investment performance analysis for the period ending ... · •advance” estimate of fourth...

Investment Performance AnalysisFor the period ending December 31, 2013

February 2014

Allan Martin, PartnerDan LeBeau, Consultant

Page

Market Environment Update and Outlook 2

Total Fund Performance 12

Total Fund Performance: Net of Fees 49

Appendix: Market Environment 53

New Mexico Educational Retirement Board

Contents

December 31, 2013


1

Market Environment Update and Outlook

• “Advance” estimate of fourth quarter 2013 GDP growth is 3.2% after increasing by 4.1% in the third quarter.

– Retail sales rose to a 3.7% year-over-year growth rate in December 2013.– The inventory-to-sales ratio has remained mostly flat since early 2010 and closed at 1.29 in November 2013. – Corporate profits as a percent of GDP remained near secular highs at 12.6% at the end of Q3 2013.– The trade deficit decreased marginally in November.

• The unemployment rate fell to 6.7% in December, its lowest level since 2008; U-6, a broader measure of unemployment, also decreased to 13.1% during the fourth quarter.

– JP Morgan has stated that sustained GDP growth of 1.5% is needed for positive job creation, and closer to 3% growth is needed to decrease the unemployment rate.

• Consumer confidence rose to 78.1 in December; the Case-Schiller Home Price Index (as of 9/30) rose to its highest level (150.92) since the financial crisis.

• Rolling 12-month CPI increased to 1.5% at the end of December; Capacity Utilization rose slightly to 79.2% in the month.

• Fed Funds rate remains at 0.25% while the 10-year Treasury Yield finished December at 3.03%.

• Fed balance sheets increased in 2013, while European Central Bank balance sheets decreased significantly.

– Large economies continue easing (Japan to the extreme), while the ECB tightens.

• S&P valuations are slightly above the 10-year and long-term averages, which are nearly equal at 16.35x, using current price/earnings ratios.

– Cyclically adjusted Shiller PE ratios, however, are well above the long-term average of 17.6x and above the 10-year average of 23.0x.

Economic Environment

December 31, 2013


3

Market Environment – Q4 2013 Overview

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

World Equity Benchmarks

MSCI World World 8.0% 26.7% 11.5% 15.0% 7.0%

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

Domestic Equity Benchmarks

S&P 500 Large Core 10.5% 32.4% 16.2% 17.9% 7.4%

Russell 1000 Large Core 10.2% 33.1% 16.3% 18.6% 7.8%

Russell 1000 Growth Large Growth 10.4% 33.5% 16.5% 20.4% 7.8%

Russell 1000 Value Large Value 10.0% 32.5% 16.1% 16.7% 7.6%

Russell 2000 Small Core 8.7% 38.8% 15.7% 20.1% 9.1%

Russell 2000 Growth Small Growth 8.2% 43.3% 16.8% 22.6% 9.4%

Russell 2000 Value Small Value 9.3% 34.5% 14.5% 17.6% 8.6%

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

International Equity Benchmarks

MSCI EAFE International Developed 5.7% 22.8% 8.2% 12.4% 6.9%

MSCI EM Emerging Equity 1.8% -2.6% -2.1% 14.8% 11.2%

S&P EPAC SmallCap Small Cap Int'l 5.9% 28.4% 9.8% 17.5% 10.0%

MSCI ACWI ex-US World ex-US 4.8% 15.3% 5.1% 12.8% 7.6%

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

Domestic Fixed Income Benchmarks

Barclays Aggregate Core Bonds -0.1% -2.0% 3.3% 4.4% 4.6%

Barclays US High Yield High Yield 3.6% 7.4% 9.3% 18.9% 8.6%

BofA ML US HY BB/B High Yield 3.4% 6.3% 8.7% 16.6% 7.8%

CSFB Levered Loans Bank Loans 1.8% 6.2% 5.8% 13.5% 5.1%

BofA ML US 3-Month T-Bill Cash 0.0% 0.1% 0.1% 0.1% 1.7%

Barclays US TIPS 1-10 Yr Inflation -1.3% -5.6% 2.6% 5.0% 4.4%

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

Global Fixed Income Benchmarks

Citigroup WGBI World Gov. Bonds -1.1% -4.0% 1.3% 2.3% 4.2%

BC Global Credit Global Bonds 1.6% 1.1% 5.7% 8.8% 5.6%

JPM GBI-EM Glob. Diversified Em. Mkt. Bonds (Local) -1.5% -9.0% 1.5% 8.1% 9.5%

JPM EMBI+ Em. Mkt. Bonds 0.6% -8.3% 5.7% 10.7% 8.3%

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

Alternative Benchmarks

DJ UBS Commodity Index Commodity -1.1% -9.5% -8.1% 1.5% 0.9%

DJCS HF Composite Hedge Fund 4.2% 9.7% 5.1% 10.3% 8.5%

HFRI FoF Conservative Fund of Funds 2.7% 7.7% 2.7% 4.9% 3.1%

Burgiss Global PE Lagged** Private Equity 3.0% 13.6% 12.6% 8.2% 13.4%

NCREIF Property Index Real Estate 2.5% 11.0% 13.4% 6.4% 12.9%

Wilshire REIT Index REIT -0.8% 1.9% 9.4% 16.7% 8.4%

CPI + 2%* Inflation/Real Assets 2.3% 3.5% 4.1% 4.2% 4.6%

*As of 11/30/2013**As of 9/30/2013

December 31, 2013


4

• Performance was driven by the extended period of strong performance of global equities, and U.S. equities in particular.

• Absolute Total Fund performance likely exceeded actuarial targets.

• Manager alpha may have boosted results above policy and/or allocation indices.

• Longer term results (five- and 10-year) should look better on a peer-relative, benchmark-relative and risk-adjusted basis.

• Diversification did not help in 2013, but we believe a risk-balanced approach to investing still makes sense.

2013 – Looking Back

December 31, 2013


5

Global Equity• A brighter economic outlook and continued stimulus from the Federal Reserve drove returns higher through the year, with the

Russell 2000 Index gaining 38.8% and the S&P 500 Index returning 32.4% in 2013.

• Sectors tied to the improving economy – consumer discretionary, healthcare, industrials, and financials – outperformed; defensive, yield-oriented sectors – telecommunications and utilities – lagged.

• Small capitalization stocks outperformed large capitalization stocks in 2013, growth bested value in both large and small stocks for the year.

• In 2013, international developed markets equities gained 22.8%, according to the MSCI EAFE Index.

• Emerging Markets Equities trailed, posting losses of 2.6% in 2013.

Private Equity• New private equity funds raised nearly $300 billion of capital for investments in 2013, an 11% jump over a year earlier,

according to Thomson Reuters.

• Investor interest underscored economic optimism with nearly 60% of commitments going to buyout and growth equity funds.

• Venture capital firms represented 9% of new commitments, marking the first time in two decades that new VC funds fell below 10% in a single year.

• U.S. and Europe clocked modest gains in fundraising with $196 billion and $73 billion, respectively, committed to new funds.

• Asian private equity suffered its third straight annual decline as investors sought greater clarity around the region’s near-term growth prospects in light of China’s new leadership and balance of payments issues affected certain economies.

• Private direct lending is an attractive fixed income alternative for investors.

• Appealing opportunities for secondary funds as banks in U.S. and Europe whittle down their private equity portfolios to comply with Basel III and other regulations.

Market Environment

December 31, 2013


6

Fixed Income• The reality of rising rates materialized in mid-December when the Fed announced a monthly $10 billion reduction in asset

purchases.

• The yield on the U.S. Treasury 10-year note increased 40 basis points to 3.03% in December, the first time yields have been above 3% since July 2011.

• U.S. TIPS lost 2.0% during the fourth quarter, bringing the year’s losses to 8.6%. The breakeven spread widened modestly to 2.24%.

• The Barclays U.S. Aggregate Bond Index, which tracks the U.S. investment grade fixed income market, lost 0.1% in the fourth quarter; losses for the year totaled 2.0%, the index’s third negative annual return since its inception.

• High yield bonds returned 3.6% during the fourth quarter, ending the year with gains of 7.4%. The yield spread over Treasuries fell to 3.82% on December 31, 2014, from 5.11% a year earlier.

• Leveraged loans returned 1.8% in the fourth quarter and 6.2% in 2013.

• Emerging market debt denominated in local currency lost 1.5% in the fourth quarter and racked up losses of 9.0% for the year.Hard currency debt gained 0.6% in the fourth quarter, but lost 8.3% in 2013.

Market Environment

December 31, 2013


7

Commodities• Commodities posted losses of 9.5% in 2013, according to the Dow Jones UBS Commodity Index.

• Within commodities, natural gas led in spot-price appreciation with a 26.2% return in 2013.

• Offsetting the gains from natural gas were precious metals and agriculture.

Real Estate• NEPC is neutral on core real estate in the U.S. and remains positive on non-core real estate, that is, value-add and

opportunistic strategies, particularly in Europe.

• Within U.S. core real estate, fundamentals continue to improve with decreasing vacancy rates, increasing rents, limited new construction (outside of the apartment sector), and still attractive if narrowing income spreads relative to interest rates.

• In Europe, undervalued non-core properties and capital structure distress remain, creating more appealing prospects than in the U.S.

• Real estate debt strategies are appealing, particularly in Europe’s distressed lending environment, although currency risk is a potential consideration.

Real Assets/Inflation-Linked Assets• NEPC believes that energy, specifically in North America, represents an attractive opportunity in the up-stream and mid-

stream parts of the energy value chain.

• Agriculture and metals/mining opportunities seem appealing based on long-term demographic trends despite a less certain short-term outlook.

• Timber is an area of portfolios where we would recommend underweight positions as total return targets are low with a relatively small market opportunity and managers seeking deals outside the U.S.

Market Environment

December 31, 2013


8

• Reassess current and future liquidity needs.– Determine the ability to pursue additional returns by locking-up capital in private markets/alternative investments.

• Alpha generation opportunities often higher in alternatives.

– Consider strategies that replace traditional bank activities, such as direct lending to medium-sized companies and real estate lending.

• Maintain diversification across and within asset classes. Rebalance…rebalance…rebalance– Review rebalancing thresholds established in the Investment Policy Statement relative to actual allocations.– Rebalancing policies provide a risk control feature, as well as an opportunity for enhanced returns.

• Rising rate environment should spur investors to continue reviewing the role of core U.S. and non-U.S. fixed income.

– While rates have risen, forecasted returns remain below most assumed rates of return.– Rebalance to target with high yield and bank loans.– Consider allocations to global multi-sector and unconstrained bond funds.

• Do not neglect the risk of economic inflation in the portfolio.– Despite tapering, Fed policy remains accommodative.– U.S. improvements in economic and financial conditions could increase risks of economic inflation.– Risk parity, real assets, and private market strategies can be considered as tools to address inflation risk and extend

diversification of a portfolio.

• Maintain long-term commitment to emerging markets.– In the short-term, emerging world faces distinctive conditions in each country. – Long-term secular outlook of stronger growth and continued development remains in place.– Use active management to navigate potential macroeconomic and currency issues.– Emerging markets stock and bond weakness presents an opportunity for investors whose portfolios are below-market

weight.– Relatively attractive return opportunities, but risks related to balance of payments (i.e., economic competitiveness)

have come to light for some countries.

NEPC 2014 Focused Actions for Public Funds

December 31, 2013


9

NEPC Updates

• Professional Staff Updates– Elected into NEPC Partnership

• Timothy R. Bruce, Partner, Hedge Funds

– New Principals• Richard J. Harper, CFA, CAIA, Principal, Senior Consultant• Eric R. Harnish, Principal, Director of Private Markets Research• Daniel V. Kelly, Principal, Chief Operating Officer• Judy A. Murphy, Principal, Director of Organizational Development• Sean P. Ruhmann, Principal, Senior Consultant, Private Markets

• Favorable Client Feedback– 7th biennial client survey

• High marks in nearly every category

– Greenwich Associates annual plan sponsor survey• Among our 10 largest competitors, NEPC:

– Ranked #2 overall in 2013 and ranked #3 or higher in 10 of the past 11 years.

