Investment Management Committee Book - July 2020 Documents/imc_committee...(Committee Chair David Corpus; Members: Jarvis V. Hollingsworth, Christopher Moss, Nanette Sissney, Robert

July 2020

Investment Management

Teacher Retirement System of Texas 1000 Red River Street Austin, Texas 78701-2698

NOTE: The Board of Trustees (Board) of the Teacher Retirement System of Texas will not consider or act upon any item before the Investment Management Committee (Committee) at this meeting of the Committee. This meeting is not a regular meeting of the Board. However, because the full Committee constitutes a quorum of the Board, the meeting of the Committee is also being posted as a meeting of the Board out of an abundance of caution.

TEACHER RETIREMENT SYSTEM OF TEXAS MEETING BOARD OF TRUSTEES

AND INVESTMENT MANAGEMENT COMMITTEE

(Committee Chair David Corpus; Members: Jarvis V. Hollingsworth, Christopher Moss,

Nanette Sissney, Robert H. Walls)

By Videoconference

THE JULY 15, 2020, MEETING OF THE TRS INVESTMENT MANAGEMENT COMMITTEE AND BOARD OF TRUSTEES MEETING WILL BE CONDUCTED BY VIDEOCONFERENCE IN ACCORDANCE WITH THE GOVERNOR’S AUTHORIZATION CONCERNING SUSPENSION OF CERTAIN OPEN MEETING LAW REQUIREMENTS IN RESPONSE TO THE COVID-19 (CORONAVIRUS) DISASTER. A quorum of members of the Committee will participate in the meeting and will be audible to the public. Members of the public may access the meeting by clicking https://zoom.us/j/984-348-8378 Meeting ID: 984-348-8378, please email the Board Secretary to obtain the meeting password at [email protected]. The open portions of the July 16, 2020, meeting are being broadcast over the Internet. Access to the Internet broadcast and agenda materials of the meeting is provided at www.trs.texas.gov. A recording of the meeting will be available at www.trs.texas.gov.

AGENDA July 16, 2020 – 8:00 a.m.

1. Call roll of Committee members.

2. Consider the approval of the proposed minutes of the December 2019 committee meeting – Committee Chair.

3. CIO Update including Fleet Strategy; Talent Management; Accomplishments; Notices and Key Dates and Upcoming Events – Jase Auby.

4. Discuss the First Quarter 2020 Performance Review – Steve Voss and Mike McCormick, Aon Hewitt.

5. Annual Update on External Private Markets – Eric Lang, Carolyn Hansard, Neil Randall, and Grant Walker.

6. Review of Proposed Modifications to Investment Policy Statement – Katy Hoffman.

https://zoom.us/j/http://www.trs.texas.gov/

Minutes of the Investment Management Committee

December 12, 2019

The Investment Management Committee of the Board of Trustees of the Teacher Retirement System of Texas met on December 12, 2019, in the boardroom located on the fifth floor of the TRS East Building offices at 1000 Red River Street, Austin, Texas.

Committee Members present: Mr. David Corpus, Chair Mr. Jarvis V. Hollingsworth Mr. Christopher Moss Ms. Nanette Sissney Mr. Robert H. Walls, Jr. Other Board Members present: Mr. John Elliott Mr. James D. Nance Ms. Nanette Sissney Others present: Brian Guthrie, TRS Steve Voss, Aon Hewitt Andrew Roth, TRS Mike McCormick, Aon Hewitt Don Green, TRS Dr. Keith Brown, Board Investment Advisor Carolina de Onis, TRS Ann Fickel, TCTA Jerry Albright, TRS Jase Auby, TRS Amanda Jenami, TRS James Nield, TRS Bernie Bozzelli, TRS Mohan Balachandran, TRS Joel Hinkhouse, TRS Heather Traeger, TRS Katherine Farrell, TRS Suzanne Dugan, Cohen Milstein Investment Management Committee Chair Mr. Corpus called the meeting to order at 11:31 a.m.

1. Call roll of Committee members.

Ms. Farrell called the roll. A quorum was present.

2. Consider the approval of the proposed minutes of the September 2019 committee meeting – Committee Chair.

On a motion by Mr. Moss, seconded by Ms. Sissney, the committee voted to approve the proposed minutes for the September 2019 Investment Management Committee meeting as presented.

3. CIO Update including Fleet Strategy; Talent Management; Accomplishments; Notices and Key Dates and Upcoming Events – Jerry Albright.

