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THE CITY OF NEW YORK
OFFICE OF THE COMPTROLLER
September 26, 2016
Overview – Second Quarter 2016
Asset Class IndexSecond
Quarter 2016Fiscal YTD 3 Year 5 Year Expected*
Equities - U.S. Russell 3000 2.6% 2.1% 11.1% 11.6% 7.8%
Equities - Developed Intl MSCI EAFE -1.5% -10.2% 2.1% 1.7% 8.9%
Equities - Emerging Intl MSCI EMF 0.7% -12.1% -1.6% -3.8% 11.0%
Debt - US Government NYC Treas/Agency +5 4.0% 12.0% 6.6% 6.5% 2.8%
Debt - Investment Grade NYC IG Credit 3.4% 7.3% 5.1% 5.1% 3.4%
Debt - High Yield Citigroup BB & B 5.0% 0.8% 3.9% 5.6% 6.1%
2
Market Returns: Q2-2016
Source: State Street
*Average of consultant long-term arithmetic expected returns, as of 2016
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
1300
1350
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
700
800
900
1000
1100
1200
1300Equity Indices
Russell 3000 Index : Q2 Return: 2.63%
MSCI Emerging Markets Index: Q2 Return .66%
MSCI EAFE Index: Q2 Return: -1.46%
3
Continuation of Rally
Source: Bloomberg
Equities and fixed income positive.
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
0
0.2
0.4
0.6
0.8
1
1.2
1.4
-0.5
0
0.5
1
1.5
2
2.5
UST 10YR Yield : -30 bps
Germany 10Yr Yield : -92 bps
JPY 10YR Yield : -69 bps
Sep-16Jun-16Mar-15Dec-15Sep-15
4
Global Government Yields
Source: Bloomberg
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Jul-15 Oct-15 Jan-16 Apr-16
100
200
300
400
500
600
700
800
Investment Grade : Q2 Return 3.42% High Yield : Q2 Return 4.97%
Jul-16
5
Investment Grade & High Yield Spreads
Source: Bloomberg
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
0
10
20
30
40
50
60
2016 2017 2018
18
38
60
0
11
28
Bp
s o
f T
igh
ten
ing
Market Based Expectations Fed Rate Hikes
Amount of Tightening 3/31/16 Amount of Tightening 6/30/16
6
Accommodative Global Monetary Policy Continues
Source: Bloomberg
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
7
Statement from The Bank of England
• The Bank of England is monitoring developments
closely. It has undertaken extensive contingency
planning and is working closely with HM Treasury,
other domestic authorities and overseas central
banks. The Bank of England will take all necessary
steps to meet its responsibilities for monetary and
financial stability.
24 June 2016
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Source: Bank of England
8
China Hard Landing Concerns Abate
7.9
7.6
7.37.4
7.17.2
7 76.9
6.86.7 6.7
6
6.2
6.4
6.6
6.8
7
7.2
7.4
7.6
7.8
8
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
GD
P
China GDP
Source: http://www.tradingeconomics.com/china/gdp-growth-annual
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
9
China Credit Growth
2,042
1,312 1,260 1,160 1,469
2,659
1,416 1,666
3,454
911
3,243
2,011
1,394
2,869
981
2,400
17,263
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
JAN FEB MAR APR MAY JUN JUL AUG
Adjusted New TSF (Including Govt Bond Issuance), RMB Bn
2015 2016 2016 Aggregate
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Jan-16 Apr-16 Jul-16
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
GBP Currency - YTD
British Pound
Sept 14-16
10
Limited Brexit Impact
Source: Bloomberg
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Jan-16 Apr-16 Jul-16
5000
5500
6000
6500
7000
7500
FTSE 100 Index
Sept 14-16
11
FTSE 100 Index- YTD
Source: Bloomberg
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Jan-16 Apr-16 Jul-16
UK Govt Bonds 10 Year Yield
Sept 14-16
12
UK Govt Bonds 10 Year Yield- YTD
Source: Bloomberg
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Jan-16 Apr-16 Jul-16
10
15
20
25
30
35
40
45
SPX Volatility Index FTSE 100 Volatility Index Euro Stoxx 50 Volatility Index
Sept 14-16
13
SPX VIX, FTSE 100 & Euro VIX - YTD
Source: BloombergOFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Recent
• Bank of Japan (September 21) - shifted focus of Quantitative Easing from quantity of
assets purchased to interest rate yield targeting, adding yield curve control.