• Industry Recognitions– NEPC: 2013 aiCIO Industry Innovation Consultant Award– NEPC Clients: 2013 aiCIO Industry Innovation Awards

• Winner in the Defined Contribution Plan category– United Technologies (Robin Diamonte, CIO)

• Winner in the Public Pension Plan below $15 billion category– San Bernardino County Employees’ Retirement Association (Don Pierce, CIO)

December 31, 2013

Note: Greenwich Associates is an independent research firm. Their ratings are not an endorsement of NEPC.


10

NEPC Updates

• NEPC Research– White Papers recently posted to http://www.nepc.com/research/

• When Did Defined Contribution Get So Complex? Outsourcing Certain Functions of Your Defined Contribution Program (January 2014)– Christine A. Loughlin, CFA, CAIA, Partner

• NEPC Survey on Hedge Fund Operations (November 2013)– Bill Bogle, Partner; Erin Faccone, ODD Consultant; Lauren Walsh, ODD Analyst

• Shedding Light on the Future: Asset Allocation and Risk Management in a Post-Credit Crisis World (November 2013)– Erik Knutzen, CFA, CAIA, Chief Investment Officer; John Minahan, CFA, Senior Lecturer in Finance, MIT

• Quantitative Equity Hedge Funds: Revisiting Their Strengths (October 2013)– Timothy O’Connell, Research Analyst; Asher Watson, Analyst, Timothy Bruce, Senior Research Consultant

• Recent Events– 2014 Public Funds Workshop – January 27-28, 2014 in Phoenix, AZ– 2014 Market Outlook Webinar – January 23, 2014

• Upcoming Events– NEPC’s 19th Annual Client Conference – May 13-14, 2014 in Boston, MA


December 31, 2013

11

Total Fund Performance

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:

Hammes Partners II (‘Hammes’) was selected for investment on November 21, 2013 as part of the Fund’s allocation to Real Estate. The commitment was approved for $25 million.

Hammes has provided documentation stating that the firm has engaged Probitas Funds Group, LLC (‘Probitas’) to act as a Placement Agent in connection with investments with respect to the fund, and Probitas has been involved with respect to the NMERB’s investment in the fund. Probitas is not a corporate affiliate.

Hammes disclosed that Probitas’s compensation is as follows: (i) Probitas will receive an Advisory Fee of $200,000, and to the extent paid, this retainer will be credited against the Placement Fee; and (ii) a Placement Fee in the amount of $500,000-$562,500 in connection with the NMERB’s investment in the fund.

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

Apollo Fund VIII (‘Apollo’) was selected for investment on December 12, 2013, as part of the Fund’s allocation to Private Equity. The commitment was approved for $50 million.

Apollo has provided documentation confirming no placement agents will be compensated for NMERB’s investment in the fund.

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

Third Party Placement Agent DisclosureNew Mexico Educational Retirement Board

December 31, 2013


13

Market Value 3 Mo Rank FiscalYTD Rank 1 Yr Rank 3 Yrs Rank 5 Yrs Rank 10 Yrs Rank 15 Years Rank 20 Years Rank 25 Years Rank Return Since

_

Total Fund $10,733,226,200 4.2% 74 7.7% 92 11.7% 81 8.6% 77 13.2% 27 7.1% 47 5.9% 80 7.4% 83 9.0% 28 9.4% Jul-83Policy Index 4.1% 76 7.6% 92 11.2% 84 8.0% 83 11.4% 78 6.4% 78 5.6% 88 7.0% 88 7.9% 93 -- Jul-83Allocation Index 4.1% 76 7.5% 92 11.3% 83 8.3% 79 11.9% 71 7.2% 36 -- -- -- -- -- -- -- Jul-8360% MSCI World(Gross) / 40% CITIWGBI

4.4% 67 10.8% 32 13.9% 66 7.9% 87 10.4% 90 6.5% 73 5.7% 84 6.9% 88 -- -- -- Jul-83

IFx Public DB > $1BGross Median 4.7% 10.1% 15.0% 9.6% 12.6% 7.0% 6.5% 7.9% 8.6% 9.3% Jul-83

XXXXX

December 31, 2013

5 Years Ending December 31, 2013

Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank SortinoRatio Rank

_

Total Fund 13.2% 27 9.1% 37 1.5 11 2.2 11Policy Index 11.4% 78 9.1% 38 1.2 57 2.0 4260% MSCI World (Gross) / 40%CITI WGBI 10.4% 90 11.8% 97 0.9 99 1.3 99

IFx Public DB > $1B Gross Median 12.6% -- 9.6% -- 1.3 -- 2.0 --


Anlzd Ret Rank Anlzd StdDev Rank Sharpe

Ratio Rank SortinoRatio Rank

_

Total Fund 8.6% 77 6.8% 14 1.3 39 1.5 54Policy Index 8.0% 83 7.2% 26 1.1 68 1.5 5460% MSCI World (Gross) / 40%CITI WGBI 7.9% 87 8.8% 81 0.9 99 1.2 97

IFx Public DB > $1B Gross Median 9.6% -- 7.7% -- 1.2 -- 1.5 --XXXXX

New Mexico Educational Retirement BoardTotal Fund Performance Summary

For the one-year period ending December 31, 2013, the Fund experienced a net investment gain of $1.1 billion, which includes a net investment gain of $434.3 million during the fourth calendar quarter. Assets increased from $9.9 billion twelve months ago to $10.7 billion on December 31, 2013, with $320.9 million in net distributions during the year.

Over the past five years, the Fund returned 13.2% per annum, outperforming the policy index by 1.8% and ranking in the 27th percentile of the InvestorForce Public Funds > $1 Billion universe. The Fund’s volatility was 9.1%, which ranks in the 37th percentile of its peers over this period. The Fund’s risk-adjusted performance, as measured by the Sharpe Ratio, ranks in the 11th percentile of its peers. Therefore, the Fund has produced more return per unit of risk taken over this period than 89% of its peers.

Over the past three years, the Fund returned 8.6% per annum, outperforming the policy index by 0.6% and ranking in the 77th percentile of its peer group. Over the past three years, the Fund has reduced its volatility on both an absolute and relative basis, resulting in a three-year Sharpe Ratio of 1.3, which ranks in the 39th percentile.

Over the past year, the Fund returned 11.7%, outperforming the policy index by 0.5% and ranking in the 81st percentile of its peers. The Fund’s volatility over the last year was 4.7%, ranking in the 13th percentile of its peer group, resulting in a Sharpe Ratio of 2.5, which ranks in the 64th percentile.

All asset classes were within policy ranges as of December 31, 2013.

14

December 31, 2013

New Mexico Educational Retirement BoardTotal Fund Asset Growth Summary

Sources of Portfolio Growth Last ThreeMonths Fiscal Year-To-Date One Year Three Years Five Years Inputted Date

10/1/05_

Beginning Market Value $10,369,878,615 $10,126,933,745 $9,906,036,343 $9,203,490,500 $6,601,156,016 $7,694,652,364Net Additions/Withdrawals -$70,957,336 -$168,653,203 -$320,908,623 -$932,899,953 -$1,349,778,921 -$1,980,779,392Investment Earnings $434,304,921 $774,945,658 $1,148,098,480 $2,462,635,653 $5,481,849,105 $5,019,353,228Ending Market Value $10,733,226,200 $10,733,226,200 $10,733,226,200 $10,733,226,200 $10,733,226,200 $10,733,226,200

_

15

21.4% 20.0%

2.4%2.0%

5.5%5.0%

9.8%10.0%

10.7%

7.0%

20.4%

20.0%

1.9%

2.0%

4.1%

3.0%

9.7%

10.0%

4.7%

5.0%

6.9%

8.0%

1.8%

7.0%

0.8% 1.0%

Total Fund Asset Allocation vs. Policy TargetsNew Mexico Educational Retirement Board

1Long-Term Policy Target approved by the Board in September 2012.

Note: Allocations shown here include cash held in separately managed portfolios.

Totals may not add to 100% due to rounding.

Current Allocation Policy Target


Equity39.1%

Fixed Income33.0%

Alternatives27.2%

Equity37.0%

Fixed Income29.0%

Alternatives33.0%

Cash1.0%

Cash0.8%`

December 31, 2013

Current Mkt ValueCurrent

Allocation Policy Target1 Difference Policy Range Within Range

Equity $4,193,138,852 39.1% 37.0% 2.1% 20% - 55% YesU.S. Equity $2,555,803,058 23.8% 22.0% 1.8% 15% - 30% Yes

U.S. Large Cap Equity $2,294,258,488 21.4% 20.0% 1.4% 15% - 25% YesU.S. Small/Mid Cap Equity $261,544,570 2.4% 2.0% 0.4% 0% - 5% Yes

Non-U.S. Equity $1,637,335,794 15.3% 15.0% 0.3% 5% - 25% YesNon-U.S. Developed Mkts $586,269,486 5.5% 5.0% 0.5% 0% - 10% YesNon-U.S. Emerging Mkts $1,051,066,308 9.8% 10.0% -0.2% 5% - 15% Yes

Fixed Income $3,538,629,885 33.0% 29.0% 4.0% 10% - 40% YesCore Fixed Income $1,151,823,221 10.7% 7.0% 3.7% 0% - 15% Yes

Opportunistic Credit $2,187,979,238 20.4% 20.0% 0.4% 0% - 30% YesEmerging Mkts Debt $198,827,426 1.9% 2.0% -0.1% 0% - 8% Yes

Alternatives $2,915,165,292 27.2% 33.0% -5.8% 10% - 40% YesAbsolute Return $441,653,112 4.1% 3.0% 1.1% 0% - 10% Yes

Global Asset Allocation/Risk Parity $1,041,266,653 9.7% 10.0% -0.3%Global Asset Allocation $518,248,496 4.8% 5.0% -0.2% 0% - 10% Yes

Risk Parity $523,018,157 4.9% 5.0% -0.1% 0% - 10% Yes

Real Estate $500,021,303 4.7% 5.0% -0.3% 0% - 10% YesREITs $289,149,619 2.7% 3.0% -0.3%

Private Real Estate $210,871,684 2.0% 2.0% 0.0%

Private Equity $737,146,320 6.9% 8.0% -1.1% 0% - 15% Yes

Inflation-Linked Assets $195,077,904 1.8% 7.0% -5.2% 0% - 12% Yes

Cash $86,292,171 0.8% 1.0% -0.2% 0% - 10% Yes

Total $10,733,226,199 100.0% 100.0% 0.0%

16

December 31, 2013

New Mexico Educational Retirement BoardTotal Fund Asset Allocation History

17

December 31, 2013

New Mexico Educational Retirement BoardTotal Fund Risk/Return

18

December 31, 2013

New Mexico Educational Retirement BoardTotal Fund Risk/Return

19

3 Year Risk/Return ProfileNew Mexico Educational Retirement BoardNew Mexico Educational Retirement Board

Gre

ater

Ret

urn

Greater Risk

December 31, 2013

Total Fund

US Equity

Int'l Equity

EM Equity

Fixed IncomeGTAA

Absolute Return

Real Estate

Private Equity

Real Assets

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

20

5 Year Risk/Return ProfileNew Mexico Educational Retirement BoardNew Mexico Educational Retirement Board

Gre

ater

Ret

urn

Greater Risk

December 31, 2013

Total Fund

US Equity

Int'l EquityEM Equity

Fixed Income

Absolute Return

Real Estate

Private Equity

Real Assets

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

21

December 31, 2013

Total Fund vs. IFx Public DB > $1B Gross (USD) (peer)1 Year

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

22

December 31, 2013

Total Fund vs. IFx Public DB > $1B Gross (USD) (peer)3 Years


23

December 31, 2013



24

December 31, 2013



25

Total Fund Rolling 5-Year Excess ReturnsNew Mexico Educational Retirement Board

Note: Returns are gross of fees.


