View
1
Download
0
Category
Preview:
Citation preview
State of New MexicoDeferred Compensation Plan
Defined Contribution Performance EvaluationFourth Quarter 2014
Services provided by Mercer Investment Consulting, Inc.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer i
Contents
Market Environment ............................................................................................................................................................................................................ 1
Summary .......................................................................................................................................................................................................................... 11
Fund Profiles .................................................................................................................................................................................................................... 24
Appendix
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 1
Mark et Envir onm ent
5.24.94.94.85.05.9
9.710.19.4
0.41.8
-3.9-3.6-2.3
-4.5
0.01.8
-0.51.91.8
-1.0-1.5
-5.7
12.98.1
0.8-12.1
-27.7
-40 -30 -20 -10 0 10 20 30 40
Russell 3000S&P 500
Russell 1000Russell 1000 Growth
Russell 1000 ValueRussell Midcap
Russell 2000Russell 2000 Growth
Russell 2000 Value
MSCI ACWIMSCI ACWI Small CapMSCI AC World ex US
MSCI EAFEMSCI EAFE Small Cap
MSCI EM
Barclays T-Bill 1-3 monthsBarclays Aggregate
Barclays TIPS 5-10 yrsBarclays Treasury
Barclays CreditBarclays High Yield
Citi WGBIJP GBI-EM Global Div.
NAREIT Equity REITsNAREIT Global REITsHFRI FOF Composite
Bloomberg Commodity TRS&P GSCI Commodity
Returns (%)
12.613.713.213.013.513.2
4.95.6
4.2
4.21.8
-3.9-4.9-4.9
-2.2
0.06.0
2.85.0
7.52.5
-0.5-5.7
28.015.9
3.2-17.0
-33.1
-40 -30 -20 -10 0 10 20 30 40
Russell 3000S&P 500
Russell 1000Russell 1000 Growth
Russell 1000 ValueRussell Midcap
Russell 2000Russell 2000 Growth
Russell 2000 Value
MSCI ACWIMSCI ACWI Small CapMSCI AC World ex US
MSCI EAFEMSCI EAFE Small Cap
MSCI EM
Barclays T-Bill 1-3 monthsBarclays Aggregate
Barclays TIPS 5-10 yrsBarclays Treasury
Barclays CreditBarclays High Yield
Citi WGBIJP GBI-EM Global Div.
NAREIT Equity REITsNAREIT Global REITsHFRI FOF Composite
Bloomberg Commodity TRS&P GSCI Commodity
Returns (%)
Performance Summary: Quarter in ReviewMarket PerformanceFourth Quarter 2014
Market PerformanceYTD
Source: Standard & Poor's, Russell, MSCI Barra, NAREIT, Bloomberg Source: Standard & Poor's, Russell, MSCI Barra, NAREIT, Bloomberg
DOMESTIC EQUITY
INTERNATIONAL EQUITY
FIXED INCOME
ALTERNATIVES
DOMESTIC EQUITY
INTERNATIONAL EQUITY
FIXED INCOME
ALTERNATIVES
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 2
World Economic Growth(Projections as of December 2014)
Macro Environment: Economic Review
Source: Bureau of Economic Analysis
Annual GDP Growth
Source: Bloomberg
§ Developed world growth is likely to improve in 2015 due to lower energyprices and less fiscal tightening. However, growth will remain unevenacross regions. The expansion is likely to be the strongest in the US andthe UK, while the Eurozone and Japan are likely to struggle.
§ US GDP is forecast to expand by 3% in 2015, which would be the bestyear for growth since 2005. The unemployment rate has declined to 5.6%,which is in-line with historical averages, although broader measures stillsuggest some labor slack. While the Fed is likely to raise rates in 2015, weexpect that it will do so gradually as inflationary pressures remainsubdued.
§ The 2015 outlook for the Eurozone is modestly better than 2014 due toreduced fiscal tightening, a weaker euro, and a stronger global economy.However, the region is forecast to expand by only 1.1% in 2015. WhetherQE and structural reforms will be implemented and prove sufficient athelping the region avoid a prolonged period of weakness remains to beseen.
§ Consumption tax increases slowed growth more than expected in Japan in2014. While the weaker yen has improved the near-term outlook, furtherstructural reforms of the corporate sector and labor markets are needed toimprove the secular growth outlook.
§ The EM growth outlook is mixed. Stronger growth in developed marketsand weaker currencies should help exports. However, there is also a widedivergence across countries. Countries with a high potential for structuralreform (India, Mexico, Indonesia) are likely to enjoy better prospects thannon-reformers (Brazil, South Africa, Russia). The sharp fall in oil prices willalso have an uneven impact. Energy importers (Asia) will benefit at theexpense of energy exporters such as Russia and Middle Easterncountries.
§ Chinese growth is likely to slow further in 2015; however, a hard landingremains unlikely given China’s ability to provide stimulus and recapitalizethe banking sector. The secular outlook depends on the ability toimplement structural reforms in order to transition the economy towardconsumption.
2.33.0
0.3
1.5
-0.4
1.30.4
7.3
5.4
0.20.5
3.02.6
1.0 1.20.4
1.80.8
7.0
5.5
0.9
-1.2-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
US
UK
Japa
n
Ger
man
y
Italy
Spai
n
Fran
ce
Chi
na
Indi
a
Braz
il
Rus
sia
(%)
2014 (f)
2015 (f)
-4
-2
0
2
4
6
8
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
(F)
(%)
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 3
Macro Environment: CurrenciesPerformance of Foreign Currencies versus the US Dollar
Currency Valuation versus US Dollar (Based on Relative PPP)
Source: Bloomberg
Source: Bloomberg
Undervalued relative to the dollar
Overvalued relative to the dollar
§ On a trade-weighted basis, the US dollar advanced 5.6% in the fourthquarter, taking its 2014 gain to 10.3% and marking the strongestcalendar year performance since 1982. The yen and euro were hitparticularly hard, tumbling 8.4% and 4.2% in the fourth quarter, and bothpushing 2014 losses to 12.0%. Commodity sensitive currencies andemerging market currencies were also pummeled. Speculators arepositioned very long the dollar, posing the risk of a short-term countertrend move. However, we believe the dollar is likely to continue toappreciate over the intermediate-term.
§ Monetary policy should continue to support the dollar. The Fed hasended QE3 and expected rate hikes will likely lead to a US yieldadvantage, making the dollar more attractive to foreign investors and adestination for carry trade flows.
§ Japan’s reflationary efforts largely hinge on a weaker yen, and in thefourth quarter the BOJ intensified its QE program. In Europe, weak GDPgrowth and deflationary fears may push the ECB to engage in QE. Ofcourse, an excessively strong dollar could hinder growth and inflationprompting the Fed to slow the pace of interest rate normalization.
§ The dollar does face a few headwinds. It now appears modestly richbased on purchasing power parity (PPP). Additionally, the US continuesto run a current account deficit. The US is also likely to experience higherinflation than most other developed markets over the long-term.
§ After the 2014 rally, we have less conviction in the strength of the dollarthan we did a year ago. However, we expect further, albeit more modest,appreciation going forward, fueled by a powerful monetary policytailwind.
-0.1-1.1
-1.7-3.6-3.8-3.9-3.9
-4.2-4.2
-6.3-8.0
-8.4-9.0
-5.0-2.5
-1.9-8.6
-5.7-10.2
-5.9-4.2
-12.0-8.3
-11.1-12.0-11.6
-15 -10 -5 0 5
New Zealand DollarChinese YuanIndian Rupee
Canadian DollarTaiwan Dollar
Swiss FrancGB Pound
Korean WonEuro
Australian DollarBrazilian RealJapanese YenMexican Peso
Returns (%)Quarter2014
-40
-20
0
20
40
60
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
(%)
Euro UK Pound
Yen Swiss Franc
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 4
Asset Class: US Equities – Style, Sector, Cap PerformanceStyle and Capitalization Market Performance
Sector Performance
Source: Standard & Poor's, Russell, Bloomberg
Source: Russell 1000 GICs Sector
Broad MarketUS equities delivered strong returns for the quarter and the year. TheRussell 3000 Index advanced 5.2% in the fourth quarter and gained 12.6%in 2014. However, returns varied significantly by sector and capitalization.
Market Cap§ Large Caps: The S&P 500 rose by 4.9% during the fourth quarter and
returned 13.7% for the year. While large cap stocks lagged mid andsmall cap stocks in the fourth quarter, they outperformed by 50 basispoints and 880 basis points, respectively, in 2014.§ Mid Caps: The Russell Midcap Index gained 5.9% during the fourth
quarter and returned 13.2% for the year. Mid caps outpaced large capsby 100 basis points in the fourth quarter, but lagged small caps by 380basis points. For the year, mid caps trailed large caps by 50 basispoints, but outperformed small caps by 830 basis points.§ Small Caps: Small cap stocks surged in the fourth quarter, gaining 9.7%.
For the year, small cap stocks only advanced 4.9%, underperformingboth large caps and mid caps.
Style§ Value vs. Growth: While value outperformed growth within large and
mid caps in the fourth quarter, small cap growth stocks were the leaderfor the quarter, spiking 10.1%. For the year, mid cap value was the topperforming style gaining 14.7%, while small cap value stocks were thelaggard, returning only 4.2%.
Sector§ There was a wide dispersion in sector returns in the fourth quarter and in
2014. Energy stocks plummeted by 12.2% during the quarter, whileutilities spiked by 12.7%. For the year, energy stocks fell by 8.6%. Theutilities, health care, and information technology sectors were the topperformers, earning 27.5%, 25.7%, and 18.7%, respectively.
