investment performance analysis for the period … 2017 nmerb ipa (final + universe).pdfinvestment...

Investment Performance Analysis for the period ending June 30, 2017

August 2017

Allan Martin, PartnerMichael Miranda, Senior Analyst

Page

Market Environment Update and Outlook 3

Third Party Placement Agent Disclosure 16

Total Fund Performance 20

Appendix: Market Environment 57

ContentsNew Mexico Educational Retirement Board

2

Market Environment Update and Outlook

3

• Second quarter GDP growth rate (advance estimate) is estimated at 2.6%.– Retail sales ended May at +4.2% on a YoY basis. In the same period last year the YoY growth rate was 1.6%.– Corporate profits (ended January) as a percent of GDP decreased slightly to 9.1% from 9.2% (in October) and remain

elevated relative to historical levels.– The inventory-to-sales ratio ended May flat at 1.4 and has remained relatively flat since early 2010.– The U.S. trade deficit declined by a meager 1.8% ended May as exports increased and imports decreased.

• The unemployment rate decreased to 4.4% in Q2 from 4.5% in Q1; U-6, a broader measure ofunemployment, decreased to 8.6% during the second quarter from 8.9%.

• The Case-Shiller Home Price Index (ended May) increased to 190.6 from 185.5 in January and isat levels higher than that of pre-financial crisis levels of 150.9.

• Rolling 12-month seasonally-adjusted CPI saw a down-tick to 1.6% at the end of June from2.4% at the end of March; Capacity Utilization marginally increased to 76.6% in Q2 from 76.4%in Q1.

• Fed Funds rate was increased +0.25% to a targeted range of 1.0% - to – 1.25%. The 10-yearTreasury Yield (constant maturity) finished Q2 at 2.2% down from 2.5% in Q1.

• The Fed balance sheet decreased slightly during Q2 2017, while the European Central Bankbalance sheet continues to increase.– ECB held its benchmark refinance rate at 0%, deposit rates -0.4% and asset purchases at €60 billion per month of

corporate and public securities

• S&P valuations increased slightly in Q2 remaining above the 10-year and long-term averages.– Cyclically adjusted Shiller PE ratio (29.7x) is above the long-term average of 16.7x and above the 10-year average of 23.0x.

Economic Environment

June 30, 2017

4

Market Environment – Q2 2017 Overview

* As of 3/31/2017

June 30, 2017

Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.

World Equity Benchmarks

MSCI ACWI (Net) (USD) World 4.3% 18.8% 4.8% 10.5% 3.7%

MSCI ACWI (Local) World (Local Currency) 3.1% 19.2% 7.6% 12.4% 4.3%

Domestic Equity Benchmarks

S&P 500 Large Core 3.1% 17.9% 9.6% 14.6% 7.2%

Russell 1000 Large Core 3.1% 18.0% 9.3% 14.7% 7.3%

Russell 1000 Growth Large Growth 4.7% 20.4% 11.1% 15.3% 8.9%

Russell 1000 Value Large Value 1.3% 15.5% 7.4% 13.9% 5.6%

Russell 2000 Small Core 2.5% 24.6% 7.4% 13.7% 6.9%

Russell 2000 Growth Small Growth 4.4% 24.4% 7.6% 14.0% 7.8%

Russell 2000 Value Small Value 0.7% 24.9% 7.0% 13.4% 5.9%

International Equity Benchmarks

MSCI ACWI Ex USA World ex-US 5.8% 20.5% 0.8% 7.2% 1.1%

MSCI EAFE (Net) (USD) Int'l Developed 6.1% 20.3% 1.1% 8.7% 1.0%

MSCI EAFE (Local) Int'l Developed (Local Currency) 2.7% 22.1% 7.0% 12.5% 2.0%

S&P EPAC Small Cap Small Cap Int'l 8.9% 23.4% 5.9% 13.2% 3.6%

MSCI EM Emerging Equity 6.3% 23.7% 1.1% 4.0% 1.9%

Domestic Fixed Income Benchmarks

Barclays Aggregate Core Bonds 1.4% -0.3% 2.5% 2.2% 4.5%

Barclays US High Yield High Yield 2.2% 12.7% 4.5% 6.9% 7.7%

BofA ML US HY BB/B High Yield 2.2% 11.2% 4.5% 6.7% 7.1%

CSFB Levered Loans Bank Loans 0.8% 7.5% 3.5% 4.8% 4.2%

BofA ML US 3-Month T-Bill Cash 0.2% 0.5% 0.2% 0.2% 0.6%

Barclays US TIPS 1-10 Yr Inflation -0.4% -0.3% 0.3% 0.3% 3.6%

Global Fixed Income Benchmarks

Citigroup WGBI World Gov. Bonds 2.9% -4.1% -1.0% -0.2% 3.5%

Barclays Global Aggregate Global Core Bonds 2.6% -2.2% -0.4% 0.8% 3.7%

BC Global Credit Global Bonds 3.4% 2.2% 0.9% 2.8% 4.3%

JPM GBI-EM Glob. Diversified Em. Mkt. Bonds (Local Currency) 3.6% 6.4% -2.8% -0.7% 4.0%

JPM EMBI+ Em. Mkt. Bonds 2.4% 3.7% 4.8% 5.0% 7.2%

Alternative Benchmarks

Bloomberg Commodity Index Commodities -3.0% -6.5% -14.8% -9.2% -6.5%

Credit Suisse Hedge Fund Index Hedge Fund 0.8% 5.8% 1.6% 4.5% 3.2%

HFRI FoF Conservative Fund of Hedge Funds 0.5% 5.3% 1.5% 3.6% 0.8%

Cambridge PE Lagged* Private Equity 4.3% 17.8% 10.3% 12.7% 9.8%

NCREIF ODCE Net Lagged* Real Estate 1.5% 7.4% 10.8% 10.9% 4.6%

Wilshire REIT Index REIT 1.8% -1.7% 8.3% 9.3% 5.6%

CPI + 2% Inflation/Real Assets 0.5% 3.7% 2.9% 3.3% 3.7%

5

Global Equity

• U.S. equities as measured by the S&P 500 posted moderate gains in the second quarter (+3.1%).

• Small cap stocks underperformed large cap stocks during the quarter, with the Russell 2000 Index returning 2.5% and the Russell 1000 Index returning 3.1%.

• International equities outperformed U.S. markets during the quarter, returning 5.8%, as measured by the MSCI ACWI ex-U.S. Index. Emerging markets returned 6.3% as measured by the MSCI Emerging Markets Index in U.S. dollar terms. – Developed international markets returned 6.1% in USD terms, while in local currency terms returned

2.7% as measured by the MSCI EAFE Index.

Private Equity

• Capital commitment momentum continued in Q2 2017.

• Private equity fundraising totaled $121 billion in Q2 2017.– North America focused private equity funds raised $67.5 billion.– Asia focused private equity funds raised $18.2 billion.– Europe focused private equity raised $32.5 billion.

• Private equity dry powder continued its increase to $906 billion ended Q2 up from $842 billion ended Q1.

Market Environment

June 30, 2017

6

Fixed Income

• The nominal yield curve continued to flatten in Q2. Intermediate –to- long term yields declined 4 –to- 18 basis points across five to 30 year treasury bonds while short term yields increased 10 –to- 27 basis points across terms under one year.

• The spread between two and 10 year rates decreased to 93 basis points from 113 basis points in Q2.

• Treasury Inflation-Protected Securities, or TIPS, returned -0.4% during the quarter, as measured by the BBg Barclays US TIPS 1-10 Yr Index.

• The BBg Barclays Long Duration Credit Index gained 4.70%.

• Long Treasuries gained 3.96% and investment-grade US corporate debt gained 1.4%.

• The BBg Barclays 1-3 year US Government/ Credit Index returned 0.31%. US high yield bonds gained 2.2% driven by tighter spreads.

• Emerging markets debt had moderate –to- strong gains. – US dollar-denominated debt, as measured by the JP Morgan EMBI Index, gained 2.4%; local

currency debt gained 3.6%, according to the JP Morgan GBI-EM BD Index.

Market Environment

June 30, 2017

7

Real Assets/Inflation-Linked Assets

• Energy remains attractive despite volatile oil prices. – Private equity and debt opportunities are attractive.

– Fire sale prices never materialized but focusing on assets outside of the hottest zip codes provides potential for strong returns as market normalizes.

• Infrastructure – select opportunities to access growth markets. – High quality assets are receiving premium bids from direct investors (Pension Funds and Sovereigns)

with low costs of capital and long hold horizons; focus on mismanaged or niche opportunities.

• Metals & Mining – have commodity prices bottomed?– Peak capex occurred in 2012, lagging commodity price drops that began in 2011.

– Diverse demand drivers for underlying commodity prices.

• Timber – low return potential and limited opportunity for outperformance.

• Agriculture – near-term slowdown in price appreciation creates opportunity to invest in a strong (very) long term outlook supported by demographic trends.

Market Environment

June 30, 2017

8

Commodities

• Commodities ended the quarter down 3.0% as measured by the Bloomberg Commodity Index.– Agricultural commodities and energy price weakness contributed to the quarter’s losses.

Real Estate

• NEPC continues to be neutral on core real estate in the US and remains positive on non-core real estate, that is, value-add and opportunistic strategies.

• Real estate fundamentals (rent growth, occupancy, net absorption) remain strong; however, valuations are high on an absolute and relative basis.– Rising interest rates have been baked into existing valuations but excess cap rate expansion (beyond

general expectations) will reset valuations.

• Overall, the non-core real estate investment environment in the U.S. is normalizing; however, select areas remain attractive.

• Europe is viewed as the best place for a marginal dollar of non-core real estate investment. – Current US-dollar denominated investors with currency exposure will feel near-term impact of Brexit,

but new investors may benefit from a strong US-dollar. Long-term Brexit and broader European political instability, however, are unclear.

Market Environment

June 30, 2017

9

Economic cycles don’t die of old ageWe believe the US economy is in an extended expansionary cycle despite being eight years removed from the last recession

The health of US consumers continue to drive economic growth given relatively low debt levels

A prolonged US economic expansion can support a continued rally for US equities despite elevated valuation levels

US recession concerns are mutedThe US economy appears on a path ofslow but steady growth as excesscapacity is gradually absorbed by theeconomy

The labor market recovery has beenstrong but slack remains as many haveyet to return to the workforce

Key Market Themes

Source: FRED

Extended US Economic Cycle

June 30, 2017

10

The Federal Reserve is expected toslowly increase interest rates

Expected path of Fed policy through2019 matters more than timing of thenext hike as the disconnect betweenmarket expectations and Fed signalinghas grown

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

Reduction of the Fed balance sheetwill likely be a gradual process

The market impact is untested but theFed has announced a specific scheduleto not reinvest a portion of the balancesheet securities that mature

Politics could intersect with Fed policyas Fed Chair Janet Yellen’s term is setto expire in February 2018

Key Market Themes

Source: Fed, Bloomberg

Source: Fed, Bloomberg, NEPCForecast based on the June Fed Minutes: MBS assumes $4B per month for 3-month intervals over 12 months with a $20B cap; Treasuries

assume $6B per month for 3-month intervals over 12 months with a $30B cap; Other Securities are assumed to stay constant

Federal Reserve Gradualism

June 30, 2017

11

What does this mean for thefuture path of rate hikes?

“The evolution of the economy will warrant gradual increases in the federal funds rate over time to achieve and maintain maximum employment and

stable prices.”- Fed Chair Janet Yellen July 12th, 2017

What implications does this havefor other central banks?

ECB: “A very substantial degree of monetaryaccommodation is still needed for underlyinginflation pressures to gradually build…”– ECB President Mario Draghi July 20th, 2017

BoJ: Though the monetary stimulus programremained unchanged in July, the 2% inflationtarget was postponed further – indicatingongoing stimulus measures will continue to benecessary

0.0%

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3.5%

4.0%

4.5% June Fed Dot Plot

Long Term20192017 2018

Despite Transparency, a Number of Outstanding Questions Remain…

Source: Fed, NEPC

Source: Bloomberg, Federal Reserve, Bank of Japan, ECB, NEPC

$0

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June 30, 2017

12

The Fed’s Challenge

“With further gradual adjustments in the stance of monetary policy, the economy will continue to expand at a moderate pace over the next couple of years, with the job market strengthening

somewhat further and inflation rising to 2%”- Fed Chair Janet Yellen July 12th, 2017

Source: Bureau of Labor StatisticsRepresents employed persons as a percentage of age 16+ population

Source: Bureau of Labor Statistics, Bloomberg

58%

59%

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61%

62%

63%

64%

65%

66%

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Employment : Working‐Age Population

0.0%

1.0%

2.0%

3.0%

4.0%

5.0% YoY Real Wage Growth

• The ongoing challenge for the Fed will be to balance continued strength in the labor market with lagging inflation– Even with sustained improvements in unemployment, there has been significant difficulty

reaching the 2% inflation target

• Despite historically low unemployment, structural changes in demographics and the labor pool have introduced uncertainty regarding the remaining slack in the labor force

June 30, 2017

13

China is the global growth enginebut faces fundamental transitions

China’s economic transition is pivotingfrom a production to a service andconsumption based economy

Fixed investment is required to sustainthe production based economy andsupport labor force migration

Any disruption to these transitions willhave global repercussions due toChina’s role in the global economy

China’s government is negotiatinga balance between deleveragingand near term economic growth

Unrestrained growth in credit and realestate markets pose a systematic risk

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

Key Market Themes

Source: China Foreign Exchange Trade System, Bloomberg

Source: Bank for International Settlements

China Transitions

0%

1%

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7%

2006 2008 2010 2012 2014 2016

3‐Month SHIBOR

75%85%95%105%115%125%135%145%155%165%175%

0%5%

10%15%20%25%30%35%40%45%50%

2006

2007

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2010

2011

2012

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2015

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China Credit (as % of GDP)

Household Credit (LHS)Non‐Financial Credit (RHS)

June 30, 2017

14

NEPC Insights• 2017 First Quarter Market Thoughts (April 2017)• The French Election – A Sigh of Relief (May 2017)• An Insight into a Goals-Based Asset Allocation Framework

(May 2017)• The Essential Guide to Third-Party Valuations for Hedge Fund

Investors (May 2017)• Market Chatter: What’s Next for Puerto Rico Bondholders?