December 31, 2013

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

Excess Return - Total Fund vs Policy IndexExcess Return - Total Fund vs Median Public Funds > $1 Billion*Excess Return - Total Fund vs 60/40 Index

26

December 31, 2013

Note: Plan attribution calculations are 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 theperformance summary. May not add due to rounding.

New Mexico Educational Retirement BoardTotal Fund Attribution Analysis

Attribution Summary3 Months Ending December 31, 2013

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects

U.S. Large Cap EquityComposite 10.4% 10.5% -0.1% 0.0% 0.2% 0.0% 0.1%

U.S. Small/Mid Cap EquityComposite 9.6% 8.7% 0.9% 0.0% 0.0% 0.0% 0.0%

Non-U.S. Developed MktsEquity Composite 6.2% 5.7% 0.5% 0.0% 0.0% 0.0% 0.0%

Non-U.S. Emerging MktsEquity Composite 2.9% 1.8% 1.1% 0.1% 0.0% 0.0% 0.1%

Core Fixed IncomeComposite 0.1% -0.1% 0.2% 0.0% 0.0% 0.0% 0.0%

Non-U.S. Emerging MarketDebt Composite -0.4% -1.5% 1.2% 0.0% 0.0% 0.0% 0.0%

Opportunistic CreditComposite 3.6% 2.6% 1.1% 0.2% 0.0% 0.0% 0.2%

Absolute Return Composite 0.1% 0.5% -0.4% 0.0% 0.0% 0.0% 0.0%Global AssetAllocation/Risk ParityComposite

0.4% 4.7% -4.3% -0.4% -0.1% 0.1% -0.4%

Public Real EstateComposite 0.0% -0.8% 0.8% 0.0% 0.0% 0.0% 0.0%

Private Real EstateComposite 4.3% 2.5% 1.8% 0.0% 0.0% 0.0% 0.0%

Private Equity Composite 4.7% 4.8% -0.2% 0.0% -0.1% 0.0% -0.1%Real Assets Composite 0.7% 1.5% -0.8% -0.1% -0.1% 0.0% -0.1%Cash 0.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0%Total 4.2% 4.2% 0.0% -0.1% 0.0% 0.1% 0.0%

27

December 31, 2013

Attribution SummaryFYTD Ending December 31, 2013

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects

U.S. Large Cap EquityComposite 16.3% 16.3% 0.0% 0.0% 0.1% 0.0% 0.1%


Non-U.S. Developed MktsEquity Composite 17.8% 17.9% -0.1% 0.0% 0.0% 0.0% 0.0%

Non-U.S. Emerging MktsEquity Composite 6.3% 7.7% -1.4% -0.1% -0.1% 0.0% -0.2%

Core Fixed IncomeComposite 0.7% 0.4% 0.3% 0.0% 0.0% 0.0% 0.1%



Absolute Return Composite 0.9% 1.0% -0.1% 0.0% 0.0% 0.0% 0.0%Global AssetAllocation/Risk ParityComposite

3.4% 9.9% -6.5% -0.6% -0.1% 0.1% -0.6%

Public Real EstateComposite -2.4% -3.8% 1.5% 0.0% 0.0% 0.0% 0.0%


Private Equity Composite 6.4% 8.0% -1.5% -0.1% -0.1% 0.0% -0.2%Real Assets Composite 2.7% 3.2% -0.5% 0.0% -0.1% 0.0% -0.2%Cash 0.7% 0.0% 0.7% 0.0% 0.0% 0.0% 0.0%Total 7.7% 7.9% -0.2% -0.1% -0.1% 0.0% -0.2%



28

December 31, 2013

Attribution Summary1 Year Ending December 31, 2013

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects




Non-U.S. Emerging MktsEquity Composite -6.8% -2.6% -4.2% -0.5% 0.0% 0.0% -0.5%

Core Fixed IncomeComposite -1.6% -2.0% 0.4% 0.1% 0.2% 0.0% 0.2%



Absolute Return Composite 4.9% 2.0% 2.9% 0.3% 0.0% -0.1% 0.2%Global AssetAllocation/Risk ParityComposite

-1.9% 15.1% -17.0% -1.1% 0.0% -0.1% -1.2%

Public Real EstateComposite 3.7% 1.9% 1.8% 0.1% 0.0% 0.0% 0.1%


Private Equity Composite 14.5% 16.7% -2.2% -0.2% 0.0% 0.0% -0.1%Real Assets Composite 2.9% 6.6% -3.7% 0.0% -0.1% -0.1% -0.2%Cash 0.8% 0.0% 0.8% 0.0% 0.0% 0.0% 0.0%Total 11.8% 11.4% 0.3% 0.0% 0.3% 0.0% 0.3%



29

December 31, 2013



Attribution Summary3 Years Ending December 31, 2013

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects


U.S. Small/Mid Cap EquityComposite 14.8% 16.3% -1.5% 0.0% 0.1% 0.0% 0.1%


Non-U.S. Emerging MktsEquity Composite -5.2% -2.1% -3.1% -0.3% -0.1% 0.0% -0.4%

Core Fixed IncomeComposite 4.4% 3.3% 1.1% 0.2% -0.2% 0.0% 0.0%

Non-U.S. Emerging MarketDebt Composite -- -- -- 0.0% 0.0% 0.0% 0.0%

Opportunistic CreditComposite 10.3% 7.2% 3.1% 0.6% 0.2% -0.1% 0.7%

Absolute Return Composite 1.8% 2.1% -0.2% 0.0% 0.0% 0.0% -0.1%Global AssetAllocation/Risk ParityComposite

8.5% 8.3% 0.2% -0.1% 0.1% 0.0% 0.0%



Private Equity Composite 13.9% 15.4% -1.6% 0.0% 0.2% -0.1% 0.1%Real Assets Composite 2.8% 7.2% -4.4% 0.0% 0.0% 0.0% -0.1%Cash 0.8% 0.1% 0.7% 0.0% 0.0% 0.0% 0.0%Total 8.6% 8.0% 0.6% 0.4% 0.3% -0.2% 0.5%

30

December 31, 2013



Attribution Summary5 Years Ending December 31, 2013

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects


U.S. Small/Mid Cap EquityComposite 19.0% 21.8% -2.8% -0.1% 0.3% -0.1% 0.2%

Non-U.S. Developed MktsEquity Composite 12.1% 12.4% -0.4% 0.0% -0.3% 0.0% -0.3%

Non-U.S. Emerging MktsEquity Composite 12.8% 14.8% -2.0% -0.2% 0.0% 0.0% -0.2%

Core Fixed IncomeComposite 7.5% 4.4% 3.1% 0.9% -0.3% -0.2% 0.5%

Non-U.S. Emerging MarketDebt Composite -- -- -- 0.0% 0.0% 0.0% 0.0%


Absolute Return Composite 5.0% 2.1% 2.9% 0.3% 0.0% -0.1% 0.2%Global AssetAllocation/Risk ParityComposite

-- -- -- 0.1% 0.1% 0.0% 0.1%



Private Equity Composite 10.7% 10.6% 0.1% 0.0% 0.2% 0.0% 0.1%Real Assets Composite 0.3% 7.2% -6.9% 0.0% 0.0% 0.0% -0.1%Cash -- -- -- 0.0% 0.0% 0.0% 0.0%Total 13.5% 11.4% 2.1% 1.6% 0.7% -0.3% 2.0%

31


% of Tot Anlzd Ret Rank Anlzd StdDev Rank Tracking

Error Rank Info Ratio Rank Beta Rank Anlzd AJ Rank SharpeRatio

_

Global Asset Allocation/Risk ParityComposite 9.70% 8.49% 16 6.56% 31 7.94% 99 0.02 17 0.33 4 5.70% 1 1.29

60% MSCI World HH/40% CITIWGBI HH -- 8.30% 19 7.72% 47 0.00% 1 -- -- 1.00 56 0.00% 44 1.07




U.S. Large Cap EquityComposite 21.38% 16.16% 48 12.07% 31 0.11% 1 -0.14 56 1.00 35 0.03% 42 1.33

S&P 500 -- 16.18% 47 12.11% 31 -- -- -- -- -- -- 0.00% 42 1.33

U.S. Small/Mid Cap EquityComposite 2.44% 14.07% 83 16.95% 77 2.83% 9 -0.49 90 1.02 75 -1.76% 87 0.83

NMERB Small/Mid CapEquity Blended Index -- 15.44% 68 16.31% 65 -- -- -- -- -- -- 0.00% 79 0.94

Non-U.S. Developed MktsEquity Composite 5.46% 7.17% 88 16.74% 70 2.06% 8 -0.48 92 1.01 77 -1.06% 87 0.43

MSCI EAFE -- 8.17% 74 16.48% 61 -- -- -- -- -- -- 0.00% 76 0.49

Non-U.S. Emerging MktsEquity Composite 9.79% -5.46% 96 20.37% 85 2.20% 4 -1.55 99 1.05 86 -3.29% 97 -0.27

MSCI Emerging Markets -- -2.06% 75 19.31% 58 -- -- -- -- -- -- 0.00% 76 -0.11

Core Fixed Income Composite 10.73% 4.23% 39 2.75% 51 0.78% 49 1.24 29 0.96 41 1.09% 37 1.52

Barclays Aggregate -- 3.26% 88 2.75% 51 -- -- -- -- -- -- 0.00% 90 1.17

Non-U.S. Emerging MarketDebt Composite 1.85% -- -- -- -- -- -- -- -- -- -- -- -- --

JP Morgan GBI - EMDiversified -- 1.45% 87 12.79% 80 -- -- -- -- -- -- 0.00% 87 0.11

Opportunistic Credit Composite 20.39% 9.31% 1 4.69% 12 3.88% 28 0.54 1 0.67 9 4.42% 1 1.97

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

-- 7.23% 19 4.46% 10 -- -- -- -- -- -- 0.00% 17 1.61

New Mexico Educational Retirement BoardTotal Fund Risk Statistics

December 31, 2013

32




_

U.S. Large Cap EquityComposite 21.38% 18.10% 53 15.72% 44 0.54% 1 0.30 33 0.99 56 0.27% 60 1.15

S&P 500 -- 17.94% 57 15.81% 47 0.00% 1 -- -- 1.00 59 0.00% 63 1.13U.S. Small/Mid Cap EquityComposite 2.44% 18.96% 94 19.49% 59 3.66% 6 -0.27 98 0.93 62 0.50% 97 0.97

NMERB Small/Mid CapEquity Blended Index -- 19.94% 86 20.76% 83 0.00% 1 -- -- 1.00 86 0.00% 98 0.96

Non-U.S. Developed MktsEquity Composite 5.46% 12.08% 86 19.62% 60 2.24% 7 -0.16 90 0.99 61 -0.23% 90 0.61

MSCI EAFE -- 12.44% 81 19.71% 63 0.00% 1 -- -- 1.00 70 0.00% 88 0.63Non-U.S. Emerging Mkts EquityComposite 9.79% 12.84% 94 23.46% 75 2.36% 4 -0.83 99 1.03 78 -2.45% 95 0.54

MSCI Emerging Markets -- 14.79% 74 22.59% 53 0.00% 1 -- -- 1.00 58 0.00% 77 0.65Core Fixed Income Composite 10.73% 7.50% 10 3.30% 78 1.61% 76 1.89 10 1.00 58 3.06% 13 2.25 Barclays Aggregate -- 4.44% 87 2.88% 28 0.00% 1 -- -- 1.00 58 0.00% 89 1.51Non-U.S. Emerging Market DebtComposite 1.85% -- -- -- -- -- -- -- -- -- -- -- -- --

JP Morgan GBI - EMDiversified -- 8.06% 92 12.94% 82 0.00% 1 -- -- 1.00 83 0.00% 91 0.62

Opportunistic Credit Composite 20.39% 18.93% 1 7.22% 57 4.87% 1 0.80 1 0.81 71 6.70% 1 2.61 50% Credit SuisseLeveraged Loan Index / 50%BofA ML US HY BB-B RatedConstrained Index

