Common Investment Meeting Public Session 12/16/2020

Common Investment Meeting_Public Session_12/16/2020THE CITY OF NEW YORK OFFICE OF THE COMPTROLLER
This document was developed by the New York City Comptroller’s Office Bureau of Asset Management (“BAM”). The information contained in this Executive Appendix is confidential, may not be distributed to unauthorized persons, and may contain material non-public information pertaining to certain investment activities and portfolio companies. Federal, state, and/or foreign securities laws prohibit any person who has received such information from purchasing or selling such securities based on material non-public information or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.
December 16, 2020
MARKETS UPDATE
Market Returns: Q3-2020
Source: State Street
*Average of consultant long-term arithmetic expected market returns, as of 2019
Sheet1
5.64%
1.10%
0.73%
5.60%
6.80%
FTSE Treasury 10+
2.6 2.4
Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
US GD
US GDP Growth (QoQ,%)
4.4
14.7
13.3
11.1
10.2
0
2
4
6
8
10
12
14
16
Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
Un em
pl oy
m en
Source: GSAM
• Recent Equity rally • Policy Implications from election • COVID surge and vaccine rollout • Equity Valuations
6
7
Equities - Developed Intl
Equities - Emerging Intl
FTSE Treasury 10+ (2.75)
Equity Rotation (as of 12/8)
Index Name QTD 3 Years
Russell 1000® Growth Index 8.85 22.37
Russell 1000® Value Index 15.08 6.09
Growth minus Value -6.23 16.28
Russell 2000® Growth Index 24.27 15.14
Russell 2000® Value Index 30.98 3.3
Growth minus Value -6.71 11.84
• COVID-19 and vaccine – current surge; vaccine rollout (“COVID-19 is the most critical driver of the path of the economy”, Fed Chair Powell)
8
S+P 500 Valuation MetricsS+P 500 Equity Risk Premium
11
Current Market Developments
Will 10-yr yields remain low given - Economic recovery post vaccine rollout? - Increase in budget deficits? - Adoption of Average Inflation Targeting (AIT) by Federal Reserve?
US Treasury 10-yr yield
Summary of Rebalancing Activities 3Q 2020
OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
15
Relative Mix to Adjusted New Policy Weights
Q3 – Asset Allocation Review – Inflation Protection Relative Mix to Adjusted New Policy Weights
17
18
Previous Duration Target
New Duration Target
Duration as of 06/30/2020
Duration as of 09/30/20
• Core Bond Portfolio Duration, Actual Vs. Target (as of 09/30/2020)
QUESTIONS?
When you’re done, hit mute again
PERFORMANCE REPORTING 3rd Quarter 2020
21
$225,450m Total AUM for all 5 Systems as of September 30, 2020
38%, 85,973
32%, 72,609
19%, 43,619
7%, 15,987
3%, 7,261
TRS
NYCERS
POLICE
FIRE
BERS
Net of mgr. fees in public asset classes are recorded on an accrual basis. Private markets data is reported on a lagged basis.
