source: Bloomberg


December 31, 2015

21

• Underlying market conditions remain fragile despite rebound from August sell-off– Credit markets’ could be challenged to

absorb exodus from crowded positions

• Credit inventories lower today with less bank capital at risk– Liquidity provisions of new regulatory

model are untested in true crisis

• Derivative exposure less reliable– Variable and negative CDX basis

makes hedging unpredictable

• Certain factors in place that can help stave off a liquidity crisis– Low rate policies, bullish sentiment,

positive economic results

• Dynamic active strategies with disciplined credit approach can exploit periods of stress

Credit Market Liquidity Warrants Caution

Source: Barclays Capital

Source: NY Federal Reserve


December 31, 2015

22

General Client Actions

23

• Influence of monetary policy provides basis for extended US economic cycle– Continued growth supports accrual

of risk premia even in a low expected return environment

– Profit margin pressures and enhanced credit risk are challenges of a maturing economic cycle

• US equity and credit markets offer reasonable risk premia– Equity markets are near fair value

but distortion from monetary policy supports continued positive returns

– Pressure of stronger dollar and energy market distress are a headwind for returns

– Focus on niche strategies and hedge funds to exploit potential volatility in equity and credit markets

Extended US Economic Cycle Supports US Risk Assets

Source: Bloomberg

Source: Bloomberg

December 31, 2015


24

• Europe and Japan have faced major economic challenges– For Japan, these challenges extend

over the previous two decades– Non-US equity returns relative to

domestic are highly cyclical

• Success of US monetary action galvanized unprecedented action by the European Central Bank and Bank of Japan– Seeking positive response in both

capital markets and real economy

• Equities and other risky asset markets likely to benefit– Stimulus promotes credit growth,

spending and earnings– Japanese companies flush with cash

also seeking improved profitability

• Hedging a portion of non-US developed currency exposure remains a strategic goal– Dollar strength likely to persist as

Fed policy lifts off

Non-US Developed Equities Remain Attractive Given Monetary Support

Source: TSE, ECB, Bloomberg

Source: Standard & Poors, MSCI, Bloomberg

December 31, 2015


25

• Fundamentals of emerging markets suggest higher return potential than developed world– Valuations appear reasonable

especially versus developed world– Superior real yields and

fundamentals expected to flow through to higher returns over time

• Unique risks across countries suggest caution and patience– China continues slow process to

delicately rebalance economy– Commodity dependent countries

face financial challenges as they adjust to lower prices

– Credit dependence, particularly for dollar based borrowers could cause further strain

Emerging Markets Present Interesting Opportunity… But Require Patience

Source: JP Morgan, Bloomberg

Source: MSCI, Bloomberg

December 31, 2015


26

• Safe haven exposure is critical as an asset allocation building block– Provides unique stability in times of

equity market stress

• Partial allocation to TIPS diversifies safe haven exposure– Current low inflation breakevens

make TIPS attractive relative to nominal US Treasuries

• Tactical bond strategies and unique credit exposures are key portfolio components– Mitigate the impact of a rising

interest rate environment– Credit selection is key given

challenging environment today across credit qualities and sectors

– Global multi-sector credit, absolute return fixed income, credit hedge funds, private lending are a focus

Seek Differentiated Fixed Income Strategies but Don’t Abandon Safe Havens

Source: Barclays, Bloomberg

Source: Barclays, Bloomberg

December 31, 2015


27

• Massive oil selloff generated distress across commodity markets– Impacted oil-related and other

inflation sensitive assets– Selloff in related asset classes may

present opportunities for active managers and private strategies

• Seek inflation sensitive asset classes that offer positive yield– Oil futures commodity roll yield is

strongly negative– Other asset classes may offer

attractive price upside

• Private market strategies may be more attractive– Patient capital can seize high return

opportunities as they materialize

Seek Opportunities from Energy Distress Outside of Traditional Commodity Vehicles

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

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

December 31, 2015


28

• Passive trends a headwind for traditional active management– Remain committed to high

conviction active managers– Give managers greater discretion,

but evaluate effectiveness of investment thesis over time

– Reduced regional constraints provide expanded opportunity for alpha in global equity strategies

• Untether exposures from traditional benchmark risks and bias in Emerging Markets– Make use of small cap and

consumer focused equity strategies– Use non-traditional strategies with

reduced constraints across markets to capitalize on divergences

• Conviction in ability to generate alpha as well as uniqueness of strategy must align with fees

Active Management – An Accelerating Trend to Passive Implementation

Source: EPFR Global

Source: EPFR Global

December 31, 2015


29

• Global Equity– Global strategies can exploit regional divergences but is not a total equity replacement

• Non-US Developed Equity– Make use of currency hedged to fund overweight allocation

• Emerging Market Equity– Small cap and Consumer focused approach

• Core Fixed Income– Barbell Unconstrained with TIPS/Long Bonds

• Credit Exposure– Think outside the “benchmark box” dynamic credit strategies, Private Lending

• Emerging Market Debt– Blended approach and consider complementing with EM Macro HF

• Overlay– Provides disciplined rebalance approach

• Risk Parity– Risk balanced inflation-sensitive assets exposure preferable to long only commodities

• Inflation-Sensitive Assets– Make use of multi-asset inflation focused strategies to fund private real assets

• Opportunistic Allocations– Create an opportunistic “bucket” to exploit future market dislocations

Strategy Implementation Views: 10 Considerations

December 31, 2015


30

2016 5-to-7 Year Return Forecasts

* Core Bonds assumption based on market weighted blend of components of Aggregate Index (Treasuries, IG Corp Credit, and MBS).