-- 15.01% 1 6.73% 53 0.00% 1 -- -- 1.00 83 0.00% 41 2.22

December 31, 2013

New Mexico Educational Retirement BoardTotal Fund Risk Statistics




_

Global Asset Allocation/RiskParity Composite 9.70% -- -- -- -- -- -- -- -- -- -- -- -- --

60% MSCI World HH/40%CITI WGBI HH -- 10.16% 30 10.02% 60 0.00% 1 -- -- 1.00 71 0.00% 56 1.01

XXXXX

33

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)

Rank 1 Yr(%) Rank 3 Yrs

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

(%) Rank Return(%) Since

_

U.S. Equity Composite 2,555,803,058 23.8 10.3 39 16.6 72 32.8 71 15.9 59 18.1 72 7.4 91 11.4 Jan-85Russell 3000 10.1 44 17.1 65 33.6 64 16.2 53 18.7 65 7.9 82 11.2 Jan-85

Over/Under 0.2 -0.5 -0.8 -0.3 -0.6 -0.5 0.2eA All US Equity Gross Median 9.8 18.5 35.6 16.4 20.1 9.6 12.6 Jan-85

U.S. Large Cap Equity Composite 2,294,258,488 21.4 10.4 47 16.3 65 32.5 61 16.2 48 18.1 54 7.2 87 5.0 Aug-99S&P 500 10.5 45 16.3 65 32.4 62 16.2 47 17.9 57 7.4 83 4.3 Aug-99

Over/Under -0.1 0.0 0.1 0.0 0.2 -0.2 0.7eA US Large Cap Equity Gross Median 10.3 17.3 33.6 16.0 18.2 8.6 6.3 Aug-99

S&P 500 Index Fund 2,294,258,488 21.4 10.4 43 16.3 66 32.5 58 16.2 51 17.8 54 7.1 91 3.5 Jan-00S&P 500 10.5 41 16.3 65 32.4 58 16.2 50 17.9 50 7.4 87 3.6 Jan-00

Over/Under -0.1 0.0 0.1 0.0 -0.1 -0.3 -0.1eA US Large Cap Core Equity Gross Median 10.3 17.1 32.9 16.2 17.9 8.5 5.6 Jan-00

U.S. Small/Mid Cap Equity Composite 261,544,570 2.4 9.5 50 19.7 46 36.2 61 14.1 83 18.3 98 8.2 99 7.2 Aug-99NMERB Small/Mid Cap Equity Blended Index 8.7 66 18.5 66 36.8 58 15.4 68 19.9 86 9.0 98 8.3 Aug-99

Over/Under 0.8 1.2 -0.6 -1.3 -1.6 -0.8 -1.1eA US Small-Mid Cap Core Equity Gross Median 9.4 19.3 38.4 16.9 23.1 10.7 11.1 Aug-99

Lord Abbett 128,714,319 1.2 9.9 26 17.1 64 35.1 55 12.8 88 -- -- -- -- 17.3 Aug-10Russell 2500 Value 8.8 54 15.8 81 33.3 73 15.4 59 19.6 81 9.3 87 19.0 Aug-10

Over/Under 1.1 1.3 1.8 -2.6 -1.7eA US Small-Mid Cap Value Equity Gross Median 9.0 18.3 35.5 15.7 21.9 11.2 20.0 Aug-10

Pinnacle 132,830,251 1.2 9.0 33 22.3 48 37.3 73 -- -- -- -- -- -- 29.3 Dec-11Russell 2500 Growth 8.5 42 21.4 59 40.6 48 17.1 52 24.0 49 10.1 68 25.8 Dec-11

Over/Under 0.5 0.9 -3.3 3.5eA US Small-Mid Cap Growth Equity GrossMedian 8.3 22.0 40.3 17.4 23.9 11.2 24.8 Dec-11

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

December 31, 2013

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.*Performance shown is gross of fees.*Fiscal year ends June 30.

34

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Non-U.S. Equity Composite 1,637,335,794 15.3 4.0 92 10.2 99 2.0 99 -1.3 99 11.7 90 6.2 98 7.2 Jul-95MSCI ACWI ex USA 4.8 82 15.3 68 15.3 89 5.1 90 12.8 82 7.6 83 -- Jul-95

Over/Under -0.8 -5.1 -13.3 -6.4 -1.1 -1.4eA All ACWI ex-US Equity Gross Median 6.1 16.8 20.2 8.2 14.8 9.5 8.8 Jul-95

Non-U.S. Developed Mkts Equity Composite 586,269,486 5.5 6.2 60 17.7 67 21.7 72 7.2 88 11.7 90 6.1 98 7.0 Sep-95MSCI EAFE 5.7 71 17.9 63 22.8 65 8.2 74 12.4 81 6.9 89 5.5 Sep-95

Over/Under 0.5 -0.2 -1.1 -1.0 -0.7 -0.8 1.5eA All EAFE Equity Gross Median 6.6 18.6 24.6 9.7 14.5 8.4 8.0 Sep-95

Pyramis 289,736,423 2.7 6.7 49 18.2 58 22.4 67 9.3 58 12.2 85 7.6 78 9.8 Jun-03MSCI EAFE 5.7 71 17.9 63 22.8 65 8.2 74 12.4 81 6.9 89 9.2 Jun-03

Over/Under 1.0 0.3 -0.4 1.1 -0.2 0.7 0.6eA All EAFE Equity Gross Median 6.6 18.6 24.6 9.7 14.5 8.4 10.6 Jun-03

BlackRock MSCI EAFE 295,866,427 2.8 5.7 71 18.7 48 -- -- -- -- -- -- -- -- 12.0 Aug-13MSCI EAFE 5.7 71 17.9 63 22.8 65 8.2 74 12.4 81 6.9 89 12.0 Aug-13

Over/Under 0.0 0.8 0.0eA All EAFE Equity Gross Median 6.6 18.6 24.6 9.7 14.5 8.4 12.4 Aug-13

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

December 31, 2013

1 - Non-US Equity Composite includes includes $799,785 in liquidating portfolios as well as $760 in the Non-US Transition Accounts2 - Non-US Developed Markets Equity Composite includes $666,136 in liquidating portfolios as well as $500 in the Non-US Developed Markets Transition Account.*Performance shown is gross of fees.*Fiscal year ends June 30.

35

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Non-U.S. Emerging Mkts Equity Composite 1,051,066,308 9.8 2.9 50 6.2 78 -7.0 97 -5.5 96 12.5 94 9.5 98 7.8 Sep-00MSCI Emerging Markets 1.8 70 7.7 66 -2.6 80 -2.1 75 14.8 74 11.2 75 9.2 Sep-00

Over/Under 1.1 -1.5 -4.4 -3.4 -2.3 -1.7 -1.4eA Emg Mkts Equity Gross Median 2.8 8.7 1.0 -0.1 16.8 12.5 11.3 Sep-00

Robeco 403,218,185 3.8 1.6 74 8.5 54 -2.2 77 -2.8 83 14.3 82 -- -- 13.3 Nov-08MSCI Emerging Markets 1.8 70 7.7 66 -2.6 80 -2.1 75 14.8 74 11.2 75 14.2 Nov-08

Over/Under -0.2 0.8 0.4 -0.7 -0.5 -0.9eA Emg Mkts Equity Gross Median 2.8 8.7 1.0 -0.1 16.8 12.5 15.8 Nov-08

Neuberger Berman Emerging Markets 334,917,919 3.1 3.8 36 12.8 11 -- -- -- -- -- -- -- -- 6.7 Aug-13MSCI Emerging Markets 1.8 70 7.7 66 -2.6 80 -2.1 75 14.8 74 11.2 75 6.6 Aug-13

Over/Under 2.0 5.1 0.1eA Emg Mkts Equity Gross Median 2.8 8.7 1.0 -0.1 16.8 12.5 7.1 Aug-13

Mondrian Emerging Markets Small Cap 312,816,296 2.9 3.6 43 -2.3 99 -- -- -- -- -- -- -- -- 2.6 Aug-13MSCI Emerging Markets Small Cap 1.3 96 4.8 65 1.0 93 -3.5 99 19.6 90 12.0 -- 4.2 Aug-13

Over/Under 2.3 -7.1 -1.6eA Emg Mkts Small Cap Equity Gross Median 3.1 6.0 8.1 3.6 24.2 -- 5.4 Aug-13

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

December 31, 2013

1 - Non-US Emerging Markets Equity Composite includes $133,649 in liquidating portfolios as well as $260 in the Non-US Emerging Markets Transition Account.*Performance shown is gross of fees.*Fiscal year ends June 30.

36

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Fixed Income Composite 3,538,629,885 33.0 2.2 14 4.1 13 6.1 13 7.4 18 11.4 19 6.5 20 2.7 Jan-85Barclays Aggregate -0.1 88 0.4 81 -2.0 83 3.3 68 4.4 71 4.5 63 7.5 Jan-85

Over/Under 2.3 3.7 8.1 4.1 7.0 2.0 -4.8 eA All US Fixed Inc Gross Median 0.4 1.0 -0.3 4.0 5.8 4.9 8.0 Jan-85

Core Fixed Income Composite 1,151,823,221 10.7 0.1 61 0.7 65 -1.7 70 4.2 39 7.4 13 4.8 73 5.9 Dec-99Barclays Aggregate -0.1 84 0.4 83 -2.0 82 3.3 88 4.4 87 4.5 87 5.6 Dec-99

Over/Under 0.2 0.3 0.3 0.9 3.0 0.3 0.3 eA US Core Fixed Inc Gross Median 0.2 0.8 -1.4 4.0 5.8 5.0 6.0 Dec-99

Neuberger Berman 386,609,614 3.6 0.0 63 0.7 64 -1.8 73 3.7 67 6.5 28 -- -- 5.5 Apr-06Barclays Aggregate -0.1 84 0.4 83 -2.0 82 3.3 88 4.4 87 4.5 87 5.1 Apr-06

Over/Under 0.1 0.3 0.2 0.4 2.1 0.4 eA US Core Fixed Inc Gross Median 0.2 0.8 -1.4 4.0 5.8 5.0 5.6 Apr-06

Pyramis 443,823,863 4.1 0.2 44 0.8 50 -1.8 73 4.0 45 6.5 28 -- -- 5.6 Apr-06Barclays Aggregate -0.1 84 0.4 83 -2.0 82 3.3 88 4.4 87 4.5 87 5.1 Apr-06


WAMCO 321,389,744 3.0 -0.1 85 0.4 85 -1.4 53 5.2 8 9.6 2 -- -- 5.9 Apr-06Barclays Aggregate -0.1 84 0.4 83 -2.0 82 3.3 88 4.4 87 4.5 87 5.1 Apr-06


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

December 31, 2013

*Performance shown is gross of fees.*Fiscal year ends June 30.

37

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Non-U.S. Emerging Market Debt Composite 198,827,426 1.9 -0.4 67 -1.2 79 -5.5 43 -- -- -- -- -- -- 0.6 Sep-11JP Morgan GBI - EM Diversified -1.5 89 -2.0 87 -9.0 82 1.5 87 8.1 92 9.5 50 -1.6 Sep-11

Over/Under 1.1 0.8 3.5 2.2eA All Emg Mkts Fixed Inc Gross Median 0.8 1.4 -6.1 5.0 12.5 9.5 4.0 Sep-11

Pictet 114,885,930 1.1 -1.6 89 -3.3 99 -10.3 96 -- -- -- -- -- -- -2.3 Sep-11JP Morgan GBI - EM Diversified -1.5 89 -2.0 87 -9.0 82 1.5 87 8.1 92 9.5 50 -1.6 Sep-11

Over/Under -0.1 -1.3 -1.3 -0.7eA All Emg Mkts Fixed Inc Gross Median 0.8 1.4 -6.1 5.0 12.5 9.5 4.0 Sep-11

Citi EMSO 83,941,496 0.8 1.2 37 1.8 43 1.9 4 -- -- -- -- -- -- 4.9 Sep-11JP Morgan GBI - EM Diversified -1.5 89 -2.0 87 -9.0 82 1.5 87 8.1 92 9.5 50 -1.6 Sep-11

Over/Under 2.7 3.8 10.9 6.5eA All Emg Mkts Fixed Inc Gross Median 0.8 1.4 -6.1 5.0 12.5 9.5 4.0 Sep-11

New Mexico Educational Retirement BoardPerformance Detail - Emerging Market Debt

December 31, 2013

*Performance shown is gross of fees except for Citi EMSO.*Fiscal year ends June 30.