5.2
4.9
4.9
4.8
5.0
5.9
5.8
6.1
9.7
10.1
9.4
12.6
13.7
13.2
13.0
13.5
13.2
11.9
14.7
4.9
5.6
4.20 5 10 15 20
Russell 3000
S&P 500
Russell 1000
Russell 1000 Growth
Russell 1000 Value
Russell Midcap
Russell Mid Growth
Russell Mid Value
Russell 2000
Russell 2000 Growth
Russell 2000 Value
Returns (%)
Quarter2014
12.7
8.4
8.3
7.8
7.4
6.7
4.9
-1.1
-4.2
-12.2
27.5
9.9
16.0
25.7
15.0
8.9
18.7
6.8
2.5
-8.6
-20 -15 -10 -5 0 5 10 15 20 25 30 35
Utilities
Consumer Discretionary
Consumer Staples
Health Care
Financials
Industrials
Info Tech
Materials
Telecomm Services
Energy
Returns (%)
Quarter
2014
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 5
Asset Class: US Equities – Valuation ReviewS&P500 – P/E Ratio
S&P500 – Estimated Equity Risk Premium1
Versus Long-Term Treasuries
Source: S&P, Bloomberg, Mercer
1 Definitions:Shiller’s P/E= Current S&P 500 price/average 10-year real earningsNormalized P/E= Current S&P 500 price/(current trailing twelve month sales * 6.6% profit margin)Equity Risk Premium= Earnings yield (1/PE) minus the real yield on long-term Treasuries
Source: S&P, Bloomberg, Mercer
§ Valuations ticked higher in the fourth quarter as price gains outpacedearnings growth. The P/E ratio on trailing earnings moved from 19.1 to19.4, which is above the median of 17.4 since 1956. Valuations are muchhigher based on measures that adjust for record high profit margins. TheP/E ratio based on average 10-year real earnings (Shiller’s methodology)finished the quarter at 26.6, compared to a median of 19.2 since 1956.
§ The Shiller P/E for the S&P 500 is very high compared to historicalmeasures, but current values are negatively impacted by a 2001 changein GAAP accounting standards, which significantly reduced profits duringthe financial crisis. The ratio based on MSCI’s measure of earnings,which have been consistent throughout history, stands at a morereasonable 23.7.
§ The US has emerged as a global growth leader and current readings ofthe ISM Business Activity Composite suggest an improvement in revenuegrowth, which should support further earnings growth. Additionally, loweroil prices should improve profitability through lower input costs, andcorporations continue to reduce their share count through stockbuybacks.
§ However, the stronger dollar could prove a powerful headwind as S&P500 corporations generate over 40% of their sales abroad. Additionally,further improvement in the labor market could lead to higher labor costsand reduced margins.
§ On a relative basis, valuations remain fairly attractive against bonds. Aconservative estimate of the equity risk premium over long-termTreasuries finished the fourth quarter at 2.9%, which is near the long-term average. While we expect stocks to outperform bonds, currentvaluations suggest long-term returns will be below normal.
0
5
10
15
20
25
30
35
40
45
50
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
Shiller's (10-yr Avg. Real Earnings)
Normalized Earnings
Reported Earnings
-2
0
2
4
6
8
10
12
14
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
(%)
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 6
Asset Class: International Equities – Performance Review§ Global equities were mixed for the quarter and the year. US equities
rose, while currency declines and economic concerns weighed on theperformance of international developed and emerging market equities.The MSCI ACWI Index gained 0.4% in the fourth quarter and 4.2% in2014, while the MSCI ACWI-ex US Index tumbled 3.9% for both periods.
§ Global small cap equities lagged large cap equities in 2014 due to theunderperformance of US small stocks.
§ International small cap equities performed in-line with internationallarge caps for the year.
§ International developed stocks fell by 3.6% in the fourth quarter. Thelosses were entirely attributable to currency declines. In local terms,EAFE returned 1.8%. For the year, EAFE fell 4.9% in $US terms, butrose 5.9% in local terms. EAFE underperformed the S&P 500 by 1860basis points in $US terms and 780 basis points in local terms during theyear. European stocks tumbled 4.4% in the fourth quarter as the euroexperienced further losses. In local terms, European stocks were flat asthe region experienced subpar economic growth. For the year, Europereturned 4.7% in local terms, but dropped 6.2% in $US terms. Japanesestocks contracted by 2.4% in $US terms in the fourth quarter as the yenfell relative to the US dollar. In local terms, Japanese stocks rose a solid6.7%, outperforming the S&P 500 by 180 basis points. For the year,Japanese stocks returned 9.5% in local currency terms, but stumbled4.0% in $US terms.
§ Emerging market stocks struggled in the fourth quarter due to currencyweakness and a sharp decline in oil prices. In local terms, the MSCI EMIndex was flat; however, it fell 4.5% in $US terms. EM stocks lagged theS&P 500 by 1590 basis points in $US terms for the year. The sharp dropin oil prices, political tensions, and currency declines weighed on EasternEuropean stocks, which fell 28.8% for the year. The decline incommodity prices dragged Latin America down by 12.3%. Lowercommodity prices and prospects for reform helped push Asian stocks toa 4.9% gain.
Developed Country Performance
Global and International Equity Performance
Emerging Market Performance
Source: MSCI, Bloomberg
Source: MSCI, Bloomberg
Source: MSCI, Bloomberg
0.4
1.8
-3.9
-3.6
-2.3
-2.3
-4.9
4.2
1.8
-3.9
-4.9
-4.9
-4.4
-5.4-30 -25 -20 -15 -10 -5 0 5 10 15
MSCI ACWI
MSCI ACWI Small Cap
MSCI AC World ex US
MSCI EAFE
MSCI EAFE Small Cap
MSCI EAFE Growth
MSCI EAFE Value
Returns (%)
Quarter2014
4.04.6
-4.8-4.4-4.2
-0.4-6.1
-13.4-8.2
-2.4-3.6
11.912.7
1.5-6.2-5.4
-10.4-9.9-9.5
-4.7-4.0-3.4
-30 -25 -20 -15 -10 -5 0 5 10 15
North AmericaUSA
CanadaEurope
UKGermany
FranceItaly
SpainJapan
Australia
Returns (%)
Quarter2014
-4.5
-19.4
-0.3
-13.4
-2.2
-28.84.9
-12.3-30 -25 -20 -15 -10 -5 0 5 10 15
MSCI EM
EM Europe & M/East
EM Asia
EM Latin America
Returns (%)Quarter2014
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 7
Asset Class: International Equities – Valuation ReviewGlobal Valuations
Valuation of MSCI Emerging Markets to MSCI World(Based on Average of P/E, P/B and P/CF)
Source: MSCI, Bloomberg
Source: MSCI, Bloomberg
§ The weak growth environment in Europe has continued to weigh on profitgrowth as EPS rose only an estimated 3.0% in 2014, and corporateprofitability remains depressed. A weaker euro should help profitability,and high operating leverage could lead to a rapid earnings reboundshould economic conditions improve. However, it remains to be seen iffirms can overcome domestic headwinds. Based on trailing earnings,Europe appears reasonably valued at a P/E of 16.8, and valuations lookmore compelling if margins return to historical averages. A potential QEprogram could provide a jolt to the stock market as it did in the US andJapan.
§ Supported by a weak yen, Japanese earnings spiked by 17% in 2014.Firms still have ample room to improve profitability as ROE remainsnearly 20% below the pre-financial crisis peak. While the slowdown inthe domestic economy is a concern, the drop in energy prices and alower yen should be supportive of earnings. From a structural standpoint,enacting corporate governance reforms could lead to further profit marginimprovements. Japanese stocks appear reasonably valued, trading at16.1x trailing earnings.
§ The drop in energy and other commodity prices has darkened theoutlook for emerging market equities. Additionally, tighter Fed policycould lead to capital outflows and further currency weakness. On thesurface EM valuations are compelling. They trade at a P/E of only 13.2, a11% discount to their historical average. They are also trading at a 28%discount to developed stocks. However, these discounts are drivenprimarily by commodity-sensitive sectors and Chinese financials. On asector-neutral basis, we estimate EM stocks are trading at P/E of 17 andonly a 12% discount to developed stocks. We continue to favor EMstocks on a strategic basis; however, the commodity exposure and othermacro pressures will provide headwinds over the short-term.
-60
-50
-40
-30
-20
-10
0
10
20
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(%)
Historical average for the longest period availableHistorical average since 2000
19.2
16.8 16.1
13.2
25.2
14.613.1 12.812.3
8.88.2 7.8
2.81.8 1.4 1.52.0
3.31.8
2.9
0
5
10
15
20
25
30
MSCI US MSCI Europe MSCI Japan MSCI EM
P/E TrailingP/E NormalizedP/CFP/BDividend Yield
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 8
Asset Class: Fixed Income – Interest Rates and Yield Curve
Bond Performance by Duration
§ The yield curve continued to flatten in the fourth quarter and has leveledsignificantly since the end of 2013. During 2014, the 2-year yield rose by29 basis points, while the 10- and 30-year yields fell by 87 and 121 basispoints, respectively. While the yield curve has historically flattenedaround rate hikes, the large decline in long yields took many investors bysurprise.
§ The timing and pace of interest rate increases as well as the ultimateendpoint for the target rate are likely to be the key drivers of yieldmovements. While the Fed is likely to raise rates in 2015, we expectthem to do so gradually given the subdued inflation outlook. However,the market may be pricing an overly dovish Fed policy. For example,while the Fed expects the target rate to reach 3.5% by the end of 2017,Fed funds futures are pricing only a 2.0% rate.
§ US Bonds rose as yields declined. The Barclays Aggregate indexreturned 1.8% in the fourth quarter and 6.0% in 2014. Credit laggedTreasuries in the fourth quarter, but outperformed for the year.
§ Long-Duration Bonds advanced in the fourth quarter as the yield on 30-year Treasury dropped by 46 basis points. The Barclays Long Treasury,and Long Credit Indexes returned 8.6% and 4.1%, respectively, in thefourth quarter and gained 25.1% and 16.4%, respectively, for the year.
§ TIPS underperformed Treasuries in the fourth quarter and for the year asinflation breakeven rates declined. The real yield on 5-year TIPS rose by32 basis points to 0.38% in 2014. The inflation breakeven rate on 10-Year TIPS fell from 2.24% to 1.68% during the year.