(June 2017)• Are US Equities Falling out of Favor? (June 2017)

Highlights of Second Quarter Happenings at NEPCJune 30, 2017

Conference Recap• NEPC hosted its 22nd Annual Investment Conference in Boston

in May. This year’s agenda focused on the uncertainty and challenges facing investors today. Over 200 NEPC clients attended the panel discussions, keynote presentations and breakout sessions. Thank you to everyone who took time out of their schedules to make this conference our biggest and, according to our attendees, our best one yet! Check out some pictures from the event here: http://info.nepc.com/nepc-22nd-annual-investment-conference

Webinar Replays• NEPC’s 7th Annual Investment Manager Webinar (May 2017)

Recent Updates• Chief Investment Officer’s 6th annual list of

the world’s most influential investment consultants includes NEPC’s Allan Martin, Partner on the Public Funds team.

• Healthcare Financial Management Association (HFMA) has awarded NEPC’s Healthcare practice with the “Peer Reviewed by HFMA ®” designation.*

NEPC Gives Back • NEPC's Stacey Flier, CFA, Private Wealth

Senior Consultant, hosted an educational day to discuss the importance of education and preparing for future careers to a group of 7th grade girls that attend St. Andrew Nativity School, a college-prep middle school in Portland, OR, that provides education for low-income, primarily minority, students of all religious backgrounds.

• NEPC participated in the J.P. Morgan Corporate Challenge Series, a world-wide series of 3.5-mile running events open to groups from organizations within the business and public sectors in Boston. The Corporate Challenge is set up to be the world's greenest road race, and this year the race made a donation to the Boston Children's Hospital Trust.

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

*HFMA staff and volunteers determined that this business solution has met specific criteria developed under the HFMA Peer Review Process. HFMA does not endorse or guarantee the use of this business solution.

15

Third Party Placement Agent Disclosure

16

The New Mexico Educational Retirement Board Policy Regarding Placement Agent Disclosures requires that quarterly performance reports to the Board include information regarding any third-party marketers that were used by recipients of investments including any fee, commission or retainer paid by the hired fund to the third-party marketer for services rendered. These fees are not paid by NMERB but are paid by the hired funds for marketing services to the third-party.

The following investments were approved by the NMERB Investment Committee during the quarter, with disclosures made under the policy:

Fidelity Select InternationalThe contract extension was approved for a $271 million commitment on April 20, 2017 as part of the Fund’s allocation to Non-US Developed Markets Equity.

Fidelity has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Fidelity has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Blackrock MSCI EAFEThe contract extension was approved for a $286 million commitment on April 20, 2017 as part of the Fund’s allocation to Non-US Developed Markets Equity.

Blackrock has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Blackrock has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Neuberger Berman Emerging Markets EquityThe contract extension was approved for a $312 million commitment on April 20, 2017 as part of the Fund’s allocation to Non-US Emerging Markets Equity.

Neuberger Berman has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Neuberger Berman has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Mondrian Emerging Markets Small CapThe contract extension was approved for a $359 million commitment on April 20, 2017 as part of the Fund’s allocation to Non-US Emerging Markets Equity.

Mondrian has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Mondrian has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Third Party Placement Agent DisclosureNew Mexico Educational Retirement Board

June 30, 2017

17

One William StreetThe investment was approved for a $100 million commitment on June 22, 2017 as part of the Fund’s allocation to Opportunistic Credit.

One William Street has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, One William Street has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

GT NM, LPThe contract extension was approved for a $174 million commitment on June 22, 2017 as part of the Fund’s allocation to Opportunistic Credit.

GT NM, LP has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, GT NM, LP has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Z Capital Special Situations Fund IIIThe investment was approved for a $50 million commitment on April 22, 2017 as part of the Fund’s allocation to Private Equity.

Z Capital has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Z Capital has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Water Property Investors IIThe investment was approved for a $30 million commitment on April 22, 2017 as part of the Fund’s allocation to Real Assets.

Water Asset Management has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Water Asset Management has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Stonepeak CreditThe investment was approved for a $25 million commitment on April 22, 2017 as part of the Fund’s allocation to Real Assets.

Stonepeak has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Stonepeak has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.


June 30, 2017

18

I Squared IIThe investment was approved for a $50 million commitment on June 22, 2017 as part of the Fund’s allocation to Real Assets.

I Squared has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, I Squared has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

Five Point Midstream Fund IIIThe investment was approved for a $40 million commitment on June 22, 2017 as part of the Fund’s allocation to Real Assets.

Five Point has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Five Point has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.

BrookfieldThe contract extension was approved for a $248 million commitment on June 22, 2017 as part of the Fund’s allocation to Real Estate.

Brookfield has provided documentation confirming no placement agent was used in connection with the NMERB’s investment.

Additionally, Brookfield has completed the ERB Campaign Contribution Disclosure and reports no applicable campaign contributions.


June 30, 2017

19

Total Fund PerformanceNote: All of the data shown on the following pages is as of June 30, 2017 and reflects the deduction of investment manager fees, unless otherwise noted.

20

5 Years Ending June 30, 2017

Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank SortinoRatio Rank

_

Total Fund 8.7% 48 4.7% 7 1.8 4 3.0 7Policy Index 7.8% 71 4.9% 11 1.6 28 2.7 22InvestorForce Public DB > $1BNet Median 8.6% -- 5.7% -- 1.4 -- 2.3 --

XXXXX


Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank SortinoRatio Rank

_

Total Fund 6.1% 7 5.0% 6 1.2 4 1.9 4Policy Index 5.4% 32 5.3% 20 1.0 17 1.7 9InvestorForce Public DB > $1BNet Median 4.9% -- 5.9% -- 0.8 -- 1.2 --

New Mexico Educational Retirement BoardTotal Fund Performance Summary (Net of Fees)

June 30, 2017

The InvestorForce Public Funds >$1 Billion Net Universe contains 65 observations for the period ending June 30, 2017, with total assets of $556 billion.

Market Value 3 Mo Rank YTD Rank 1 Yr Rank 3 Yrs Rank 5 Yrs Rank 10 Yrs Rank 15 Yrs Rank 20 Yrs Rank 30 Yrs Rank Return Since_

Total Fund $12,333,534,379 2.8% 55 7.1% 66 12.0% 71 6.1% 7 8.7% 48 5.2% 27 7.3% 27 6.4% 40 8.6% 10 9.1% Jul-83Policy Index 2.7% 65 6.9% 73 12.1% 67 5.4% 32 7.8% 71 4.6% 66 6.8% 49 6.2% 58 7.8% 58 -- Jul-8360% MSCI ACWI (Net) /40% CITI WGBI 3.7% 11 8.6% 14 9.1% 96 2.6% 94 6.3% 94 4.0% 83 6.5% 68 -- -- -- -- -- Jul-83

InvestorForce Public DB> $1B Net Median 2.9% 7.4% 12.7% 4.9% 8.6% 4.8% 6.8% 6.3% 7.8% 8.6% Jul-83

XXXXX

Over the past five years, the Fund returned 8.7% per annum, outperforming the policy index by 90 basis points and ranking in the 48th percentile of the InvestorForce Public Funds > $1 Billion universe. The Fund’s volatility was 4.7%, which ranks in the 7th percentile of its peers over this period. The Fund’s risk-adjusted performance, as measured by the Sharpe Ratio, ranks in the 4th percentile of its peers.

Over the past three years, the Fund returned 6.1% per annum, outperforming the policy index by 70 basis points and ranking in the 7th percentile of its peer group. Over the same period, the Fund's volatility ranks in the 6th percentile of its peers, resulting in a three-year Sharpe Ratio of 1.2, which ranks in the 4th percentile.

For the year ending June 30, 2017, the Fund experienced a net investment gain of $1.36 billion, which includes a net investment gain of $341.2 million during the quarter. Assets increased from $11.4 billion twelve months ago to $12.3 billion on June 30, 2017, with $389 million in net distributions during the year. The Fund returned 12.0%, underperforming the policy index by 10 basis points and ranking in the 71st percentile of its peers.

All asset classes were within policy range as of June 30, 2017.

21

June 30, 2017

New Mexico Educational Retirement BoardTotal Fund Asset Growth Summary

Last ThreeMonths Year-To-Date One Year Three Years Five Years Since

10/1/05_

Beginning Market Value $12,076,800,316 $11,683,011,729 $11,366,601,630 $11,274,476,583 $9,413,328,925 $7,694,652,364Net Cash Flow -$84,442,760 -$184,633,074 -$389,012,801 -$1,042,835,872 -$1,670,989,156 -$3,176,237,374Net Investment Change $341,176,824 $835,155,725 $1,355,945,550 $2,101,893,668 $4,591,194,610 $7,815,119,389Ending Market Value $12,333,534,379 $12,333,534,379 $12,333,534,379 $12,333,534,379 $12,333,534,379 $12,333,534,379

_

22

Current Allocation

PolicyTarget

1Long-Term Policy Target approved by the Board in June 2014.

Asset allocation targets approved in June 2016 as a result of the asset/liability study that was conducted will be reported at a future date. Note: Allocations shown here include cash held in separately managed portfolios.

Totals may not add to 100% due to rounding. Total Plan includes Legacy Assets portfolio totaling $58,345.

New Mexico Educational Retirement BoardTotal Fund Asset Allocation vs. Policy Targets

June 30, 2017

Current Mkt ValueCurrent

Allocation Policy Target1 Difference Policy Range Within Range

Equity $4,105,336,761 33.3% 35.0% -1.7% 20% - 55% YesU.S. Equity $2,306,612,638 18.7% 20.0% -1.3% 15% - 30% Yes

U.S. Large Cap Equity $2,009,687,198 16.3% 18.0% -1.7% 15% - 25% YesU.S. Small/Mid Cap Equity $296,925,440 2.4% 2.0% 0.4% 0% - 5% Yes

Non-U.S. Equity $1,798,724,123 14.6% 15.0% -0.4% 5% - 25% YesNon-U.S. Developed Mkts $592,992,257 4.8% 5.0% -0.2% 0% - 10% YesNon-U.S. Emerging Mkts $1,205,731,866 9.8% 10.0% -0.2% 5% - 15% Yes

Fixed Income $3,515,861,684 28.5% 28.0% 0.5% 10% - 40% YesCore Fixed Income $983,174,925 8.0% 6.0% 2.0% 0% - 15% Yes

Opportunistic Credit $2,316,650,789 18.8% 20.0% -1.2% 0% - 30% YesEmerging Mkts Debt $216,035,970 1.8% 2.0% -0.2% 0% - 8% Yes

Alternatives $4,303,750,981 34.9% 36.0% -1.1% 10% - 40% YesAbsolute Return $577,139 0.0% 0.0% 0.0% 0% - 10% Yes

Global Asset Allocation/Risk Parity $1,230,523,551 10.0% 10.0% 0.0%Global Asset Allocation $601,965,199 4.9% 5.0% -0.1% 0% - 10% Yes

Risk Parity $628,558,353 5.1% 5.0% 0.1% 0% - 10% Yes

Real Estate $899,639,445 7.3% 7.0% 0.3% 0% - 10% YesREITs $356,322,243 2.9% 3.0% -0.1%

Private Real Estate $543,317,202 4.4% 4.0% 0.4%

Private Equity $1,393,923,377 11.3% 11.0% 0.3% 0% - 15% Yes

Inflation-Linked Assets $779,087,468 6.3% 8.0% -1.7% 0% - 12% Yes

Cash $408,526,608 3.3% 1.0% 2.3% 0% - 10% Yes

Total $12,333,534,379 100.0% 100.0% 0.0%

23

June 30, 2017

New Mexico Educational Retirement BoardTotal Fund Asset Allocation History

24

New Mexico Educational Retirement BoardTotal Fund Allocations vs. Peer Universe

June 30, 2017

25

Note: Ranks are based on net returns.

New Mexico Educational Retirement BoardTotal Fund Risk/Return

June 30, 2017

26


New Mexico Educational Retirement BoardTotal Fund Risk/Return

June 30, 2017

27

Note: Ranks are based on net returns. Universe contains 65 observations with total assets of $556 billion.

June 30, 2017

New Mexico Educational Retirement BoardTotal Fund Risk Statistics vs. Peer Universe

Total Fund vs. InvestorForce Public DB > $1B Net (USD) (peer)1 Year

28


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31

Note: Returns are net of fees. The graph on the right side shows composite level sharpe ratios.

New Mexico Educational Retirement Board3 Year Risk/Return Profile

June 30, 2017

32

Note: Returns are net of fees. The graph on the right side shows composite level sharpe ratios.

New Mexico Educational Retirement Board5 Year Risk/Return Profile

June 30, 2017

33

June 30, 2017

New Mexico Educational Retirement BoardRolling 5 Year Excess Returns - Net of Fees

34

Attribution Summary3 Months Ending June 30, 2017

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

TotalEffects

U.S. Large Cap EquityComposite 3.0% 3.1% -0.1% 0.0% 0.0% 0.0%

U.S. Small/Mid Cap EquityComposite 3.3% 2.1% 1.2% 0.0% 0.0% 0.0%

Non-U.S. Developed MktsEquity Composite 6.3% 6.1% 0.2% 0.0% 0.0% 0.0%

Non-U.S. Emerging MktsEquity Composite 5.0% 6.3% -1.2% -0.1% 0.0% -0.1%

Core Fixed IncomeComposite 1.5% 1.4% 0.1% 0.0% 0.0% 0.0%

Non-U.S. Emerging MarketDebt Composite 2.3% 2.9% -0.6% 0.0% 0.0% 0.0%

Opportunistic CreditComposite 1.6% 1.5% 0.1% 0.0% 0.0% 0.0%

Absolute Return Composite -2.0% 0.7% -2.7% 0.0% 0.0% 0.0%Global AssetAllocation/Risk ParityComposite

0.3% 0.9% -0.6% -0.1% 0.0% -0.1%

Public Real EstateComposite 1.9% 1.8% 0.1% 0.0% 0.0% 0.0%

Private Real EstateComposite 4.4% 1.8% 2.6% 0.1% 0.0% 0.1%

Private Equity Composite 4.8% 4.3% 0.5% 0.0% 0.0% 0.0%Real Assets Composite 2.5% 1.0% 1.5% 0.1% 0.0% 0.1%Cash 0.2% 0.2% 0.0% 0.0% 0.0% 0.0%Total 2.8% 2.7% 0.1% 0.1% 0.0% 0.1%

New Mexico Educational Retirement BoardTotal Fund Attribution Analysis

Note: Plan attribution calculations are net returns based and the results shown reflect the composites shown. As a result, the total returns shown may vary from the calculated return shown on the performance summary. May not add due to rounding.