38

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Opportunistic Credit Composite 2,187,979,238 20.4 3.6 1 6.7 7 12.7 1 9.3 1 17.8 1 -- -- 10.4 May-0850% Credit Suisse Leveraged Loan Index / 50% BofAML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 7.4 May-08

Over/Under 1.0 2.3 6.5 2.1 2.8 3.0 BofA Merrill Lynch US High Yield BB-B RatedConstrained Index 3.3 1 5.5 9 6.3 1 8.7 1 16.5 1 7.7 1 8.9 May-08

eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 3.6 May-08Beachpoint Combined 701,586,644 6.5 3.5 1 6.9 7 13.2 1 9.4 1 18.0 1 -- -- 7.7 Mar-04

50% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 6.4 Mar-04

Over/Under 0.9 2.5 7.0 2.2 3.0 1.3 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 5.3 Mar-04

Beachpoint Total Return 701,586,644 6.5 3.5 1 6.9 7 13.2 1 9.4 1 18.0 1 -- -- 8.9 Jun-0850% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 7.4 Jun-08

Over/Under 0.9 2.5 7.0 2.2 3.0 1.5 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 3.9 Jun-08

Pimco Disco Combined 386,190,243 3.6 4.1 1 6.2 8 12.3 1 12.6 1 18.8 1 -- -- 14.8 Jul-0850% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 7.7 Jul-08

Over/Under 1.5 1.8 6.1 5.4 3.8 7.1 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 3.9 Jul-08

Pimco Disco II 386,190,243 3.6 4.1 1 6.2 8 12.3 1 -- -- -- -- -- -- 24.4 Oct-1150% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 10.1 Oct-11

Over/Under 1.5 1.8 6.1 14.3 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 6.5 Oct-11

New Mexico Educational Retirement BoardPerformance Detail - Opportunistic Fixed Income

December 31, 2013

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

39

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

GoldenTree Combined 125,450,210 1.2 5.4 1 9.1 4 12.7 1 10.7 1 -- -- -- -- 13.1 Oct-0950% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 9.0 Oct-09

Over/Under 2.8 4.7 6.5 3.5 4.1 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 6.4 Oct-09

Goldentree II 125,450,210 1.2 5.4 1 9.1 4 12.7 1 -- -- -- -- -- -- 15.4 Sep-1150% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 9.0 Sep-11

Over/Under 2.8 4.7 6.5 6.4 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 4.7 Sep-11

Medley Capital 111,470,720 1.0 0.5 80 6.3 8 10.2 1 -- -- -- -- -- -- 8.6 Aug-1150% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 7.0 Aug-11

Over/Under -2.1 1.9 4.0 1.6 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 4.1 Aug-11

GSO Capital 66,392,286 0.6 1.8 50 5.0 11 7.8 1 -- -- -- -- -- -- 5.6 Sep-1150% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 9.0 Sep-11

Over/Under -0.8 0.6 1.6 -3.4 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 4.7 Sep-11

Waterfall - Eden 207,612,878 1.9 2.8 4 4.5 47 12.9 1 -- -- -- -- -- -- 14.3 Aug-1150% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 7.0 Aug-11

Over/Under 0.2 0.1 6.7 7.3 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 4.1 Aug-11

Waterfall - Victoria 126,377,981 1.2 1.5 61 5.1 10 12.2 1 -- -- -- -- -- -- 10.5 Aug-1150% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 7.0 Aug-11

Over/Under -1.1 0.7 6.0 3.5 eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 4.1 Aug-11


December 31, 2013


40

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Marathon Asset Mgmt 194,596,287 1.8 4.4 1 6.0 8 11.9 1 -- -- -- -- -- -- 10.7 Oct-1150% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 10.1 Oct-11

Over/Under 1.8 1.6 5.7 0.6eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 6.5 Oct-11

Elegantree Fund 136,192,960 1.3 3.6 1 6.4 8 14.5 1 -- -- -- -- -- -- 14.0 Mar-1250% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 7.8 Mar-12

Over/Under 1.0 2.0 8.3 6.2eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 4.6 Mar-12

Gramercy Distressed Opp II 61,798,154 0.6 12.3 1 27.8 1 23.8 1 -- -- -- -- -- -- -2.1 Jun-1250% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 8.8 Jun-12

Over/Under 9.7 23.4 17.6 -10.9eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 5.9 Jun-12

ICE Canyon 64,686,694 0.6 2.9 4 0.7 84 6.8 1 -- -- -- -- -- -- 6.3 Jun-1250% Credit Suisse Leveraged Loan Index / 50%BofA ML US HY BB-B Rated Constrained Index 2.6 6 4.4 50 6.2 1 7.2 19 15.0 1 6.4 1 8.8 Jun-12

Over/Under 0.3 -3.7 0.6 -2.5eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 5.9 Jun-12

Lone Star VIII 5,624,182 0.1 -7.0 99 -- -- -- -- -- -- -- -- -- -- -- Jun-13eA Global Credit Fixed Inc Net Median 1.8 4.3 0.9 5.9 9.0 5.3 1.5 Jun-13


December 31, 2013


41

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Absolute Return Composite 441,653,112 4.1 0.1 -- 0.9 -- 4.9 -- 1.8 -- 5.0 -- -- -- 1.1 Jan-07HFRI FOF Conservative (1 Mo Lag) 2.7 -- 2.4 -- 7.9 -- 2.9 -- 3.7 -- 2.7 -- 1.1 Jan-07

Over/Under -2.6 -1.5 -3.0 -1.1 1.3 0.0 91 Day T-Bill + 2% (1 Mo Lag) 0.5 -- 1.0 -- 2.0 -- 2.1 -- 2.1 -- 3.6 -- 3.0 Jan-07Austin Capital (in liquidation) 4,893,265 0.0 -17.6 -- -19.4 -- -20.7 -- -12.9 -- -8.5 -- -- -- -6.1 Jan-07DB Advisors (in liquidation) 2,468,019 0.0 0.8 -- 2.2 -- 6.3 -- 0.7 -- 2.9 -- -- -- 0.4 Jan-07Absolute Return Composite (ex Austin & DB) 434,291,828 4.0 0.4 -- 1.1 -- 5.3 -- 2.1 -- 5.9 -- -- -- 1.1 Jan-07

HFRI FOF Conservative (1 Mo Lag) 2.7 -- 2.4 -- 7.9 -- 2.9 -- 3.7 -- 2.7 -- 1.1 Jan-07Over/Under -2.3 -1.3 -2.6 -0.8 2.2 0.0

91 Day T-Bill + 2% (1 Mo Lag) 0.5 -- 1.0 -- 2.0 -- 2.1 -- 2.1 -- 3.6 -- 3.0 Jan-07Benchmark Plus 270,091,834 2.5 0.1 -- 4.5 -- 7.9 -- 2.7 -- 7.6 -- -- -- 3.6 Feb-07

HFRI FOF Conservative (1 Mo Lag) 2.7 -- 2.4 -- 7.9 -- 2.9 -- 3.7 -- 2.7 -- 0.9 Feb-07Over/Under -2.6 2.1 0.0 -0.2 3.9 2.7

91 Day T-Bill + 2% (1 Mo Lag) 0.5 -- 1.0 -- 2.0 -- 2.1 -- 2.1 -- 3.6 -- 2.9 Feb-07GAM 159,128,068 1.5 0.6 -- -3.9 -- 1.4 -- 0.6 -- -- -- -- -- 1.7 Aug-10

HFRI FOF Conservative (1 Mo Lag) 2.7 -- 2.4 -- 7.9 -- 2.9 -- 3.7 -- 2.7 -- 3.5 Aug-10Over/Under -2.1 -6.3 -6.5 -2.3 -1.8

91 Day T-Bill + 2% (1 Mo Lag) 0.5 -- 1.0 -- 2.0 -- 2.1 -- 2.1 -- 3.6 -- 2.1 Aug-10Gottex Market Neutral 2,398,939 0.0 4.4 -- 5.5 -- 7.9 -- 2.9 -- 4.3 -- -- -- -2.9 Jan-07TAG 2,672,987 0.0 0.7 -- -0.5 -- 3.9 -- 2.2 -- 3.7 -- -- -- 1.3 Feb-07

HFRI FOF Conservative (1 Mo Lag) 2.7 -- 2.4 -- 7.9 -- 2.9 -- 3.7 -- 2.7 -- 0.9 Feb-07Over/Under -2.0 -2.9 -4.0 -0.7 0.0 0.4

91 Day T-Bill + 2% (1 Mo Lag) 0.5 -- 1.0 -- 2.0 -- 2.1 -- 2.1 -- 3.6 -- 2.9 Feb-07

New Mexico Educational Retirement BoardPerformance Detail - Absolute Return

December 31, 2013

1 - Absolute Return Composites, underlying managers and benchmark performance are lagged one month.*Performance shown is net of fees.*Fiscal year ends June 30.

42

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Global Asset Allocation/Risk Parity Composite 1,041,266,653 9.7 0.4 96 3.4 82 -1.9 91 8.1 26 -- -- -- -- 10.8 Oct-0960% MSCI World HH/40% CITI WGBI HH 4.7 22 9.9 26 15.1 15 8.3 19 10.2 30 6.2 62 8.4 Oct-09

Over/Under -4.3 -6.5 -17.0 -0.2 2.4 eA Global TAA Net Median 3.8 7.1 8.1 6.0 8.5 7.3 6.6 Oct-09

Global Asset Allocation Composite 518,248,496 4.8 -0.1 99 2.5 93 1.7 83 -- -- -- -- -- -- 1.9 Nov-12Credit Suisse Hedge Global Macro 2.8 71 2.9 93 4.3 73 5.1 66 8.0 69 8.3 31 5.5 Nov-12

Over/Under -2.9 -0.4 -2.6 -3.6 eA Global TAA Net Median 3.8 7.1 8.1 6.0 8.5 7.3 8.1 Nov-12

Bridgewater Pure Alpha 244,666,931 2.3 0.7 95 4.3 74 3.6 76 6.4 45 -- -- -- -- 10.4 Oct-09Credit Suisse Hedge Global Macro 2.8 71 2.9 93 4.3 73 5.1 66 8.0 69 8.3 31 7.3 Oct-09

Over/Under -2.1 1.4 -0.7 1.3 3.1 eA Global TAA Net Median 3.8 7.1 8.1 6.0 8.5 7.3 6.6 Oct-09

Bridgewater Pure Alpha Major Markets 11,862,966 0.1 0.6 95 5.1 69 2.7 81 6.7 43 -- -- -- -- 7.4 Dec-10Credit Suisse Hedge Global Macro 2.8 71 2.9 93 4.3 73 5.1 66 8.0 69 8.3 31 5.9 Dec-10

Over/Under -2.2 2.2 -1.6 1.6 1.5 eA Global TAA Net Median 3.8 7.1 8.1 6.0 8.5 7.3 7.0 Dec-10

PIMCO All Asset All Authority 261,718,599 2.4 -0.9 99 0.7 96 -- -- -- -- -- -- -- -- 0.7 Jul-13Credit Suisse Hedge Global Macro 2.8 71 2.9 93 4.3 73 5.1 66 8.0 69 8.3 31 2.9 Jul-13

Over/Under -3.7 -2.2 -2.2 eA Global TAA Net Median 3.8 7.1 8.1 6.0 8.5 7.3 7.1 Jul-13