Treasury Yield Curve
Source: Federal Reserve
Source: Barclays, Bloomberg
0.01.8
1.91.0
8.6
1.80.8
4.1
1.80.8
4.00.0
-0.5
0.06.0
5.02.6
25.1
7.54.2
16.4
7.54.3
15.73.6
2.8-5 0 5 10 15 20 25 30
Barclays T-Bill 1-3 monthsBarclays Aggregate
Barclays TreasuryBarclays Int Treasury
Barclays Long Treasury
Barclays CreditBarclays Credit Intermediate
Barclays Credit Long
Barclays CorporateBarclays Int Corporate
Barclays Long CorporateBarclays US TIPS
Barclays TIPS 5-10 yrs
Returns (%)
Quarter
2014
-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.0
3 mo 6 mo 1 yr 2 Yr 3 Yr 5 yr 7 yr 10 yr 20 yr 30 yr
(%)
Treasuries at 12/31/13TIPS at 12/31/13Treasuries at 09/30/14TIPS at 09/30/14Treasuries at 12/31/14TIPS at 12/31/14
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 9
Asset Class: Fixed Income – Credit and Non-US Bonds§ During the year, the yield on the Corporate index declined a modest 15
basis points to 3.1% while the option-adjusted spread to Treasuriesmoved up by 17 basis points to 1.3%, which is moderately above longterm norms. Given above average spreads and the favorable economicoutlook, the downside risk for corporates relative to Treasuries is limitedover the short-term.
§ The yield on the Barclays High Yield index rose from 6.1% to 6.6%during the fourth quarter. During 2014, the yield increased by 97 basispoints. The option adjusted spread widened by 59 basis points in thefourth quarter and 101 basis points in 2014, finishing the year at 4.8%,which is near long-term norms. The increase in spreads was drivenlargely by the energy sector, although the selloff has also spread to othersectors. While defaults could occur in the energy sector, a healthy USeconomy should keep defaults low outside of energy.
§ US Treasuries rose as Treasury yields declined. The Barclays TreasuryIndex returned 1.9% in the fourth quarter and 5.0% for the year.
§ US Corporate bonds lagged Treasuries by 10 basis points in the fourthquarter as spreads widened. For the year, I/G corporate bonds returned7.5%, outperforming Treasuries by 250 basis points.
§ US MBS, Agency, CMBS, and ABS bonds suffered from credit spreadwidening and a flatter yield curve, causing them to lag Treasuries in thefourth quarter.
§ High Yield bonds shed 1.0% in the fourth quarter as yields increasedand credit spreads widened. High yield bonds trailed Treasuries by 250basis points in 2014 due to the wider spreads and higher yields.
§ Local currency Emerging Market debt fell by 5.7% for the quarter andthe year due to currency declines. $US-denominated debt dropped 0.9%in the fourth quarter as spreads widened, but rose 6.2% for the year.
§ Global Bonds were hurt as the dollar appreciated relative to foreigncurrencies. The Citigroup World Government Bond Index fell 1.5% in thefourth quarter and finished 2014 down 0.5%.
Sector, Credit, and Global Bond Performance
Credit Spreads
Source: Barclays
Source: Barclays, Citigroup, JP Morgan, Bloomberg
-1.0
1.4
0.0
1.8
1.8
1.9
1.8
1.2
0.5
-0.9
-1.5
2.5
3.9
3.6
7.5
7.5
5.0
6.1
3.6
1.9
6.2
-0.5
-5 0 5 10
Barclays High Yield
Barclays CMBS
Barclays US TIPS
Barclays Corporate
Barclays Credit
Barclays Treasury
Barclays MBS
Barclays Agency
Barclays ABS
JP Morgan EMBI
Citi WGBI
Returns (%)
Quarter
2014
02468101214161820
0
1
2
3
4
5
6
7
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(%)
OAS to Treasuries I/G Corporates - left scaleOAS to Treasuries MBS - left scaleHigh Yield Bond Credit Spread - right scale
Average
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 10
Asset Class: Alternatives – Performance Review§ REITs – Global and US REITs moved 8.1% and 12.9% higher in the
fourth quarter. They returned 15.9% and 28.0%, respectively, in 2014,benefiting from the decline in interest rates and improving propertyprices.
§ Commodities suffered major losses as oil prices tumbled 41.5% duringthe quarter and 45.9% in 2014, which reflects the second largestcalendar year slide since 1983 (compared to -53.4% in 2008). The S&PNA Natural Resources Index declined 13.9% in the fourth quarter and9.8% for the year, while the Bloomberg Commodity Index lost 12.1% inthe fourth quarter and finished the year down 17.0%.
§ Hedge funds outperformed global equities in the fourth quarter, buttrailed them by 100 basis points for the year. The HFRI Fund of FundsComposite Index gained 0.8% in the fourth quarter and returned 3.2% in2014. Macro strategies were the top performer for the quarter and theyear, while distressed strategies were hurt by spread widening.
Real Asset Performance
Hedge Fund Performance
Source: HFR
Source: NAREIT, Dow-Jones, UBS, Goldman Sachs
12.9
8.1
-12.1
-27.7
-12.3
-13.9
28.0
15.9
-17.0
-33.1
4.8
-9.8
-50 -40 -30 -20 -10 0 10 20 30 40
NAREIT Equity REITs
NAREIT Global REITs
Bloomberg Commodity TR
S&P GSCI Commodity
Alerian Energy MLP TR
S&P NA Natural Resources
Returns (%)
Quarter2014
0.8
0.0
0.9
0.7
0.7
0.4
-1.4
-3.6
-0.4
3.1
3.2
2.8
3.2
2.8
3.6
2.3
1.1
-1.1
4.5
6.4
-10 -5 0 5 10
HFRI FOF Composite
HFRI FOF: Conservative
HFRI FOF: Diversified
HFRI FOF: Strategic
HFRI Fund Weighted Composite
HFRI Equity Hedge (Total)
HFRI Event-Driven (Total)
HFRI ED: Distressed/Restructuring
HFRI Relative Value (Total)
HFRI Macro (Total)
Returns (%)
Quarter
2014
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 11
Summary – Investment Structure
Tier ILifeCycle Funds
Tier IICore Array (Passive)
Tier IIICore Array (Active)
Tier IVExtended Choice Array
Capital PreservationNew Mexico Stable Value (Galliard) TIPS
US Core Fixed Income US Core Fixed Income BlackRock Inflation Protected BondVanguard Total Bond Market Index
Diversified Inflation Hedge Global Fixed IncomePrincipal Diversified Real Asset Templeton Global Bond
BalancedOakmark Equity & Income
US Large Cap Core Equity US Large Cap EquityTarget Date Funds Vanguard Institutional Index Dodge & Cox Stock Fund
Custom LifeCycle Portfolios Fidelity Contrafund Global Real EstateNon-US Equity Non-US Equity Invesco Global Real Estate
Vanguard Total Intl Stock Index Fidelity Diversified InternationalAmerican Funds EuroPac Growth
US Mid Cap EquityPrincipal MidCap
US Small / Mid Cap Core Equity T. Rowe Price Mid Cap GrowthUS Small Cap Equity
Fidelity Low-Priced StockDFA US Small Cap Portfolio
Emerging Markets EquityAberdeen Emerging Markets EquitySelf-Directed Brokerage Account
Brokerage Link
Conservative
Aggressive
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 12
Summary – Plan Assets§ On December 31, 2014, Plan assets totaled $491.7 million, which represents an increase of $11.1 million (2.3%) from the prior quarter
balance of $480.5 million.§ There were 18,066 participants with a balance at quarter-end. The average account balance was $26,732 (excluding the New Mexico
Loan Account). Contributions totaled $10.5 million for the quarter, compared to $11.1 million in withdrawals. Investment gainsrepresented $11.0 million over the quarter. Net brokerage window and loan account activity accounted for $0.7 million of inflows.
§ Plan assets were concentrated primarily in the following investment options:Rank Fund Percentage of Total
Assets1 New Mexico Stable Value 27.0%2 New Mexico LifeCycles 19.6%3 Vanguard Institutional Index Fund Institutional 14.5%4 Fidelity Contrafund 7.0%
Total 68.1%
Observations & Recommendations§ Five out of the fifteen of the Plan’s active funds either matched or outperformed their respective indices and universe medians during the
quarter. Three funds performed in between benchmarks and seven funds lagged both measures.§ For the quarter, all six LifeCycle Portfolios outperformed their respective benchmarks, but underperformed their respective peer
universes. Benchmark relative performance was helped by solid performance from T. Rowe Price Mid Cap Growth, DFA US Small Cap,and the active non-US developed equity managers. The New Mexico Stable Value fund also aided performance for the Conservative and2015 portfolios. Aberdeen Emerging Markets and Invesco Global Real Estate detracted from benchmark relative performance for thequarter. Greater exposure to emerging markets equity and an underweight to domestic equity relative to some peers proved a headwindfor the funds compared to their universe medians. For the trailing 3-year, 5-year and 7-year periods, all six portfolios generallyoutperformed their respective benchmarks, but lagged their respective universe medians.
§ Per the Board’s action, the Fidelity funds in the Plan have transitioned to lower cost K share classes. The transition to the K shares forthe Fidelity Contrafund and Diversified International Fund occurred in August 2014 and October 2014, respectively. On December 16,2014 the Low-Priced Stock fund transition to the K shares was completed.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 13
Summary – Key ObservationsPrincipal Diversified Real Asset Fund§ The fund trailed the Diversified Real Asset Custom Index for all time periods evaluated. Relative to the Mercer Mutual Fund Diversified
Inflation Hedge Universe, the fund ranked in the bottom quartile of the universe for the quarter, but ranked in the top quartile for the 1-and 3-year periods. Performance for the quarter was hampered by an overweight to the master limited partnership (MLP), as well asunderperformance by the infrastructure manager, as an emphasis on energy infrastructure weighed on results. Underperformance by thenatural resource manager also detracted. Shorter-term performance of the strategy will likely be driven by factors other than realizedinflation or market inflation expectations given the fund does not aim to directly track CPI. Rather, the strategy seeks exposure to assetclasses and investments that should benefit from, or protect against, inflation and perform relatively well during periods of rising inflation.We continue to appreciate the diversified asset mix and the use of external managers in this strategy, viewing it is a key source ofdifferentiation and value-add relative to their competitors, especially given that few managers have capabilities in each of the underlyingcategories. We recommend retention.