June 30, 201735

Attribution Summary1 Year Ending June 30, 2017

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

TotalEffects

U.S. Large Cap EquityComposite 17.6% 17.9% -0.3% 0.0% -0.1% -0.1%


Non-U.S. Developed MktsEquity Composite 19.3% 20.3% -1.0% 0.0% 0.0% -0.1%


Core Fixed IncomeComposite 0.5% -0.3% 0.9% 0.1% -0.3% -0.2%

Non-U.S. Emerging MarketDebt Composite 8.6% 6.3% 2.3% 0.0% 0.0% 0.1%


Absolute Return Composite 5.1% 2.5% 2.6% 0.0% 0.0% 0.0%Global AssetAllocation/Risk ParityComposite

6.9% 6.1% 0.8% 0.1% 0.0% 0.1%

Public Real EstateComposite -0.2% -1.7% 1.5% 0.1% 0.1% 0.1%


Private Equity Composite 16.9% 17.8% -0.9% -0.1% 0.0% -0.1%Real Assets Composite 8.7% 5.7% 3.0% 0.2% 0.2% 0.3%Cash 0.7% 0.5% 0.2% 0.0% -0.1% -0.1%Total 12.0% 12.1% -0.1% 0.3% -0.3% -0.1%



June 30, 201736

Attribution Summary3 Years Ending June 30, 2017

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

TotalEffects

U.S. Large Cap EquityComposite 9.6% 9.6% 0.0% 0.0% 0.0% 0.0%


Non-U.S. Developed MktsEquity Composite 1.1% 1.1% -0.1% 0.0% 0.0% 0.0%

Non-U.S. Emerging MktsEquity Composite 0.9% 1.1% -0.2% 0.0% 0.0% -0.1%

Core Fixed IncomeComposite 2.7% 2.5% 0.3% 0.0% -0.1% 0.0%

Non-U.S. Emerging MarketDebt Composite 1.4% -3.3% 4.7% 0.1% 0.0% 0.1%



1.5% 1.8% -0.2% 0.0% 0.0% 0.0%

Public Real EstateComposite 6.6% 8.3% -1.7% -0.1% -0.1% -0.1%


Private Equity Composite 14.3% 10.3% 4.0% 0.3% 0.0% 0.3%Real Assets Composite 6.8% 4.9% 1.8% 0.1% 0.0% 0.1%Cash 0.5% 0.2% 0.2% 0.0% 0.0% 0.0%Total 6.1% 5.4% 0.7% 0.9% -0.3% 0.7%

June 30, 2017


Note: Plan attribution calulations are net returns based and the results shown reflect the composites shown. As a result, the total returns shown may vary from the calculated return shown on the performance summary. May not add due to rounding.

37

Attribution Summary5 Years Ending June 30, 2017

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

TotalEffects

U.S. Large Cap EquityComposite 14.6% 14.6% 0.0% 0.0% 0.0% 0.0%


Non-U.S. Developed MktsEquity Composite 8.1% 8.7% -0.5% 0.0% 0.0% 0.0%


Core Fixed IncomeComposite 2.8% 2.2% 0.6% 0.1% 0.0% 0.1%

Non-U.S. Emerging MarketDebt Composite 2.1% -1.0% 3.1% 0.1% 0.0% 0.1%



3.3% 5.2% -1.9% -0.1% 0.0% -0.1%

Public Real EstateComposite 9.0% 9.3% -0.3% 0.0% -0.1% -0.1%


Private Equity Composite 14.8% 12.7% 2.0% 0.2% 0.0% 0.1%Real Assets Composite 6.1% 5.3% 0.8% 0.1% 0.1% 0.1%Cash 0.5% 0.2% 0.3% 0.0% 0.0% 0.0%Total 8.7% 7.8% 0.9% 0.9% -0.1% 0.8%

June 30, 2017



38


% of Tot Anlzd Ret Rank Anlzd Std Dev Rank Anlzd AJ Rank Tracking Error Rank Info Ratio Rank Beta_

Opportunistic Credit Composite 18.8% 6.0% -- 2.3% -- 4.3% -- 3.0% -- 0.6 -- 0.4

50% Credit Suisse Leveraged Loan Index /50% BofA ML US HY BB-B RatedConstrained Index

-- 4.0% -- 3.9% -- 0.0% -- 0.0% -- -- -- 1.0

Global Asset Allocation/Risk Parity Composite 10.0% 1.5% 64 6.3% 18 -0.4% 43 4.8% 58 -0.3 37 0.7

GAA/Risk Parity Custom Index -- 2.9% 9 7.0% 59 0.0% 36 0.0% 1 -- -- 1.0XXXXX

1 - Performance for Equity, Fixed Income, and Emerging Mkt Debt, Opportunistic Credit and GAA/Risk Parity composites are net of fees.Note: Percent of Total equals 96.8% because Absolute Return Composite and Cash Composite are not included.

June 30, 2017

New Mexico Educational Retirement BoardTotal Fund Risk Statistics



U.S. Large Cap Equity Composite 16.3% 9.6% 4 10.3% 12 0.0% 12 0.2% 1 -0.2 26 1.0

S&P 500 -- 9.6% 3 10.4% 14 0.0% 12 0.0% 1 -- -- 1.0

U.S. Small/Mid Cap Equity Composite 2.4% 7.2% 91 12.8% 99 0.7% 3 3.5% 94 0.1 14 0.9

NMERB Small/Mid Cap Equity BlendedIndex -- 6.9% 92 13.3% 99 0.0% 12 0.0% 1 -- -- 1.0

Non-U.S. Developed Mkts Equity Composite 4.8% 1.1% 49 11.9% 68 0.0% 50 1.3% 3 0.0 50 1.0

MSCI EAFE -- 1.1% 49 12.4% 87 0.0% 49 0.0% 1 -- -- 1.0

Non-U.S. Emerging Mkts Equity Composite 9.8% 0.9% 60 13.7% 20 0.0% 60 3.5% 46 0.0 60 0.8

MSCI Emerging Markets -- 1.1% 58 16.1% 95 0.0% 59 0.0% 1 -- -- 1.0

Core Fixed Income Composite 8.0% 2.7% 69 2.9% 52 0.2% 77 0.4% 7 0.6 21 1.0

BBgBarc US Aggregate TR -- 2.5% 78 2.9% 41 0.0% 86 0.0% 1 -- -- 1.0

Non-U.S. Emerging Market Debt Composite 1.8% 1.4% 43 6.7% 25 3.4% 5 4.1% 77 1.1 1 0.6

Non-U.S. EMD Custom Benchmark -- -3.3% 69 10.0% 68 0.0% 54 0.0% 1 -- -- 1.0XXXXX

39



Real Estate Composite 7.3% 10.6% 58 8.0% 97 11.8% 9 9.4% 96 0.0 53 -0.1

NCREIF Property Index -- 10.2% 74 4.3% 31 0.0% 82 0.0% 1 -- -- 1.0

Private Equity Composite 11.3% 14.3% 6 4.1% 13 15.5% 7 7.8% 50 0.5 10 -0.1

Cambridge Associates US All PE (1 QtrLag) -- 10.3% 51 5.8% 73 0.0% 93 0.0% 1 -- -- 1.0

Real Assets Composite 6.3% 6.8% 6 3.8% 15 5.2% 22 3.8% 22 0.5 51 0.3

CPI + 4% (Seasonally Adjusted) -- 4.9% 19 0.8% 1 0.0% 58 0.0% 1 -- -- 1.0XXXXX


June 30, 2017


40



Opportunistic Credit Composite 18.8% 9.2% -- 2.5% -- 6.5% -- 2.7% -- 1.3 -- 0.5

50% Credit Suisse Leveraged Loan Index /50% BofA ML US HY BB-B RatedConstrained Index

-- 5.8% -- 3.4% -- 0.0% -- 0.0% -- -- -- 1.0

Global Asset Allocation/Risk Parity Composite 10.0% 3.3% 94 6.1% 20 -1.7% 63 4.6% 63 -0.8 88 0.7

GAA/Risk Parity Custom Index -- 7.0% 1 6.5% 25 0.0% 28 0.0% 1 -- -- 1.0XXXXX


June 30, 2017




U.S. Large Cap Equity Composite 16.3% 14.6% 16 9.5% 8 0.1% 14 0.2% 1 0.0 35 1.0

S&P 500 -- 14.6% 15 9.6% 9 0.0% 20 0.0% 1 -- -- 1.0

U.S. Small/Mid Cap Equity Composite 2.4% 14.6% 16 12.1% 99 1.1% 3 3.1% 91 0.2 11 1.0

NMERB Small/Mid Cap Equity BlendedIndex -- 14.0% 60 12.2% 99 0.0% 20 0.0% 1 -- -- 1.0

Non-U.S. Developed Mkts Equity Composite 4.8% 8.1% 50 11.3% 79 -0.2% 76 1.3% 7 -0.4 76 1.0

MSCI EAFE -- 8.7% 39 11.7% 89 0.0% 62 0.0% 1 -- -- 1.0

Non-U.S. Emerging Mkts Equity Composite 9.8% 3.2% 91 13.1% 35 -0.4% 72 3.0% 29 -0.3 81 0.9

MSCI Emerging Markets -- 4.0% 43 14.4% 92 0.0% 68 0.0% 1 -- -- 1.0

Core Fixed Income Composite 8.0% 2.8% 63 2.9% 49 0.6% 72 0.5% 11 1.3 11 1.0

BBgBarc US Aggregate TR -- 2.2% 87 2.9% 34 0.0% 94 0.0% 1 -- -- 1.0

Non-U.S. Emerging Market Debt Composite 1.8% 2.1% 31 6.6% 8 2.7% 7 4.1% 88 0.8 1 0.6

Non-U.S. EMD Custom Benchmark -- -1.0% 67 10.0% 65 0.0% 40 0.0% 1 -- -- 1.0XXXXX

41



Real Estate Composite 7.3% 11.6% 24 7.1% 97 13.0% 8 8.6% 96 0.1 44 -0.2

NCREIF Property Index -- 10.5% 70 4.3% 36 0.0% 87 0.0% 1 -- -- 1.0

Private Equity Composite 11.3% 14.8% 13 4.1% 18 14.8% 8 7.8% 47 0.3 11 0.0

Cambridge Associates US All PE (1 QtrLag) -- 12.7% 30 6.6% 93 0.0% 93 0.0% 1 -- -- 1.0

Real Assets Composite 6.3% 6.1% 24 3.7% 7 2.7% 31 3.7% 24 0.2 62 0.6

CPI + 4% (Seasonally Adjusted) -- 5.3% 30 0.8% 1 0.0% 61 0.0% 1 -- -- 1.0XXXXX


June 30, 2017


42

New Mexico Educational Retirement BoardPerformance Detail - Total Fund and U.S. Equity

June 30, 2017

1 - U.S. Small/Mid Cap Equity Composite includes the performance history of the U.S. Small Cap Equity Composite through November 2011.2 - NMERB Small/Mid Cap Equity Blended Benchmark is the Russell 2000 Index through November 2011 and the Russell 2500 Index from December 2011 - forward.3 - Total Fund market value includes $58,345 from Legacy Assets.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD

(%) Rank 1 Yr(%) Rank 3 Yrs

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

(%) Rank Return(%) Since

_

Total Fund 12,333,534,379 100.0 2.8 55 7.1 66 12.0 71 6.1 7 8.7 48 5.2 27 9.1 Jul-83Policy Index 2.7 65 6.9 73 12.1 67 5.4 32 7.8 71 4.6 66 -- Jul-83

Over/Under 0.1 0.2 -0.1 0.7 0.9 0.660% MSCI ACWI (Net) / 40% CITI WGBI 3.7 11 8.6 14 9.1 96 2.6 94 6.3 94 4.0 83 -- Jul-83

InvestorForce Public DB > $1B Net Median 2.9 7.4 12.7 4.9 8.6 4.8 8.6 Jul-83U.S. Equity Composite 2,306,612,638 18.7 3.1 44 9.2 24 18.2 75 9.3 9 14.6 16 7.0 52 11.2 Jan-85

Russell 3000 3.0 45 8.9 40 18.5 68 9.1 17 14.6 27 7.3 21 11.1 Jan-85Over/Under 0.1 0.3 -0.3 0.2 0.0 -0.3 0.1InvestorForce Public DB > $1 Billion US Equity Net Median 2.9 8.6 19.0 8.5 14.3 7.0 11.2 Jan-85

U.S. Large Cap Equity Composite 2,009,687,198 16.3 3.0 45 9.2 25 17.6 90 9.6 4 14.6 16 7.0 51 6.0 Aug-99S&P 500 3.1 34 9.3 23 17.9 86 9.6 3 14.6 15 7.2 30 5.4 Aug-99

Over/Under -0.1 -0.1 -0.3 0.0 0.0 -0.2 0.6InvestorForce Public DB > $1 Billion US Equity Net Median 2.9 8.6 19.0 8.5 14.3 7.0 6.1 Aug-99

S&P 500 Index Fund 2,009,687,198 16.3 3.0 49 9.2 45 17.6 43 9.6 17 14.6 19 6.9 53 4.8 Jan-00S&P 500 3.1 47 9.3 43 17.9 41 9.6 17 14.6 19 7.2 39 4.9 Jan-00

Over/Under -0.1 -0.1 -0.3 0.0 0.0 -0.3 -0.1eA US Large Cap Core Equity Net Median 2.9 8.8 16.9 8.0 13.5 7.0 6.1 Jan-00