Geometric Expected ReturnAsset Class 2015 2016 2016-2015Cash 1.75% 1.50% -0.25%Treasuries 1.75% 1.75%IG Corp Credit 3.25% 3.75% 0.50%MBS 2.00% 2.00%Core Bonds* 2.30% 2.46% 0.16%TIPS 2.25% 2.50% 0.25%High-Yield Bonds 4.00% 5.25% 1.25%Bank Loans 4.50% 5.50% 1.00%Global Bonds (Unhedged) 1.00% 1.00%Global Bonds (Hedged) 1.13% 1.09% -0.04%EMD External 4.50% 4.75% 0.25%EMD Local Currency 5.50% 6.50% 1.00%Large Cap Equities 6.00% 6.00%Small/Mid Cap Equities 6.00% 6.25% 0.25%Int'l Equities (Unhedged) 7.00% 7.25% 0.25%Int'l Equities (Hedged) 7.39% 7.57% 0.18%Emerging Int'l Equities 9.00% 9.75% 0.75%Private Equity 8.50% 8.50%Private Debt 7.50% 7.50%Private Real Assets 8.00% 8.25% 0.25%Real Estate 6.50% 6.50%Commodities 5.25% 4.50% -0.75%Hedge Funds 5.75% 5.75%

December 31, 2015


31

2016 Volatility Forecasts

* Core Bonds assumption based on market weighted blend of components of Aggregate Index (Treasuries, IG Corp Credit, and MBS).

VolatilityAsset Class 2015 2016 2016-2015Cash 1.00% 1.00%Treasuries 5.50% 5.50%IG Corp Credit 7.50% 7.50%MBS 7.00% 7.00%Core Bonds* 6.03% 6.03%TIPS 7.50% 6.50% -1.00%High-Yield Bonds 13.00% 13.00%Bank Loans 8.00% 9.00% 1.00%Global Bonds (Unhedged) 9.00% 8.50% -0.50%Global Bonds (Hedged) 5.00% 5.00%EMD External 12.00% 13.00% 1.00%EMD Local Currency 15.00% 15.00%Large Cap Equities 17.50% 17.50%Small/Mid Cap Equities 21.00% 21.00%Int'l Equities (Unhedged) 21.00% 21.00%Int'l Equities (Hedged) 17.50% 18.00% 0.50%Emerging Int'l Equities 26.00% 27.00% 1.00%Private Equity 27.00% 23.00% -4.00%Private Debt 17.00% 15.00% -2.00%Private Real Assets 23.00% 20.00% -3.00%Real Estate 15.00% 15.00%Commodities 18.00% 19.00% 1.00%Hedge Funds 9.00% 9.00%

December 31, 2015


32

Q4 Executive Summary

33

December 31, 2015

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

_

Total Composite $30,945,758 0.7% 39 -2.7% 92 -1.7% 84 1.9% 65 3.6% 54Allocation Index 1.4% 11 -1.1% 73 -1.2% 79 -- -- -- --

Year to Date

AnlzdRet Rank Anlzd

Std Dev Rank SharpeRatio Rank

SortinoRatioRF

Rank

_

Total Composite -1.68% 84 3.85% 69 -0.45 88 -0.65 82 Allocation Index -1.22% 79 3.79% 68 -0.33 81 -0.65 82

Eastern Michigan University - Board of RegentsTotal Fund Performance Summary

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

_

Long Term Investment Pool $19,939,438 1.7% 70 -4.2% 63 -1.8% 48 3.4% 77 5.1% 56Long Term Allocation Index 2.3% 55 -2.5% 23 -1.1% 35 -- -- -- --Long Term Balanced Index 2.3% 54 -2.6% 24 -1.2% 36 3.8% 72 4.9% 61

XXXXX

Composite Performance- The Total Composite returned 0.7% for the 4th quarter of 2015, while the Long Term Investment Pool returned 1.7% trailing the Policy Index by 60 basis points

Allocation Index- Over/Underweights relative to policy had little impact during the quarter as the portfolio is positioned close to target weights

Active Management-Artisan Global Opportunities outperformed its benchmark by 230 basis points for the quarter. Relative outperformance was driven in part by strength among technology and healthcare holdings. Below-benchmark positioning to the index-lagging energy sector also aided returns. Consumer staples and consumer discretionary holdings were a source ofrelative weakness though not enough to offset strength elsewhere- AQR trailed the benchmark by 630 basis points. Negative contributors included nominal bond exposures, which were mixed for the quarter, and commodities

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

The Total Composite is ranked in the InvestorForce Trust Funds >60% Fixed Income Net Universe

34

December 31, 2015

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.