Fidelity Contrafund§ The fund trailed the S&P 500 Index for all time periods evaluated. Relative to the Mercer Mutual Fund US Equity Large Cap Core
Universe, the fund placed in the bottom quartile for the quarter and 1-year period, but outperformed the universe median for the 3-, 5-,and 7-year periods. For the quarter, an underweight allocation to the energy sector helped relative performance, but did not offset poorsecurity selection within the information technology and energy sectors. The fund is unconstrained with its allowable exposures and hasa persistent growth bias. The fund is hamstrung by its size, its over diversification, and Portfolio Manager Will Danoff's limited bandwidthas a stock picker given other responsibilities and an inefficiently large support structure. Additionally, the fund continues to exhibit a highlevel of realized tracking error despite a more moderate expected tracking error. However, Danoff has a long track record of success withthe Fidelity Contrafund. The fund has benefitted from Danoff's ability to gain access to company management (based on his reputationand his fund's size) and uncommon judgment in determining which ideas to emphasize. We recommend retention.
Invesco Global Real Estate Fund§ On a cumulative basis, the fund underperformed the FTSE NAREIT EPRA Developed Index but outperformed the universe median for all
periods evaluated. For the quarter, stock selection in Hong Kong, the US and UK contributed positively to relative results, as didunderweight allocations to a number of relatively weak performing European countries, including Switzerland, Spain and theNetherlands. Key detractors from performance were stock selection in Japan, Australia and Sweden. An underweight allocation to USREITs also hurt relative performance. The fund benefits from an experienced team with deep knowledge of the real estate securitiesmarket, which provides for a repeatable and consistent investment process. We view this strategy as a top global REIT offering and donot have concerns over the team or process; we recommend retention.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 14
Summary – Organizational UpdatesVanguard Group (Vanguard Total Bond Market Index Fund)Josh Barrickman continues to lead Vanguard’s Bond Indexing Group. Barrickman has worked for Vanguard for fifteen years, eleven of whichwere in bond indexing portfolio management. Vanguard continues to monitor risk using Barclays POINT to follow tracking error variance(TEV) from a variety of sources, including curve, swap spread, volatility, and various spread sectors. Idiosyncratic risk is the largest sourceof TEV, which is to be expected given that the team does not seek to fully replicate all bonds in the index. As of 09/30/14, the Total BondMarket Index Fund had a portfolio of 7,584 bonds compared to the Barclays Aggregate Float Adjusted Index of over 8,900. In addition,deviations in the fund’s performance versus that of the benchmark index may occur given the fund’s sampling approach to approximate theindex and temporary pricing differences between the fund and the index. However specifically from mid-2011 to early 2013, tracking errorwas also attributed to MBS pricing differentials. The benchmark priced their MBS holdings at a generic level, even though bonds with pre-pay protection were at higher levels.
Principal Financial Group (Principal Diversified Real Asset Fund)Principal recently announced a change to the custom benchmark for their Diversified Real Asset (DRA) strategy. The composition of theoriginal custom benchmark changed over time to reflect the addition of new asset classes, changes to existing sub advisor allocations andthe occasional change from one benchmark to another for an existing asset class. Principal believes that while this process is effective atmeasuring the performance of each sub advisor versus their assigned benchmark, it did not provide a means to measure asset allocationdecisions. Thus, the Portfolio Managers decided to change the methodology and composition of the custom benchmark. Principal hasassured us that this change does not in any way impact portfolio management decisions regarding the strategy. The new custom benchmarkis designed to be static (if/when changes within the strategy occur the benchmarks weights will not change).
New DRA Benchmark Effective 12-31-14Weight
Barclays U.S. TIPS 40%MSCI ACWI 40%Bloomberg Commodity Total Return Index 20%
This new benchmark for the multi-manager and multi-asset class strategy should help management and fund investors better measureasset allocation and manager selection decisions. Each of the strategies will be measured relative to this composite of publicly availableindices. Importantly, the benchmark will better align with the Fund’s objective and risk constraints.
These indices were selected because they generally represent the opportunity set, as well as the inflation beta, return, risk characteristics,and volatility profile of DRA. US TIPS and floating rate debt combined have historically represented approximately 40% of the DRA Fundallocations, and has been used to dampen overall volatility while maintaining inflation beta. The Bloomberg Commodity index is a direct linkto the commodity sleeve managed by Credit Suisse. The MSCI ACWI is assumed to represent the remainder of the allocations across theinflation linked equities (MLP, REITs, Natural Resources, Agriculture, Timber, Infrastructure stocks), which have historically represented
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 15
about 40% of the portfolio. This is in contrast to the dynamic nature of the original custom index, which was composed of the underlyingindices for each of the sleeves in the Fund and weighted according to the most current target allocations for each sleeve.
We understand the benefits of the benchmark change, providing a more consistent yardstick to compare performance and asset allocationagainst, given the outcome orientated objectives of the strategy (CPI-U +3-5%). The previous benchmark had to be updated on a consistentbasis, mirroring any asset allocation changes, which made it challenging and complex to keep track of. Underlying managers of the strategywill remain to be judged against their individual benchmarks. The previous benchmark is available for those clients who request it.
Dimensional Fund Advisors (DFA US Small Cap Portfolio)On November 27, 2014, Dimensional Fund Advisors (DFA) announced that Chairman of Dimensional Fund Advisors Limited, DavidSalisbury would retire at the end of 2014. Art Barlow, Managing Director of the London office, will assume the role of Chairman in addition tohis current responsibilities.
We do not recommend any rating changes as a result of this announcement. This news has not come as a surprise to us, as Salisbury’sretirement has been expected. Salisbury was not involved in day-to-day investment decisions and his responsibilities were centered on theLondon office. As such we do not anticipate this change to affect the investment products DFA offers.
Invesco (Invesco Global Real Estate Fund)Mercer recently met with Invesco for a Global and US REIT strategy update. We continue to have confidence in Invesco’s real estatesecurities capabilities. The team has proven the ability to apply its investment process in a consistent manner. The team is led by JoeRodriguez, who is highly respected and has been managing real estate securities for nearly two decades. The team has a deep knowledgeand understanding of the real estate securities market, and is effective in combining private real estate market research with its managementof publicly traded securities. The Invesco real estate securities team has remained incredibly stable over the years. There have been nonotable departures and the team has been able to attract talented investment professionals across the global. During 2014 the team addedthree analysts -- Dan Moran, Chris Rynn, and Lindsay Schroll
Invesco’s philosophy is based on two fundamental principles: 1) to maximize predictability and consistency of investment returns and 2) tominimize risk through strict attention to portfolio design. Invesco believes that long-term performance will be determined by property marketcycles, quality of real estate assets and expertise of the management team. Through the global financial crisis, low quality rally and macrodriven environment, Invesco has stayed true to its philosophy and has not materially deviated from its process. Over time the team hastweaked the process at the margins (loosening the tracking error budgets at time and reducing the number of holdings), but generally, theprocess has not changed..
Because of Invesco’s high quality bias and focus on investing only in those companies with strong balance sheet, strong management, andthe best properties in the best locations, we do not expect this strategy to outperform when real estate securities are driven by forces otherthan real estate fundamentals. Over a full market cycle, this strategy should offer strong downside protection with moderate upside potential.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 16
The team has been focused on increasing its active share over the past few years. After being close to 20% active share in 2011, the globalstrategy’s active share is now up to about 45%. Notwithstanding this trend it is notable that the level of ex ante tracking error remainssubdued at around 1 to 2%.