NYC Pension System Portfolio Std
Dev - 1 yr. 3 Month One Year Trailing
Three Year Trailing
Five Year Trailing
Public Mkt Equiv 65/35 5.26% 9.54% 7.31% 8.74%
Median Fund - TUCS 5.23% 7.61% 6.86% 8.44%
22
Total NYC Pension Fund Net Performance as of 09/30/2020
Source: State Street OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
Sheet1
3 Month
Fiscal YTD
579 612
bp s TRS
NYCERS
Police
Fire
BERS
Basis Points of Excess Return (SSB T, N, p.14; F p.15 ; P p.17; B p.20)
Source: State Street OFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
171 bps Assumed Rate of Return (7%)
24
Quarter to Date as of 09/30/2020 Excess Return – Total Portfolio
(33) (2)
(31) (70)
-500
-300
-100
100
300
500
QTD Total Excess Return QTD Asset Allocation QTD Manager Value Added
bp s
Basis Points of Excess Return (SSB T, N, p.14; F p.15 ; P p.17; B p.20)
25
-9
TRS: 28.76% NYCERS: 30.04% POLICE: 32.7% FIRE: 29.94% BERS: 33.21%
bp s
Basis Points of Excess Return (SSB T, N p.30; F p.31; P p.33; B p.36)
26
215
754
bp s
27
70
-267
-125
bp s
28
18
-260
-170
9
bp s
Basis Points of Excess Return (SSB T p.34; N p.35; F p.37; B, P p.39)
29
bp s
Basis Points of Excess Return (SSB T p.36; N p.37; F p.39; P, B, p.41)
Value Added- Hedge Funds Basis Points of Excess Return
Weights as of 09/30/2020
Value Added - Hedge Funds Basis Points of Excess Return
-202
615
266
-183
677
294
-1,500
-1,000
-500
0
500
1,000
1,500
POLICE: 6.5%
FIRE: 5.87%
82 95 123 98
-600
-400
-200
0
200
400
600
Excess Return Since Inception; PME Benchmark: 50% JP Morgan Global High Yield 50% CS Leveraged Loans as of 09/30/20
TRS - 10/24/2007
NYCERS - 10/24/2007
Police - 10/24/2007
Fire - 10/24/2007
BERS - N/A
Inception Date
300bps Target
bp s
The PME Spread is the difference between the IRR and the PME.
33
-600
-400
-200
0
200
400
600
Excess Return Since Inception; The PE Benchmark is the Russell 3000 + 300 bps as of 6/30/20
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
34
-83 -151 -112 -98
67
-700
-500
-300
-100
100
300
500
700
Excess Return Since Inception; Core PME = 40% Russell 3000 & 60% Barclay Agg. as of 6/30/20
TRS - 9/28/2006
NYCERS - 9/28/2006
Police - 9/28/2006
Fire - 9/28/2006
BERS - 12/13/2010
Inception Date
Basis Points of Cumulative IRR above Public Market Equivalent bp
s
The PME Spread is the difference between the IRR and the Core PME Return.
35
230
-78
294
-700
-500
-300
-100
100
300
500
700
Excess Return Since Inception; Non-core PME = 60% Russell 3000 & 40% Barclay Agg. as of 6/30/20
TRS - 12/6/2002
NYCERS - 12/6/2002
Police - 12/6/2002
Fire - 12/6/2002
BERS - 04/11/2011
Inception Date
s
The PME Spread is the difference between the IRR and the Non-Core PME Return.
36
(1,200)
(1,000)
(800)
(600)
(400)
(200)
200
400
600
800
1,000
1,200
Excess Return Since Inception; PME: 50% R3000 & 50% Barclays Agg. as of 6/30/20
TRS - 11/19/2013
NYCERS - 11/19/2013
Police - 11/19/2013
Fire - 11/19/2013
BERS - 11/19/2013
Inception Date
s
QUESTIONS?
RISK UPDATE 3RD QUARTER 2020
39
TOTAL PLAN SUMMARY
Source: MSCIOFFICE OF NEW YORK CITY COMPTROLLER SCOTT M. STRINGER | Bureau of Asset Management
40
QUARTERLY CHANGES IN RISK
Portfolio Risk June 30, 2020 15.44 Beginning value Change in Volatility (0.62) Reduction in risk as a result of lower market volatility Change in Correlation (0.18) Reduction in risk as a result of more diversification in market Change in Portfolio Exposures 0.06 Increase in risk as a result of active investments in the portfolio Portfolio Risk September 30, 2020 14.70 Ending value
Source: MSCI
• Overall portfolio risk declined by 74bp since June
• Change in risk was decomposed into three categories • Changes in Volatility and Correlation (blue arrows) are market-driven • Change in Portfolio Exposures (red arrow) are unique to our investment mix
• Changes were driven by Industry factors and, to a lesser degree, Spread factors
41
FACTOR SUMMARY
• There’s potential for increased systematic risk in the U.S. Public Equity Markets. – Fewer and fewer companies account for more weight in broad-
market indices and drive more index return. – This could be a result of a secular shift in markets or a sign of a
speculative bubble.