Eastern Michigan University - Board of RegentsTotal Fund Performance Summary

Market Value($)

3 Mo(%) Rank

FiscalYTD(%)

Rank 1 Yr(%) Rank 3 Yrs

(%) Rank 5 Yrs(%) Rank

_

Total Composite 30,945,758 0.7 39 -2.7 92 -1.7 84 1.9 65 3.6 54Allocation Index 1.4 11 -1.1 73 -1.2 79 -- -- -- --

InvestorForce Trust Funds >60% Fixed Income Net Median 0.5 -0.3 0.3 2.9 3.8 Short Term Investment Pool 401,565 0.0 -- 0.0 -- 0.0 -- 0.0 -- 0.1 --

91 Day T-Bills 0.0 -- 0.0 -- 0.0 -- 0.0 -- 0.0 --Intermediate Term Investment Pool 10,604,756 -0.2 34 0.3 6 0.9 31 1.4 8 2.9 3

Intermediate Term Allocation Index -0.5 86 0.3 3 0.9 20 -- -- -- --Intermediate Term Balanced Index -0.6 93 0.1 37 0.8 35 0.8 39 1.6 32BofA Merrill Lynch Gov 1-3 Yrs -0.4 80 -0.1 71 0.6 78 0.5 80 0.7 92

eA US Short Duration Fixed Inc Net Median -0.3 0.0 0.7 0.7 1.4 Long Term Investment Pool 19,939,438 1.7 70 -4.2 63 -1.8 48 3.4 77 5.1 56

Long Term Allocation Index 2.3 55 -2.5 23 -1.1 35 -- -- -- --Long Term Balanced Index 2.3 54 -2.6 24 -1.2 36 3.8 72 4.9 61

InvestorForce All E&F < $50mm Net Median 2.4 -3.7 -1.9 5.6 5.4 Total Equity 7,429,847 5.4 -- -3.8 -- 1.0 -- -- -- -- --

MSCI ACWI 5.0 -- -4.9 -- -2.4 -- 7.7 -- 6.1 --Total Fixed 4,925,703 0.2 -- -2.7 -- -1.9 -- -- -- -- --

Barclays Aggregate -0.6 -- 0.7 -- 0.5 -- 1.4 -- 3.2 --GAA/ Risk Parity 3,842,455 -1.1 -- -4.9 -- -3.3 -- -- -- -- --

60% MSCI World (Net) / 40% CITI WGBI 2.8 -- -1.7 -- -1.7 -- 4.7 -- 4.7 --Real Assets 1,779,824 0.0 -- -8.6 -- -8.7 -- -- -- -- --

PIMCO All Asset Index 0.2 -- -0.8 -- 0.0 -- 1.7 -- 4.1 --Hedge Funds 1,961,608 -0.3 -- -4.0 -- -1.9 -- -- -- -- --

HFRI Fund of Funds Composite Index 0.8 -- -2.9 -- -0.2 -- 4.0 -- 2.1 --XXXXX

35

December 31, 2015

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

Asset Allocation vs. Target

Current Policy Current Net AssetAllocation Policy Range

_

Domestic Equity $1,964,579 10.0% 9.9% 19.6% 5.0% - 20.0%International Equity $1,118,318 5.0% 5.6% 16.8% 0.0% - 10.0%Emerging Markets Equity $777,012 5.0% 3.9% 6.7% 0.0% - 8.0%Global Equity $3,569,937 15.0% 17.9% -- 10.0% - 20.0%Core Fixed Income $1,097,520 5.0% 5.5% 17.4% 0.0% - 10.0%High Yield -- -- -- 1.6% --Multi-sector Fixed Income $930,989 5.0% 4.7% -- 0.0% - 10.0%Non-US Developed Bonds -- -- -- 6.5% --Emerging Market Debt $895,161 5.0% 4.5% 7.9% 0.0% - 8.0%GAA/Risk Parity $3,842,455 20.0% 19.3% -- 10.0% - 30.0%Hedge Funds $1,961,608 10.0% 9.8% 16.5% 0.0% - 20.0%Absolute Return $2,002,034 10.0% 10.0% -- 5.0% - 15.0%Real Assets $1,779,824 10.0% 8.9% 3.9% 5.0% - 15.0%Cash -- -- -- 3.1% --Total $19,939,438 100.0% 100.0% 100.0%

XXXXX

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

36

cchow

Rectangle

Diligence Monitor Eastern Michigan University - Board of Regents

December 31, 2015

Manager Changes/ NEPC DueInvestment Options Announcements Diligence Committee

(Recent Quarter) Recommendations

PIMCO Litigation: Bill Gross Lawsuit WatchAll Asset Strategy 10/2015

Permal Group Change of Firm Ownership: EnTrust/Permal Merger On HoldPermal Fixed Income Holdings Institutional Ltd 1/2016

37

Diligence Monitor Eastern Michigan University - Board of Regents

December 31, 2015

Investment Option Commentary NEPC Rating

PIMCO On 10/8, Bill Gross filed a lawsuit against PIMCO claiming wrongful termination. The lawsuit has a number of claims but the general basis is that the PIMCO Managing Directors plotted against Gross in order to gain greater access to PIMCO’s bonus pool. The lawsuit also makes a number of claims against certain individuals but Andrew Balls, Dan Ivascyn and Mohamed El-Erian seem to be the main targets. PIMCO believes that these claims have no merit and announced that their legal team and Executive Committee will be taking the matter to court. NEPC was onsite the day that this lawsuit was announced and had a conversation with a member of their Executive Committee to discuss the filing. NEPC is not concerned with the lawsuit and believes it is more of a publicity driven event than anything that will impact PIMCO’s business operations. NEPC recommends No Action.