.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 17
Summary – Asset Allocation
27.0%
3.7%0.4%
0.3%
4.5%19.6%
37.5%
4.5%0.7% 1.8%
Current Asset Allocation - December 31, 2014
Stable Value
Domestic Fixed
International Fixed
Real Estate
Balanced
Target-Date
Domestic Equity
International Equity
Brokerage Window
Other
27.8%
3.8%0.4%0.2%
4.5%19.3%
36.9%
4.7%0.6% 1.7%
Prior Asset Allocation - September 30, 2014
Stable Value
Domestic Fixed
International Fixed
Real Estate
Balanced
Target-Date
Domestic Equity
International Equity
Brokerage Window
Other
19.6%
17.7%
58.5%
4.2%
Current Tier Allocation - December 31, 2014
Tier I - LifeCycle Funds
Tier II - Core Array (Passive)
Tier III - Core Array (Active)
Tier IV - Extended Choice Array
19.3%
17.5%
59.2%
4.0%
Prior Tier Allocation - September 30, 2014
Tier I - LifeCycle Funds
Tier II - Core Array (Passive)
Tier III - Core Array (Active)
Tier IV - Extended Choice Array
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 18
Summary – Asset AllocationInvestment Option Tier/Asset Class Current Balance Prior Balance % of Plan % Chg vs. PriorLifeCycle Funds Tier I $96,276,135 $92,721,855 19.6% 0.3% LifeCycle Conservative Portfolio Target-Date $13,465,145 $13,229,622 2.7% 0.0%
LifeCycle 2015 Portfolio Target-Date $20,771,378 $20,633,863 4.2% -0.1% LifeCycle 2025 Portfolio Target-Date $33,773,135 $32,354,190 6.9% 0.1%
LifeCycle 2035 Portfolio Target-Date $15,389,157 $14,529,401 3.1% 0.1%
LifeCycle 2045 Portfolio Target-Date $8,792,085 $8,534,434 1.8% 0.0%
LifeCycle 2055 Portfolio Target-Date $4,085,235 $3,440,344 0.8% 0.1%
Core Array (Passive) Tier II $87,226,794 $83,960,125 17.7% 0.3% Vanguard Total Bond Market Index Fund Inst US Fixed $14,780,199 $14,628,980 3.0% 0.0%
Vanguard Institutional Index Fund Institutional US Large Cap Equity $71,202,480 $68,214,375 14.5% 0.3%
Vanguard Total International Stock Index Fund Inst International Equity $1,244,116 $1,116,770 0.3% 0.0%
Core Array (Active) Tier III $287,594,703 $284,522,791 58.5% -0.7% New Mexico Stable Value Fund Stable Value $132,962,230 $133,457,811 27.0% -0.7% Oakmark Equity and Income Fund I Balanced $21,336,728 $20,863,267 4.3% 0.0%
Principal Diversified Real Asset Fund Inst Balanced $774,735 $859,765 0.2% 0.0%
Dodge & Cox Stk Fund US Large Cap Equity $28,338,815 $27,853,106 5.8% 0.0%
Fidelity Contrafund K US Large Cap Equity $34,413,017 $33,563,756 7.0% 0.0%
Principal MidCap Fund Inst US Mid Cap Equity $9,369,866 $8,660,876 1.9% 0.1% T Rowe Price Inst Mid-Cap Eqty Growth Fund US Mid Cap Equity $21,872,480 $20,718,710 4.4% 0.1%
Fidelity Low-Priced Stock Fund1 US Small + Mid Cap Equity $0 $8,334,707 0.0% -1.7%
Fidelity Low-Priced Stock Fund K1 US Small + Mid Cap Equity $8,729,251 $151,622 1.8% 1.7%
DFA US Small Cap Portfolio Institutional US Small Cap Equity $10,444,088 $10,064,264 2.1% 0.0% Fidelity Diversified International Fund1 International Equity $0 $11,324,818 0.0% -2.4%
Fidelity Diversified International Fund K1 International Equity $11,058,373 $106,204 2.2% 2.2%
American Funds EuroPacific Growth Fund R-6 International Equity $8,295,119 $8,563,886 1.7% -0.1%
Extended Choice Array Tier IV $20,589,005 $19,344,765 4.2% 0.2% BlackRock Inflation Protected Bond Port BlackRock US Fixed $3,653,908 $3,728,732 0.7% 0.0% Templeton Global Bond Fund R6 International Fixed $2,118,977 $1,691,509 0.4% 0.1%
Invesco Global Real Estate Fund R5 Real Estate $1,271,350 $1,194,071 0.3% 0.0%
Aberdeen Emerging Markets Fund Institutional Emerging Markets Equity $1,520,712 $1,635,860 0.3% 0.0%
Brokerage Link Brokerage Window $3,280,753 $2,929,525 0.7% 0.1%
Loan Account Other $8,743,306 $8,165,068 1.8% 0.1%Total Plan $491,686,637 $480,549,536 100%
1 Due to the redemption fees, assets were transferred from the retail to the K shares on 10/16/14 and 12/16/14 for the Diversified International and Low-Priced Stock funds, respectively
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 19
Summary – Investment Expense AnalysisFund Style Fund Balance Estimated
FundExpense
Fund NetExpense
Ratio
Median NetExpense
Ratio2
NetExpense
Diff.
RevenueSharing ($)
RevenueSharing
(%) LifeCycle Conservative Portfolio Target-Date $13,465,145 $55,241 0.41% 0.55% -0.14% $0 0.00% LifeCycle 2015 Portfolio Target-Date $20,771,378 $82,380 0.40% 0.57% -0.17% $0 0.00% LifeCycle 2025 Portfolio Target-Date $33,773,135 $141,571 0.42% 0.61% -0.19% $0 0.00% LifeCycle 2035 Portfolio Target-Date $15,389,157 $71,091 0.46% 0.64% -0.18% $0 0.00% LifeCycle 2045 Portfolio Target-Date $8,792,085 $42,486 0.48% 0.65% -0.17% $0 0.00% LifeCycle 2055 Portfolio Target-Date $4,085,235 $20,042 0.49% 0.67% -0.18% $0 0.00% Vanguard Total Bond Market Index Fund Inst US Fixed $14,780,199 $10,346 0.07% 0.20% -0.13% $0 0.00% Vanguard Institutional Index Fund Institutional US Large Cap Equity $71,202,480 $28,481 0.04% 0.20% -0.16% $0 0.00% Vanguard Total International Stock Index Fund Inst International Equity $1,244,116 $1,493 0.12% 0.39% -0.27% $0 0.00% New Mexico Stable Value Fund Stable Value $132,962,230 $575,726 0.43% 0.46% -0.03% $0 0.00% Oakmark Equity & Income Fund I Balanced $21,336,728 $164,293 0.77% 0.90% -0.13% $64,010 0.30% Principal Diversified Real Asset Fund Inst Balanced $774,735 $6,740 0.87% 0.89% -0.02% $775 0.10% Dodge & Cox Stock Fund US Large Cap Equity $28,338,815 $147,362 0.52% 0.76% -0.24% $28,339 0.10% Fidelity Contrafund K US Large Cap Equity $34,413,017 $192,713 0.56% 0.78% -0.22% $0 0.00% Principal MidCap Blend Fund Inst US Mid Cap Equity $9,369,866 $61,841 0.66% 0.93% -0.27% $9,370 0.10% T Rowe Price Inst Mid-Cap Eqty Growth Fund US Mid Cap Equity $21,872,480 $133,422 0.61% 0.97% -0.36% $0 0.00% Fidelity Low-Priced Stock Fund K3 US Small + Mid Cap Equity $8,729,251 $62,851 0.72% 1.00% -0.28% $0 0.00% DFA US Small Cap Portfolio Institutional US Small Cap Equity $10,444,088 $38,643 0.37% 1.00% -0.63% $0 0.00% Fidelity Diversified International Fund K4 International Equity $11,058,373 $86,255 0.78% 0.99% -0.21% $0 0.00% American Funds EuroPacific Growth Fund R-6 International Equity $8,295,119 $40,646 0.49% 0.99% -0.50% $0 0.00% BlackRock Inflation Protected Bond Port BlackRock US Fixed $3,653,908 $12,058 0.33% 0.51% -0.18% $0 0.00% Templeton Global Bond Fund R6 International Fixed $2,118,977 $11,231 0.53% 0.70% -0.17% $0 0.00% Invesco Global Real Estate Fund R5 Real Estate $1,271,350 $11,315 0.89% 0.99% -0.10% $4,450 0.35% Aberdeen Emerging Markets Fund Institutional Emerging Markets Equity $1,520,712 $16,728 1.10% 1.15% -0.05% $0 0.00% Brokerage Link Brokerage Window $3,280,753 N/A N/A N/A NA NA Loan Account Other $8,743,306 N/A N/A N/A NA NATotal $491,686,637 $2,014,955 0.42%5 $106,943 0.02%6
2 Median institutional share class net expense ratio as defined by the respective Mercer Mutual Fund Universe and Lipper categorizations; stable value median as of 9/30/20143 Fund carries a 1.5% redemption fee for shares held less than 90 days4 Fund carries a 1.0% redemption fee for shares held less than 30 days5 Total net expense ratio is calculated net of Loan and Brokerage accounts6 Total revenue sharing ratio is calculated net of Loan and Brokerage accounts
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 20
Summary – PerformancePeriods ending December 31, 2014
% of Plan 3 Months 1 Year 3 Years 5 Years 7 Years
Tier I - LifeCycle Funds
LifeCycle Conservative PortfolioNew Mexico Conservative IndexMercer MF Target-Date Income Universe MedianFund Rank in Universe