U.S. Small/Mid Cap Equity Composite 296,925,440 2.4 3.3 19 9.5 19 22.7 2 7.2 91 14.6 16 6.6 84 7.3 Aug-99NMERB Small/Mid Cap Equity Blended Index 2.1 95 6.0 99 19.8 31 6.9 92 14.0 60 7.0 45 8.2 Aug-99

Over/Under 1.2 3.5 2.9 0.3 0.6 -0.4 -0.9InvestorForce Public DB > $1 Billion US Equity Net Median 2.9 8.6 19.0 8.5 14.3 7.0 6.1 Aug-99

Lord Abbett 145,610,808 1.2 2.2 29 3.6 57 14.5 88 6.5 43 13.8 45 -- -- 12.4 Aug-10Russell 2500 Value 0.3 69 2.0 78 18.4 61 6.2 45 13.7 47 6.5 56 13.1 Aug-10

Over/Under 1.9 1.6 -3.9 0.3 0.1 -0.7eA US Small-Mid Cap Value Equity Net Median 1.4 3.9 19.7 5.9 13.6 6.9 13.0 Aug-10

Pinnacle 151,314,632 1.2 4.4 53 15.9 14 31.7 4 7.8 33 15.5 10 -- -- 15.5 Dec-11Russell 2500 Growth 4.1 55 10.6 56 21.4 38 7.7 38 14.3 21 8.2 40 14.1 Dec-11

Over/Under 0.3 5.3 10.3 0.1 1.2 1.4eA US Small-Mid Cap Growth Equity Net Median 4.5 11.3 20.1 6.8 13.0 7.4 12.8 Dec-11

43

New Mexico Educational Retirement BoardPerformance Detail - Non-U.S. Equity

June 30, 2017

1 - InvestorForce Public DB > $1B Dev Mkt ex-US Eq Net is unavailable, universe includes all public funds.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Non-U.S. Equity Composite 1,798,724,123 14.6 5.5 81 15.7 43 18.9 86 1.0 93 4.9 99 0.2 92 6.5 Jul-95MSCI ACWI ex USA 5.8 77 14.1 79 20.5 53 0.8 97 7.2 87 1.1 71 -- Jul-95

Over/Under -0.3 1.6 -1.6 0.2 -2.3 -0.9InvestorForce Public DB > $1 Billion Global ex-US Equity Net Median 6.4 15.5 20.5 2.4 8.4 1.6 5.9 Jul-95

Non-U.S. Developed Mkts Equity Composite 592,992,257 4.8 6.3 41 14.4 53 19.3 47 1.1 49 8.1 50 0.3 79 6.2 Sep-95MSCI EAFE 6.1 44 13.8 82 20.3 32 1.1 49 8.7 39 1.0 57 5.0 Sep-95

Over/Under 0.2 0.6 -1.0 0.0 -0.6 -0.7 1.2InvestorForce Public DB Dev Mkt ex-US Eq Net Median 5.8 14.4 19.1 1.1 8.1 1.5 6.3 Sep-95

Pyramis 288,972,646 2.3 6.4 57 14.6 51 17.8 69 0.7 83 8.3 72 1.1 74 7.7 Jun-03MSCI EAFE 6.1 67 13.8 61 20.3 48 1.1 77 8.7 67 1.0 76 7.4 Jun-03

Over/Under 0.3 0.8 -2.5 -0.4 -0.4 0.1 0.3eA All EAFE Equity Net Median 6.6 14.6 20.1 2.3 9.6 2.3 8.3 Jun-03

BlackRock MSCI EAFE 304,019,611 2.5 6.3 60 14.1 56 20.7 44 1.5 68 -- -- -- -- 5.4 Aug-13MSCI EAFE 6.1 67 13.8 61 20.3 48 1.1 77 8.7 67 1.0 76 5.1 Aug-13

Over/Under 0.2 0.3 0.4 0.4 0.3eA All EAFE Equity Net Median 6.6 14.6 20.1 2.3 9.6 2.3 5.9 Aug-13

44

New Mexico Educational Retirement BoardPerformance Detail - Non-U.S. Emerging Market Equity

June 30, 2017

1 - Parametric Emerging Markets Equity was funded in May, 2015 with $232.8 M.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Non-U.S. Emerging Mkts Equity Composite 1,205,731,866 9.8 5.0 73 16.2 87 18.7 78 0.9 60 3.2 91 0.4 88 6.8 Sep-00MSCI Emerging Markets 6.3 43 18.4 56 23.7 25 1.1 58 4.0 43 1.9 32 7.8 Sep-00

Over/Under -1.3 -2.2 -5.0 -0.2 -0.8 -1.5 -1.0 InvestorForce Public DB > $1 Billion Emg Mkt Eq Net Median 6.0 18.5 21.9 1.4 3.9 1.7 7.3 Sep-00

Robeco 324,239,797 2.6 6.3 52 20.1 39 29.4 9 2.8 29 5.0 56 -- -- 9.3 Nov-08MSCI Emerging Markets 6.3 53 18.4 62 23.7 42 1.1 68 4.0 73 1.9 66 9.4 Nov-08

Over/Under 0.0 1.7 5.7 1.7 1.0 -0.1 eA Emg Mkts Equity Net Median 6.4 19.3 22.9 1.7 5.2 2.5 10.2 Nov-08

Neuberger Berman Emerging Markets 332,165,879 2.7 6.4 50 20.2 37 23.4 45 2.5 37 -- -- -- -- 5.2 Aug-13MSCI Emerging Markets 6.3 53 18.4 62 23.7 42 1.1 68 4.0 73 1.9 66 4.0 Aug-13

Over/Under 0.1 1.8 -0.3 1.4 1.2 eA Emg Mkts Equity Net Median 6.4 19.3 22.9 1.7 5.2 2.5 4.6 Aug-13

Mondrian Emerging Markets Small Cap 296,093,890 2.4 3.2 92 11.1 99 7.6 96 -2.3 93 -- -- -- -- 1.9 Aug-13MSCI Emerging Markets Small Cap 2.6 97 16.0 80 17.0 62 0.8 77 5.1 73 2.2 99 3.9 Aug-13

Over/Under 0.6 -4.9 -9.4 -3.1 -2.0 eA Emg Mkts Small Cap Equity Net Median 5.5 19.6 19.7 3.2 8.1 6.4 4.8 Aug-13

Parametric Emerging Markets Equity 253,232,301 2.1 3.9 85 14.2 91 18.2 75 -- -- -- -- -- -- 3.0 Jun-15MSCI Emerging Markets 6.3 53 18.4 62 23.7 42 1.1 68 4.0 73 1.9 66 2.8 Jun-15

Over/Under -2.4 -4.2 -5.5 0.2 eA Emg Mkts Equity Net Median 6.4 19.3 22.9 1.7 5.2 2.5 3.7 Jun-15

45

June 30, 2017

New Mexico Educational Retirement BoardPerformance Detail - Total Fixed Income and Core Fixed Income

Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Fixed Income Composite 3,515,861,684 28.5 1.6 71 4.2 39 7.6 13 4.8 7 6.5 4 7.0 9 3.0 Jan-85BBgBarc US Aggregate TR 1.4 83 2.3 97 -0.3 98 2.5 65 2.2 95 4.5 89 7.0 Jan-85

Over/Under 0.2 1.9 7.9 2.3 4.3 2.5 -4.0 InvestorForce Public DB > $1 Billion Fixed Income Net Median 1.7 3.9 4.7 2.7 3.3 5.4 7.7 Jan-85

Core Fixed Income Composite 983,174,925 8.0 1.5 58 2.6 70 0.5 82 2.7 69 2.8 63 5.1 61 5.4 Dec-99BBgBarc US Aggregate TR 1.4 66 2.3 87 -0.3 93 2.5 78 2.2 87 4.5 90 5.1 Dec-99

Over/Under 0.1 0.3 0.8 0.2 0.6 0.6 0.3 InvestorForce Public DB > $1 Billion US Fixed Income Net Median 1.6 3.0 3.0 3.0 3.3 5.4 5.7 Dec-99

Core Fixed Income 983,174,925 8.0 1.5 46 2.6 34 0.5 34 -- -- -- -- -- -- 2.1 Apr-15BBgBarc US Aggregate TR 1.4 64 2.3 65 -0.3 72 2.5 59 2.2 72 4.5 76 1.7 Apr-15

Over/Under 0.1 0.3 0.8 0.4 eA US Core Fixed Inc Net Median 1.5 2.4 0.2 2.6 2.5 4.7 1.9 Apr-15

46

June 30, 2017

New Mexico Educational Retirement BoardPerformance Detail - Emerging Market Debt

1 - Non-U.S. Emerging Market Debt Composite market value includes $18,953 in terminated manager account.2 - InvestorForce Public DB > $1B Emerging Mkt Fixed Income unavailable, universe includes all DB plans.3 - Non-U.S. EMD Custom Benchmark Composition from 9/1/2011–1/31/2016: JP Morgan GBI–EM Diversified. 2/1/2016 – Current: 50% JPM EMBI Global Diversified / 50% JPM GBI–EM Global Diversified.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Non-U.S. Emerging Market Debt Composite 216,035,970 1.8 2.3 76 7.3 63 8.6 35 1.4 43 2.1 31 -- -- 1.6 Sep-11Non-U.S. EMD Custom Benchmark 2.9 28 8.3 49 6.3 81 -3.3 69 -1.0 67 -- -- -1.4 Sep-11

Over/Under -0.6 -1.0 2.3 4.7 3.1 3.0 InvestorForce All DB Emg Mkt Fix Inc Net Median 2.6 8.2 7.5 -0.9 0.8 -- 1.3 Sep-11

EMSO 101,069,524 0.8 1.3 90 4.4 95 8.6 32 5.4 5 5.8 17 -- -- 5.2 Sep-11JP Morgan GBI - EM Global Diversified Index 3.6 6 10.4 22 6.4 71 -2.8 86 -0.7 82 4.0 83 -1.1 Sep-11

Over/Under -2.3 -6.0 2.2 8.2 6.5 6.3 eA All Emg Mkts Fixed Inc Net Median 2.4 7.8 7.3 2.4 3.7 6.3 4.1 Sep-11

Prudential 114,947,493 0.9 3.2 13 9.9 25 8.5 34 -- -- -- -- -- -- 15.7 Feb-1650% JPM EMBI Global Diversified/ 50% JPM GBI-EM Global Diversified 2.9 25 8.3 42 6.3 75 1.3 57 2.5 56 5.7 60 13.2 Feb-16

Over/Under 0.3 1.6 2.2 2.5 eA All Emg Mkts Fixed Inc Net Median 2.4 7.8 7.3 2.4 3.7 6.3 13.9 Feb-16

47

New Mexico Educational Retirement BoardPerformance Detail - Opportunistic Fixed Income

June 30, 2017


Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Opportunistic Credit Composite 2,316,650,789 18.8 1.6 -- 4.6 -- 10.7 -- 6.0 -- 9.2 -- -- -- 8.9 May-0850% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 6.3 May-08

Over/Under 0.1 1.4 1.4 2.0 3.4 2.6 BofA Merrill Lynch US High Yield BB-B Rated Constrained Index 2.2 -- 4.5 -- 11.1 -- 4.6 -- 6.7 -- 7.1 -- 7.6 May-08Beachpoint Combined 678,732,369 5.5 1.1 -- 4.6 -- 10.1 -- 4.2 -- 7.7 -- 6.9 -- 7.0 Mar-04

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 5.9 Mar-04

Over/Under -0.4 1.4 0.8 0.2 1.9 1.2 1.1 Beachpoint Total Return 678,732,369 5.5 1.1 -- 4.6 -- 10.1 -- 4.2 -- 7.7 -- -- -- 7.4 Jun-08

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 6.4 Jun-08

Over/Under -0.4 1.4 0.8 0.2 1.9 1.0 Pimco Disco Combined 133,615,848 1.1 4.4 -- 8.9 -- 16.6 -- 8.3 -- 13.6 -- -- -- 12.4 Jul-08

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 6.5 Jul-08

Over/Under 2.9 5.7 7.3 4.3 7.8 5.9 Pimco Disco II 133,615,848 1.1 4.4 -- 8.9 -- 16.6 -- 8.3 -- 13.6 -- -- -- 14.6 Oct-11

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 6.7 Oct-11

Over/Under 2.9 5.7 7.3 4.3 7.8 7.9 GoldenTree Combined 173,916,468 1.4 1.6 -- 4.6 -- 9.0 -- 5.0 -- 8.6 -- -- -- 9.4 Oct-09


Over/Under 0.1 1.4 -0.3 1.0 2.8 2.4 Goldentree II 173,916,468 1.4 1.6 -- 4.6 -- 9.0 -- 5.0 -- 8.6 -- -- -- 9.0 Sep-11

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 6.4 Sep-11

Over/Under 0.1 1.4 -0.3 1.0 2.8 2.6 Medley Capital 114,448,817 0.9 0.7 -- 3.7 -- 7.9 -- 6.4 -- 8.0 -- -- -- 7.4 Aug-11

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 5.6 Aug-11

Over/Under -0.8 0.5 -1.4 2.4 2.2 1.8

48


June 30, 2017

1 - Gramercy was funded in June 2012 with $9.4 M.2 - ICE Canyon was funded in June 2012 with $45 M. 3 - Marathon European Credit Opportunity II was funded in March 2014.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Waterfall - Eden 267,644,874 2.2 3.0 -- 7.5 -- 14.6 -- 6.5 -- 9.6 -- -- -- 10.3 Aug-1150% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 5.6 Aug-11

Over/Under 1.5 4.3 5.3 2.5 3.8 4.7 Waterfall - Victoria 144,454,359 1.2 1.4 -- 2.0 -- 7.5 -- 7.8 -- 9.8 -- -- -- 9.2 Aug-11


Over/Under -0.1 -1.2 -1.8 3.8 4.0 3.6 Elegantree Fund 50,913,212 0.4 0.4 -- 4.3 -- 9.9 -- 8.7 -- 10.8 -- -- -- 10.7 Mar-12


Over/Under -1.1 1.1 0.6 4.7 5.0 5.0 Gramercy Distressed Opp II 144,974,776 1.2 -0.5 -- 0.8 -- 9.2 -- 0.8 -- 5.5 -- -- -- 5.5 Jul-12