Preferred

All Asset Strategy

Permal GroupIn January, Legg Mason, Inc. (NYSE: LM) announced it has entered into a definitive agreement to combine Permal, Legg Mason's existing hedge fund platform, with EnTrust Capital. Legg Mason has simultaneously announced the acquisition of Baltimore based ETF firm, Precidian Investments and real-estate firm Clarion Partners LLC. The string of acquisitions suggests a strategic endeavor on Legg Mason’s part to diversify revenue streams and improve performance. NEPC was informed that this transaction was pursued by Legg Mason and was not Permal’s initiative to seek a fund of hedge fund partner. The strategic benefits of this merger to both parties remain to be understood fully at this stage.

As a result of the combination, Legg Mason will own 65% of the new entity, branded EnTrustPermal, with 35% being owned by Gregg S. Hymowitz, EnTrust's Co-founder and Managing Partner. The full details of the transaction have not been disclosed yet thus limiting us from assessing the economic incentives and contractual obligations of key personnel that would suggest retention of investment talent and stability of investment team. However, our initial conversations reveal departures of Permal’s Co-Chief Investment Officer, Mr. Chris Fawcett, Chief Risk Officer and Global Head of Risk. Specifics on merging infrastructures and integrating teams would be dealt with in due course as the transaction is finalized by May 2016.The business combination will create a new global alternatives firm with total assets of $29 billion representing

approximately $12 billion in assets from EnTrust and $17 billion from Permal (including approximately $5 billion in retail products). Permal’s private equity business is not part of this transaction and will be held separately under Legg Mason pending future strategic decision. EnTrust’s US centric business has had a major focus on Taft Hartley clients while two-thirds of Permal’s institutional business is derived globally. EnTrustPermal will continue to retain their legacy products, namely Permal Fixed Income Holdings, Permal Macro Holdings and EnTrust Capital Diversified without any combination but managed from a combined investment platform. Pending further evaluation, all Entrust and Permal investment products have a recommended status of Hold.

Preferred

Permal Fixed Income Holdings Institutional Ltd

38

Total Fund Summary

39

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)


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

(%) Rank Return(%) Since

_

Total Composite 30,945,758 100.0 0.7 39 -2.7 92 -1.7 84 1.9 65 3.6 54 -- -- 5.1 Apr-09Allocation Index 1.4 11 -1.1 73 -1.2 79 -- -- -- -- -- -- -- Apr-09

InvestorForce Trust Funds >60% Fixed Income Net Median 0.5 -0.3 0.3 2.9 3.8 4.2 5.8 Apr-09Short Term Investment Pool 401,565 1.3 0.0 -- 0.0 -- 0.0 -- 0.0 -- 0.1 -- -- -- 0.1 Apr-09

91 Day T-Bills 0.0 -- 0.0 -- 0.0 -- 0.0 -- 0.0 -- 1.1 -- 0.1 Apr-09Dreyfus Institutional Preferred 69 0.0 0.0 68 0.0 95 0.0 99 0.1 89 0.1 95 -- -- 0.1 Apr-09

91 Day T-Bills 0.0 52 0.0 81 0.0 86 0.0 91 0.0 96 1.1 96 0.1 Apr-09Vanguard Prime MMKT Inst 145 0.0 0.0 52 0.1 77 0.1 83 0.1 82 0.1 81 -- -- 0.2 Apr-09

91 Day T-Bills 0.0 52 0.0 81 0.0 86 0.0 91 0.0 96 1.1 96 0.1 Apr-09Northern Inst Govt Select MMKT 41,299 0.1 0.0 74 0.0 95 0.0 99 0.0 99 0.0 99 -- -- 0.0 Nov-09

91 Day T-Bills 0.0 52 0.0 81 0.0 86 0.0 91 0.0 96 1.1 96 0.1 Nov-09eA US Cash Management Net Median 0.0 0.1 0.2 0.2 0.2 1.5 0.2 Nov-09

Bank of Ann Arbor Trust Cash 360,052 1.2 0.0 69 0.0 96 0.0 99 0.0 99 0.0 99 -- -- 0.0 Nov-0991 Day T-Bills 0.0 52 0.0 81 0.0 86 0.0 91 0.0 96 1.1 96 0.1 Nov-09

eA US Cash Management Net Median 0.0 0.1 0.2 0.2 0.2 1.5 0.2 Nov-09Intermediate Term Investment Pool 10,604,756 34.3 -0.2 34 0.3 6 0.9 31 1.4 8 2.9 3 -- -- 5.4 Apr-09

Intermediate Term Allocation Index -0.5 86 0.3 3 0.9 20 -- -- -- -- -- -- -- Apr-09Intermediate Term Balanced Index -0.6 93 0.1 37 0.8 35 0.8 39 1.6 32 -- -- 2.3 Apr-09BofA Merrill Lynch Gov 1-3 Yrs -0.4 80 -0.1 71 0.6 78 0.5 80 0.7 92 2.5 85 1.0 Apr-09

eA US Short Duration Fixed Inc Net Median -0.3 0.0 0.7 0.7 1.4 3.0 2.3 Apr-09Baird - Core Bond 3,579,396 11.6 -0.6 67 0.4 54 0.6 49 -- -- -- -- -- -- 1.9 Oct-14

Barclays Aggregate -0.6 57 0.7 35 0.5 50 1.4 56 3.2 68 4.5 69 1.9 Oct-14eA US Core Fixed Inc Net Median -0.5 0.5 0.5 1.5 3.5 4.7 1.7 Oct-14

DoubleLine Low Duration 7,025,360 22.7 0.0 4 -0.1 87 1.0 25 -- -- -- -- -- -- 0.8 Oct-14BofA Merrill Lynch US Treasuries 1-3 Yrs -0.4 31 -0.1 88 0.5 51 0.5 99 0.7 99 2.4 98 0.6 Oct-14

eA US Core Fixed Inc Net Median -0.5 0.5 0.5 1.5 3.5 4.7 1.7 Oct-14

December 31, 2015

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.