2.7% 1.0%1.0%1.1%
56
4.4%4.0%3.9%
37
5.9%5.5%6.2%
59
5.5%5.1%6.3%
70
4.0%3.3%4.5%
54
LifeCycle 2015 PortfolioNew Mexico 2015 benchmarkMercer MF Target-Date 2015 Universe MedianFund Rank in Universe
4.2% 1.4%1.2%1.5%
57
5.3%6.2%4.7%
33
8.0%8.1%9.2%
76
6.9%6.6%7.9%
89
3.0%2.6%4.4%
87
LifeCycle 2025 PortfolioNew Mexico 2025 benchmarkMercer MF Target-Date 2025 Universe MedianFund Rank in Universe
6.9% 1.7%1.5%1.8%
54
6.0%5.3%5.6%
40
11.9%11.3%11.6%
36
8.6%8.4%9.3%
78
3.9%3.2%4.6%
90
LifeCycle 2035 PortfolioNew Mexico 2035 benchmarkMercer MF Target-Date 2035 Universe MedianFund Rank in Universe
3.1% 1.6%1.4%2.0%
78
5.7%4.7%5.7%
52
13.3%12.6%13.5%
55
9.2%9.1%10.7%
94
3.8%3.5%4.8%
88
LifeCycle 2045 PortfolioNew Mexico 2045 benchmarkMercer MF Target-Date 2045 Universe MedianFund Rank in Universe
1.8% 1.6%1.3%2.2%
83
5.6%4.6%5.9%
66
14.0%13.2%14.6%
62
10.5%9.4%10.9%
61
4.4%3.4%5.0%
75
LifeCycle 2055 PortfolioNew Mexico 2055 benchmarkMercer MF Target-Date 2050+ Universe MedianFund Rank in Universe
0.8% 1.6%1.3%2.1%
85
5.6%4.7%6.1%
67
14.3%13.6%14.9%
67
10.4%9.6%10.6%
58
3.9%3.2%4.8%
72
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 21
Summary – PerformancePeriods ending December 31, 2014
% of Plan 3 Months 1 Year 3 Years 5 Years 7 Years
Tier II – Core Array (Passive)
Vanguard Total Bond Market Index Fund InstVanguard Spliced Barclays USAgg Float Adj IdxMercer MF US Fixed Core Universe MedianFund Rank in Universe
3.0% 1.7%1.8%0.9%
11
5.9%5.8%4.7%
27
2.6%2.7%3.4%
67
4.4%4.4%4.7%
57
4.7%4.8%4.8%
50
Vanguard Institutional Index Fund InstitutionalS&P 500Mercer MF US Equity Large Cap Core Universe MedianFund Rank in Universe
14.5% 4.9%4.9%4.5%
34
13.7%13.7%11.6%
21
20.4%20.4%19.3%
28
15.4%15.5%13.8%
17
7.3%7.3%6.5%
24
Vanguard Total International Stock Index Fund Inst7
Vanguard Total International Composite IndexMercer MF Intl Equity Universe MedianFund Rank in Universe
0.3% -4.2%-3.8%-3.3%
67
-4.2%-3.4%-5.2%
34
9.3%9.4%10.7%
73
4.3%4.4%5.8%
76
-0.8%-0.7%-0.1%
65
Tier III – Core Array (Active)
New Mexico Stable Value FundNew Mexico Stable Value Fund (Net)8
Galliard Composite (Net)9
Citigroup 3-Month Tbill + 100 bp PremiumMercer Stable Value Universe MedianFund Rank in Universe
27.0% 0.4%0.3%0.4%0.3%0.5%
93
1.5%1.2%1.6%1.0%1.8%
94
1.6%1.4%2.0%1.1%2.1%100
1.8%1.5%2.4%1.1%2.8%100
2.3%2.0%3.0%1.3%3.2%100
Oakmark Equity and Income Fund IS&P 500 60% / 40% BC AggregateMercer MF US Balanced Universe MedianFund Rank in Universe
4.3% 3.7%3.7%1.7%
9
6.9%10.6%5.2%
27
13.2%13.1%11.1%
28
9.8%11.2%9.1%
38
7.0%6.6%5.0%
7
7 Due to lack of performance history for the Institutional share class, performance for the Investor share class is shown for the 5- and 7-year periods.8 The Mercer Stable Value universe returns are shown gross of fees and the New Mexico Stable Value Fund’s rank within the universe is based off of the fund’s net returns.9 Assets were mapped from Dwight to a Galliard separate account on July 1, 2012. The Galliard composite is shown net of the same expenses paid by participants in the New Mexico StableValue Fund and is shown for informational purposes only.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 22
Summary – PerformancePeriods ending December 31, 2014
% of Plan 3 Months 1 Year 3 Years 5 Years 7 Years
Tier III – Core Array (Active)
Principal Diversified Real Asset Fund InstPrincipal Real Asset Custom IdxMercer MF Diversified Inflation Hedge Universe MedianFund Rank in Universe
0.2% -3.0%-2.5%-1.8%
75
2.5%3.5%1.1%
0
5.2%5.7%1.1%
13
NA7.7%3.2%NA
NA4.5%2.7%NA
Dodge & Cox Stk FundRussell 1000 ValueMercer MF US Equity Large Cap Value Universe MedianFund Rank in Universe
5.8% 2.2%5.0%4.1%
81
10.4%13.5%10.9%
64
23.7%20.9%19.7%
0
15.6%15.4%13.9%
14
6.3%6.4%6.1%
44
Fidelity Contrafund K10
S&P 500Mercer MF US Equity Large Cap Core Universe MedianFund Rank in Universe
7.0% 3.1%4.9%4.5%
82
9.7%13.7%11.6%
78
19.7%20.4%19.3%
42
15.0%15.5%13.8%
24
7.1%7.3%6.5%
31
Principal MidCap Fund InstRussell MidcapMercer MF US Equity Mid Cap Core Universe MedianFund Rank in Universe
1.9% 6.9%5.9%5.4%
25
12.7%13.2%8.0%
13
21.5%21.4%18.9%
17
19.1%17.2%15.1%
0
11.3%8.9%7.8%
0
T Rowe Price Inst Mid-Cap Eqty Growth FundRussell Midcap GrowthMercer MF US Equity Mid Cap Growth Universe MedianFund Rank in Universe
4.4% 8.9%5.8%5.3%
6
13.8%11.9%7.1%
2
21.6%20.7%18.1%
8
18.0%16.9%15.1%
7
10.4%8.6%7.3%
4
Fidelity Low-Priced Stock Fund K11
Russell 2500 ValueRussell 2000Mercer MF US Equity Small+Mid Value Universe MedianFund Rank in Universe
1.8% 4.2%6.1%9.7%6.1%
73
7.7%7.1%4.9%5.0%
25
19.8%19.4%19.2%18.8%
34
15.8%15.5%15.5%15.1%
25
9.1%8.6%8.2%8.4%
33
DFA US Small Cap Portfolio InstitutionalRussell 2000Mercer MF US Equity Small Cap Core Universe MedianFund Rank in Universe
2.1% 8.8%9.7%7.3%
29
4.4%4.9%4.2%
48
20.7%19.2%18.2%
20
17.4%15.5%15.1%
14
9.9%8.2%7.9%
13
10 Due to lack of performance history for the K share class, performance for the Retail share class is shown for the 7-year period.11 Due to lack of performance history for the K share class, performance for the Retail share class is shown for the 7-year period.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 23
Summary – PerformancePeriods ending December 31, 2014
% of Plan 3 Months 1 Year 3 Years 5 Years 7 Years
Tier III – Core Array (Active)
Fidelity Diversified International Fund K12
MSCI EAFE NET WHTMercer MF Intl Equity Universe MedianFund Rank in Universe
2.2% -1.1%-3.6%-3.3%
14
-3.0%-4.9%-5.2%
23
13.3%11.1%10.7%
18
6.6%5.3%5.8%
33
-0.2%-0.5%-0.1%
51
American Funds EuroPacific Growth Fund R-613
MSCI EAFE NET WHTMSCI AC Wld ex US NetMercer MF Intl Equity Universe MedianFund Rank in Universe
1.7% -1.6%-3.6%-3.9%-3.3%
21
-2.3%-4.9%-3.9%-5.2%
18
12.1%11.1%9.0%10.7%
30
6.0%5.3%4.4%5.8%
45
1.5%-0.5%-0.6%-0.1%
26
Tier IV – Extended Choice Array
BlackRock Inflation Protected Bond Port BlackRockBarclays US TIPSMercer MF US Inflation Protected Universe MedianFund Rank in Universe
0.7% -0.8%0.0%-0.5%
63
2.7%3.6%2.7%
53
0.4%0.4%0.2%
36
3.8%4.1%3.7%
43
4.3%4.2%3.8%
19
Templeton Global Bond Fund R614
Citigroup WGBIMercer MF Global Fixed Universe MedianFund Rank in Universe
0.4% -1.6%-1.5%-0.9%
76
2.0%-0.5%2.3%
52
6.6%-1.0%3.3%
0
6.0%1.7%4.2%
17
7.9%3.1%4.7%
0
Invesco Global Real Estate Fund R5FTSE NAREIT EPRA DevelopedMercer MF Global Real Estate Universe MedianFund Rank in Universe
0.3% 6.7%8.1%6.6%
49
14.8%15.9%13.9%
32
14.9%15.9%14.9%
45
10.8%12.0%10.2%
41
2.8%3.5%2.7%
45
Aberdeen Emerging Markets Fund InstitutionalMSCI EM NetMercer MF Emerging Markets Equity Universe MedianFund Rank in Universe
0.3% -5.6%-4.5%-4.9%
58
-2.5%-2.2%-2.6%
49
4.4%4.0%4.5%
52
5.3%1.8%2.1%
16
4.5%-1.3%-1.7%
1
12 Due to lack of performance history for the K share class, performance for the Retail share class is shown for the 7-year period.13 Due to lack of performance history for the R-6 share class, performance for the R-5 share class is shown for the 7-year period.14 Due to lack of performance history for the R6 share class, performance for the Advisor share class is shown for the 3-, 5-, and 7- year periods.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 24
Family ProfileTier I - Target-Date - New Mexico PERA Lifecycles15
Glide Path Comparison vs. Universe of Target-Date Families (as of 12/31/2014)
Family Asset Allocation (as of 12/31/2014)
15 The global REIT allocation is included in the equity category: 50% to domestic equity and 50% to international equity.