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 5.8 Jul-12

Over/Under -2.0 -2.4 -0.1 -3.2 -0.3 -0.3 ICE Canyon 71,952,953 0.6 3.2 -- 9.7 -- 24.0 -- 1.1 -- 3.0 -- -- -- 3.0 Jun-12

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 5.9 Jun-12

Over/Under 1.7 6.5 14.7 -2.9 -2.8 -2.9 Lone Star VIII 28,764,670 0.2 0.0 -- -3.7 -- -8.9 -- 12.0 -- -- -- -- -- 12.2 Oct-13


Over/Under -1.5 -6.9 -18.2 8.0 7.1 Marathon European Credit Opportunity I 42,671,876 0.3 0.7 -- 5.0 -- 7.6 -- 6.3 -- 8.4 -- -- -- 7.9 Oct-11


Over/Under -0.8 1.8 -1.7 2.3 2.6 1.2 Marathon European Credit Opportunity II 122,815,470 1.0 2.1 -- 4.7 -- 8.0 -- 6.3 -- -- -- -- -- 6.1 Mar-14


Over/Under 0.6 1.5 -1.3 2.3 1.8

49


June 30, 2017

1 - Lone Star IX funded in March 2015 with $1.5 M.2 - Kildare European Partners I LP funded in May 2014 with $17.2M.3 - Black Forest funded in July 2014 with $14.5M.4 - Gramercy Distressed Opp III was funded with $40 M in mid-December 2015.5 - GSO Capital Opps III was funded with $2.05 M in mid-September 2016.6 - Cross Ocean ESS II funded with $30 M in late-April 2017.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Lone Star IX 54,159,987 0.4 -0.3 -- 2.7 -- 22.1 -- -- -- -- -- -- -- -28.0 Apr-1550% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 4.9 Apr-15

Over/Under -1.8 -0.5 12.8 -32.9 Kildare European Partners I LP 37,652,538 0.3 4.6 -- 10.3 -- 15.5 -- 10.9 -- -- -- -- -- 9.3 May-14

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 4.3 May-14

Over/Under 3.1 7.1 6.2 6.9 5.0 Black Forest 131,036,406 1.1 2.2 -- 4.2 -- 7.9 -- -- -- -- -- -- -- 7.6 Aug-14


Over/Under 0.7 1.0 -1.4 3.2 Gramercy Distressed Opp III 64,499,370 0.5 -0.2 -- -1.1 -- 8.5 -- -- -- -- -- -- -- -0.6 Jan-16

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 10.4 Jan-16

Over/Under -1.7 -4.3 -0.8 -11.0 GSO Capital Opp III 21,400,562 0.2 2.3 -- 2.8 -- -- -- -- -- -- -- -- -- 1.7 Oct-16


Over/Under 0.8 -0.4 -3.4 Cross Ocean ESS II 32,996,234 0.3 -- -- -- -- -- -- -- -- -- -- -- -- 10.0 May-17

50% Credit Suisse Leveraged Loan Index / 50% BofA ML US HY BB-BRated Constrained Index 1.5 -- 3.2 -- 9.3 -- 4.0 -- 5.8 -- 5.7 -- 0.6 May-17

Over/Under 9.4

50

June 30, 2017

New Mexico Educational Retirement BoardPerformance Detail - Global Asset Allocation and Risk Parity

1 - Absolute Return Composite includes $577,139 in liquidating assets and a transfer account. 2 - PanAgora was funded in December 2013.3 - GAA/Risk Parity Custom Index: 60% MSCI World Half Hedged/ 40% CITI WGBI Half Hedged Inception - 6/30/2014; 60% MSCI World/ 40% CITI WGBI from 7/1/2014 - present.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Absolute Return Composite 577,139 0.0 Global Asset Allocation/Risk Parity Composite 1,230,523,551 10.0 0.3 74 3.6 69 6.9 48 1.5 64 3.3 94 -- -- 7.5 Oct-09

GAA/Risk Parity Custom Index 3.6 3 8.2 9 8.8 21 2.9 9 7.0 1 4.0 75 6.4 Oct-09Over/Under -3.3 -4.6 -1.9 -1.4 -3.7 1.1 InvestorForce Public DB > $1 Billion Global Tactical Net Median 1.1 5.1 6.9 1.7 4.8 4.7 6.9 Oct-09

Global Asset Allocation Composite 601,965,199 4.9 -0.4 88 2.8 80 9.7 20 0.2 86 -- -- -- -- 1.8 Nov-12Credit Suisse Hedge Global Macro -1.8 96 -1.5 99 3.3 92 0.6 78 2.3 99 4.6 65 1.9 Nov-12

Over/Under 1.4 4.3 6.4 -0.4 -0.1 InvestorForce Public DB > $1 Billion Global Tactical Net Median 1.1 5.1 6.9 1.7 4.8 4.7 3.3 Nov-12

Bridgewater Pure Alpha 276,915,285 2.2 -2.9 99 -1.2 99 9.7 34 0.8 69 2.9 84 -- -- 6.6 Oct-09Credit Suisse Hedge Global Macro -1.8 99 -1.5 99 3.3 88 0.6 75 2.3 90 4.6 36 4.3 Oct-09

Over/Under -1.1 0.3 6.4 0.2 0.6 2.3 eA Global TAA Net Median 2.5 6.3 7.0 1.5 5.0 4.3 5.6 Oct-09

PIMCO All Asset All Authority 325,049,914 2.6 1.7 67 6.4 48 9.6 35 -0.7 87 -- -- -- -- 1.2 Jul-13Credit Suisse Hedge Global Macro -1.8 99 -1.5 99 3.3 88 0.6 75 2.3 90 4.6 36 1.4 Jul-13

Over/Under 3.5 7.9 6.3 -1.3 -0.2 eA Global TAA Net Median 2.5 6.3 7.0 1.5 5.0 4.3 4.1 Jul-13

Risk Parity 628,558,353 5.1 1.0 60 4.5 60 4.4 87 2.8 10 -- -- -- -- 3.6 Nov-12GAA/Risk Parity Custom Index 3.6 3 8.2 9 8.8 21 2.9 9 7.0 1 4.0 75 6.6 Nov-12

Over/Under -2.6 -3.7 -4.4 -0.1 -3.0 InvestorForce Public DB > $1 Billion Global Tactical Net Median 1.1 5.1 6.9 1.7 4.8 4.7 3.3 Nov-12

Bridgewater All Weather 421,052,696 3.4 0.7 92 3.8 78 5.4 74 1.5 52 3.4 71 -- -- 8.0 Oct-0960% MSCI World (Gross) / 40% CITI WGBI 3.7 25 8.4 33 9.2 37 3.2 27 7.1 22 4.5 40 6.5 Oct-09

Over/Under -3.0 -4.6 -3.8 -1.7 -3.7 1.5 eA Global TAA Net Median 2.5 6.3 7.0 1.5 5.0 4.3 5.6 Oct-09

PanAgora 207,505,657 1.7 1.6 69 5.8 53 2.5 92 5.7 1 -- -- -- -- 8.6 Dec-13GAA/Risk Parity Custom Index 3.6 26 8.2 34 8.8 40 2.9 32 7.0 23 4.0 65 4.1 Dec-13

Over/Under -2.0 -2.4 -6.3 2.8 4.5 eA Global TAA Net Median 2.5 6.3 7.0 1.5 5.0 4.3 2.9 Dec-13

51

New Mexico Educational Retirement BoardPerformance Detail - Real Estate

June 30, 2017

1 - InvestorForce Public DB > $1B Real Estate Private is unavailable, universe includes all public funds.Note: Performance shown is net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Real Estate Composite 899,639,445 7.3 3.4 1 4.3 23 7.0 60 10.6 58 11.6 24 6.6 1 10.1 Dec-03NCREIF Property Index 1.8 64 3.3 65 7.0 59 10.2 74 10.5 70 6.4 2 9.2 Dec-03

Over/Under 1.6 1.0 0.0 0.4 1.1 0.2 0.9 Wilshire REIT 1.8 55 1.8 94 -1.7 99 8.3 88 9.3 82 5.6 18 9.6 Dec-03

InvestorForce Public DB > $1 Billion Real Estate Net Median 1.8 3.5 7.4 10.7 11.2 3.9 7.3 Dec-03Public Real Estate Composite 356,322,243 2.9 1.9 35 2.3 88 -0.2 99 6.6 94 9.0 86 5.7 15 9.5 Dec-03

Wilshire REIT 1.8 55 1.8 94 -1.7 99 8.3 88 9.3 82 5.6 18 9.6 Dec-03Over/Under 0.1 0.5 1.5 -1.7 -0.3 0.1 -0.1 InvestorForce Public DB > $1 Billion Real Estate Net Median 1.8 3.5 7.4 10.7 11.2 3.9 7.3 Dec-03

REIT Index Fund 100,554,750 0.8 1.6 57 1.6 70 -1.9 55 8.2 56 9.2 64 5.7 84 9.5 Dec-03Wilshire REIT 1.8 55 1.8 59 -1.7 54 8.3 45 9.3 56 5.6 84 9.6 Dec-03

Over/Under -0.2 -0.2 -0.2 -0.1 -0.1 0.1 -0.1 eA US REIT Net Median 1.9 2.5 -1.2 8.2 9.5 6.4 10.1 Dec-03

Brookfield 255,767,493 2.1 2.0 46 2.5 50 0.4 31 5.4 93 9.6 44 -- -- 10.3 Jul-11MSCI US REIT 1.3 67 2.0 54 -3.1 87 6.8 89 8.0 94 4.5 97 8.7 Jul-11

Over/Under 0.7 0.5 3.5 -1.4 1.6 1.6 eA US REIT Net Median 1.9 2.5 -1.2 8.2 9.5 6.4 9.9 Jul-11

Private Real Estate Composite 543,317,202 4.4 4.4 1 5.7 1 12.3 1 14.3 1 14.4 1 -- -- 7.7 Jan-08NCREIF Property Index 1.8 38 3.3 57 7.0 64 10.2 63 10.5 71 6.4 1 6.0 Jan-08

Over/Under 2.6 2.4 5.3 4.1 3.9 1.7 InvestorForce Public DB Real Estate Priv Net Median 1.6 3.6 7.5 10.8 11.1 4.5 4.1 Jan-08

Non-U.S. Private Real Estate 7,812,463 0.1 8.7 -- 10.1 -- 7.4 -- 5.3 -- 6.4 -- -- -- -3.3 Aug-08NCREIF Property Index 1.8 -- 3.3 -- 7.0 -- 10.2 -- 10.5 -- 6.4 -- 6.2 Aug-08

Over/Under 6.9 6.8 0.4 -4.9 -4.1 -9.5 U.S. Private Real Estate 535,504,739 4.3 4.3 -- 5.7 -- 12.4 -- 14.5 -- 14.6 -- -- -- 8.4 Jan-08

NCREIF Property Index 1.8 -- 3.3 -- 7.0 -- 10.2 -- 10.5 -- 6.4 -- 6.0 Jan-08Over/Under 2.5 2.4 5.4 4.3 4.1 2.4

52

New Mexico Educational Retirement BoardPerformance Detail - Private Equity and Real Assets

June 30, 2017

1 - Harvest Fund was funded in July 2016 with $50 M. 2 - Energy funded in January 2014. Composite includes Five Point Cap, Lime Rock, Enervest, BP Natural Gas, and Bluescape Energy.3 - Agriculture Composite contains Halderman Farm Mgmt Services, Hancock Agriculture, and Blue Road Capital L.P. 4 - Timber Composite contains Brookfield Brazil Timber, Conservation Forestry II, Conservation Forestry IV, and ETO II Operating Partnership, which was funded in August 2014.Note: Performance is shown net of fees. Fiscal year ends June 30.

Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Private Equity Composite 1,393,923,377 11.3 4.8 27 8.2 21 16.9 6 14.3 6 14.8 13 6.9 82 6.5 Jun-06Cambridge Associates US All PE (1 Qtr Lag) 4.3 32 9.0 7 17.8 5 10.3 51 12.7 30 9.8 15 11.9 Jun-06

Over/Under 0.5 -0.8 -0.9 4.0 2.1 -2.9 -5.4 InvestorForce Public DB > $1 Billion Private Equity Net Median 2.9 6.0 13.1 10.6 11.5 8.1 9.2 Jun-06

Real Assets Composite 779,087,468 6.3 2.5 14 4.3 15 8.7 15 6.8 6 6.1 24 -- -- 1.6 Jul-08CPI + 4% (Seasonally Adjusted) 1.0 27 2.4 40 5.7 24 4.9 19 5.3 30 5.7 1 5.3 Jul-08

Over/Under 1.5 1.9 3.0 1.9 0.8 -3.7 InvestorForce Public DB > $1 Billion Real Assets/Commodities NetMedian 0.0 1.1 2.2 0.2 -0.2 2.3 1.6 Jul-08

Infrastructure Composite 327,906,295 2.7 3.5 -- 5.6 -- 8.5 -- 9.1 -- 7.1 -- -- -- 2.6 Jul-08Infrastructure 308,045,446 2.5 3.2 -- 5.4 -- 9.1 -- 7.3 -- 6.3 -- -- -- 2.2 Jul-08

CPI + 4% (Seasonally Adjusted) 1.0 -- 2.4 -- 5.7 -- 4.9 -- 5.3 -- 5.7 -- 5.3 Jul-08Over/Under 2.2 3.0 3.4 2.4 1.0 -3.1

International Infrastructure 19,860,849 0.2 7.4 -- 8.8 -- -0.6 -- 32.4 -- -- -- -- -- -5.1 Jan-13CPI + 4% (Seasonally Adjusted) 1.0 -- 2.4 -- 5.7 -- 4.9 -- 5.3 -- 5.7 -- 5.2 Jan-13

Over/Under 6.4 6.4 -6.3 27.5 -10.3 Natural Resources 451,181,172 3.7 1.8 -- 3.3 -- 9.0 -- 4.4 -- 5.2 -- -- -- 2.9 Mar-09