Eastern Michigan University - Board of RegentsTotal Fund Performance Detail

40

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Long Term Investment Pool 19,939,438 64.4 1.7 70 -4.2 63 -1.8 48 3.4 77 5.1 56 -- -- 5.0 Apr-09Long Term Allocation Index 2.3 55 -2.5 23 -1.1 35 -- -- -- -- -- -- -- Apr-09Long Term Balanced Index 2.3 54 -2.6 24 -1.2 36 3.8 72 4.9 61 -- -- 4.7 Apr-09

InvestorForce All E&F < $50mm Net Median 2.4 -3.7 -1.9 5.6 5.4 5.1 10.2 Apr-09Total Equity 7,429,847 24.0 5.4 -- -3.8 -- 1.0 -- -- -- -- -- -- -- 3.8 Jan-14

MSCI ACWI 5.0 -- -4.9 -- -2.4 -- 7.7 -- 6.1 -- 4.8 -- 0.8 Jan-14SSgA Russell 3000 Index ETF 1,964,579 6.3 7.5 11 -1.0 22 0.2 39 -- -- -- -- -- -- 0.7 Dec-14

Russell 3000 6.3 23 -1.4 26 0.5 37 14.7 34 12.2 30 7.4 51 0.4 Dec-14eA All US Equity Net Median 4.4 -4.7 -1.3 13.4 10.9 7.4 -0.6 Dec-14

CopperRock International Small Cap 1,118,318 3.6 5.2 72 -2.6 71 10.3 41 -- -- -- -- -- -- 9.2 Dec-14MSCI EAFE Small Cap 6.8 45 -0.5 48 9.6 61 10.4 69 6.3 78 4.6 91 8.3 Dec-14

eA EAFE Small Cap Equity Net Median 6.2 -0.7 10.1 10.9 7.9 5.7 9.0 Dec-14Acadian Emerging Markets Equity 777,012 2.5 0.0 76 -17.6 82 -16.2 78 -- -- -- -- -- -- -15.4 Oct-14

MSCI Emerging Markets 0.7 62 -17.4 78 -14.9 68 -6.8 74 -4.8 71 3.6 69 -15.3 Oct-14eA Emg Mkts Equity Net Median 1.6 -14.8 -12.9 -4.6 -3.4 4.2 -13.3 Oct-14

Artisan Global Opportunities 1,830,939 5.9 7.3 9 -1.9 31 8.0 6 -- -- -- -- -- -- 5.5 Dec-14MSCI ACWI 5.0 43 -4.9 60 -2.4 69 7.7 69 6.1 74 4.8 71 -3.9 Dec-14

eA All Global Equity Net Median 4.7 -3.9 -0.6 9.1 7.5 5.7 -1.7 Dec-14Hexavest GE 1,738,998 5.6 3.8 72 -1.9 31 -0.4 48 -- -- -- -- -- -- -2.0 Dec-14

MSCI ACWI 5.0 43 -4.9 60 -2.4 69 7.7 69 6.1 74 4.8 71 -3.9 Dec-14eA All Global Equity Net Median 4.7 -3.9 -0.6 9.1 7.5 5.7 -1.7 Dec-14

Total Fixed 4,925,703 15.9 0.2 -- -2.7 -- -1.9 -- -- -- -- -- -- -- 0.5 Jan-14Barclays Aggregate -0.6 -- 0.7 -- 0.5 -- 1.4 -- 3.2 -- 4.5 -- 3.2 Jan-14Franklin Templeton- Global Multi-Sector Plus 930,989 3.0 2.2 1 -4.8 94 -4.6 81 -- -- -- -- -- -- -5.0 Oct-14

Barclays Multiverse -0.9 61 -0.4 41 -3.3 56 -1.7 51 1.0 68 3.8 78 -3.5 Oct-14eA Global Agg Fixed Inc Net Median -0.6 -0.6 -3.0 -1.6 1.6 4.4 -3.3 Oct-14

BlackRock- SIO 2,002,034 6.5 -0.1 6 -1.1 70 -0.3 62 -- -- -- -- -- -- 0.3 Oct-14Barclays Aggregate -0.6 42 0.7 7 0.5 22 1.4 62 3.2 86 4.5 81 1.9 Oct-14

eA US Core Plus Fixed Inc Net Median -0.6 -0.4 -0.1 1.6 4.0 5.2 0.8 Oct-14Baird - Core Bond 1,012,148 3.3 -0.6 67 0.4 55 0.6 49 -- -- -- -- -- -- 0.6 Dec-14

Barclays Aggregate -0.6 57 0.7 35 0.5 50 1.4 56 3.2 68 4.5 69 0.6 Dec-14eA US Core Fixed Inc Net Median -0.5 0.5 0.5 1.5 3.5 4.7 0.6 Dec-14