15
25
35
45
55
65
75
85
95
2055 2045 2035 2025 2015 Conservative
Allo
catio
nto
Equi
ty(%
)
75th-95th Median-75th 25th-Median 5th-25th New Mexico PERA Lifecycles
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2055 2045 2035 2025 2015 Conservative
Allo
catio
n(%
)
Cash and Equivalents
Fixed Income
Domestic Equity
International Equity
Other
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 25
Family ProfileTier I - Target-Date - New Mexico PERA Lifecycles16
Fund Conservative 2015 2025 2035 2045 2055Qtr. Return Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Stable ValueNew Mexico Stable Value Fund (Galliard) 0.3% 25.0% 16.3% 2.0% 0.0% 0.0% 0.0%
Total Stable Value 25.0% 16.3% 2.0% 0.0% 0.0% 0.0%
US Fixed Income Blackrock Inflation Protection Bond -0.8% 12.5% 4.7% 0.0% 0.0% 0.0% 0.0%
Vanguard Total Bond Market Index Fund 1.7% 20.4% 26.5% 21.4% 9.4% 3.2% 0.9%Total US Fixed Income 32.9% 31.2% 21.4% 9.4% 3.2% 0.9%
Global Fixed IncomeTempleton Global Bond Fund -1.6% 1.0% 1.2% 2.4% 2.7% 2.3% 1.6%
Total Global Fixed Income 1.0% 1.2% 2.4% 2.7% 2.3% 1.6%
US EquityUS Large Cap Equity
Vanguard Institutional Index Fund 4.9% 9.1% 12.7% 20.7% 25.5% 27.8% 28.9%Sub-Total US Large Cap Equity 9.1% 12.7% 20.7% 25.5% 27.8% 28.9%
US Mid/Small Cap EquityPrincipal MidCap Equity 6.9% 2.0% 1.8% 3.0% 3.6% 4.0% 4.1%T. Rowe Price Mid Cap Growth Fund 8.9% 0.0% 1.8% 3.0% 3.6% 4.0% 4.1%DFA US Small Cap Portfolio 8.8% 2.0% 1.8% 3.0% 3.6% 4.0% 4.1%
Sub-Total US Mid/Small Cap Equity 3.9% 5.4% 8.9% 10.9% 11.9% 12.4%Total US Equity 13.0% 18.2% 29.6% 36.5% 39.7% 41.2%
Non-US EquityVanguard Total International Stock Index -4.2% 3.0% 4.2% 6.9% 8.5% 9.3% 9.6%Fidelity Diversified International -1.1% 3.0% 4.2% 6.9% 8.5% 9.3% 9.6%American Funds EuroPacific Growth Fund -1.6% 3.0% 4.2% 6.9% 8.5% 9.3% 9.6%Aberdeen Emerging Markets -5.6% 3.9% 5.4% 8.9% 10.9% 11.9% 12.4%
Total Non-US Equity 13.0% 18.2% 29.5% 36.5% 39.7% 41.3%
Global Real Estate Securities INVESCO Global Real Estate 6.7% 7.8% 8.2% 10.0% 10.0% 10.0% 10.0%Total Non-US Equity 7.8% 8.2% 10.0% 10.0% 10.0% 10.0%
Real Return (Diversified Inflation Protection)Principal Diversified Real Asset -3.0% 7.3% 6.9% 5.0% 5.0% 5.0% 5.0%
Total Real Return 7.3% 6.9% 5.0% 5.0% 5.0% 5.0%Totals 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
16 Totals may not add due to rounding.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 26
Fund ProfileTier I - Target-Date - LifeCycle Conservative Portfolio
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 27
Fund ProfileTier I - Target-Date - LifeCycle 2015 Portfolio
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 28
Fund ProfileTier I - Target-Date - LifeCycle 2025 Portfolio
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 29
Fund ProfileTier I - Target-Date - LifeCycle 2035 Portfolio
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 30
Fund ProfileTier I - Target-Date - LifeCycle 2045 Portfolio
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 31
Fund ProfileTier I - Target-Date - LifeCycle 2055 Portfolio
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 32
Fund ProfileTier II - Domestic Fixed - Vanguard Total Bond Market Index Fund Inst - VBTIX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 33
Fund ProfileTier II - Domestic Equity - Vanguard Institutional Index Fund Institutional - VINIX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 34
Fund ProfileTier II - International Equity - Vanguard Total International Stock Index Fund Inst - VTSNX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 35
Fund ProfileTier III - Stable Value - New Mexico Stable Value FundShare Class: N/A Benchmark: Citigroup 3-Month Tbill + 100 bp Premium
Investment Philosophy
Galliard’s primary stable value investment objective is to provide safety of principal. Secondary objectives are consistency of returns, while maintaining a stable creditedrate of interest.
Fund Composition as of December 31, 2014 Credit Quality Distribution as of December 31, 2014
Key Facts and Figures
Portfolio Manager: Galliard Capital ManagementMarket-to-Book Ratio: 100.9%Crediting Rate (Gross): 1.46%
Total Fund Assets: $140.2 MillionFund Duration: 2.6 years
Expense Ratio (Net): 0.43%Mercer Median Expense Ratio (Net): 0.46% (9/30/14)
U.S.Treasury/Agency,
25.5%
Other U.S.Government, 2.4%
Corporates, 22.9%
Taxable Municipals,1.8%
MBS, 23.5%
ABS, 11.5%
Intl Govt/Agency,0.3%
Cash/Equivalents,11.9%
AAA, 76.6%
AA, 4.7%
A, 13.0%
BBB, 5.4% <BBB, 0.3%
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 36
Fund ProfileTier III - Balanced - Oakmark Equity and Income Fund I - OAKBX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 37
Fund ProfileTier III - Balanced - Principal Diversified Real Asset Fund Inst - PDRDX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 38
Fund ProfileTier III - Domestic Equity - Dodge & Cox Stk Fund - DODGX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 39
Fund ProfileTier III - Domestic Equity - Fidelity Contrafund K - FCNKX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 40
Fund ProfileTier III - Domestic Equity - Principal MidCap Fund Inst - PCBIX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 41
Fund ProfileTier III - Domestic Equity - T Rowe Price Inst Mid-Cap Eqty Growth Fund - PMEGX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 42
Fund ProfileTier III - Domestic Equity - Fidelity Low-Priced Stock Fund K - FLPKX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 43
Fund ProfileTier III - Domestic Equity - DFA US Small Cap Portfolio Institutional - DFSTX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 44
Fund ProfileTier III - International Equity - Fidelity Diversified International Fund K - FDIKX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 45
Fund ProfileTier III - International Equity - American Funds EuroPacific Growth Fund R-6 - RERGX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 46
Fund ProfileTier IV - Domestic Fixed - BlackRock Inflation Protected Bond Port BlackRock - BPLBX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 47
Fund ProfileTier IV - International Fixed - Templeton Global Bond Fund R6 - FBNRX17
17 Due to lack of performance history for the R6 share class, performance is shown for the Advisor share class.
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 48
Fund ProfileTier IV - Real Estate - Invesco Global Real Estate Fund R5 - IGREX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 49
Fund ProfileTier IV - International Equity - Aberdeen Emerging Markets Fund Institutional - ABEMX
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 50
Appendix – DisclosuresImportant noticesReferences to Mercer shall be construed to include Mercer LLC and/or its associatedcompanies.
© 2015 Mercer LLC. All rights reserved.
This contains confidential and proprietary information of Mercer and is intended for theexclusive use of the parties to whom it was provided by Mercer. Its content may not bemodified, sold or otherwise provided, in whole or in part, to any other person or entity,without Mercer’s prior written permission.
The findings, ratings and/or opinions expressed herein are the intellectual property ofMercer and are subject to change without notice. They are not intended to convey anyguarantees as to the future performance of the investment products, asset classes orcapital markets discussed. Past performance does not guarantee future results. Mercer’sratings do not constitute individualized investment advice.
Information contained herein has been obtained from a range of third party sources. Whilethe information is believed to be reliable, Mercer has not sought to verify it independently.As such, Mercer makes no representations or warranties as to the accuracy of theinformation presented and takes no responsibility or liability (including for indirect,consequential or incidental damages), for any error, omission or inaccuracy in the datasupplied by any third party.
This does not constitute an offer or a solicitation of an offer to buy or sell securities,commodities and/or any other financial instruments or products or constitute a solicitationon behalf of any of the investment managers, their affiliates, products or strategies thatMercer may evaluate or recommend.
For the most recent approved ratings of an investment strategy, and a fuller explanation oftheir meanings, contact your Mercer representative.
For Mercer’s conflict of interest disclosures, contact your Mercer representative or seewww.mercer.com/conflictsofinterest.
Mercer universes: Mercer’s universes are intended to provide collective samples ofstrategies that best allow for robust peer group comparisons over a chosen timeframe.Mercer does not assert that the peer groups are wholly representative of and applicable toall strategies available to investors.
The value of your investments can go down as well as up, and you may not get back theamount you have invested. Investments denominated in a foreign currency will fluctuatewith the value of the currency. Certain investments, such as securities issued by smallcapitalization, foreign and emerging market issuers, real property, and illiquid, leveraged orhigh-yield funds, carry additional risks that should be considered before choosing aninvestment manager or making an investment decision.
Returns for periods greater than one year are annualized. Returns are calculated gross ofinvestment management fees, unless noted as net of fees.
Style analysis graph time periods may differ reflecting the length of performance historyavailable.
THE FOLLOWING PROVISIONS APPLY TO DATA OR OTHER SERVICES PROVIDEDBY THE FOLLOWING COMPANIES: Where “End User” appears before the Vendor name,a direct end-user license with the Vendor is required to receive some indices. You areresponsible for ensuring you have in place all such licenses as are required by Vendors.
BARCLAYS: © Barclays Bank PLC 2015. This data is provided by Barclays Bank PLC.Barclays Bank PLC and its affiliated companies accept no liability for the accuracy,timeliness or completeness of such data which is provided “as is.” All warranties in relationto such data are hereby extended to the fullest extent permitted under applicable law.
BARCLAYS CAPITAL: The Barclays Indices are a proprietary product of Barclays.Barclays shall maintain exclusive ownership of and rights to the Barclays Indices and thatinclusion of the Barclays Indices in this Service shall not be construed to vest in thesubscriber any rights with respect to the Indices. The subscriber agrees that it will notremove any copyright notice or other notification or trade name or marks of Barclays thatmay appear in the Barclays Indices and that any reproduction and/or distribution of theBarclays Indices (if authorized) shall contain such notices and/or marks.
BLOOMBERG L.P.: © 2015 Bloomberg L.P. All rights reserved. BLOOMBERG,BLOOMBERG PROFESSIONAL, BLOOMBERG FINANCIAL MARKETS, BLOOMBERGNEWS, BLOOMBERG TRADEMARK, BLOOMBERG BONDTRADER, AND BLOOMBERGTELEVISION are trademarks and service marks of Bloomberg L.P. a Delaware LimitedPartnership.
CENTER FOR RESEARCH IN SECURITY PRICES (CRSP): Derived based upon datafrom Center for Research in Security Prices (CRSP® ), The University of Chicago BoothSchool of Business
CITIGROUP GLOBAL MARKETS (formerly SALOMON SMITH BARNEY): SmithBarneysm and Citigroup Global Equity Indexsm are service marks of Citigroup Inc."BECAUSE ACCURACY COUNTS®" is a registered service mark of Citigroup Inc.FloatWatch© is a trade mark of Citigroup Inc. Citigroup Global Equity Index Systemsm ,Citigroup Broad Market Indexsm, Citigroup Primary Market Indexsm, Citigroup ExtendedMarket Indexsm, Citigroup Cap-Range Indexsm, Citigroup Internet Index (NIX)sm, CitigroupStyle Indices (Growth/Value)sm, Citigroup Property Indexsm are service marks of CitigroupInc. ©2015 Citigroup Inc All rights reserved. Any unauthorized use, duplication ordisclosure is prohibited by law and may result in prosecution. Citigroup, including itsparent, subsidiaries and/or affiliates ("the Firm"), usually makes a market in the securitiesdiscussed or recommended in its report and may sell to or buy from customers, asprincipal, securities discussed or recommended in its report. The Firm or employeespreparing its report may have a position in securities or options of any company discussedor recommended in its report. An employee of the Firm may be a director of a companydiscussed or recommended in its report. The Firm may perform or solicit investmentbanking or other services from any company discussed or recommended in its report.Securities recommended, offered, or sold by SSB: (i) are not insured by the Federal
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 51
Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insureddepository institution (including Citibank); and (iii) are subject to investment risks, includingthe possible loss of the principal amount invested. Although information has been obtainedfrom and is based upon sources SSB believes to be reliable, we do not guarantee itsaccuracy and it may be incomplete or condensed. All opinions and estimates constituteSSB’s judgment as of the date of the report and are subject to change without notice. Itsreport is for informational purposes only and is not intended as an offer or solicitation forthe purchase or sale of a security. Its report does not take into account the investmentobjectives or financial situation of any particular person. Investors should obtain advicebased on their own individual circumstances before making an investment decision.