• Federal Reserve (September 21)- signaled rate hike in December, while signaling
slower pace and lower terminal rate.
Future
• US election (November 8)
• Potential for increase in fiscal policy globally, and “coordination” with monetary
policy.
14
Current Events
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Gross of fees in public asset classes
(SSB N, T, F p.17; P p19; B p.21)
NYC Pension SystemPortfolio Std
Dev - 1 yr
Second
QuarterFYTD 2016 Three Year Five Year
BERS 10.1% 2.1% 0.4% 7.5% 7.0%
TRS 8.9% 2.2% 1.9% 7.3% 7.1%
POLICE 8.4% 2.0% 1.4% 7.5% 7.1%
NYCERS 8.1% 2.1% 1.8% 7.2% 7.0%
FIRE 8.1% 2.0% 1.7% 7.3% 6.9%
Median Fund - TUCS 1.8% 1.3% 7.2% 7.1%
15
Total NYC Pension Fund Performance: 6/30/16
Source: State Street
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
16
Asset Allocation Second Quarter 2016 - Equity
Source: State Street
Relative Mix to Adjusted New Policy Weights (SSB F, T, N p.9; P, p.11; B p.13 )
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
17
Asset Allocation Second Quarter 2016 - Fixed Income
Relative Mix to Adjusted New Policy Weights (SSB F, T, N p.9; P, p.11; B p.13 )
Source: State Street
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
18
FY Return – Total Portfolio
-600
-400
-200
0
200
400
600
FYTD Benchmark FYTD Portfolio FYTD Excess
bp
s
TRS
NYCERS
Police
Fire
BERS
FISCAL YEAR TO DATE June 30, 2016 (SSB T, F, N p.23; P p.25; B p.27)
Source: State StreetOFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
19
Excess Return – Total Portfolio
(600)
(400)
(200)
-
200
400
600
FY 2016 Total Excess Return FY 2016 Qtr Asset Allocation FY 2016 Qtr Manager Value Added
bp
s
TRS
NYCERS
Police
Fire
BERS
Source: State Street
FY 2016 Basis Points of Excess Return (SSB T, N , F p. 11; P, p. 13; p. 10; B p.15)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
20
Manager Value Added- Total Portfolio
-600
-400
-200
0
200
400
600
FY 2016 FY 2015
TRS
NYCERS
Police
Fire
BERS
bp
sBasis Points of Excess Return (SSB T , N p. 11; P, p. 13; F p. 10; B p.15)
Source: State Street
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
21
Value Added – Total U.S. Equities
-600
-400
-200
0
200
400
600
FY 2016 FY 2015
TRS - 33.86%
NYCERS - 33.92%
Police - 35.68%
Fire - 30.90%
BERS - 37.67%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.23; P p.25; B p.27)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
22
Value Added – U.S. Equities – Small Cap
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 1.27%
NYCERS - 3.07%
Police - 2.49%
Fire - 1.61%
BERS - 1.45%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.23; P p.25; B p.27)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
23
Value Added – U.S. Equities – Mid Cap
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 2.22%
NYCERS - 3.15%
Police - 1.98%
Fire - 1.89%
BERS - 3.13%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.23; P p.26; B p.27)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
24
Value Added – Emerging Manager Program
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 0.58%
NYCERS - 1.89%
Police - 0.56%
Fire - 1.44%
BERS - 3.35%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.24; P p.26; B p.28)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
25
Value Added – Total International Equities
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 16.88%
NYCERS - 16.37%
Police - 15.41%
Fire - 15.78%
BERS - 20.98%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.25; P p.27; B p.29)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
26
Value Added – Developed Growth
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 3.57%
NYCERS - 3.35%
Police - 3.12%
Fire - 3.93%
BERS - 6.97%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.25; P p.27; B p.29)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
27
Value Added – Developed Value
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 2.97%
