COMMON INVESTMENT MEETING Public Session - Office …€¦ · · 2017-06-21THE CITY OF NEW YORK...
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THE CITY OF NEW YORK OFFICE OF THE COMPTROLLER June 21, 2017 COMMON INVESTMENT MEETING Public Session This document was developed by the New York City Comptroller’s Office Bureau of Asset Management (“BAM”). The information contained in this Executive Appendix is confidential, may not be distributed to unauthorized persons, and may contain material non-public information pertaining to certain investment activities and portfolio companies. Federal, state, and/or foreign securities laws prohibit any person who has received such information from purchasing or selling such securities based on material non-public information or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.
Transcript of COMMON INVESTMENT MEETING Public Session - Office …€¦ · · 2017-06-21THE CITY OF NEW YORK...
THE CITY OF NEW YORKOFFICE OF THE COMPTROLLER
June 21, 2017
COMMON INVESTMENT MEETINGPublic Session
This document was developed by the New York City Comptroller’s Office Bureau of Asset Management (“BAM”). The information contained in this Executive Appendix is confidential, may not be distributed to unauthorized persons, and may contain material non-public information pertaining to certain investment activities and portfolio companies. Federal, state, and/or foreign securities laws prohibit any person who has received such information from purchasing or selling such securities based on material non-public information or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.
QUARTERLY PERFORMANCE OVERVIEWQ1 2017
Asset Class IndexFirst Quarter
2017Fourth Quarter
Fiscal Year To Date
3 Year 5 Year Expected*
Equities - U.S. Russell 3000 5.7% 4.2% 15.0% 9.8% 13.2% 7.8%
Equities - Developed Intl MSCI EAFE 7.3% -0.7% 13.3% 0.5% 5.8% 8.9%
Equities - Emerging Intl MSCI EMF 11.4% -4.2% 16.4% 1.2% 0.8% 11.0%
Debt – UST Long Duration Citigroup Treasury 10+ 2.6% -11.7% -9.6% 5.8% 3.5% 2.1%
Debt - US Government NYC Treas/Agency +5 1.1% -7.3% -6.8% 3.8% 2.7% 2.8%Debt - Investment Grade NYC IG Credit 1.4% -3.1% -0.4% 3.5% 3.7% 3.4%
Debt - High Yield Citigroup BB & B 2.3% 1.6% 9.2% 4.1% 6.2% 6.1%
3
Market Returns: Q1-2017
Source: State Street
*Average of consultant long-term arithmetic expected returns, as of 2016
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
1
1.5
2
2.5
3
5/31/16 6/30/16 7/31/16 8/31/16 9/30/16 10/31/16 11/30/16 12/31/16 1/31/17 2/28/17 3/31/170
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Atlanta Fed GDPNow GDP Forecast UST 10 Year YieldSource: Bloomberg
4
Q1 Themes1) US Q1 GDP Weakness
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
2) Developed Market Interest Rates – Inflation declining, Yields lower
• US/Federal ReserveMarch 14 FOMC – “Dovish” rate hike
• Europe/European Central BankMarch 9 ECB meeting – “No evidence of a convincing upward trend in underlying inflation”
5
Q1 Themes
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17
US PCE Inflation YoY US PCE Core Inflation Index YoY EU CPI YoY EU Core CPI YoY
6
US and European Inflation
Source: BloombergPREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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Stronger than expected S&P 500 Earnings
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017
S&P 500 Price Level S&P 500 YoY Quarterly Earnings Growth Source: Bloomberg
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
8
Continued Global Central Bank Balance Sheet Expansion
Source: Bloomberg
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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Continued Global Central Bank Balance Sheet Expansion
Source: Bloomberg
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Domestic:-Probability, timing and specifics of US tax and spending plans-Divergence between S&P 500 and UST 10 Year Yields-Federal Reserve – Pace and magnitude of interest rate increases; Impact of Fed’s balance sheet reduction
