new mexico state investment council · 2016. 8. 25. · performance versus peers as of march 31,...

New Mexico State Investment CouncilExecutive SummaryPerformance Review

Capital Markets Update

Current Market Themes

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Recent Events• In her first press conference as Fed chair, Janet Yellen focused on the

persistently below target rate of inflation and indicated that the Fed will review a "wide range of information" before increasing interest rates.

• The Russian annexation of Crimea contributed to sharp declines in Russian equity and currency markets. Outside of nearby emerging markets, global markets largely withstood the geopolitical turmoil.

Domestic Equity• U.S. equity markets faltered at the start of the quarter following a robust year

in 2013, but finished in positive territory. The S&P 500 returned 1.81% in Q1.International Equity• Non-U.S. developed markets continued to lag the U.S. markets; however,

returns of major indices were still positive across the board.Fixed Income• Fixed income markets started the year on a positive note, with the Barclays

US Aggregate Bond Index returning 1.84%.

Performance Update as of March 31, 2014

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Index

CalendarYear2010

Return

CalendarYear2011

Return

CalendarYear2012

Return

CalendarYear2013

Return

As of March 31, 2014

QTDReturn

YTDReturn

1-YearReturn

3-YearAnnualized

Return

5-YearAnnualized

Return

10-YearAnnualized

Return Russell 1000 Index 16.10% 1.50% 16.43% 33.11% 2.05% 2.05% 22.41% 14.75% 21.73% 7.80%

Russell 2000 Index 26.86% -4.18% 16.34% 38.82% 1.12% 1.12% 24.90% 13.18% 24.31% 8.53%

Russell 3000 Index 16.93% 1.03% 16.42% 33.55% 1.97% 1.97% 22.61% 14.61% 21.93% 7.86%

MSCI EAFE Index (Net) 7.75% -12.14% 17.32% 22.78% 0.66% 0.66% 17.56% 7.21% 16.02% 6.53%

MSCI EAFE Index (Local) (Gross) 5.26% -11.74% 17.89% 27.46% -0.18% -0.18% 15.90% 9.41% 14.19% 6.03%

MSCI EAFE Small Cap Index (Net) 22.04% -15.94% 20.00% 29.30% 3.36% 3.36% 23.26% 9.40% 21.70% 8.61%

MSCI Emerging Markets Index (Net) 18.88% -18.42% 18.23% -2.60% -0.43% -0.43% -1.43% -2.86% 14.48% 10.11%

MSCI AC World ex-US Index (Net) 11.15% -13.71% 16.83% 15.29% 0.51% 0.51% 12.31% 4.15% 15.52% 7.12%

B US Aggregate Bond Index 6.54% 7.84% 4.21% -2.02% 1.84% 1.84% -0.10% 3.75% 4.80% 4.46%

BofA ML 3 Mo US T-Bill 0.13% 0.10% 0.11% 0.07% 0.01% 0.01% 0.07% 0.08% 0.12% 1.65%

NCREIF ODCE Index AWA (Gross) 16.36% 15.99% 10.94% 13.94% 2.52% 2.52% 13.77% 13.06% 7.32% 7.18%

NCREIF Property Index 13.11% 14.27% 10.54% 10.99% 2.74% 2.74% 11.17% 11.70% 7.89% 8.65%

HFRI FOF Conservative Index 5.07% -3.55% 4.22% 7.70% 1.29% 1.29% 6.14% 2.74% 4.64% 2.61%

DJ-UBS Commodity Index 16.83% -13.32% -1.06% -9.52% 6.99% 6.99% -2.10% -7.37% 4.24% 0.43%

SIC Total Fund Performance vs. Benchmarks

Allocations & Performance as of March 31, 2014

The policy indexes are based on target allocations for the permanent funds. As of March 31, 2014, they consist of 30% Russell 1000 Index, 5% Russell 2500 Index, 9% MSCI EAFE Index (Net), 6% MSCI Emerging Markets Index (Net), 14% Barclays US Aggregate Bond Index, 6% Credit and Structured Finance Composite, 7% HFRI FOF Composite Index (Lagged 1 Month), 10% 80/20 Cambridge Private Equity Index (Lagged 1 Quarter), 8% NCREIF ODCE Index (Net) (Lagged 1 Quarter), and 5% Real Return Custom Index.

*Severance Tax target allocation excludes economically targeted investments and the state private equity program.

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LGPF Outperformed the Policy Index in the Quarter?

Relative performance from private equity was the main contributor to Total Fund outperformance relative to the policy index during the first quarter.