Ashmore EM Blended Debt Strategy 895,161 2.9 -0.3 83 -7.5 67 -5.6 59 -- -- -- -- -- -- -9.8 Nov-1450% JPM EMBI GD/ 25% JPM ELMI+/ 25% JPM GBI EM GD 0.6 52 -4.6 49 -5.2 58 -3.4 55 1.0 60 5.2 89 -7.9 Nov-14

eA All Emg Mkts Fixed Inc Net Median 0.7 -4.8 -3.8 -2.5 2.5 6.1 -6.8 Nov-14Treasury Strips 85,372 0.3 -1.6 92 1.3 28 2.1 1 1.2 83 6.8 61 -- -- 5.4 Apr-09

Barclays U.S. Treasury Long TR USD -1.4 84 3.6 1 -1.2 9 2.6 6 7.7 16 6.7 71 5.8 Apr-09eA US Long Duration Fixed Inc Net Median -0.9 0.6 -3.5 1.9 7.0 7.4 9.6 Apr-09

Long Term Balanced Index comprised of 20 % of the S & P 500 Index, 5 % of the Russell 2000 Index, 5 % of the MSCI EAFE Index and 70 % of the Barclays Aggregate Bond Index.


December 31, 2015

41

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

GAA/ Risk Parity 3,842,455 12.4 -1.1 -- -4.9 -- -3.3 -- -- -- -- -- -- -- -4.1 Dec-1460% MSCI World (Net) / 40% CITI WGBI 2.8 -- -1.7 -- -1.7 -- 4.7 -- 4.7 -- 4.7 -- -2.7 Dec-14AQR GRP EL 1,803,327 5.8 -3.4 99 -9.9 99 -8.8 94 -- -- -- -- -- -- -10.0 Dec-14

60% MSCI World (Gross) / 40% CITI WGBI 2.9 25 -1.6 18 -1.4 33 5.0 21 5.0 17 5.0 50 -2.4 Dec-14eA Global TAA Net Median 2.3 -3.7 -3.0 3.4 3.9 5.0 -4.4 Dec-14

Standard Life GARS 2,039,128 6.6 1.1 66 -0.1 4 2.2 4 -- -- -- -- -- -- 1.8 Dec-1460% MSCI World (Gross) / 40% CITI WGBI 2.9 25 -1.6 18 -1.4 33 5.0 21 5.0 17 5.0 50 -2.4 Dec-14

eA Global TAA Net Median 2.3 -3.7 -3.0 3.4 3.9 5.0 -4.4 Dec-14Real Assets 1,779,824 5.8 0.0 -- -8.6 -- -8.7 -- -- -- -- -- -- -- -10.6 Dec-14

PIMCO All Asset Index 0.2 -- -0.8 -- 0.0 -- 1.7 -- 4.1 -- 5.1 -- -0.7 Dec-14PIMCO All Asset 1,779,824 5.8 0.0 84 -8.6 97 -8.7 94 -- -- -- -- -- -- -10.6 Dec-14

PIMCO All Asset Index 0.2 82 -0.8 10 0.0 10 1.7 79 4.1 46 5.1 49 -0.7 Dec-14eA Global TAA Net Median 2.3 -3.7 -3.0 3.4 3.9 5.0 -4.4 Dec-14

Hedge Funds 1,961,608 6.3 -0.3 -- -4.0 -- -1.9 -- -- -- -- -- -- -- -1.8 Dec-14HFRI Fund of Funds Composite Index 0.8 -- -2.9 -- -0.2 -- 4.0 -- 2.1 -- 2.3 -- 0.1 Dec-14Permal Fixed Income Holdings 956,680 3.1 -1.5 88 -4.9 71 -3.9 79 -- -- -- -- -- -- -4.0 Dec-14

HFRI Fund of Funds Composite Index 0.8 37 -2.9 45 -0.2 42 4.0 59 2.1 70 2.3 91 0.1 Dec-14eV Alt Fund of Funds - Multi-Strategy Median 0.3 -3.2 -0.9 4.6 3.3 4.0 -0.9 Dec-14

Prisma Spectrum Fund Ltd 1,004,928 3.2 0.9 33 -3.1 50 0.1 40 -- -- -- -- -- -- 0.5 Dec-14HFRI Fund of Funds Composite Index 0.8 37 -2.9 45 -0.2 42 4.0 59 2.1 70 2.3 91 0.1 Dec-14

eV Alt Fund of Funds - Multi-Strategy Median 0.3 -3.2 -0.9 4.6 3.3 4.0 -0.9 Dec-14XXXXX

December 31, 2015


42

Eastern Michigan University - Board of RegentsLong Term Investment Pool

December 31, 2015

Attribution Summary3 Months Ending December 31, 2015Wtd.

ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects

Total Equity 5.4% 5.0% 0.4% 0.1% -0.1% 0.0% 0.0%Total Fixed 0.2% -0.4% 0.5% 0.1% 0.0% 0.0% 0.2%GAA/ Risk Parity -1.1% 2.8% -3.9% -0.8% 0.0% 0.0% -0.8%Real Assets 0.0% 0.2% -0.3% 0.0% 0.0% 0.0% 0.0%Hedge Funds -0.3% 0.6% -0.9% -0.1% 0.0% 0.0% -0.1%Total 1.7% 2.3% -0.7% -0.7% -0.1% 0.1% -0.7%

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.