• The trend is unique to U.S. market indices, which account for 75% of our market exposure.
42
U.S. EQUITIES AND PORTFOLIO DIVERSIFICATION
43
U.S. EQUITIES AND PORTFOLIO DIVERSIFICATION
QUESTIONS?
COMMON INVESTMENT MEETING – public session
MARKETS UPDATE
Q3 – Asset Allocation Review - Growth
Q3 – Asset Allocation Review – Inflation Protection
Q3 – Asset Allocation Review - Deflation Protection
Q3- Asset Allocation Review
QUESTIONS?If you would like to ask a questionWhen you’re done, hit mute again
PERFORMANCE REPORTING3rd Quarter 2020
NYC Retirement Systems AUM (% , in millions)
Total NYC Pension Fund Net Performance as of 09/30/2020
Quarter to Date Return as of 09/30/2020 – Total Portfolio
Quarter to Date as of 09/30/2020 Excess Return – Total Portfolio
Value Added – Total Domestic Equity
Value Added – Total World Ex-USA
Value Added – Total Emerging Markets
Value Added – Total Structured Fixed Income
Value Added – High Yield
PRIVATE MARKET DATA
Value Added - Private Equity
Value Added - Infrastructure
Risk update3rd quarter 2020
Total plan summary
u.s. equities and portfolio diversification
u.s. equities and portfolio diversification
COMMON INVESTMENT MEETING – executive session
REAl ESTATECerberus Institutional Real Estate Partners V Customized Fund
Slide Number 47
CERBERUSManager Presentation
Slide Number 50
Disclaimer – Investment Pipeline
Table of Contents
Slide Number 55
Cerberus Investment Platform
Slide Number 57
Corporate Social Responsibility and Inclusion & Diversity
Proven Focus on Recruiting and Retaining Diverse Talent
Slide Number 62
Market Opportunity: North America
Project PREOF
Project Scarborough
Ocean Ranch
Cerberus Institutional Real Estate Partners FundsGross to Net Performance
Cerberus Real Estate: Focus on Complex Opportunities
Slide Number 86
Slide Number 88
CIREP Funds Performance: Endnotes
CIREP Funds Performance: Endnotes
OPPORTUNISTIC FIXED INCOMEAnnual PlanCY 2021
Alternative Credit
OFI Overview
TRS OFI Pacing Sensitivity Analysis
NYCERS OFI Pacing Sensitivity Analysis
Police OFI Pacing Sensitivity Analysis
Fire OFI Pacing Sensitivity Analysis
BERS OFI Pacing Sensitivity Analysis
OFI Strategy Matrix and Current Exposure
CY 2021 Pipeline Strategy Characteristics
OFI 2021 Annual Plan Summary
Questions
Appendix: Fund Performance
REAL ESTATE2020/2021 Core Portfolio Rebalancing Recommendations
Table of Contents
III. Individual Manager Recommendations
Jamestown Premier Property Fund (“JPPF”)
JPM Strategic Property Fund (“SPF”)
USAA Eagle Fund (“USAA” or the “Fund”)
Core Portfolio Rebalance: Fee Impact Snapshot
PRIVATE EQUITYAnnual Implementation Plan
CY 2021 Private EquityAnnual Implementation Plan
Executive Summary
CY 2021 Joint Recommendations
CY 2021 Pacing Plan Recommendations
Forward Pipeline – Manager Re-ups
Forward Pipeline – KKR Strategic Partnership
Forward Pipeline – Potential New GPs
PRIVATE MARKETS Emerging Markets Policy Proposal
Private Markets – EM Policy Proposal
EM Policy Proposal – Changes to Current Country List

Documents

Common Investment Meeting Public Session 12/16/2020