Portfolio positioning in general, as well as equity manager performance, detracted slightly from absolute performance.

Performance shown is gross of fees. Calculation is based on monthly periodicity.

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LGPF Outperformed the Policy Index over the Last Year?

Over the last year, portfolio positioning has deviated from the target allocation as residuals intended for other asset classes are temporarily held as fixed income.

Despite that variance, strong value-add by managers within US equity, fixed income, and alternative assets led to overall outperformance by the Total Fund.


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STPF Outperformed the Policy Index in the Quarter?

Relative performance from private equity was the main contributor to Total Fund outperformance relative to the policy index during the first quarter.

Portfolio positioning in general, as well as equity manager performance, detracted slightly from absolute performance.


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STPF Outperformed the Policy Index over the Last Year?

Over the last year, portfolio positioning has deviated from the target allocation as residuals intended for other asset classes are temporarily held as fixed income.

Despite that variance, strong value-add by managers within US equity, fixed income, and alternative assets led to overall outperformance by the Total Fund.


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SIC Total Fund Performance vs. Peers

Performance versus Peers as of March 31, 2014

Performance shown is gross of fees. Performance is annualized for periods greater than one year.

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QTD CYTD FYTD 1Year

3Years

5Years

7Years

10Years

FY2013

FY2012

FY2011

FY2010

FY2009

Land Grant Total Fund Composite 2.01 2.01 11.92 12.99 8.63 13.15 5.15 6.73 13.28 0.74 22.40 14.43 -22.15Severance Tax Total Fund Composite 1.98 1.98 11.86 12.76 8.11 12.50 4.32 6.07 12.15 0.19 22.63 12.18 -23.65

All Public Plans > $10B (Custom Peer Group) Median 2.03 2.03 12.35 12.51 9.07 14.39 5.41 7.07 12.45 1.10 21.06 12.92 -18.91Land Grant Total Fund Composite Rank 52 52 61 42 74 71 63 80 26 61 30 23 82Severance Tax Total Fund Composite Rank 55 55 62 45 82 82 97 96 58 80 23 67 88

Population 26 26 25 25 23 23 23 20 30 32 31 23 18

All Public Plans-Total Fund Median 1.76 1.76 12.81 12.83 9.00 14.22 5.59 6.88 12.44 1.03 21.35 12.68 -15.81Land Grant Total Fund Composite Rank 31 31 72 46 62 80 70 56 33 56 34 22 95Severance Tax Total Fund Composite Rank 33 33 73 53 75 89 91 87 57 70 32 59 97

Population 294 294 289 288 267 254 186 159 424 435 438 427 376

All Public Plans > $1B-Total Fund Median 2.01 2.01 12.48 12.45 9.13 14.50 5.54 7.15 12.38 1.10 21.77 13.47 -18.68Land Grant Total Fund Composite Rank 50 50 63 37 68 78 71 73 31 62 39 27 88Severance Tax Total Fund Composite Rank 53 53 65 42 80 86 94 93 55 78 35 70 92

Population 83 83 82 81 73 71 70 64 81 87 91 85 66

Asset Allocation versus Peers as of March 31, 2014

• Asset allocation as of March 31, 2014 compared to the All Public Plans >$10 Billion universe:

– US equity allocations are higher than peers while international equities are significantly lower.– Both permanent funds’ fixed income allocations are largely in line with peers.– Both permanent funds maintain an above average allocation to alternative investments. This segment

includes absolute return, real return, and private equity investments.

Parentheses contain percentile ranks.

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Asset Allocation versus Peers as of March 31, 2014

• Asset allocation as of March 31, 2014 compared to the All Public Plans universe:

– US equity, international equity, and fixed income allocations are lower than peers.– Both permanent funds maintain an above median allocation to alternative investments. This segment

includes absolute return, real return, and private equity investments.

Parentheses contain percentile ranks.

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Risk / Return vs. Peers as of March 31, 2014

Performance shown is gross of fees. Parentheses contain percentile ranks.

All Public Plans - Total Fund Universe All Public Plans > $10B – Total Fund Universe

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Composite Performance as of March 31, 2014

Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Return, and Private Equity investments, which are shown net of fees. Performance is annualized for periods greater than one year.

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Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Return, and Private Equity investments, which are shown net of fees. Performance is annualized for periods greater than one year.


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Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Return, and Private Equity investments, which are shown net of fees.


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Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Return, and Private Equity investments, which are shown net of fees.