43

December 31, 2015

Eastern Michigan University - Board of RegentsLong Term Investment Pool

Attribution Summary1 Year Ending December 31, 2015

Wtd.ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects

Total Equity 1.0% -1.7% 2.7% 0.9% -0.2% 0.0% 0.7%Total Fixed -1.9% -1.4% -0.6% -0.1% 0.0% 0.0% -0.1%GAA/ Risk Parity -3.3% -1.7% -1.5% -0.3% 0.0% 0.0% -0.3%Real Assets -8.7% 0.0% -8.8% -0.9% 0.0% 0.0% -0.8%Hedge Funds -1.9% -0.2% -1.7% -0.2% 0.0% 0.0% -0.2%Total -1.8% -1.2% -0.7% -0.6% -0.1% 0.1% -0.7%

44

gwyniemko

Oval

gwyniemko

Line

gwyniemko

Text Box

NOTE: This page details attribution for the full calendar year

gwyniemko

Line

gwyniemko

Line

gwyniemko

Text Box

The equity portfolio, in aggregate, noticeably outperformed the benchmark during the year with significant outperformance from the global managers

gwyniemko

Text Box

While PIMCO trailed the manager benchmark during the year it significantly outperformed the commodities sector which was down 24.7% in 2015

December 31, 2015

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

3 Years Ending December 31, 2015

Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank_

Long Term Investment Pool 3.39% 77 5.47% 15 0.61 71Long Term Allocation Index -- -- -- -- -- --Long Term Balanced Index 3.82% 72 5.10% 12 0.74 60


Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank_

Long Term Investment Pool 5.10% 56 5.59% 10 0.90 18Long Term Allocation Index -- -- -- -- -- --Long Term Balanced Index 4.93% 61 4.69% 8 1.04 9

45

December 31, 2015

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

46

December 31, 2015

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

47

December 31, 2015

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

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

48

December 31, 2015

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

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

49

December 31, 2015

Eastern Michigan University - Board of RegentsTotal Fund Risk/Return


Anlzd Ret Rank Anlzd StdDev Rank

_

Total Composite 3.63% 54 3.84% 54 Allocation Index -- -- -- --

XXXXX


Anlzd Ret Rank Anlzd StdDev Rank

_

Total Composite 1.93% 65 3.69% 65 Allocation Index -- -- -- --

XXXXX

50

December 31, 2015

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

51

December 31, 2015

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

52

December 31, 2015

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

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

53

December 31, 2015

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

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

54

December 31, 2015

Eastern Michigan University - Board of RegentsTotal Fund Asset Allocation History

55

December 31, 2015

Eastern Michigan University - Board of RegentsTotal Fund Asset Growth Summary

Last ThreeMonths One Year Three Years

_

Beginning Market Value $30,514,226 $21,160,488 $43,030,600- Withdrawals -$16,846,009 -$53,025,374 -$253,127,234+ Contributions $16,933,333 $62,958,903 $236,446,017= Net Cash Flow $87,324 $9,933,528 -$16,681,217+ Net Investment Change $344,208 -$148,258 $4,596,375= Ending Market Value $30,945,758 $30,945,758 $30,945,758

_

56

December 31, 2015

Quarter Ending December 31, 2015

BeginningMarket Value Withdrawals Contributions Net Cash Flow Net Investment

ChangeEnding

Market Value_

Acadian Emerging Markets Equity $775,849 $0 $0 $0 $1,163 $777,012AQR GRP EL $1,866,789 $0 $0 $0 -$63,462 $1,803,327Artisan Global Opportunities $1,414,769 $0 $300,000 $300,000 $116,170 $1,830,939Ashmore EM Blended Debt Strategy $897,784 $0 $0 $0 -$2,623 $895,161Baird - Core Bond $2,209,784 -$1,300,000 $2,700,000 $1,400,000 -$30,388 $3,579,396Baird - Core Bond $1,018,705 $0 $0 $0 -$6,557 $1,012,148Bank of Ann Arbor Trust Cash $752,804 -$392,741 $0 -$392,741 -$11 $360,052BlackRock- SIO $2,004,029 $0 $0 $0 -$1,995 $2,002,034CopperRock International Small Cap $1,063,492 $0 $0 $0 $54,826 $1,118,318DoubleLine Low Duration $2,176,960 -$2,650,000 $7,500,000 $4,850,000 -$1,599 $7,025,360Dreyfus Institutional Preferred $2,119,514 -$5,186,180 $3,066,666 -$2,119,514 $69 $69Franklin Templeton- Global Multi-Sector Plus $910,766 $0 $0 $0 $20,223 $930,989Hexavest GE $1,383,627 $0 $300,000 $300,000 $55,371 $1,738,998Northern Inst Govt Select MMKT $2,100,017 -$2,058,639 $0 -$2,058,639 -$79 $41,299Permal Fixed Income Holdings $971,360 $0 $0 $0 -$14,680 $956,680PIMCO All Asset $1,780,536 $0 $0 $0 -$712 $1,779,824Prisma Spectrum Fund Ltd $995,490 $0 $0 $0 $9,438 $1,004,928SSgA Russell 3000 Index ETF $1,836,770 -$9,699 $0 -$9,699 $137,508 $1,964,579Standard Life GARS $2,016,598 $0 $0 $0 $22,530 $2,039,128Treasury Strips $86,797 $0 $0 $0 -$1,425 $85,372Vanguard Prime MMKT Inst $2,131,785 -$5,198,452 $3,066,667 -$2,131,785 $145 $145Total $30,514,226 -$16,795,712 $16,933,333 $137,621 $293,910 $30,945,758