CREDIT SUISSE FIRST BOSTON LLC. (CSFB): Copyright © 1996 – 2015 Credit SuisseFirst Boston LLC and/or its affiliate companies. All rights reserved.
DATASTREAM: Source: ThomsonReuters Datastream
DOW JONES: The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones& Company, Inc. and have been licensed for use. All content of Dow Jones IndexesSM ©2015 is proprietary to Dow Jones & Company, Inc.
“End User” FTSE™ : is a trade mark of the London Stock Exchange PLC and TheFinancial Times Limited and is used by FTSE International Limited under license. RussellInvestment Group Europe Ltd is licensed by FTSE International Limited to distribute FTSEAdvanced Service and other FTSE indices. FTSE shall not be responsible for any error oromission in FTSE data. All copyright and database rights in FTSE products belong toFTSE or its licensors. Redistribution of the data comprising the FTSE products is notpermitted. You agree to comply with any restrictions or conditions imposed upon the use,access, or storage of the data as may be notified to you by FTSE or Russell/Mellon EuropeLtd. You are not permitted to receive the FTSE Advanced Service unless you have aseparate agreement with FTSE. “FTSE™”, “FT-SE™” and “Footsie™” are trade marks ofLondon Stock Exchange PLC and The Financial Times Limited and are used by FTSEInternational Limited under license.
The FTSE Private Investor Indices are owned and calculated by FTSE International andare produced in association with APCIMS (Association of Private Client InvestmentManagers and Stockbrokers). ã FTSE International Limited 2015The UK Value and Growth Indices are owned and calculated by FTSE International Limitedin association with Russell Investment Group. ã FTSE International Limited 2015.HFRI: Source: Hedge Fund Research, Inc., © HFR, Inc. 2015,www.hedgefundresearch.com
IMONEYNET: © iMoneyNet, an Informa Business
INTERACTIVE DATA: © 2015 Interactive Data Pricing and Reference Data, Inc.
JPMORGAN: The JPMorgan EMBI Index (i) is protected by copyright and JPMorganclaims trade secret rights, (ii) is and shall remain the sole property of JPMorgan, and (iii)title and full ownership in the JPMorgan EMBI Index is reserved to and shall remain withJPMorgan. All proprietary and intellectual property rights of any nature, including patents,copyrights, trademarks and trade secrets regarding the JPMorgan EMBI Index, and anyand all parts, copies, modifications, enhancements and derivative works are owned by, andshall remain the property of JPMorgan and its affiliates. The JPMorgan EMBI Index andrelated materials and software were developed, compiled, prepared and arranged byJPMorgan through expenditure of substantial time, effort and money and constitute
valuable intellectual property and trade secrets of JPMorgan. The JPMorgan EMBI Indexshall not be used in a manner that would infringe the property rights of JPMorgan or othersor violate the laws, tariffs, or regulations of any country.
LIPPER: Performance data was supplied by Lipper, A Thomson Reuters Company, subjectto the following: Copyright 2015 © Thomson Reuters. All rights reserved. Any copying,republication or redistribution of Lipper Information, including by caching, framing or similarmeans, is expressly prohibited without the prior written consent of Lipper. Lipper shall notbe liable for any errors or delays in the Information, or for any actions taken in reliancethereon. Lipper performance data is total return, and is preliminary and subject to revision.The data contained herein has been obtained from company reports, financial reportingservices, periodicals, and other resources believed to be reasonable. Although carefullyverified, data on compilations is not guaranteed by Lipper Inc. - A Reuters Company andmay be incomplete. No offer or solicitations to buy or sell any of the securities herein isbeing made by Lipper. Portions of the information contained in this report was derived byMercer using Content supplied by Lipper, A Thomson Reuters Company.
MERRILL LYNCH: The Merrill Lynch Indices are used with permission. Copyright 2015,Merrill Lynch, Pierce, Fenner & Smith Incorporated. All rights reserved. The Merrill LynchIndices may not be copied, used, or distributed without Merrill Lynch’s prior writtenapproval.This Product is not sponsored, endorsed, sold or promoted by Merrill Lynch. Merrill Lynchmakes no guarantees, representations or warranties of any kind, express or implied, to anyperson, including, without limitation, any member of the public regarding the use of theIndices in the Product, the advisability of investing in securities generally or of the ability ofthe Index to track any market performance. Merrill Lynch’s only relationship to MellonAnalytical Solutions or any other person or entity in respect to this Product is limited to thelicensing of the Merrill Lynch Indices, which are determined, composed, and calculated byMerrill Lynch without regard to Mellon Analytical Solutions or this Product. Merrill Lynchretains exclusive ownership of the Indices and the programs and trademarks used inconnection with the Indices. Merrill Lynch has no obligation to take the needs of MellonAnalytical Solutions or the purchasers, investors or participants in the Product intoconsideration in determining, composing or calculating the Indices, nor shall Merrill Lynchhave any obligation to continue to calculate or provide the Indices in the future. MerrillLynch may, in its absolute discretion and without prior notice, revise or terminate theIndices at any time. IN NO EVENT SHALL MERRILL LYNCH OR ANY OF ITSPARTNERS, AFFILIATES, EMPLOYEES, OFFICERS, DIRECTORS OR AGENTS HAVEANY LIABILITY TO ANY PERSON OR ENTITY FOR ANY INDIRECT, PUNITIVE,SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS.
MOODY’S INVESTORS SERVICE: Moody’s © Copyright 2015, Moody’s InvestorsService, Inc. (“Moody’s). Moody’s ratings (“Ratings”) are proprietary to Moody’s or itsaffiliates and are protected by copyright and other intellectual property laws. Ratings arelicensed to Distributor by Moody’s. RATINGS MAY NOT BE COPIED OR OTHERWISEREPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENTUSE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNEROR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIORWRITTEN CONSENT. Moody’s® is a registered trademark of Moody’s Investors Service,Inc..
Defined Contribution Performance Evaluation Report State of New Mexico - Deferred Compensation Plan
Mercer 52
MORNINGSTAR: Copyright (c) 2015 Morningstar. Portions of this report property ofMorningstar, Inc. or its Information Providers and is protected by copyright and intellectualproperty laws. All rights reserved.
MSCI®: Portions of this report are copyright MSCI 2015. Unpublished. All Rights Reserved.This information may only be used for your internal use, may not be reproduced orredisseminated in any form and may not be used to create any financial instruments orproducts or any indices. This information is provided on an “as is” basis and the user of thisinformation assumes the entire risk of any use it may make or permit to be made of thisinformation. Neither MSCI, any of its affiliates or any other person involved in or related tocompiling, computing or creating this information makes any express or implied warrantiesor representations with respect to such information or the results to be obtained by the usethereof, and MSCI, its affiliates and each such other person hereby expressly disclaim allwarranties (including, without limitation, all warranties of originality, accuracy,completeness, timeliness, non-infringement, merchantability and fitness for a particularpurpose) with respect to this information. Without limiting any of the foregoing, in no eventshall MSCI, any of its affiliates or any other person involved in or related to compiling,computing or creating this information have any liability for any direct, indirect, special,incidental, punitive, consequential or any other damages (including, without limitation, lostprofits) even if notified of, or if it might otherwise have anticipated, the possibility of suchdamages. MSCI is a registered trademark of MSCI, Inc.
NAREIT: NAREIT® is the exclusive registered mark of the National Association of RealEstate Investment Trusts.
NCREIF: All NCREIF Data - Copyright by the National Council of Real Estate InvestmentFiduciaries. This information is proprietary and may not be reported in whole or in partwithout written permission.
PRIVATE INFORMANT: © 2015 The Burgiss Group, LLC
RUSSELL INVESTMENT GROUP: Russell Investment Group is the source and owner ofcertain of the data contained or reflected in this material and all trademarks and copyrightsrelated thereto. The material may contain confidential information and unauthorized use,disclosure, copying, dissemination or redistribution is strictly prohibited. This is a userpresentation of the data. Russell Investment Group is not responsible for the formatting orconfiguration of this material or for any inaccuracy in presentation thereof. Russell indicesare trademarks/service marks of the Russell Investment Group. Russell® is a trademark ofthe Russell Investment Group.
STANDARD & POOR’S: Standard & Poor’s information contained in this document issubject to change without notice. Standard & Poor’s cannot guarantee the accuracy,adequacy or completeness of the information and is not responsible for any errors oromissions or for results obtained from use of such information. Standard & Poor’s makesno warranties or merchantability or fitness for a particular purpose. In no event shallStandard & Poor’s be liable for direct, indirect or incidental, special or consequentialdamages from the information here regardless or whether such damages were foreseen orunforeseen.
STYLE RESEARCH: Source: Style Research Ltd
WILSHIRE ASSOCIATES: Copyright © 2015 Wilshire Associates Incorporated.
Investment advisory services provided by Mercer Investment Consulting,Inc.
Mercer (US) Inc.777 South Figueroa StreetSuite 1900Los Angeles, CA 90017+1 213 346 2200
Recommended