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

December 31, 2013


43

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Risk Parity 523,018,157 4.9 1.1 93 4.7 72 -3.6 94 -- -- -- -- -- -- -1.5 Nov-1260% MSCI World HH/40% CITI WGBI HH 4.7 22 9.9 26 15.1 15 8.3 19 10.2 30 6.2 62 15.0 Nov-12

Over/Under -3.6 -5.2 -18.7 -16.5 eA Global TAA Net Median 3.8 7.1 8.1 6.0 8.5 7.3 8.1 Nov-12

Bridgewater All Weather 367,576,390 3.4 0.9 94 4.5 73 -3.8 95 9.6 10 -- -- -- -- 11.4 Oct-0960% MSCI World (Gross) / 40% CITI WGBI 4.4 27 10.8 21 13.9 21 7.9 28 10.4 27 6.5 58 8.3 Oct-09

Over/Under -3.5 -6.3 -17.7 1.7 3.1 eA Global TAA Net Median 3.8 7.1 8.1 6.0 8.5 7.3 6.6 Oct-09

PanAgora 155,441,767 1.4 -- -- -- -- -- -- -- -- -- -- -- -- -- Dec-1360% MSCI World HH/40% CITI WGBI HH 4.7 -- 9.9 -- 15.1 -- 8.3 -- 10.2 -- 6.2 -- 1.0 Dec-13

Over/Under Real Estate Composite 500,021,303 4.7 1.8 -- 2.9 -- 10.0 -- 12.2 -- 15.2 -- 9.1 -- 9.3 Dec-03

NCREIF Property Index 2.5 -- 5.2 -- 11.0 -- 11.9 -- 5.7 -- 8.6 -- 8.9 Dec-03Over/Under -0.7 -2.3 -1.0 0.3 9.5 0.5 0.4

Wilshire REIT -0.8 -- -3.8 -- 1.9 -- 9.4 -- 16.7 -- 8.4 -- 8.6 Dec-03Public Real Estate Composite 289,149,620 2.7 -0.1 56 -2.5 54 3.5 41 10.4 39 17.3 77 8.7 90 9.0 Dec-03

Wilshire REIT -0.8 85 -3.8 88 1.9 73 9.4 79 16.7 88 8.4 98 8.6 Dec-03Over/Under 0.7 1.3 1.6 1.0 0.6 0.3 0.4 eA US REIT Gross Median 0.1 -2.4 3.1 10.2 17.7 10.1 10.5 Dec-03

REIT Index Fund 159,965,053 1.5 -0.8 84 -3.8 88 1.5 88 9.1 89 16.4 98 8.3 98 8.6 Dec-03Wilshire REIT -0.8 85 -3.8 88 1.9 73 9.4 79 16.7 88 8.4 98 8.6 Dec-03

Over/Under 0.0 0.0 -0.4 -0.3 -0.3 -0.1 0.0 eA US REIT Gross Median 0.1 -2.4 3.1 10.2 17.7 10.1 10.5 Dec-03

Brookfield 129,184,566 1.2 0.9 27 -0.8 18 6.4 13 -- -- -- -- -- -- 11.1 Jul-11MSCI US REIT -1.0 92 -4.3 91 1.3 91 8.2 98 15.2 99 -- -- 5.9 Jul-11

Over/Under 1.9 3.5 5.1 5.2 eA US REIT Gross Median 0.1 -2.4 3.1 10.2 17.7 10.1 7.6 Jul-11

New Mexico Educational Retirement BoardPerformance Detail - Real Estate

December 31, 2013

*PanAgora was funded 12/19/2013. Quarterly performance is not applicable.*Performance shown is net of fees.*Fiscal year ends June 30.

44

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Private Real Estate Composite 210,871,684 2.0 4.3 -- 11.2 -- 20.5 -- 15.1 -- 6.2 -- -- -- 4.6 Jan-08NCREIF Property Index 2.5 -- 5.2 -- 11.0 -- 11.9 -- 5.7 -- 8.6 -- 3.6 Jan-08

Over/Under 1.8 6.0 9.5 3.2 0.5 1.0 U.S. Private Real Estate 204,477,376 1.9 4.4 -- 11.3 -- 20.8 -- 15.5 -- 7.1 -- -- -- 5.5 Jan-08

NCREIF Property Index 2.5 -- 5.2 -- 11.0 -- 11.9 -- 5.7 -- 8.6 -- 3.6 Jan-08Over/Under 1.9 6.1 9.8 3.6 1.4 1.9

Non-U.S. Private Real Estate 6,394,308 0.1 3.9 -- 8.6 -- 9.2 -- 6.1 -- -7.3 -- -- -- -8.4 Aug-08NCREIF Property Index 2.5 -- 5.2 -- 11.0 -- 11.9 -- 5.7 -- 8.6 -- 3.5 Aug-08

Over/Under 1.4 3.4 -1.8 -5.8 -13.0 -11.9 Private Equity Composite 737,146,320 6.9 4.7 -- 6.4 -- 14.5 -- 13.9 -- 10.7 -- -- -- 2.7 Jun-06

Cambridge PE 1 Qtr Lag 4.8 -- 8.0 -- 16.7 -- 15.4 -- 10.6 -- 15.2 -- 11.8 Jun-06Over/Under -0.1 -1.6 -2.2 -1.5 0.1 -9.1

Real Assets Composite 195,077,904 1.8 0.7 -- 2.7 -- 2.9 -- 2.8 -- 0.2 -- -- -- -1.6 Jul-08CPI + 5% 1.5 -- 3.2 -- 6.6 -- 7.2 -- 7.2 -- 7.5 -- 6.5 Jul-08

Over/Under -0.8 -0.5 -3.7 -4.4 -7.0 -8.1 Infrastructure Composite 124,225,209 1.2 1.1 -- 2.3 -- 1.3 -- 2.2 -- 0.0 -- -- -- -1.0 Jul-08

Infrastructure 114,202,473 1.1 1.0 -- 2.3 -- 2.0 -- 2.4 -- 0.1 -- -- -- -0.9 Jul-08CPI (Seasonally Adjusted) + 6% 1.7 -- 3.7 -- 7.6 -- 8.2 -- 8.2 -- 8.5 -- 7.5 Jul-08

Over/Under -0.7 -1.4 -5.6 -5.8 -8.1 -8.4 International Infrastructure 10,022,737 0.1 1.9 -- 1.8 -- -65.2 -- -- -- -- -- -- -- -65.2 Jan-13

CPI (Seasonally Adjusted) + 6% 1.7 -- 3.7 -- 7.6 -- 8.2 -- 8.2 -- 8.5 -- 7.6 Jan-13Over/Under 0.2 -1.9 -72.8 -72.8

Timber 27,263,126 0.3 1.0 -- 4.9 -- 8.9 -- 5.5 -- -- -- -- -- 2.1 Mar-09NCREIF Timberland Index 5.9 -- 7.0 -- 9.7 -- 6.3 -- 2.7 -- 8.4 -- 2.8 Mar-09

Over/Under -4.9 -2.1 -0.8 -0.8 -0.7 Hancock Agriculture 16,440,127 0.2 8.2 -- 9.0 -- 9.3 -- -- -- -- -- -- -- 6.4 Aug-12

CPI (Seasonally Adjusted) + 6% 1.7 -- 3.7 -- 7.6 -- 8.2 -- 8.2 -- 8.5 -- 7.9 Aug-12Over/Under 6.5 5.3 1.7 -1.5

Mitigation Banking 11,489,550 0.1 -2.2 -- 5.1 -- 15.8 -- -- -- -- -- -- -- -14.0 Mar-1191 Day T-Bills 0.0 -- 0.0 -- 0.0 -- 0.1 -- 0.1 -- 1.6 -- 0.1 Mar-11

Over/Under -2.2 5.1 15.8 -14.1

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

December 31, 2013


45

Market Value($)

% ofPortfolio

3 Mo(%) Rank

FiscalYTD(%)




_

Halderman Farm Mgmt Services 8,780,569 0.1 -60.0 -- -- -- -- -- -- -- -- -- -- -- -60.0 Aug-13Brookfield Brazil Timber 6,879,322 0.1 -- -- -- -- -- -- -- -- -- -- -- -- -- Dec-13

NCREIF Timberland 5.9 -- 7.0 -- 9.7 -- 6.3 -- 2.7 -- 8.4 -- 5.9 Dec-13Over/Under

CashCash 83,368,071 0.8 0.1 -- 0.2 -- 0.3 -- 0.7 -- 0.7 -- 1.6 -- 1.1 Dec-99

91 Day T-Bills 0.0 -- 0.0 -- 0.0 -- 0.1 -- 0.1 -- 1.6 -- 2.0 Dec-99Over/Under 0.1 0.2 0.3 0.6 0.6 0.0 -0.9

NM ERB Cash 2,924,100 0.0 0.0 -- 3.7 -- 3.7 -- 1.3 -- 0.9 -- 1.7 -- 1.3 Jun-0091 Day T-Bills 0.0 -- 0.0 -- 0.0 -- 0.1 -- 0.1 -- 1.6 -- 1.9 Jun-00

Over/Under 0.0 3.7 3.7 1.2 0.8 0.1 -0.6XXXXX

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

December 31, 2013

*Brokfield Brazil Timber was funded 12/23/2013. Quarterly performance is not applicable.*Performance shown is net of fees.*Fiscal year ends June 30.

46

December 31, 2013

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

47

December 31, 2013

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

48

Appendix: Net of Fees Performance

Market Value($)

% ofPortfolio

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Fund 10,733,226,200 100.0 4.2 7.7 11.6 8.3 12.9 6.9 9.4 Jul-83Policy Index 4.1 7.6 11.2 8.0 11.4 6.4 -- Jul-83

Over/Under 0.1 0.1 0.4 0.3 1.5 0.5 Allocation Index 4.1 7.5 11.3 8.3 11.9 7.2 -- Jul-8360% MSCI World (Gross) / 40% CITI WGBI 4.4 10.8 13.9 7.9 10.4 6.5 -- Jul-83U.S. Equity Composite 2,555,803,058 23.8 10.3 16.6 32.8 15.9 18.1 7.4 11.4 Jan-85

Russell 3000 10.1 17.1 33.6 16.2 18.7 7.9 11.2 Jan-85Over/Under 0.2 -0.5 -0.8 -0.3 -0.6 -0.5 0.2

U.S. Large Cap Equity Composite 2,294,258,488 21.4 10.4 16.3 32.5 16.2 18.1 7.2 5.0 Aug-99S&P 500 10.5 16.3 32.4 16.2 17.9 7.4 4.3 Aug-99

Over/Under -0.1 0.0 0.1 0.0 0.2 -0.2 0.7 S&P 500 Index Fund 2,294,258,488 21.4 10.4 16.3 32.5 16.2 17.8 7.1 3.5 Jan-00

S&P 500 10.5 16.3 32.4 16.2 17.9 7.4 3.6 Jan-00Over/Under -0.1 0.0 0.1 0.0 -0.1 -0.3 -0.1

U.S. Small/Mid Cap Equity Composite 261,544,570 2.4 9.5 19.7 36.2 14.1 18.3 8.2 7.2 Aug-99NMERB Small/Mid Cap Equity Blended Index 8.7 18.5 36.8 15.4 19.9 9.0 8.3 Aug-99

Over/Under 0.8 1.2 -0.6 -1.3 -1.6 -0.8 -1.1 Lord Abbett 128,714,319 1.2 9.9 17.1 35.1 12.8 -- -- 17.3 Aug-10

Russell 2500 Value 8.8 15.8 33.3 15.4 19.6 9.3 19.0 Aug-10Over/Under 1.1 1.3 1.8 -2.6 -1.7

Pinnacle 132,830,251 1.2 9.0 22.3 37.3 -- -- -- 29.3 Dec-11Russell 2500 Growth 8.5 21.4 40.6 17.1 24.0 10.1 25.8 Dec-11

Over/Under 0.5 0.9 -3.3 3.5

New Mexico Educational Retirement BoardTotal Fund Performance Detail (Net of Fee)

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.Note: Performance shown is net of fees.