International:-UK-EU separation negotiations-German election (anticipated fall of ’17)-Italian election (either fall of ’17 or spring of ’18) and Italian banking system concerns-North Korea concerns-Middle East concerns-ECB and BOJ – exit from current extraordinarily accommodative monetary policy-Global terrorism
10
Current Global Macro Issues
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
1800
1900
2000
2100
2200
2300
2400
2500
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
2.8
5/31/16 6/30/16 7/31/16 8/31/16 9/30/16 10/31/16 11/30/16 12/31/16 1/31/17 2/28/17 3/31/17 4/30/17 5/31/17
UST 10 Yr Yield CME Standard & Poor's 500 Index Future
11
Divergence
Source: Bloomberg
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
0
0.5
1
1.5
2
2.5
3
END 2017 END 2018 END 2019
1.241.48
1.66
Fed Funds Rate Expectations
Fed Fund Futures FOMC Expectations
12
Fed Fund Futures and FOMC Expectations
Source: Thomson Reuters
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
1.125
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Fed Asset Holdings (in billions)
Total Assets Source: Thomson Reuters
13
Fed’s Asset Holdings
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Net of fees in public asset classes
(SSB B p.3; N, T, F p.7; P p.9)
NYC Pension SystemPortfolio Std
Dev - 1 yr1st Quarter FYTD One Year Three Year
BERS 3.83% 5.34% 11.32% 13.62% 6.19%TRS 3.62% 4.88% 9.32% 11.72% 5.94%FIRE 3.33% 4.65% 9.47% 11.62% 6.06%POLICE 3.32% 4.67% 9.94% 12.11% 6.31%NYCERS 3.26% 4.61% 9.74% 11.98% 6.06%Median Fund - TUCS 4.28% 9.16% 11.65% 5.94%
PME 35 (43% R3000 + 22% MSCI EAFE + 35% BBG Barclays Aggr.) 4.34% 8.62% 10.36% 5.36%
14
Total NYC Pension Fund Performance as of 3/31/2017
Source: State Street
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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Standard Deviation – 1 Year
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
TRS NYCERS POLICE FIRE BERS Public Mkt Equiv 35
Source: State Street
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
16
Asset Allocation First Quarter 2017 - Growth
Source: State Street
Relative Mix to Adjusted New Policy Weights (SSB F, T, N p.8; P p.10; B p.12)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
17
Asset Allocation First Quarter 2017 – Inflation Protection
Source: State Street
Relative Mix to Adjusted New Policy Weights (SSB F, T, N p.8; P p.10; B p.12)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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Asset Allocation First Quarter 2017 - Deflation Protection
Source: State Street
Relative Mix to Adjusted New Policy Weights (SSB F, T, N p.8; P p.10; B p.12)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
19
Treasury Duration Actual Vs. Target
7.46.5
7.58.2
5.6
17.8
10.9
17.8 17.8
10.8
0.0
3.0
6.0
9.0
12.0
15.0
18.0
21.0
Actual TargetNYCERSTRS POLICE FIRE BERS
Source: State Street
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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Fiscal Year to Date Return – Total Portfolio
-1200
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
1200
FYTD Portfolio FYTD Benchmark FYTD Excess
bps
TRS
NYCERS
Police
Fire
BERS
Basis Points of Excess Return (SSB T, N, F p.15; P p.17; B p.19)
Source: State StreetPREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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Fiscal Year to Date Excess Return – Total Portfolio
-600
-400
-200
0
200
400
600
FYTD Total Excess Return FYTD Asset Allocation FYTD Manager Value Added
bps
TRS
NYCERS
Police
Fire
BERS
Source: State Street
Basis Points of Excess Return (SSB T, N, F p.15; P p.17; B p.19)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
22
Fiscal Year to Date Manager Value Added - Total Portfolio
(600)
(400)
(200)
-
200
400
600
FYTD 3 Year Trailing
TRS
NYCERS
Police
Fire
BERS
bps
Basis Points of Excess Return (SSB T, N, F p.17; P p.19; B p.21)
Source: State Street
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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Value Added – Total U.S. Equities
-600
-400
-200
0
200
400
600
FYTD 3 Year Trailing
TRS: 30.56%NYCERS: 32.53%POLICE: 36.42%FIRE: 32.44%BERS: 36.29%
Source: State Street
Weights as of3/31/2017
bps
Basis Points of Excess Return (SSB N, F, T p.27; P p.29; B p.31)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