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Asset Class Performance

US Equity

NM SIC US Equity Structure Update

• Recent Manager Hires– There were no US equity managers hired over the last year.

• Recent Manager Terminations– There were no US equity managers terminated over the last year.

• Structural Updates– Long-term Target

• 31%– Current Interim Target

• 35%– Target as of 6/30/2012

• 40%

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NM SIC US Equity as of March 31, 2014

• The US Equity Composite trailed the Russell 3000 Index in the first quarter of 2014.– The US Small/Mid Cap Pool posted strong results in absolute and relative terms in Q1, while the US Large

Cap Pool posted positive absolute returns but trailed the Russell 1000 Index.– Donald Smith was by far the best performer over the quarter, returning 8.17% vs. 1.78% for its benchmark.– On the other hand, no active large cap manager was able to beat its benchmark to start 2014, with J.P.

Morgan yielding the lowest return (-1.17% vs. 1.12%).

Performance shown is gross of fees, except where noted otherwise. Performance is annualized for periods greater than one year.

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NM SIC US Equity as of March 31, 2014 – Continued

Performance shown is gross of fees. Calculation is based on quarterly periodicity. Parentheses contain percentile ranks.

All Public Plans – US Equity Segment

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NM SIC US Equity as of March 31, 2014 – Continued


All Public Plans – US Equity Segment

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NM SIC US Equity as of March 31, 2014 – ContinuedUS Equity Composite Holdings

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Non-US Equity

NM SIC Non-US Equity Structure Update

• Recent Manager Hires– LSV Int'l Large Cap Value– T. Rowe Price Int'l Core– Schroder Int'l Alpha– MFS Int'l Large Cap Growth– Templeton Int'l Small Cap Equity– BlackRock Emg Mkts Opp Fund– DuPont Capital Management

• Recent Manager Terminations– Schroder Int'l Alpha

• Structural Updates– Target (Long-term, Current Interim, and as of 6/30/2012)

• 15%

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NM SIC Non-US Equity as of March 31, 2014

• The Non-US Equity Composite underperformed the Non-US Equity Custom Index over the last quarter.

– Developed Markets finished the first quarter with a modest 0.35% return, but the composite trailed the MSCI EAFE Index (Net) by 31 basis points.

– Emerging Markets posted a negative -1.63% return in Q1, 120 basis points lower than the MSCI Emerging Markets Index (Net).


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NM SIC Non-US Equity as of March 31, 2014 – Continued


All Public Plans – Non-US Equity Segment

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NM SIC Non-US Equity as of March 31, 2014 – Continued


All Public Plans – Non-US Equity Segment

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NM SIC Non-US Equity as of March 31, 2014 – ContinuedNon-US Equity Composite Holdings

Allocation to "Other" consists of holdings domiciled in countries/regions that do not meet economic development, size, liquidity or market accessibility criteria as defined by the MSCI region standards. RVK 32

Fixed Income

NM SIC Fixed Income Equity Structure Update

• Recent Manager Hires– PIMCO Unconstrained– Loomis Sayles Unconstrained

• Recent Manager Terminations– There were no fixed income managers terminated over the last year.

• Structural Updates– Long-term Target

• 16%– Current Interim Target

• 20%– Target as of 6/30/2012

• 20%

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NM SIC US Fixed Income as of March 31, 2014

• Despite the perceived risk of rising interest rates, the Fixed Income Composite outperformed its benchmark 2.38% vs. 1.79% over the first quarter.

– All three US Core Bond managers outperformed their benchmark in Q1.– The Credit & Structured Finance Pool outperformed both its primary and secondary benchmarks over the

quarter.


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NM SIC US Core Bonds as of March 31, 2014 – Continued


All Public Plans – US Fixed Income Segment

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NM SIC US Core Bonds as of March 31, 2014 – Continued


All Public Plans – US Fixed Income Segment

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NM SIC US Core Bonds as of March 31, 2014 – ContinuedUS Core Bonds Composite Characteristics

Allocation to "Other" consists of preferred securities and interest rate swaps held by the underlying managers. Negative sector allocation reflects manager's use of derivatives. RVK 38

Absolute Return

NM SIC Absolute Return as of March 31, 2014

Performance shown is net of fees. Absolute Return market values are lagged 1 month and provided by J.P. Morgan. Performance for Absolute Return is preliminary and shown as of the most current month end. Performance forMariner Matador, LLC prior to August 2008 consists of Mariner Select LP.

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new mexico state investment council · 2016. 8. 25. · performance versus peers as of march 31,...

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