December 31, 201350

1 - Non-US Equity Composite includes includes $799,785 in liquidating portfolios as well as $760 in the Non-US Transition Accounts2 - Non-US Developed Markets Equity Composite includes $666,136 in liquidating portfolios as well as $500 in the Non-US Developed Markets Transition Account.Note: Performance shown is net of fees.


December 31, 2013

Market Value($)

% ofPortfolio

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Non-U.S. Equity Composite 1,637,335,794 15.3 4.0 10.2 2.0 -1.3 11.7 6.2 7.2 Jul-95MSCI ACWI ex USA 4.8 15.3 15.3 5.1 12.8 7.6 -- Jul-95

Over/Under -0.8 -5.1 -13.3 -6.4 -1.1 -1.4 Non-U.S. Developed Mkts Equity Composite 586,269,486 5.5 6.2 17.7 21.7 7.2 11.7 6.1 7.0 Sep-95

MSCI EAFE 5.7 17.9 22.8 8.2 12.4 6.9 5.5 Sep-95Over/Under 0.5 -0.2 -1.1 -1.0 -0.7 -0.8 1.5

Pyramis 289,736,423 2.7 6.7 18.2 22.4 9.3 12.2 7.6 9.8 Jun-03MSCI EAFE 5.7 17.9 22.8 8.2 12.4 6.9 9.2 Jun-03

Over/Under 1.0 0.3 -0.4 1.1 -0.2 0.7 0.6 BlackRock MSCI EAFE 295,866,427 2.8 5.7 18.7 -- -- -- -- 12.0 Aug-13

MSCI EAFE 5.7 17.9 22.8 8.2 12.4 6.9 12.0 Aug-13Over/Under 0.0 0.8 0.0

Non-U.S. Emerging Mkts Equity Composite 1,051,066,308 9.8 2.9 6.2 -7.0 -5.5 12.5 9.5 7.8 Sep-00MSCI Emerging Markets 1.8 7.7 -2.6 -2.1 14.8 11.2 9.2 Sep-00

Over/Under 1.1 -1.5 -4.4 -3.4 -2.3 -1.7 -1.4 Robeco 403,218,185 3.8 1.6 8.5 -2.2 -2.8 14.3 -- 13.3 Nov-08

MSCI Emerging Markets 1.8 7.7 -2.6 -2.1 14.8 11.2 14.2 Nov-08Over/Under -0.2 0.8 0.4 -0.7 -0.5 -0.9

Neuberger Berman Emerging Markets 334,917,919 3.1 3.8 12.8 -- -- -- -- 6.7 Aug-13MSCI Emerging Markets 1.8 7.7 -2.6 -2.1 14.8 11.2 6.6 Aug-13

Over/Under 2.0 5.1 0.1 Mondrian Emerging Markets Small Cap 312,816,296 2.9 3.6 -2.3 -- -- -- -- 2.6 Aug-13

MSCI Emerging Markets Small Cap 1.3 4.8 1.0 -3.5 19.6 12.0 4.2 Aug-13Over/Under 2.3 -7.1 -1.6

51

Note: Performance shown is net of fees.

Market Value($)

% ofPortfolio

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Fixed Income Composite 3,538,629,885 33.0 2.2 4.1 6.1 7.4 11.4 6.5 2.7 Jan-85Barclays Aggregate -0.1 0.4 -2.0 3.3 4.4 4.5 7.5 Jan-85

Over/Under 2.3 3.7 8.1 4.1 7.0 2.0 -4.8 Core Fixed Income Composite 1,151,823,221 10.7 0.1 0.7 -1.7 4.2 7.4 4.8 5.9 Dec-99

Barclays Aggregate -0.1 0.4 -2.0 3.3 4.4 4.5 5.6 Dec-99Over/Under 0.2 0.3 0.3 0.9 3.0 0.3 0.3

Neuberger Berman 386,609,614 3.6 0.0 0.7 -1.8 3.7 6.5 -- 5.5 Apr-06Barclays Aggregate -0.1 0.4 -2.0 3.3 4.4 4.5 5.1 Apr-06

Over/Under 0.1 0.3 0.2 0.4 2.1 0.4 Pyramis 443,823,863 4.1 0.2 0.8 -1.8 4.0 6.5 -- 5.6 Apr-06

Barclays Aggregate -0.1 0.4 -2.0 3.3 4.4 4.5 5.1 Apr-06Over/Under 0.3 0.4 0.2 0.7 2.1 0.5

WAMCO 321,389,744 3.0 -0.1 0.4 -1.4 5.2 9.6 -- 5.9 Apr-06Barclays Aggregate -0.1 0.4 -2.0 3.3 4.4 4.5 5.1 Apr-06

Over/Under 0.0 0.0 0.6 1.9 5.2 0.8 Non-U.S. Emerging Market Debt Composite 198,827,426 1.9 -0.4 -1.2 -5.5 -- -- -- 0.6 Sep-11

JP Morgan GBI - EM Diversified -1.5 -2.0 -9.0 1.5 8.1 9.5 -1.6 Sep-11Over/Under 1.1 0.8 3.5 2.2

Pictet 114,885,930 1.1 -1.6 -3.3 -10.3 -- -- -- -2.3 Sep-11JP Morgan GBI - EM Diversified -1.5 -2.0 -9.0 1.5 8.1 9.5 -1.6 Sep-11

Over/Under -0.1 -1.3 -1.3 -0.7 Citi EMSO 83,941,496 0.8 1.2 1.8 1.9 -- -- -- 4.9 Sep-11

JP Morgan GBI - EM Diversified -1.5 -2.0 -9.0 1.5 8.1 9.5 -1.6 Sep-11Over/Under 2.7 3.8 10.9 6.5

December 31, 2013


52

Appendix: Market Environment

US Economic Environment

Source: Bloomberg as of 12/31 Source: Bloomberg as of 12/31


Consumer confidence rose to 78.1 in December; the Case-Shiller home price index (as of 9/30) rose to its highest level (150.92) since the financial crisis

Rolling 12 month CPI increased to 1.5% at December end; capacity utilization rose slightly to 79.2% in the month

GDP growth was revised upwards for the third quarter, to 4.1%

Unemployment fell to 6.7% in December; U-6 also decreased, to 13.1%

4.1%4.1%4.1%4.1%

‐8%

‐6%

‐4%

‐2%

0%

2%

4%

6%

8%

10% Real Gross Domestic Product Growth

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20% Unemployment Rate vs. U‐6

Unemployment RateU‐6

60%

65%

70%

75%

80%

85%

90%

95%

100%

‐6%

‐3%

0%

3%

6%

9%

12%

15%

18%

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

% of T

otal Cap

acity

Rolling

12 Mon

th CPI

Capacity Utilization vs. Rolling 12 Month CPI

12‐Mo CPICapacity Utilization

0

30

60

90

120

150

180

210

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Home Price Index and Consumer Confidence

S&P Case‐Shiller Home Price IndexConsumer Confidence

4.1%


December 31, 2013

54

Components of GDP



Corporate Profits as a percent of GDP remained near secular highs at 12.6% at the end of the third quarter

The trade deficit decreased marginally in November

Retail sales rose to a 3.7% year-over-year growth rate in December

The inventory-to-sales ratio has remained mostly flat since early 2010 and closed at 1.29 in November

‐10%

‐5%

0%

5%

10%

15%19

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Annu

al % Cha

nge

Retail Sales

1.2

1.3

1.4

1.5

1.6

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Inventory to Sales Ratio

‐$80

‐$70

‐$60

‐$50

‐$40

‐$30

‐$20

‐$10

$0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Billion

s

U.S. Trade Surplus (Deficit)

6%

7%

8%

9%

10%

11%

12%

13%

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

Corporate Profits as % of GDP

Profits/GDPAverage


December 31, 2013

55

Key Economic Indicators

Source: Bureau of Economic Analysis, Congressional Budget Office as of 7/1 Source: Bloomberg as of 11/30


US GDP relative to potential GDP rose slightly through Q2 but remained near historic lows

Chicago Fed National Activity 3 Month moving average remained positive through November; indicating above average growth

The rolling percentage change in the Leading Economic Indicators index increased to 5.3% through November

The small business optimism index increased marginally to 93.9 through December, up from 88.0 a year ago

‐20%

‐15%

‐10%

‐5%

0%

5%

10%

15%

20%

12 M

onth Rollin

g Ch

ange

Econ. Conference Board Leading Econ. Indicators

80

85

90

95

100

105

110

115

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Inde

x Va

lue (198

6 = 10

0)

Small Business Optimism Index

‐5

‐4

‐3

‐2

‐1

0

1

2

3 Chicago Fed National Activity 3‐Mo. Mvg. Avg.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

US GDP Relative to Potential


December 31, 2013

56

Economic Environment – Monetary Policy and Banks

Source: Bloomberg as of 12/31Source: Bloomberg as of 9/30; All calculations converted to USD *GDP figure reflects

World Bank Euro Area GDP


Large economies continue easing, Japan to the extreme, while the ECB tightens

The Japanese Yen has weakened 21.4% relative to the US dollar in 2013; while the MSCI Japan TR Net Local Index returned 54.6%

The Federal Reserve Bank balance sheet increased in 2013 while the European Central Bank balance sheet decreased

Central bank assets worldwide have risen significantly since 2008

€0

€200

€400

€600

€800

€1,000

€1,200

€1,400

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Jan‐08

Apr‐08

Jul‐0

8Oct‐08

Jan‐09

Apr‐09

Jul‐0

9Oct‐09

Jan‐10

Apr‐10

Jul‐1

0Oct‐10

Jan‐11

Apr‐11

Jul‐1

1Oct‐11

Jan‐12

Apr‐12

Jul‐1

2Oct‐12

Jan‐13

Apr‐13

Jul‐1

3

Billion

s

Billion

s

US vs. Eurozone Excess Reserves

USEurozone

€400

€800

€1,200

€1,600

€2,000

€2,400

€2,800

€3,200

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500Jan‐08

Apr‐08

Jul‐0

8Oct‐08

Jan‐09

Apr‐09

Jul‐0

9Oct‐09

Jan‐10

Apr‐10

Jul‐1

0Oct‐10

Jan‐11

Apr‐11

Jul‐1

1Oct‐11

Jan‐12

Apr‐12

Jul‐1

2Oct‐12

Jan‐13

Apr‐13

Jul‐1

3Oct‐13

Billion

s

Billion

s

Fed vs. ECB Balance Sheets

Fed

ECB

400

450

500

550

600

650

700

750

800

75

80

85

90

95

100

105

110

Apr‐12

May‐12

Jun‐12

Jul‐1

2

Aug‐12

Sep‐12

Oct‐12

Nov‐12

Dec‐12

Jan‐13

Feb‐13

Mar‐13

Apr‐13

May‐13

Jun‐13

Jul‐1

3

Aug‐13

Sep‐13

Oct‐13

Nov‐13

Dec‐13

Japanese Yen Spot vs. MSCI Japan Local

Japanese Yen Spot USD (LHS)

MSCI Japan Local Index (RHS)

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

USD

(000

,000s)

Central Bank AssetsPBoC

SNB

BoJ

BoE

ECB

FED


December 31, 2013

57

Looming Macro Uncertainties

Source: Morningstar as of 12/31 Source: Bloomberg as of 12/31


0

200

400

600

800

1000

1200

1400

1600Jun‐07

Sep‐07

Dec‐07

Mar‐08

Jun‐08

Sep‐08

Dec‐08

Mar‐09

Jun‐09

Sep‐09

Dec‐09

Mar‐10

Jun‐10

Sep‐10

Dec‐10

Mar‐11

Jun‐11

Sep‐11

Dec‐11

Mar‐12

Jun‐12

Sep‐12

Dec‐12

Mar‐13

Jun‐13

Sep‐13

Dec‐13

Basis P

oints

Eurozone CDS

Portugal

Italy

Germany

Spain

0%

5%

10%

15%

20%

25%

30%

S&P 500 MSCI EAFE MSCI EM BC US Agg Treasury BC US Corp HY

Market Volatility

1 Yr Return Std Dev

10 Yr Return Std Dev

0%

1%

1%

2%

2%

3%

Greece Spain Italy Portugal France Ireland Germany

Real GDP Growth

10 Yr Average

2014 Projected

0

5

10

15

20

25

30

Brazil Turkey Egypt China Russia

Misery Indices (Inflation + Unemployent)