Mr. Jerry Albright began by providing an update on the status of Build the Fleet, reporting 27 of the 63 planned hires. Mr. Albright stated IMD has built partnerships with Howard University and Texas Southern and is focusing the summer intern program to assist in building the pipeline based on IMD needs. Mr. Albright reviewed performance targets. Mr. Albright announced the TRS Hedge Fund Conference would be in February, with the Emerging Manager Conference to follow February 26.

4. Discuss the Third Quarter 2019 Performance Review – Steve Voss, Mike Comstock and Mike McCormick, Aon Hewitt.

Mr. Steve Voss provided market highlights for the quarter. He noted the single-largest component within the Trust is equities which had modest returns for the quarter. He stated that interest rates had fallen in some areas, but that the return on real estate assets was one of the stronger-performing components. He said for the one-year period, TRS had a roughly 6 percent return. He noted the quarter started at $156.4 billion in Trust assets, ending the period with $157.6 billion. He also noted that the Trust had grown since that time, closing recently at $161.75 billion, the highest ever for the fund.

5. Update on the Trading Group – Bernie Bozzelli.

Mr. Bernie Bozzelli provided an overview and major functions of the Trading Group. He reported that for the period ending September 30, 2019, the group executed $252 billion in notional value across equities, derivatives and foreign exchange. During the same period, they outperformed their peer trading benchmark by 5.7 basis points, which placed them in the first quartile. Mr. Bozzelli indicated that the Trading Group executes for all the profit centers in the IMD, utilizes market intelligence in collaboration across IMD, and draws their success from these main factors: highly competent team; top notch systems, technology and processes; and having the right counter-parties. Mr. Bozelli presented a special topic regarding being approached last year by one of the top-performing external quant managers about possibly providing trading services to the IMD. Mr. Bozelli stated that they entered into a six-month trial period where IMD would compare the quality of this quant firm’s trading execution versus TRS’ trading. At the end of the trial period, it was discovered that TRS’ internal team significantly outperformed this quant team. Mr. Bozzelli then reviewed the 2019 accomplishments and the 2020 priorities.

6. Annual Update on the Risk Group – James Nield.

Mr. James Nield began his annual update by discussing the Risk Group’s three key mandates: risk management, portfolio management and strategies. Mr. Nield then discussed the six key activities related to their first mandate of risk management. He gave an update on the performance of all the mandates and key activities on benchmarks and strategic asset allocations. Mr. Nield reported on the mix of internal and external risk parity. Mr. Nield concluded by discussing four key priorities for next year: implementation alpha, integrating the portfolio and risk management activities; a certification program; a joint project with the operations group; and strategy innovation.

7. Annual Update on the Multi-Asset Strategies Group – Mohan Balachandran.

Mr. Mohan Balachandran began his annual update reviewing the groups functions. He described the performance of the three portfolios they run: quantitative equity portfolio, alternative risk premia portfolio and special opportunities portfolio. Mr. Balachandran discussed several projects underway to improve the processes and the portfolios. He highlighted the alternative risk premia portfolio and the illiquid credit allocation. Mr. Balachandran concluded by discussing the Vision 2020 initiative where the group is working on improvements in the quantitative equity platform.

8. Assessment of TRS Quantitative Equity Portfolio – Steve Voss, Aon Hewitt. Mr. Steve Voss gave an overview of the program review they performed, applying the same institutional underwriting standards that would apply to any third-party investment manager. He said the team, process, data or factors and performance were all reviewed in each of the three distinct areas that the quantitative equity team focuses on. He described the team as mighty but fairly small as compared to the institutional standard. Mr. Voss stated they are comforted by the process reviewed, that institutional standards are being used, robust data sets, reliance upon external partners.

9. Review of Proxy Voting at TRS – Joel Hinkhouse. Mr. Joel Hinkhouse, joined by Mr. Mark Albert and Ms. Heather Traeger. Mr. Hinkhouse explained that TRS’ proxy voting policy guides how TRS places its votes at public company stockholder meetings. He reflected that this last year, TRS voted 61,000 items at 5,000 distinct companies in which TRS holds stock. Mr. Hinkhouse stated the policy was up for review as required every three years under the policy review schedule. Mr. Hinkhouse read the mission statement and noted that the Board selects the proxy advisor and delegate to the CIO, who appoints a proxy committee to enact the policy. He stated that TRS’ votes are a key asset of the Trust and that votes by proxy are fiscally practical and sound. Mr. Hinkhouse summarized the review and stated there are no recommended changes to the policy or the procedures that support the policy at this time. He also reported the proxy advisor contract is set to expire in the fourth quarter of next year. He said they will begin the requisition process shortly and present the finalists to the Board in July 2020 to select the proxy advisor. There being no more business before the committee, the meeting adjourned at 1:55 p.m. APPROVED BY THE INVESTMENT MANAGEMENT COMMITTEE OF THE BOARD OF TRUSTEES OF THE TEACHER RETIREMENT SYSTEM OF TEXAS ON THE 16th DAY OF JULY 2020.