NYCERS - 3.01%
Police - 2.84%
Fire - 3.45%
BERS - 7.14%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.25; P p.27; B p.29)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
28
Value Added – Developed Small Cap
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 0.89%
NYCERS - 1.21%
Police - 1.39%
Fire - 1.3%
BERS - 1.84%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.25; P p.27; B p.29)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
29
Value Added – Active Emerging Markets
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 5.6%
NYCERS - 3.99%
Police - 3.37%
Fire - 4.06%
BERS - 5.03%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T, F, N p.26; P p.28; B p.29)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
30
Value Added – Structured Fixed Income
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 17.23%
NYCERS - 16.53%
Police - 16.61%
Fire - 17.45%
BERS - 15.25%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T p.28; F, N p.29; P, B p.31)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
31
Value Added – Enhanced Yield
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 4.96%
NYCERS - 3.8%
Police - 3.98%
Fire - 3.75%
BERS - 5.29%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T p.28; F, N p.29; P, B p.31)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
32
Value Added – Bank Loans
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 2.55%
NYCERS - 1.87%
Police - 1.72%
Fire - 1.69%
BERS - 2.37%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T p.28; N p.29; F p30; B p.31 P p.32)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
33
Value Added – Economically Targeted Investments
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
FY 2016 FY 2015
TRS - 0.95%
NYCERS - 1.41%
Police - 1.12%
Fire - 0.81%
BERS - 0.66%
Source: State Street
Weights as of
6/30/2016
bp
sBasis Points of Excess Return (SSB T p.29; N, F p30; B p.31 P p.32)
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Value Added- Hedge FundsBasis Points of Excess Return
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
FY 2016 FY 2015
TRS - N/A
NYCERS - 2.39%
Police - 3.85%
Fire - 3.60%
BERS - N/A
Source: State Street
Value Added - Hedge FundsBasis Points of Excess Return (SSB N, F p.27; P p.29)
Weights as of
6/30/2016
34
bp
s
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
PRIVATE MARKET DATA
36
Value Added – Private Equity
-600
-400
-200
0
200
400
600
Excess Return Since Inception PME Benchmark: PME is the Russell 3000 Total Return Index as of 3/31/16
TRS - 07/08/99
NYCERS - 03/29/99
Police - 03/29/99
Fire - 03/29/99
BERS - 07/20/06
Inception Date
300bps Target
Basis Points of Cumulative IRR above Public Market Equivalent
bp
s
The PME Spread is the difference between the IRR and the PME Benchmark for each respective partnership.
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
37
Value Added – Opportunistic Fixed Income (OFI)
-600
-400
-200
0
200
400
600
Excess Return Since Inception; PME Benchmark: JP Morgan Global High Yield as of 6/30/16
TRS - 10/24/2007
NYCERS - 10/24/2007
Police - 10/24/2007
Fire - 10/24/2007
BERS - N/A
Inception Date
300bps Target
Basis Points of Cumulative IRR above Public Market Equivalentb
ps
The PME Spread is the difference between the IRR and the PME Benchmark for each respective partnership.
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
38
Value Added – Private Real Estate - Core
-600
-500
-400
-300
-200
-100
0
100
200
300
400
500
600
Excess Return Since Inception; Core = 40% Equities- Russell 3000 /60% BarcAgg as of 3/31/16
TRS - 12/6/2002
NYCERS - 12/6/2002
Police - 12/6/2002
Fire - 12/6/2002
BERS - 12/13/2010
Inception Date
Basis Points of Cumulative IRR above Public Market Equivalentb
ps
The PME Spread is the difference between the IRR and the PME Benchmark for each respective partnership.