Harvest Fund 50,816,408 0.4 -6.9 -- -3.0 -- -- -- -- -- -- -- -- -- 1.7 Aug-16Alerian MLP Index -6.4 -- -2.7 -- 0.4 -- -11.2 -- 1.8 -- 5.7 -- -0.2 Aug-16

Over/Under -0.5 -0.3 1.9 Energy 138,675,034 1.1 9.3 -- 14.5 -- 30.0 -- -5.2 -- -- -- -- -- -6.6 Jan-14

91 Day T-Bills 0.2 -- 0.4 -- 0.5 -- 0.2 -- 0.2 -- 0.4 -- 0.2 Jan-14Over/Under 9.1 14.1 29.5 -5.4 -6.8

Agriculture Composite 80,684,554 0.7 1.1 -- -0.1 -- -0.2 -- 3.5 -- -- -- -- -- 4.2 Aug-12NCREIF Farmland 1.6 -- 2.1 -- 6.6 -- 9.3 -- 12.9 -- 12.8 -- 13.1 Aug-12

Over/Under -0.5 -2.2 -6.8 -5.8 -8.9 Timber Composite 94,376,852 0.8 0.0 -- -0.4 -- 2.3 -- 5.2 -- 5.8 -- -- -- 3.5 Mar-09

NCREIF Timberland 0.7 -- 1.5 -- 3.4 -- 5.6 -- 7.2 -- 5.6 -- 3.9 Mar-09Over/Under -0.7 -1.9 -1.1 -0.4 -1.4 -0.4

Mitigation Banking 41,348,983 0.3 -1.9 -- -4.4 -- 7.8 -- 9.4 -- 8.2 -- -- -- -0.5 Mar-1191 Day T-Bills 0.2 -- 0.4 -- 0.5 -- 0.2 -- 0.2 -- 0.4 -- 0.1 Mar-11

Over/Under -2.1 -4.8 7.3 9.2 8.0 -0.6 Water Property Investor, L.P. 45,279,342 0.4 -0.3 -- 2.7 -- 1.7 -- -- -- -- -- -- -- 5.2 Jan-15

CPI + 4% (Seasonally Adjusted) 1.0 -- 2.4 -- 5.7 -- 4.9 -- 5.3 -- 5.7 -- 5.3 Jan-15Over/Under -1.3 0.3 -4.0 -0.1

53

New Mexico Educational Retirement BoardPerformance Detail – Cash

June 30, 2017


Market Value($)

% ofPortfolio

3 Mo(%) Rank YTD




_

Cash 408,526,608 3.3 Cash 302,229,535 2.5 0.3 -- 0.6 -- 1.0 -- 0.6 -- 0.5 -- 1.0 -- 1.0 Dec-99

91 Day T-Bills 0.2 -- 0.4 -- 0.5 -- 0.2 -- 0.2 -- 0.4 -- 1.6 Dec-99Over/Under 0.1 0.2 0.5 0.4 0.3 0.6 -0.6

NM ERB Cash 5,771,154 0.0 0.0 -- 0.1 -- 0.0 -- 0.0 -- 0.8 -- 0.9 -- 1.0 Jun-0091 Day T-Bills 0.2 -- 0.4 -- 0.5 -- 0.2 -- 0.2 -- 0.4 -- 1.5 Jun-00

Over/Under -0.2 -0.3 -0.5 -0.2 0.6 0.5 -0.5 Local Government Investment Pool (LGIP) at STO 100,525,919 0.8 0.2 -- 0.3 -- 0.4 -- -- -- -- -- -- -- 0.3 Jul-15

91 Day T-Bills 0.2 -- 0.4 -- 0.5 -- 0.2 -- 0.2 -- 0.4 -- 0.4 Jul-15Over/Under 0.0 -0.1 -0.1 -0.1

XXXXX

54


New Mexico Educational Retirement BoardTotal Fund Return Summary vs. Peer Universe

June 30, 2017

55


New Mexico Educational Retirement BoardTotal Fund Return Summary vs. Peer Universe

June 30, 2017

56

Appendix: Market Environment

57

Long Term Broad Market Performance Summary as of 06/30/2017

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

June 30, 2017

58

Inflation continues to decline, while capacity utilization trends upward Unemployment is still declining

Corporate profits fall off recent highs Manufacturing growth hit a multi-year high

US Economic Indicators

Source: Bloomberg, Federal Reserve, Bureau of Labor Statistics Source: Bloomberg, Bureau of Labor Statistics

Source: Bloomberg, Institute for Supply ManagementSource: Bloomberg, Bureau of Economic Analysis

60%

65%

70%

75%

80%

85%

90%

‐3%

‐2%

‐1%

0%

1%

2%

3%

4%

5%

6%

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

CPI (LHS)Capacity Utilization (RHS)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

US UnemploymentU‐6 Unemployment

6%

7%

8%

9%

10%

11%

12%

13%

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

Corporate Profits (% of GDP)

35

40

45

50

55

60

65

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

US ISM PMI

June 30, 2017

59

Eurozone inflation fell to 1.4%, remaining below the 2% target

Japan unemployment increased off previous month lows

Manufacturing has fallen, though still remains elevated

UK leading indicators have begun to decline

International Economic Indicators

Source: Bloomberg, Japan Ministry of Internal Affairs and Communications, Eurostat Source: Bloomberg, Japan Ministry of Internal Affairs and Communications, Eurostat

Source: Bloomberg, OECDSource: Bloomberg, OECD, Eurostat

‐3%

‐2%

‐1%

0%

1%

2%

3%

4%

5%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Japan CPIEuro CPI

0%

2%

4%

6%

8%

10%

12%

14%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Europe UnemploymentJapan Unemployment

‐10%‐8%‐6%‐4%‐2%0%2%4%6%8%

10%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

YoY % Cha

nge in M

anufacturin

g

GermanyFranceItalyJapan

97.0

98.0

99.0

100.0

101.0

102.0

103.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

OECD Lead

ing Indicator S

A

Euro AreaJapanUKCanada

June 30, 2017

60

EM inflation varies by country Relatively healthy debt/GDP ratios

Account balances remain steady EM continues trending higher as a percent of global output

Emerging Market Economic Indicators

Source: Bloomberg Source: Bloomberg, IMF

Source: Bloomberg, IMFSource: Bloomberg

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Brazil China Mexico SouthAfrica

Russia India Turkey

CPI

Most Recent1 Yr Previous

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Mexico Brazil SouthAfrica

Turkey China Russia India

Gross Gov

't De

bt as %

of G

DP

‐20%

‐15%

‐10%

‐5%

0%

5%

10%

15%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Accoun

t Balan

ce (%

of G

DP)

Mexico BrazilSouth Africa TurkeyIndia ChinaRussia

0%10%20%30%40%50%60%70%80%90%

100%

1998

2000

2001

2002

2004

2005

2006

2008

2009

2010

2012

2013

2014

2016

2017

2018

2020

2021

GDP PP

P as % of W

orld

DevelopedEmerging

June 30, 2017

61

Equity volatility remains low Treasury volatility has recently subsided

Currency volatility increased off recent lows Commodity volatility continues to decline

Volatility

Source: Bloomberg, CBOE Source: Bloomberg, Merrill Lynch

Source: Bloomberg, Merrill LynchSource: Bloomberg, Deutsche Bank

05

101520253035404550

2012 2013 2014 2015 2016

VIX Index

40

50

60

70

80

90

100

110

120

130

2012 2013 2014 2015 2016 2017

MOVE Index

456789

1011121314

2012 2013 2014 2015 2016 2017

CVIX Index

5

7

9

11

13

15

17

19

2012 2013 2014 2015 2016

Bloomberg Commodity 90D Vol

June 30, 2017

62

The ECB balance sheet continues growing Short-term interest rate has increased with recent rate hike

Ex-US developed market rates are broadly lower than the previous year

EM central bank policies vary by country-specific economic conditions

Central Banks

Source: Bloomberg, Federal Reserve, Bank of Japan, ECB, NEPC Source: Bloomberg, Federal Reserve

Source: BloombergSource: Bloomberg

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Trillions (b

alan

ce she

et assets) FED

ECBBoJ

‐1.0%‐0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

USUK

SwitzerlandSingaporeNorway

New ZealandJapanECB

CanadaAustralia

Target Central Bank Rate

1 Year PreviousCurrent

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

BrazilChinaIndia

IndonesiaMalaysiaMexicoPolandRussia

South AfricaSouth Korea

Turkey

Target Central Bank Rate

1 Year PreviousCurrent

June 30, 2017

63

EAFE valuations remain lower than the previous year

Rolling annual earnings growth continues trending upward off contraction

Profit margins continue to improve Equities have experienced positive short-term performance

Global Equity

Source: Bloomberg, Standard and Poors, MSCI *MSCI EAFE is ex UK Telecom*Standard deviation calculations on 20 years of data except S&P 500 (30 years)

Source: Bloomberg, Standard and Poors, MSCI

Source: Bloomberg, MSCISource: Bloomberg, MSCI

05

101520253035404550

S&P 500 MSCI EM MSCI EAFE MSCI ACWI

PE Ratio

+1 Std Dev ‐1 St Dev6/30/2016 6/30/2017

‐50%‐40%‐30%‐20%‐10%0%

10%20%30%40%50%

Rolling

12‐Mo Ch

ange

in EBIT

S&P 500MSCI EAFEMSCI EM

0%

2%

4%

6%

8%

10%

12%

14%

Profit Margins

S&P 500MSCI EMMSCI EAFEMSCI ACWI

0%

5%

10%

15%

20%

25%

S&P 500 MSCI EAFE MSCI EM MSCI ACWI MSCI ACWIIMI

3 Month Return1 Year Return

June 30, 2017

64

US equity valuations remain elevated relative to last year

Real GDP growth declined significantly from the previous quarter

Profit margins experience an uptick US equity continues to post positive returns

US Equity

Source: Bloomberg, Standard and Poors, Russell *Russell 2000 PE is index adjusted positive* Standard deviation calculations based on 20 years of data

Source: Bloomberg, Bureau of Economic Analysis

Source: Bloomberg, Standard and Poors, RussellSource: Bloomberg, Standard and Poors, Russell

05

1015202530354045

S&P 500 Russell 2000 Russell 1000Growth

Russell 1000Value

PE Ratio

+1 Std Dev ‐1 St Dev6/30/2016 6/30/2017

‐10%

‐8%

‐6%

‐4%

‐2%

0%

2%

4%

6%

20172016201520142013201220112010200920082007

US Real GDP Growth

‐8%‐6%‐4%‐2%0%2%4%6%8%

10%12%

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

Profit Margins

S&P 500Russell 2000

0%

5%

10%

15%

20%

25%

30%

S&P 500 Russell 2500 Russell 2000 Russell 1000Growth

Russell 1000Value


June 30, 2017

65

UK and Europe PEs remain below previous year levels International growth has steadied

Profit margins continue trending higher Strong short-term performance for EAFE

International Equity

Source: Bloomberg, MSCI, FTSE *UK represented by FTSE 100 Index *Standard deviation calculations based on 20 years of data, with Europe since 12/1998

Source: Bloomberg


0

10

20

30

40

50

60

Europe Japan United Kingdom

PE Ratio

+1 Std Dev ‐1 St Dev6/30/2016 6/30/2017

‐15%

‐10%

‐5%

0%

5%

10%

15%

20172016201520142013201220112010200920082007

EurozoneJapanUK

‐4%‐2%0%2%4%6%8%

10%12%14%

Profit Margins

MSCI EAFEEuroJapanUK

0%

5%

10%

15%

20%

25%

30%

MSCI EAFE MSCI EAFE(Local)

MSCI EAFE SC MSCI EAFE SC(Local)


June 30, 2017

66

India’s valuation fell below the previous year, though still remains elevated

Brazil continues to rebound off earnings contraction

Profit margins continue trending upward EM posts strong short-term returns

Emerging Markets Equity

Source: Bloomberg, MSCI*Standard deviation calculations based on 20 years of data, with Russia since 01/1998

Source: Bloomberg


05

101520253035404550

China Brazil South Africa Russia India South Korea

PE Ratio

+1 Std Dev ‐1 St Dev6/30/2016 6/30/2017

‐15%

‐10%

‐5%

0%

5%

10%

15%

20%

20172016201520142013201220112010200920082007

Brazil RussiaIndia China

0%

2%

4%

6%

8%

10%

12%

14%

Profit Margins

MSCI EM 0%

5%

10%

15%

20%

25%

30%

35%

MSCI EM MSCI EM(Local)

MSCI EMSmall Cap

MSCI EMSmall Cap(Local)

MSCIFrontier


Brazil 06/30 PE: 75.0

June 30, 2017

67

Ex-energy and telecom, MSCI ACWI has posted broad short-term returns

Energy and telecom sectors drag S&P 500 short-term returns

MSCI EM short-term returns have been lead by Info Tech

Financials sector weight has decreased in favor of Info Tech and Industrials

Global Equity by Sector

Source: Bloomberg, MSCI Source: Bloomberg, Standard and Poors


‐20%

‐10%

0%

10%

20%

30%

40%3 Month Return1 Year Return

‐10%

0%

10%

20%

30%

40%

50%3 Month Return1 Year Return

0%

5%

10%

15%

20%

25%

Sector W

eight o

f ACW

I

6/30/20176/30/2016

‐10%‐5%0%5%

10%15%20%25%30%35%40%


June 30, 2017

68

Many currencies have appreciated against the dollar due to recent USD weakness

EM currencies remain mixed relative to the dollar

USD expectations vary across developed markets The dollar continues trending downward

Currencies

Source: Bloomberg Source: Bloomberg

Source: Bloomberg, Federal ReserveSource: Bloomberg

60

70

80

90

100

110

120

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

USD Trade Weighted Index

‐10%‐8%‐6%‐4%‐2%0%2%4%6%8%

10%

AustralianDollar

CanadianDollar

Euro JapaneseYen

SwissFranc

PoundSterling

3 Month Spot Change1 Year Spot Change

‐30%‐25%‐20%‐15%‐10%‐5%0%5%

10%15%

3 Month Spot Change1 Year Spot Change

‐3.0%

‐2.0%

‐1.0%

0.0%

1.0%

2.0%

3.0%

Euro Yen BritishPound

SwissFranc

Aus Dollar Yuan(O/S)