______________________________ _________________ Katherine H. Farrell Date Secretary of the TRS Board of Trustees

Investment Management Division

CIO Update

Jase AubyChief Investment Officer

July 2020

CIO UpdateIMD at a Glance

2

Priorities Our People

Snapshot as of July 2020IMD FTEs 186Shared-Services 12Contractors 18Secondees 5

Activity Phase I Phase IIHired 29 10Interviewing 2 2Pipeline 1 19

32 31

Source: TRS IMD

Key Dates and Upcoming Events

Event Location DatesManagement Committee Annual Offsite Talent Review

Austin September 2-3, 2020

• Total Trust. Managed liquidity, rebalancing, and opportunistic investing through the COVID Crisis

• Return to Office. Launched Return to Office program for the IMD with small initial presence

• Strategic Asset Allocation (SAA). Evaluated US Treasury benchmark in light of historic move in bond yields

• SPN Summits. Hosted virtual public and private SPN Summits to discuss portfolio performance and market insights

• CIO Fireside Chats. Holding team-level sessions to answer questions from employees and inform of key Trust priorities

• Outreach. Engaged with TRS members by recording CIO video message focused on stability of Trust throughout pandemic

• Recruiting and Talent Management Activities.

o Recruiting. Agency-wide pause on Fleet 2 hiring; actively hiring for 5 critical open positions

o Diversity Programs. Preparing to launch two new Employee Resource Groups (ERG) – African American ERG and Women of IMD ERG

o Intern Program. Virtual/Onsite internship program begins July 1st with eleven candidates across IMD

o Accessing Performance. 360 review process started in June; MC annual offsite talent review scheduled for September

o SPN Exchange. Exchange program postponed; decision to re-schedule will be made in Fall of 2020

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Jan Feb Mar Apr May Jun

S&P 500 Performance (% Cumulative Return)Year To Date 6/30/2020

S&P 500

CIO UpdateMarkets have staged a historic “V” shaped drawdown and recovery

3

Peak to Trough(2/19 - 3/23)

S&P 500 -33.8%

Recovery(3/24 - Present)

S&P 500 +39.3%

YTD:-3.1%

• Historic drawdown and recovery.• The S&P 500 troughed on March 23rd after falling

-34% in 23 trading days…

• …and subsequently rose by +39% to end the second quarter

• Key drivers powering the rally.• Substantial monetary and fiscal stimulus enacted

by the Fed and Congress

• Plateau and decline of new coronavirus cases in major economic regions

• Largest 5 stocks by market cap lifted the S&P 500 while average stocks lagged

• Improved sentiment and optimism around the reopening of the economy

Source: Bloomberg

CIO UpdateYear To Date Market Returns

4Source: Bloomberg

Gre

ece

Eq.

WTI

Braz

il Re

alSp

ain

Eq.

Mex

ican

Pes

oLi

ve C

attle

Italy

Eq.

UK

Eq.

Braz

il Eq

.N

at G

asFr

ance

Eq.

Russ

ian

Rubl

eCo

rnCo

tton

Russ

ia E

q.W

heat

NA

HYSu

gar

Mex

ico

Eq.

Indi

a Eq

.Au

stra

lia E

q.Al

umin

umSo

ybea

nHo

ng K

ong

Eq.

Nic

kel

Cana

da E

q.Ja

pan

Eq.

Ger

man

y Eq

.G

BPIn

dian

Rup

eeSo

uth

Afric

a Eq

.Eu

rope

Xov

erCA

DEM

Cre

dit

Sout

h Ko

rean

Won

Kore

a Eq

.Ta

iwan

Eq.

Copp

erU

SA E

q.AU

DCh

ina

Renm

inbi

Fran

ce B

.Eu

rope

Cre

dit

Japa

n B.

NA

IGEU

REu

rope

ILB

JPY

Italy

B.

CHF

Ger

man

y B.

Chin

a B.

Aust

ralia

ILB

Silv

erCh

ina

Eq.

Braz

il IL

BU

K IL

BU

K B.

Aust

ralia

B.

US

ILB

Cana

da B

.U

S B.