24
Value Added – Total International Equities
-700
-500
-300
-100
100
300
500
700
FYTD 3 Year Trailing
TRS: 22.01%NYCERS: 21.18%POLICE: 16.33%FIRE: 16.9%BERS: 23.29%
Source: State Street
Weights as of3/31/2017
bps
Basis Points of Excess Return (SSB N, F, T p.29; P p.31; B p.33)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
25
Value Added – Structured Fixed Income
-600
-400
-200
0
200
400
600
FYTD 3 Year Trailing
TRS: 16.61%NYCERS: 15.54%POLICE: 14.49%FIRE: 14.66%BERS: 14.86%
Source: State Street
Weights as of3/31/2017
bps
Basis Points of Excess Return (SSB T p.32; N, F p.33; P, B p.33)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
26
Value Added – High Yield
-600
-400
-200
0
200
400
600
FYTD 3 Year Trailing
TRS: 5.28%NYCERS: 4.26%POLICE: 4.72%FIRE: 4.57%BERS: 5.13%
Source: State Street
Weights as of3/31/2017
bps
Basis Points of Excess Return (SSB T p.32; N, F p.33; P, B p.33)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
27
Value Added – Bank Loans
-600
-400
-200
0
200
400
600
FYTD 3 Year Trailing
TRS: 2.6%NYCERS: 1.84%POLICE: 1.66%FIRE: 1.63%BERS: 2.22%
Source: State Street
Weights as of3/31/2017
bps
Basis Points of Excess Return (SSB T p.32; N p.33; F p.34; B p.35; P p.36)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Value Added- Hedge FundsBasis Points of Excess Return
-600
-400
-200
0
200
400
600
FYTD 3 Year Trailing
TRS - N/A
NYCERS: 0.43%
POLICE: 4.81%
FIRE: 4.91%
BERS - N/A
Source: State Street
Weights as of3/31/2017
28
bps
Value Added - Hedge FundsBasis Points of Excess Return (SSB F p.56; N p.58; P p.60)
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
PRIVATE MARKET DATA
30
Value Added – Private Equity
-600
-400
-200
0
200
400
600
Excess Return Since Inception; PME Benchmark: Russell 3000 As of 12/31/16
TRS - 07/08/99
NYCERS - 03/29/99
Police - 03/29/99
Fire - 03/29/99
BERS - 07/20/06
Inception Date
300bps Target
Source: StepStone Group & Hamilton Lane
Basis Points of Cumulative IRR above Public Market Equivalent
bps
The PME Spread is the difference between the IRR and the PME Benchmark.
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
31
Value Added – Opportunistic Fixed Income (OFI)
-600
-400
-200
0
200
400
600
Excess Return Since Inception; PME Benchmark: 50% JP Morgan Global High Yield 50% CS Leveraged Loans as of 3/31/17
TRS - 10/24/2007
NYCERS - 10/24/2007
Police - 10/24/2007
Fire - 10/24/2007
BERS - N/A
Inception Date
300bps Target
Source: State Street
Basis Points of Cumulative IRR above Public Market Equivalent
bps
The PME Spread is the difference between the IRR and the PME Benchmark.
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
32
Value Added – Private Real Estate - Core
-600
-400
-200
0
200
400
600
Excess Return Since Inception; Core = 40% Equities- Russell 3000 /60% BarcAgg as of 12/31/16
TRS - 12/6/2002
NYCERS - 12/6/2002
Police - 12/6/2002
Fire - 12/6/2002
BERS - 12/13/2010
Inception Date
Source: State Street
Basis Points of Cumulative IRR above Public Market Equivalentbp
s
The PME Spread is the difference between the IRR and the PME Benchmark.
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
33
Value Added – Private Real Estate – Non-Core
-600
-400
-200
0
200
400
600
Excess Return Since Inception; Non-core = 60% Equities- Russell 3000/40% BarcAgg as of 12/31/16
TRS - 12/6/2002
NYCERS - 12/6/2002
Police - 12/6/2002
Fire - 12/6/2002
BERS - 12/13/2010
Inception Date
Source: State Street
Basis Points of Cumulative IRR above Public Market Equivalentbp
s
The PME Spread is the difference between the IRR and the PME Benchmark.
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
34
Value Added - Infrastructure
-600
-400
-200
0
200
400
600
Excess Return Since Inception; PME Benchmark: 50% R3000 & 50% Barclays Agg. as of 12/31/16
TRS - 11/19/2013
NYCERS - 11/19/2013
Police - 11/19/2013
Fire - 11/19/2013
BERS - 11/19/2013
Inception Date
Source: StepStone Group
Basis Points of Cumulative IRR above Public Market Equivalentbp
s
The PME Spread is the difference between the IRR and the PME Benchmark.
PREPARED BY THE OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
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