12/31/201012/31/201210/31/2013


December 31, 2013

58

S&P valuations rose in December remaining above the 10 year and long term averages, which are nearly equal at 16.35…

Market Environment – US Equity

Source: Bloomberg as of 12/31

Source: Shiller Data as of 12/31; Long term average dates to 1/1/1926Source: Bloomberg as of 12/31; Long term average dates to 1/29/1954


…The cyclically adjusted Shiller PE Ratio, however, is above the long term average of 17.55 and slightly above the 10 year average of 23.04

The VIX remained at low levels in December; the S&P 500 rose 2.5% on the month

QE1 QE2Op. Twist

Op. Twist Ext. / QE3

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Equity Valuations: S&P 500 P/E Ratio

P/E Ratio

10 Yr Avg

Long Term Avg

0

200

400

600

800

1000

1200

1400

1600

1800

2000

0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

S&P 50

0

VIX

VIX vs S&P 500VIX

S&P 500

0

5

10

15

20

25

30

35

40

45

50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Cyclically Adjusted Shiller PE Ratios

PE Ratio

Long Term Avg

10 Yr Avg


December 31, 2013

59

US Stock Market Performance



Large value stocks have marginally outperformed large growth in 2013

Domestic equity has outperformed international equity in 2013

Industrials and Consumer Discretionary have led all sectors in 2013 as Telecom and Utilities lagged in the 4th quarter but are still positive on the year

Small cap has outperformed large cap in 2013

‐25%

‐15%

‐5%

5%

15%

25%

35%

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Large Cap vs. Small Cap Equity Returns

Large Cap Outperforms

Small Cap Outperforms

‐55%

‐45%

‐35%

‐25%

‐15%

‐5%

5%

15%

25%

35%

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Domestic vs. International Equity ReturnsDomestic Outperforms

Int'l Outperforms

‐35%

‐25%

‐15%

‐5%

5%

15%

25%

35%

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Large Value vs. Large Growth Equity Returns

Value Outperforms

Growth Outperforms

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Con.Discretionary (12.54%)

Con.Staples (9.76%)

Energy (10.28%)

Financials (16.18%)

Health Care (12.95%)

Industrials (10.94%)

Info Tech. (18.63%)

Materials (3.5%)

Telecom (2.3%)

Utilities (2.92%)

S&P 500 Sector Returns and Weights

3 Month

YTD


December 31, 2013

60

Non-US Stock Performance



YTD 3-Mo 1 Yr. 3 Yr. Ann.

Europe ex UK 24.6% 7.9% 24.6% 6.5%

United Kingdom 16.2% 6.7% 16.2% 6.5%

Japan 24.9% 2.1% 24.9% 3.4%

Pacific Ex Japan 1.5% -0.4% 1.5% 0.5%

Canada 3.3% 3.5% 3.3% -1.9%

USA 29.9% 9.7% 29.9% 13.8%


Euro -4.2% -1.6% -4.2% -0.9%

Japanese Yen 17.6% 6.7% 17.6% 8.3%

British Pound -1.9% -2.3% -1.9% -2.0%

Canada 6.6% 3.0% 6.6% 2.0%

Australia 14.2% 4.3% 14.2% 4.5%


MSCI EAFE (Local) 26.9% 6.4% 26.9% 9.4%

MSCI EAFE (USD) 22.8% 5.7% 22.8% 8.2%

Currency Impact -4.1% -0.6% -4.1% -1.2%

US Dollar Return vs. Major Foreign Currencies

(Negative = Dollar Depreciates, Positive = Dollar Appreciates)

Currency Impact on Developed Mkt. Returns

(Negative = Currency Hurt, Positive = Currency Helped)

Developed Market Equity Returns (U.S. Dollars)

0% 10% 20% 30% 40% 50%

Con.Discretionary (11.93%)

Con.Staples (10.93%)

Energy (7.25%)

Financials (25.62%)

Health Care (10.03%)

Industrials (12.92%)

Info Tech. (4.52%)

Materials (7.6%)

Telecom (5.69%)

Utilities (3.51%)

MSCI EAFE Sector Returns (Wgts.)

YTD

3 Month

4

6

8

10

12

14

16

18

20

Jan‐05

May‐05

Sep‐05

Jan‐06

May‐06

Sep‐06

Jan‐07

May‐07

Sep‐07

Jan‐08

May‐08

Sep‐08

Jan‐09

May‐09

Sep‐09

Jan‐10

May‐10

Sep‐10

Jan‐11

May‐11

Sep‐11

Jan‐12

May‐12

Sep‐12

Jan‐13

May‐13

Sep‐13

EAFE and EM Equity P/E Ratio

MSCI EAFE

MSCI EM*Ex‐Negative Earners

‐60%

‐40%

‐20%

0%

20%

40%

60%

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Developed vs. Emerging Markets Equity Returns

Emerging Outperforms

Developed Outperforms


December 31, 2013

61

Emerging Markets ValuationMSCI EM MSCI EM Small Cap

PE Ratio 11.83 22.98

PE Historical Avg 14.47 18.13

PB Ratio 1.51 1.29

Historical Avg 1.53 1.27

PS Ratio 0.99 0.74

Historical Avg 1.12 0.73

Emerging Markets

- MSCI EM PE, PB, and PS Ratios are below historical averages- MSCI EM Small Cap PE is above, while PB and PS Ratios are in line with historical averages




Brazilian Real 13.2% 6.1% 13.2% 11.1%

Russian Ruble 7.1% 1.7% 7.1% 2.5%

Indian Rupee 11.4% -1.1% 11.4% 10.3%

Chinese Renminbi -2.9% -1.1% -2.9% -2.9%

Singapore Dollar -0.9% -0.2% -0.9% -0.9%

Hungarian Forint -2.0% -1.5% -2.0% 1.3%

Turkish Lira 17.0% 6.0% 17.0% 10.5%

Mexican Peso 1.4% -0.4% 1.4% 1.9%

So. African Rand 19.4% 4.6% 19.4% 14.2%

So. Korean Won -1.0% -2.2% -1.0% -2.2%

US Dollar Return vs. Major EM Currencies

(Negative = Dollar Depreciates, Positive = Dollar Appreciates)

0%

2%

4%

6%

8%

10%

12%

Brazil Russia India China

BRIC GDP Growth Rates

10 Yr Avg. Real GDP Growth

Projected 2013 Real GDP Growth

0

1

2

3

4

5

6

7

8

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EM Sovereign Bond Spread

EM (Local) ‐ US Bond Spread

Average


December 31, 2013

62

Market Environment – Emerging Markets



The MSCI EM PE Ratio remains below its long term average MSCI EM Rolling 12-Month excess returns relative to MSCI World are at the lower bound of the historical range

Projected GDP growth rates have continued to decline in emerging market countries

Currencies of BoP challenged countries (Brazil, India, Indonesia, Turkey, and South Africa) have depreciated significantly relative to currencies of other EM countries

‐40%

‐30%

‐20%

‐10%

0%

10%

20%

30%

40%

50%

60%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

MSCI EM Excess Returns vs. MSCI World

Trailing 12‐Mo Excess Return

+/‐ 1 Std Dev

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

MSCI EM PE Ratio

PE Ratio

Long Term Avg

‐2%

0%

2%

4%

6%

8%

10%

12%

US Eurozone Brazil Russia India China

BRIC GDP Growth Rates

10 Yr Avg. Real GDP Growth2013 Projection as of 12/31/20122013 Projection as of 12/31/2013

0.8

0.9

1

1.1

1.2

1.3

1.4

Feb‐09

May‐09

Aug‐09

Nov‐09

Feb‐10

May‐10

Aug‐10

Nov‐10

Feb‐11

May‐11

Aug‐11

Nov‐11

Feb‐12

May‐12

Aug‐12

Nov‐12

Feb‐13

May‐13

Aug‐13

Nov‐13

Currency Spot Prices

BoP ChallengedRest of EM


December 31, 2013

63

Market Environment – Interest Rates

Source: Bloomberg as of 12/31 Source: Citigroup as of 12/31

Source: US Treasury as of 12/31 Source: Bloomberg as of 12/31

Fed Funds rate remained at 0.25% while the 10 Yr. Treasury Yield finished December at 3.03%

The Citi Pension discount rate rose to 4.95% through December

Bond yields across the globe have mostly risen in 20130.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0 5 10 15 20 25 30Years to Maturity

U.S. Treasury Yield Curve

Dec‐13Dec‐12Dec‐11Dec‐10

0%

1%

2%

3%

4%

5%

6%

7%

8%

US UK Euro Japan Australia EM

Global Bond Yields

12/31/12

12/31/13

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

10 Year Treasury vs. Fed Funds Rate

10 YR Treasury

Fed Funds Rate

3%

4%

5%

6%

7%

8%

9%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Citigroup Pension Liabililty Index


December 31, 2013

64

Fixed Income Performance

Source: Barclays as of 12/31 Source: Barclays, Bloomberg as of 12/31

Source: Barclays as of 12/31 Source: Barclays as of 12/31

‐20%

‐15%

‐10%

‐5%

0%

5%

10%

1‐3 Yr. Trs.3‐5 Yr. Trs. 7‐10 Yr.Trs.

25+ Yr.Trs.

Core High Yield GlobalBond

EMD

Fixed Income Returns

3 Month

YTD

0

200

400

600

800

1000

1200

1400

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Basis P

oints

Corporate Spreads

Aa

A

Baa

Ba

‐18%

‐16%

‐14%

‐12%

‐10%

‐8%

‐6%

‐4%

‐2%

0%

2%

WGBI US UK Japan Canada Australia JPM EMBI

Global Bond Returns

3 Month

YTD

‐7%

‐6%

‐5%

‐4%

‐3%

‐2%

‐1%

0%

1%

2%

3%

Treasuries Agencies MBS ABS Inv.Gr. Corp. Inter. Corp. Long Corp.

Investment Grade Sector Returns

3 Month

YTD


December 31, 2013

65

Market Environment – Commodities


Source: Bloomberg as of 12/31Source: Bloomberg as of 12/31


Corn prices finished December down at $4.01 per bushelOil prices finished November up at $98.42 per barrel

Gold prices finished December down at $1205.65 per ounceMany commodity futures’ prices are contagoed, meaning a higher forward price is expected relative to the current spot

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Corn Spot Price Per Bushel

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

GasolineCoffeeCornSugarWheatLeadZinc

AverageNickelCocoaSilverGold

CottonOil

CopperSoybeanNat Gas Relative Roll Yield

Backwardation

Contango

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Gold Spot Price Per Ounce

$0

$20

$40

$60

$80

$100

$120

$140

$160

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Oil Spot Price Per Barrel


December 31, 2013

66

• NEPC uses, as its data source, the plan’s custodian bank or fund service company, and NEPC relies on those sources for security pricing, calculation of accruals, and all transactions, including income payments, splits, and distributions. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within.

• The Investment Performance Analysis (IPA) is provided as a management aid for the client’s internal use only. Portfolio performance reported in the IPA does not constitute a recommendation by NEPC.

• Information in this report on market indices and security characteristics is received from sources external to NEPC. While efforts are made to ensure that this external data is accurate, NEPC cannot accept responsibility for errors that may occur.

Information DisclosureNew Mexico Educational Retirement BoardNew Mexico Educational Retirement Board

December 31, 2013

67

investment performance analysis for the period ending ... · •advance” estimate of fourth...

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