XXXXX

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

57

Manager Pages

58

December 31, 2015

Eastern Michigan University - Board of RegentsSSgA Russell 3000 Index

59

December 31, 2015

Eastern Michigan University - Board of RegentsCopperRock International Small Cap

60

December 31, 2015

Eastern Michigan University - Board of RegentsAcadian Emerging Markets Equity

61

December 31, 2015

Eastern Michigan University - Board of RegentsArtisan Global Opportunities

62

December 31, 2015

Eastern Michigan University - Board of Regents Hexavest GE

63

Top Holdings as of 12/31/2015MEXICO(UTD MEX ST) 7.75% 4.9%

PORTUGAL REP 5.125% 2.8%

UNITED MEXICAN STATES7.62435% 2.2%

INDONESIA(REP OF) 8.25% 2.2%

BRAZIL FEDERATIVE REP 2.1%

URUGUAY REP 1.98625% 1.7%

INDONESIA(REP OF) 8.375% 1.6%

INDIA(GOVT OF) 8.83% 1.5%

FOEDERATIVE REPUBLIKBRASILIEN, BRAS 10% 1.5%

KOREA MONETARY STAB BOND 1.5%

Credit Quality as of 12/31/2015AAA 0.1%

AA 16.0%

A 25.2%

BBB 34.3%

BB 7.0%

B 11.2%

Below B 5.3%

Not Rated 1.0%

Maturities as of 12/31/20151 to 3 Years 19.6%

3 to 5 Years 9.7%

5 to 7 Years 10.2%

7 to 10 Years 16.8%

10 to 15 Years 5.7%

15 to 20 Years 0.0%

20 to 30 Years 0.4%

Greater than 30 Years 0.0%

Fund Characteristics as of 12/31/2015Sharpe Ratio (3 Year)

Average Duration 0.8

Average Coupon 7.1%

Average Effective Maturity 3.6

R-Squared (3 Year)

December 31, 2015

Eastern Michigan University - Board of RegentsFranklin Templeton- Global Multi-Sector Plus

Fixed Income Sectors as of 12/31/2015GOVERNMENT 54.2%

MUNICIPAL 0.0%

CORPORATE 7.8%

SECURITIZED 0.0%

CASH & EQUIVALENTS 24.8%

DERIVATIVE 0.0%

64

December 31, 2015

Eastern Michigan University - Board of RegentsBlackRock- SIO


3 to 5 Years 10.2%

5 to 7 Years 5.2%

7 to 10 Years 18.9%

10 to 15 Years 22.9%

15 to 20 Years 11.2%

20 to 30 Years 19.0%


Top Holdings as of 12/31/2015FANNIE MAE SINGLE FAMILY TBA2.5% 2030-01-01 9.5%

US TREASURY NOTE 1% 6.6%

US TREASURY NOTE 2.25% 5.1%



FED NATL MORT ASSC 3% 3.0%

FED NATL MORT ASSC 3.5% 2.7%


JAPAN (GOVERNMENT OF) 2YR#356 1.5%

US TREASURY NOTE 1.2%


AA 3.9%

A 7.9%

BBB 14.1%

BB 14.4%

B 0.0%

Below B 3.9%

Not Rated 5.8%


MUNICIPAL 2.1%

CORPORATE 17.9%

SECURITIZED 51.3%


DERIVATIVE 0.1%



Average Coupon 3.0%


R-Squared (3 Year)

Alpha (3 Year)

Beta (3 Year)

65

Top Holdings as of 12/31/2015US TREASURY BOND 3.5% 7.9%



US TREASURY BOND 5.25% 1.5%

GNMA 2.317% 0.9%

GE CAP CCMT 2012-3 FRN 0.9%

GNMA 2.317% 0.8%

FNMA 2.709% 0.8%


FHLMC 3.5% 0.6%


MUNICIPAL 2.0%

CORPORATE 42.2%

SECURITIZED 37.2%


DERIVATIVE 0.0%


AA 8.3%

A 22.2%

BBB 18.7%

BB 0.6%

B 0.1%

Below B 0.4%

Not Rated 0.0%


3 to 5 Years 20.8%

5 to 7 Years 6.6%

7 to 10 Years 12.0%

10 to 15 Years 4.0%

15 to 20 Years 8.8%

20 to 30 Years 32.0%




Average Coupon 3.5%


R-Squared (3 Year)

December 31, 2015

Eastern Michigan University - Board of RegentsBaird - Core Bond

66

December 31, 2015

Eastern Michigan University - Board of RegentsAshmore Emerging Markets Blended Debt Strategy

67

December 31, 2015

Eastern Michigan University - Board of RegentsAQR Global Risk Premium Enhanced Liquidity Fund

68

December 31, 2015

Eastern Michigan University - Board of RegentsStandard Life

69

December 31, 2015

Eastern Michigan University - Board of RegentsPIMCO All Asset

70

December 31, 2015

Eastern Michigan University - Board of RegentsPermal Fixed Income Holdings

71

Eastern Michigan University - Board of RegentsPrisma Spectrum Fund

December 31, 201572

Appendix

73

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.


December 31, 2015

74

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 DisclosuresEastern Michigan University - Board of Regents

December 31, 2015

75

eastern michigan university board of regents€¦ · – dambisa moyo, global economist and author...

Documents