Chan

ge versus USD

3M Currency Forward12M Currency Forward

June 30, 2017

69

Spreads remain lower than the previous year

Yields have declined slightly relative to three months prior

Similar duration/yield profiles among core indices

Ex-TIPS, fixed income indices post positive short-term returns

US Fixed Income

Source: Bloomberg, Barclays*Standard deviation calculations based on 20 years of data

Source: Bloomberg, Barclays

Source: Bloomberg, BarclaysSource: Bloomberg, Barclays

0

200

400

600

800

1000

1200

1400

1600

1800

Aaa Aa A Baa Ba B Caa

Spread

(bps)

+2 Std Dev+1 Std Dev‐1 St Dev6/30/20166/30/2017

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

Month End Yield3 Month Previous Yield

0%

1%

2%

3%

4%

5%

6%

0 1 2 3 4 5 6 7 8

Yield

Duration

BC AggBC CreditBC High YieldBC MBSBC MunicipalBC TIPSBC US Treasury

‐2%0%2%4%6%8%

10%12%14%


June 30, 2017

70

Ex-Italy, periphery yields have declined over the year relative to Germany

Yields continue to rise in the UK as a result of heightened political uncertainty

Low yields persist in global bond universe Global bonds post strong short-term returns

International Developed Fixed Income

Source: Barclays, Bloomberg, *European periphery spreads are over equivalent German Bund Source: Bloomberg

Source: Bloomberg, Citigroup, BarclaysSource: Bloomberg, Citigroup, Barclays

0

100

200

300

400

500

600

EuroAggCorp

Pan‐EuroHY

5 YearItaly

5 YearPortugal

5 YearSpain

BC AsiaIG

BC AsiaHY

OAS

or E

quivalen

t (bp

s) 6/30/2017

6/30/2016

‐0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Germany France Italy Spain Japan UK Australia

10 Yr G

ovt Y

ield

Month End Yield3 Month Previous Yield1 Year Previous Yield

‐1.0%‐0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Yield

Duration

BC Global AggBC Pan‐Euro HYBC MultiverseBC Global Infl‐LinkedBC EuroAgg

‐5%

‐4%

‐3%

‐2%

‐1%

0%

1%

2%

3%

4%

BC GlobalAgg

(Unhedged)

BC Global(Hedged)

BC GlobalAgg ex US(Unhedged)

BC GlobalAgg ex US(Hedged)

BCMultiverse

BC GlobInfl‐Linked


June 30, 2017

71

EM spreads remain steady Brazil’s bond yields have increased with concerns over President Michel Temer

EM yields remain attractive versus global counterparts

EM debt posts strong positive short-term returns

Emerging Markets Fixed Income

Source: Bloomberg, JP Morgan Source: Bloomberg

Source: Bloomberg, JP MorganSource: Bloomberg, JP Morgan

0

200

400

600

800

1000

1200

1400

Spread

in bps

EMBI Glob Div EMBI Glob Div IGEMBI Glob Div HY CEMBI Div Broad IGCEMBI Div Broad HY

0%

2%

4%

6%

8%

10%

12%

14%

10 Yr Local Govt Y

ield

Month End Yield3 Month Previous Yield1 Year Previous Yield

0%

1%

2%

3%

4%

5%

6%

7%

8%

0 1 2 3 4 5 6 7

Yield

Duration

JPM EMBI CompositeJPM GBI‐EM Glob DivCEMBI IGCEMBI HYEMBI HYEMBI IG

‐3%‐2%‐1%0%1%2%3%4%5%6%7%

JPM EMBIGlob Div

JPM GBI‐EMGlob Div

CEMBI IG CEMBI HY ELMI+ Comp


June 30, 2017

72

Short-term rate expectations increased with long-term rates declining slightly

Interest rate expectations have increased relative to prior months

10-2 spreads continue tightening Sovereign bond yields increased, though remain in negative or neutral territory

Rates



‐2.0%

‐1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

1Y 3Y 5Y 7Y 10Y

15Y

20Y

25Y

30Y

UK Month End UK 3M PreviousJapan Month End Japan 3M PreviousGerm Month End Germ 3M Previous

‐0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

US 10 Yr ‐ 2 YrJapan 10 Yr ‐ 2 YrGermany 10 Yr ‐ 2 Yr

‐2%

‐1%

0%

1%

2%

3%

4%

5%

6%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Japan 10 YrJapan 2 YrGermany 10 YrGermany 2 Yr

June 30, 2017

73

Long duration yields have steadied Long credit yield remains in line with previous years

Yield and spread components continue to offer modest returns

Long duration fixed income posts short-term gains

Long Rates and Liability

Source: Bloomberg, Citigroup, Barclays Source: Bloomberg, US Treasury, Barclays, NEPC

Source: Bloomberg, BarclaysSource: Bloomberg, Barclays

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

BC US Long Corp A+BC US Long CreditBC 20‐30 Yr STRIPSBC US Long Treasury

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

10%

Long

credit y

ield (b

y compo

nent)

Spread (US Long Credit Yield)US Long Credit OAS

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1‐3 Year 3‐5 Year 5‐10 Year Long‐Term

US Corp SpreadUS Gov't Yield

‐12%‐10%‐8%‐6%‐4%‐2%0%2%4%6%8%

20‐30 YrSTRIPs

US AggLong Treas

US LongCredit

US LongGovt/Credit

US LongCredit A+

Long CorpA+

3‐Month Return

1 Year Return

June 30, 2017

74

US real yields continue to increase French yields have declined following the election of Emmanuel Macron

US inflation expectations have decreased off of post US election highs

Inflation expectations have started to decline

Inflation and Real Rates



‐2.5%

‐2.0%

‐1.5%

‐1.0%

‐0.5%

0.0%

0.5%

1.0%

1.5%

US 10 Yr Germany10 Yr

Britain 10Yr

France 10Yr

Australia10 Yr

Japan 10Yr

Month End3‐Mo Previous

1.50%

1.70%

1.90%

2.10%

2.30%

2.50%

2.70%

2.90%

Jul‐14 Nov‐14Mar‐15 Jul‐15 Nov‐15Mar‐16 Jul‐16 Nov‐16Mar‐17

5y5y US Breakeven

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2012 2013 2014 2015 2016 2017

Infla

tion Breakeven

US 10 Yr UK 10 YrGermany 10 Yr Australia 10 YrFrance 10 Yr

June 30, 2017

75

Yields remain relatively similar to the previous year

Sustained recovery in commercial real estate occupancy rates

US REIT valuations have steadied Mixed short-term performance for inflation-sensitive growth assets

Inflation-Sensitive Growth Assets

Source: Bloomberg, Alerian, Nareit, Standard and Poors Source: CBRE

Source: Bloomberg, US Census Bureau Source: Bloomberg, Alerian, Nareit, Standard and Poors

0%

1%

2%

3%

4%

5%

6%

7%

8%

Alerian MLP NAREIT Global NAREIT US S&P Glob NatRes

Dividen

d Yield

Month‐End Yield1 Year Previous Yield

2

6

10

14

18

22

26

30

Enterprise Va

lue/EB

ITDA

Alerian MLPNAREIT GlobalNAREIT USS&P Glob Nat Res

‐10%

‐5%

0%

5%

10%

15%

20%

S&P GlobNat Res

NAREIT US NAREIT Glob Alerian MLP NCREIFProperty


June 30, 2017

76

Roll yield remains a hurdle for investing directly in certain commodities

Oil has recently experienced a steady decline

Oil production and consumption has steadied

Commodities have declined significantly over the short-term

Commodities


Source: Bloomberg, Standard and PoorsSource: Bloomberg, US Department of Energy *Crude oil and liquid fuels

‐4% ‐2% 0% 2% 4% 6%

Copper

Corn

Gold

Natural Gas

Oil

Soybeans

3‐Mo Future Roll Yield

0200400600800100012001400160018002000

0

20

40

60

80

100

120

140

160

2001 2003 2005 2007 2009 2011 2013 2015

$/Troy

Oun

ce

$/Ba

rrel

Crude Oil Spot (LHS)Gold Spot (RHS)

0

20

40

60

80

100

120

0

5

10

15

20

25

US ProductionUS ConsumptionWorld Production (RHS)World Consumption (RHS)

Crude oil and liquid fuels

‐10%

‐8%

‐6%

‐4%

‐2%

0%

2%

4%

BloombergCommodity

GSCI GSCI Non‐Energy

3‐Month Return1 Year Return

June 30, 2017

77

● 4/1/2012 – 6/30/2012: 23% S&P 500 Index, 2% Russell 2500 Index, 5% MSCI EAFE Index, 10% MSCI Emerging Markets Index, 18% Barclays Aggregate, 15% Bank of America Merrill Lynch US High BB-B Constrained Index, 2% JP Morgan GBI – EM Global Diversified Index, 5% (60% MSCI World HH / 40% CITI WGBI HH), 8% (90 Day T-Bill + 2%), 3% Wilshire REIT, 2% NCREIF Property Index, 5% Cambridge Associates US All PE 1 Quarter Lag, 1% (CPI + 4% Seasonally Adjusted), 1% 90 Day T-Bill.

● 7/1/2012 – 6/30/2013: 23% S&P 500 Index, 2% Russell 2500 Index, 5% MSCI EAFE Index, 10% MSCI Emerging Markets Index, 18% Barclays Aggregate Index, 15% (50% Credit Suisse Leveraged Loan Index / 50% Bank of America Merrill Lynch US HY BB-B Rated Constrained Index), 2% JP Morgan GBI – EM Global Diversified Index, 5% (60% MSCI World HH / 40% CITI WGBI HH), 3% Wilshire REIT, 2% NCREIF Property Index, 8% (91 Day T-Bill + 2% 1 month lag), 5% Cambridge Associates All US PE 1 Quarter Lag, 1% (CPI + 4% Seasonally Adjusted), 1% 91 Day T-Bill.

● 7/1/2013 – 6/30/2014: 20% S&P 500 Index, 2% Russell 2500 Index, 5% MSCI EAFE Index, 10% MSCI Emerging Markets Index, 7% Barclays Aggregate Index, 20% (50% Credit Suisse Leveraged Loan Index / 50% Bank of America Merrill Lynch US HY BB-B Rated Constrained Index), 2% JP Morgan GBI – EM Global Diversified Index, 5% (60% MSCI World HH / 40% CITI WGBI HH), 5% Credit Suisse Hedge Global Macro Index, 3% Wilshire REIT Index, 2% NCREIF Property Index, 3% (91 Day T-Bill + 2% 1 Month Lag), 8% Cambridge Associates US All PE 1 Quarter Lag, 7% (CPI + 4% Seasonally Adjusted), 1% 91 Day T-Bill.

● 7/1/2014 – 9/30/2014: 20% S&P 500 Index, 2% Russell 2500 Index, 5% MSCI EAFE Index, 10% MSCI Emerging Markets Index, 7% Barclays Aggregate Index, 20% (50% Credit Suisse Leveraged Loan Index / 50% Bank of America Merrill Lynch US HY BB-B Rated Constrained Index), 2% JP Morgan GBI – EM Global Diversified Index, 5% (60% MSCI World / 40% CITI WGBI), 5% Credit Suisse Hedge Global Macro Index, 3% Wilshire REIT Index, 2% NCREIF Property Index, 3% (91 Day T-Bill + 2% 1 Month Lag), 8% Cambridge Associates US All PE 1 Quarter Lag, 7% (CPI + 4% Seasonally Adjusted), 1% 91 Day T-Bill.

New Mexico Educational Retirement BoardPolicy Index History

June 30, 2017

78

● 10/1/2014 – 1/31/2016: 18% S&P 500 Index, 2% Russell 2500 Index, 5% MSCI EAFE Index, 10% MSCI Emerging Markets Index, 6% Barclays Aggregate Index, 20% (50% Credit Suisse Leveraged Loan Index / 50% Bank of America Merrill Lynch US HY BB-B Rated Constrained Index), 2% JP Morgan GBI – EM Global Diversified Index, 5% (60% MSCI World / 40% CITI WGBI), 5% Credit Suisse Hedge Global Macro Index, 4% Wilshire REIT Index, 3% NCREIF Property Index, 11% Cambridge Associates US All PE 1 Quarter Lag, 8% (CPI + 4% Seasonally Adjusted), 1% 91 Day T-Bill.

● 2/1/2016 – 12/31/2016: 18% S&P 500 Index, 2% Russell 2500 Index, 5% MSCI EAFE Index, 10% MSCI Emerging Markets Index, 6% Barclays Aggregate Index, 20% (50% Credit Suisse Leveraged Loan Index / 50% Bank of America Merrill Lynch US HY BB-B Rated Constrained Index), 2% (50% JP Morgan EMBI Global Diversified Index / 50% JP Morgan GBI – EM Global Diversified Index), 5% (60% MSCI World / 40% CITI WGBI), 5% Credit Suisse Hedge Global Macro Index, 4% Wilshire REIT Index, 3% NCREIF Property Index, 11% Cambridge Associates US All PE 1 Quarter Lag, 8% (CPI + 4% Seasonally Adjusted), 1% 91 Day T-Bill.

● 1/1/2017 – Current: 18% S&P 500 Index, 2% Russell 2500 Index, 5% MSCI EAFE Index, 10% MSCI Emerging Markets Index, 6% Barclays Aggregate Index, 20% (50% Credit Suisse Leveraged Loan Index / 50% Bank of America Merrill Lynch US HY BB-B Rated Constrained Index), 2% (50% JP Morgan EMBI Global Diversified Index / 50% JP Morgan GBI – EM Global Diversified Index), 5% (60% MSCI World / 40% CITI WGBI), 5% Credit Suisse Hedge Global Macro Index, 3% Wilshire REIT Index, 4% NCREIF Property Index, 11% Cambridge Associates US All PE 1 Quarter Lag, 8% (CPI + 4% Seasonally Adjusted), 1% 91 Day T-Bill.

New Mexico Educational Retirement BoardPolicy Index History

June 30, 2017

79

�Glossary of Investment Terminology—Risk Statistics

Alpha - Measures the relationship between the fund performance and the per-formance of another fund or benchmark index and equals the excess return while the other fund or benchmark index is zero.