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
39
Value Added – Private Real Estate – Non-Core
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
Excess Return Since Inception; Non-core = 60% Equities- Russell 3000/40% BarcAgg as of 3/31/16
TRS - 12/6/2002
NYCERS - 12/6/2002
Police - 12/6/2002
Fire - 12/6/2002
BERS - 12/13/2010
Inception Date
Basis Points of Cumulative IRR above Public Market Equivalentb
ps
The PME Spread is the difference between the IRR and the PME Benchmark for each respective partnership.
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
40
Value Added - Infrastructure
0
200
400
600
800
1000
Excess Return Since Inception; PME Benchmark: 50% R3000 & 50% Barclays Agg. as of 3/31/16
TRS - 11/19/2013
NYCERS - 11/19/2013
Police - 11/19/2013
Fire - 11/19/2013
BERS - 11/19/2013
Inception Date
Basis Points of Cumulative IRR above Public Market Equivalentb
ps
The PME Spread is the difference between the IRR and the PME Benchmark for each respective partnership.
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
THE CITY OF NEW YORK
OFFICE OF THE COMPTROLLER
September 26, 2016
Statement of Investment Principles
42
Statement of Investment Principles
Establish principles to appropriately execute the 2016 Implementation Plans, guidelines to ensure thorough
management of investment decisions and best practices standards for evaluating/ monitoring investment results.
Presents a framework for achieving the investment strategy approved by the Boards based on the 2016 Asset
Allocation Study
Objective Philosophy
Asset Allocation –
Strategic Allocation
Policy
Roles & Responsibilities
Risk Management
ReportingAsset Class Strategies
Purpose
Roadmap
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Growth of contributed assets utilizing prudent
investment practices that is sufficient to meet current
and future benefit obligations net of fund
expenses.
Limit the severity of potential asset drawdowns to minimize market driven increases in the required annual contribution to the
funds.
43
Objective
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Target asset allocation should be chosen that balances the twin objectives of adequate return and minimal asset drawdowns,
consistent with the assumed investment return adopted by the Pension Board. Diversification of asset classes, geographic exposure
and other relevant factors should be pursued as a means of controlling drawdown risk.
Variations from target allocations should be minimized through regular re-balancing; Purposeful tactical bets should be rare and
fully disclosed to the Board.
All securities held in the portfolio should be included in the relevant Board approved investable universe. This is designed to ensure
that portfolio holdings are consistent with the Board’s values as expressed in ESG guidelines and responsible contracting policies.
Investment Manager contracts should be designed with the objective of returning a large majority of excess return to fund
participants.
Every effort should be made to employ managers who practice diversity in their staffing. This includes all minority and women
owned businesses.
44
Philosophy
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Reference Allocation chosen that is consistent with long
term passive execution of investment objectives, subject
to New York State Laws.
Strategic Allocation chosen that is expected to best
achieve objectives over the next five to ten years.
The Board will re-evaluate the strategic asset
allocation at least every three years in order to ensure
that the fund objectives are being properly served.
45
Asset Allocation
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
• Investment results will be reported to the Board quarterly at the Common Investment Meeting. Additionally, the
Bureau of Asset Management will provide the Board with annual updates on risk management, compliance, and
operations during the quarterly Common Investment Meeting BAM reports.
• Reporting Responsibilities
• Report will include attribution analysis separating excess return into Strategic, Implementation, and manager effects.
• Purposeful variances from the approved strategic asset allocation should be reviewed with the Board at every CIM.
• Manager value added analysis will seek to identify the percentage of manager gross excess return that is absorbed by manager fees and
charges of all types.
• Bureau of Asset Management staff will highlight unusual investment results among sectors or managers to inform Board discussion.
• At the Common Investment Meeting (CIM), the Board will review manager recommendations from the Bureau of Asset
Management and appropriate external consultants.
• First time managers outside of BAM discretionary programs will present to the Boards during the CIM. Managers being presented for
mandate renewal will make a presentation if specifically requested to do so by the Board.
46
Reporting
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Questions?
47
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