Alpha Jensen - The average return on a portfolio over and above that predict-ed by the capital asset pricing model (CAPM), given the portfolio's beta and the average market return. Also known as the abnormal return or the risk adjusted excess return.

Annualized Excess Return over Benchmark - Annualized fund return minus the annualized benchmark return for the calculated return.

Annualized Return - A statistical technique whereby returns covering periods greater than one year are converted to cover a 12 month time span.

Beta - Measures the volatility or systematic risk and is equal to the change in the fund’s performance in relation to the change in the assigned index’s perfor-mance.

Information Ratio - A measure of the risk adjusted return of a financial security, asset, or portfolio.

Formula: (Annualized Return of Portfolio - Annualized Return of Benchmark)/Annualized Standard Deviation(Period Portfolio Return – Period Benchmark Return). To an-nualize standard deviation, multiply the deviation by the square root of the number of periods per year where monthly returns per year equals 12 and quar-terly returns is four periods per year.

R-Squared – Represents the percentage of a fund’s movements that can be explained by movements in an index. R-Squared values range from 0 to 100. An R-Squared of 100 denotes that all movements of a fund are completely ex-plained by movements in the index.

Sharpe Ratio - A measure of the excess return or risk premium per unit of risk in an investment asset or trading strategy.

Sortino Ratio - A method to differentiate between good and bad volatility in the Sharpe Ratio. The differentiation of up and down volatility allows the calcu-lation to provide a risk adjusted measure of a security or fund's performance without upward price change penalties.

Formula: Calculation Average (X-Y)/Downside Deviation (X-Y) * 2 Where X=Return Series X Y = Return Series Y which is the risk free return (91 day T-bills)

Data Source: InvestorForce

Standard Deviation - The standard deviation is a statistical term that de-scribes the distribution of results. It is a commonly used measure of volatility of returns of a portfolio, asset class, or security. The higher the standard deviation the more volatile the returns are.

Formula: (Annualized Return of Portfolio – Annualized Return of Risk Free) / Annualized Standard Deviation (Portfolio Returns)

Tracking Error - Tracking error, also known as residual risk, is a measure of the degree to which a portfolio tracks its benchmark. It is also a measure of consistency of excess returns. Tracking error is computed as the annualized standard deviation of the difference between a portfolio's return and that of its benchmark.

Formula: Tracking Error = Standard Deviation (X-Y) * �( # of periods per year) Where X = periods portfolio return and Y = the period’s benchmark return For monthly returns, the periods per year = 12 For quarterly returns, the periods per year = 4

Treynor Ratio - A risk-adjusted measure of return based on systematic risk. Similar to the Sharpe ratio with the difference being the Treynor ratio uses beta as the measurement of volatility.

Formula: (Portfolio Average Return - Average Return of Risk-Free Rate)/Portfolio Beta

Up/Down Capture Ratio - A measure of what percentage of a market's re-turns is "captured" by a portfolio. For example, if the market declines 10% over some period, and the manager declines only 9%, then his or her capture ratio is 90%. In down markets, it is advantageous for a manager to have as low a cap-ture ratio as possible. For up markets, the higher the capture ratio the better. Looking at capture ratios can provide insight into how a manager achieves ex-cess returns. A value manager might typically have a lower capture ratio in both up and down markets, achieving excess returns by protecting on the downside, whereas a growth manager might fall more than the overall market in down markets, but achieve above-market returns in a rising market.

UpsideCapture = TotalReturn(FundReturns)/TotalReturns(BMReturn) when Peri-od Benchmark Return is > = 0

DownsideCapture = TotalReturn(FundReturns)/TotalReturns(BMReturn) when Benchmark <0 �

80

�Glossary of Investment Terminology

# Of Portfolios/Observations1 – The total number of data points that make up a specified universe

Allocation Index3 - The allocation index measures the value added (or sub-tracted) to each portfolio by active management. It is calculated monthly: The portfolio asset allocation to each category from the prior month-end is multi-plied by a specified market index.

Asset Allocation Effect2 - Measures an investment manager’s ability to effec-tively allocate their portfolio’s assets to various sectors. The allocation effect determines whether the overweighting or underweighting of sectors relative to a benchmark contributes positively or negatively to the overall portfolio return. Positive allocation occurs when the portfolio is over weighted in a sector that outperforms the benchmark and underweighted in a sector that underperforms the benchmark. Negative allocation occurs when the portfolio is over weighted in a sector that underperforms the benchmark and under weighted in a sector that outperforms the benchmark.

Agency Bonds (Agencies)3 - The full faith and credit of the United States gov-ernment is normally not pledged to payment of principal and interest on the majority of government agencies issuing these bonds, with maturities of up to ten years. Their yields, therefore, are normally higher than government and their marketability is good, thereby qualifying them as a low risk-high liquidity type of investment. They are eligible as security for advances to the member banks by the Federal Reserve, which attests to their standing.

Asset Backed Securities (ABS)3 - Bonds which are similar to mortgage-backed securities but are collateralized by assets other than mortgages; com-monly backed by credit card receivables, auto loans, or other types of consumer financing.

Attribution3 - Attribution is an analytical technique that allows us to evaluate the performance of the portfolio relative to the benchmark. A proper attribution tells us where value was added or subtracted as a result of the manager’s deci-sions.

Data Source: 1InvestorForce, 2Interaction Effect Performance Attribution, 3NEPC, LLC, 4Investopedia, 5Hedgeco.net

Average Effective Maturity4 - For a single bond, it is a measure of maturity that takes into account the possibility that a bond might be called back to the issuer.

For a portfolio of bonds, average effective maturity is the weighted average of the maturities of the underlying bonds. The measure is computed by weighing each bond's maturity by its market value with respect to the portfolio and the likelihood of any of the bonds being called. In a pool of mortgages, this would also account for the likelihood of prepayments on the mortgages.

Batting Average1 - A measurement representing an investment manager's ability to meet or beat an index.

Formula: Divide the number of days (or months, quarters, etc.) in which the manager beats or matches the index by the total number of days (or months, quarters, etc.) in the period of question and multiply that factor by 100.

Brinson Fachler (BF) Attribution1 - The BF methodology is a highly accepted industry standard for calculating the allocation, selection, and interaction effects within a portfolio that collectively explains a portfolio’s underlying performance. The main advantage of the BF methodology is that rather than using the overall return of the benchmark, it goes a level deeper than BHB and measures wheth-er the benchmark sector, country, etc. outperformed/or underperformed the overall benchmark.

Brinson Hood Beebower (BHB) Attribution1 - The BHB methodology shows that excess return must be equal to the sum of all other factors (i.e., allocation effect, selection effect, interaction effect, etc.). The advantage to using the BHB methodology is that it is a highly accepted industry standard for calculating the allocation, selection, and interaction effects within a portfolio that collectively explains a portfolio’s underlying performance.

Corporate Bond (Corp) 4 - A debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the compa-ny, which is typically money to be earned from future operations. In some cas-es, the company's physical assets may be used as collateral for bonds.

Correlation1 - A range of statistical relationships between two or more random variables or observed data values. A correlation is a single number that de-scribes the degree of relationship between variables.

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Coupon4 – The interest rate stated on a bond when it is issued. The coupon is typically paid semiannually. This is also referred to as the "coupon rate" or "coupon percent rate."

Currency Effect1 - Is the effect that changes in currency exchange rates over time affect excess performance.

Derivative Instrument3 - A financial obligation that derives its precise value from the value of one or more other instruments (or assets) at the same point of time. For example, the relationship between the value of an S&P 500 futures contract (the derivative instrument in this case) is determined by the value of the S&P 500 Index and the value of a U.S. Treasury bill that matures at the expiration of the futures contract.

Downside Deviation1 - Equals the standard deviation of negative return or the measure of downside risk focusing on the standard deviation of negative re-turns.

Formula: Annualized Standard Deviation (Fund Return - Average Fund Return) where average fund return is greater than individual fund returns, monthly or quarter-ly.

Duration3 - Duration is a measure of interest rate risk. The greater the dura-tion of a bond, or a portfolio of bonds, the greater its price volatility will be in response to a change in interest rates. A bond’s duration is inversely related to interest rates and directly related to time to maturity.

Equity/Debt/Cash Ratio1 – The percentage of an investment or portfolio that is in Equity, Debt, and/or Cash (i.e. A 7/89/4 ratio represents an investment that is made up of 7% Equity, 89% Debt, and 4% Cash).

Foreign Bond3 - A bond that is issued in a domestic market by a foreign entity, in the domestic market's currency. A foreign bond is most often issued by a foreign firm to raise capital in a domestic market that would be most interested in purchasing the firm's debt. For foreign firms doing a large amount of business in the domestic market, issuing foreign bonds is a common practice.

Hard Hurdle5 – is a hurdle rate that once beaten allows a fund manager to charge a performance fee on only the funds above the specified hurdle rate.


High-Water Mark4 - The highest peak in value that an investment fund/account has reached. This term is often used in the context of fund manager compensation, which is performance based. Some performance-based fees only get paid when fund performance exceeds the high-water mark. The high-water mark ensures that the manager does not get paid large sums for poor perfor-mance.

Hurdle Rate4 - The minimum rate of return on an investment required, in order for a manager to collect incentive fees from the investor, which is usually tied to a benchmark.

Interaction Effects2 - The interaction effect measures the combined impact of an investment manager’s selection and allocation decisions within a sector. For example, if an investment manager had superior selection and over weighted that particular sector, the interaction effect is positive. If an investment manag-er had superior selection, but underweighted that sector, the interaction effect is negative. In this case, the investment manager did not take advantage of the superior selection by allocating more assets to that sector. Since many invest-ment managers consider the interaction effect to be part of the selection or the allocation, it is often combined with the either effect.

Median3 - The value (rate of return, market sensitivity, etc.) that exceeds one-half of the values in the population and that is exceeded by one-half of the val-ues. The median has a percentile rank of 50.

Modified Duration3 - The percentage change in the price of a fixed income security that results from a change in yield.

Mortgage Backed Securities (MBS)3 - Bonds which are a general obligation of the issuing institution but are also collateralized by a pool of mortgages.

Municipal Bond (Muni) 4 - A debt security issued by a state, municipality or county to finance its capital expenditures.

Net Investment Change1 – Is the change in an investment after accounting for all Net Cash Flows.

Performance Fee4 - A payment made to a fund manager for generating posi-tive returns. The performance fee is generally calculated as a percentage of investment profits, often both realized and unrealized.

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Policy Index3 - A custom benchmark designed to indicate the returns that a passive investor would earn by consistently following the asset allocation targets set forth in this investment policy statement.

Price to Book (P/B)4 - A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share, also known as the "price-equity ratio".

Price to Earnings (P/E)3 - The weighted equity P/E is based on current price and trailing 12 months earnings per share (EPS).

Price to Sales (P/S)4 - A ratio for valuing a stock relative to its own past per-formance, other companies, or the market itself. Price to sales is calculated by dividing a stock's current price by its revenue per share for the trailing 12 months.

Return on Equity (ROE)4 - The amount of net income returned as a percent-age of shareholders equity. Return on equity measures a corporation's profita-bility by revealing how much profit a company generates with the money share-holders have invested.

Selection (or Manager) Effect2 - Measures the investment manager’s ability to select securities within a given sector relative to a benchmark. The over or underperformance of the portfolio is weighted by the benchmark weight, there-fore, selection is not affected by the manager’s allocation to the sector. The weight of the sector in the portfolio determines the size of the effect—the larger the sector, the larger the effect is, positive or negative.

Soft Hurdle rate5 – is a hurdle rate that once beaten allows a fund manager to charge a performance fee based on the entire annualized return.

Tiered Fee1 – A fee structure that is paid to fund managers based on the size of the investment (i.e. 1.00% fee on the first $10M invested, 0.90% on the next $10M, and 0.80% on the remaining balance).

Total Effects2 - The active management (total) effect is the sum of the selec-tion, allocation, and interaction effects. It is also the difference between the total portfolio return and the total benchmark return. You can use the active management effect to determine the amount the investment manager has add-ed to a portfolio’s return.


Total Return1 - The actual rate of return of an investment over a specified time period. Total return includes interest, capital gains, dividends, and distributions realized over a defined time period.

Universe3 - The list of all assets eligible for inclusion in a portfolio.

Upside Deviation1 – Standard Deviation of Positive Returns

Weighted Avg. Market Cap.4 - A stock market index weighted by the market capitalization of each stock in the index. In such a weighting scheme, larger companies account for a greater portion of the index. Most indexes are con-structed in this manner, with the best example being the S&P 500.

Yield (%)3 - The current yield of a security is the current indicated annual divi-dend rate divided by current price. Yield to Maturity3 -The discount rate that equates the present value of cash flows, both principal and interest, to market price.

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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 monitoring financial markets. 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.

June 30, 2017

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Information Disclaimer

• Past performance is no guarantee of future results.

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

• NEPC’s source for portfolio pricing, calculation of accruals, and transaction information is the plan’s custodian bank.Information on market indices and security characteristics is received from other sources external to NEPC. While NEPChas exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all sourceinformation contained within.

• Some index returns displayed in this report or used in calculation of a policy, allocation or custom benchmark may bepreliminary and subject to change.

• This report is provided as a management aid for the client’s internal use only. Information contained in this report doesnot constitute a recommendation by NEPC.

• This report may contain confidential or proprietary information and may not be copied or redistributed to any party notlegally entitled to receive it.

Reporting Methodology

• The client’s custodian bank is NEPC’s preferred data source unless otherwise directed. NEPC generally reconcilescustodian data to manager data. If the custodian cannot provide accurate data, manager data may be used.

• Trailing time period returns are determined by geometrically linking the holding period returns, from the first full monthafter inception to the report date. Rates of return are annualized when the time period is longer than a year. Performanceis presented gross and/or net of manager fees as indicated on each page.

• For managers funded in the middle of a month, the “since inception” return will start with the first full month, althoughactual inception dates and cash flows are taken into account in all Composite calculations.

• This report may contain forward-looking statements that are based on NEPC’s estimates, opinions and beliefs, but NEPCcannot guarantee that any plan will achieve its targeted return or meet other goals.

Information Disclaimer and Reporting Methodology

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