Gol

d

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Calendar Year YTD 2020 Asset Class PerformanceJanuary 1, 2020 - June 30, 2020 • Local • Percent (%)

Dev Equity EM Equity Bonds Currency Commodities Credit ILB Q1 2020

Only 27% of global assets have YTD positive returns as 6/30/2020

0

500

1,000

1,500

2,000

2,500

3,000

3,500

200

300

400

500

600

Jan-01 Jan-05 Jan-09 Jan-13 Jan-17 Jan-21

Strong recovery in May retail sales

US Recession Retail Sales $B (LHS) S&P 500 Price (RHS)

CIO UpdateEffects of the economic reopening are beginning to take shape

5Source: Goldman Sachs (LHS as of June 1, 2020), US Census Bureau, Bloomberg

The impact of COVID lockdowns and restrictions drastically impacted global economic output…

…However early indicators show supporting signs of a first stage recovery and a much faster rebound than the last US recession (GFC)

+18% increase in May

Impact on global real GDP

CIO UpdateNumerous global macro and health headwinds remain

6

Ongoing Uncertainties and Risks

• Infections and Medical Developments. Current US resurgence in new cases and potential of a second wave. Unknown timing of a successful therapeutic or scalable vaccine

• Strength and Speed of Reopening. Consumer confidence levels are improving but still suppressed

• Corporate Earnings and Restructuring. Higher leverage levels, muted earnings, and zero-based budgeting could sacrifice innovation and growth

• Trade Implications. Risk of deterioration to overall global trade, especially progress of the US and China trade deal

• Election Year. Outcome of US election could result in major policy and/or corporate tax reform

Source: Bloomberg, John Hopkins University, World Health Organization (WHO), as of 6/30/2020

Metrics ReportingAs of March 31, 2020

Metric Objective Target Q4 2019 Q1 2020

Total Trust Excess Return Return in excess of the benchmark return for the Total Trust (3 Year Rolling) +100 bp +36 bp -9 bp

Private Markets Excess Return Return in excess of the benchmark return for Private Markets investments (3 Year Rolling) +155 bp +215 bp +173 bp

Active Public Markets Excess Return

Return in excess of the benchmark return for Active Public Markets investments (Annualized Since October 2017) +100 bp -74 bp -126 bp

Principal Investments Percent of portfolio capital plan in principal investments approved (cumulative year-to-date)12019: 35%2020: 38% 2019: 41% YTD: 13%

Public Equity Allocation Percent of internal public equity allocation 45% 47% 50%

Estimated Net Fee Savings External manager annual net fee savings

22018: $53M2019: $64M2020: $80M

2018: $46M2019: $65M

2020: To be reported April 2021

1 – Q4 represents actual capital commitments vs. approvals and actual capital plan vs. budgeted plan2 – CY2019 annual fee savings presented net of inception to date marginal direct and overhead costs attributed to employees hired as part of the Building the Fleet initiative

Source: State Street Bank, TRS IMDNote: Data shown as calendar-year 7

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company

Nothing in this document should be construed as legal or investment advice. Please consult with your independent professional for any such advice. To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Aon.

Teacher Retirement System of TexasPerformance Review: First Quarter 2020

Proprietary & Confidential Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 2

Summary

The decade-long bull market run came to an abrupt halt during the first quarter as the COVID-19 outbreak in China turned into a global pandemic which led to a large sell-off in the equity markets as global equities returned -22.4% for the quarter.

The U.S. nominal yield curve shifted downwards over the quarter as the combination of economic damage caused by the Pandemic and the response of easing monetary policy caused yields to fall across the curve, resulting in the positive returns shown for the Stable Value component

TRS returned -8.3% for the quarter which was 0.9 percentage points below its benchmark− Active management within Public Equities was the primary detractor from performance, as was underperformance within

Stable Value and Risk Parity.

For the trailing twelve months, TRS returned -0.4% versus the benchmark return of +0.7%− Active management in Total USA and Non-U.S. Developed, along with ENRI and Risk Parity performance were the primary

detractors from relative results

-16.2%

13.9%

1.0%

-14.1%-6.7%

23.0%

4.0%

-4.5%-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Global Equity PolicyBenchmark

Stable Value PolicyBenchmark

Real Return Policy Benchmark Risk Parity Benchmark

First Quarter One-Year


1. Market Summary – First Quarter 2020


2. Market Value Change


3. Asset Allocation DetailMarket Value $ in millions)

as of 03/31/2020 InterimPolicyTarget

Relative toInterimPolicy Target

Long TermPolicy Target

Long TermPolicy

Ranges($) (%)Investment Exposure -- 106% 104% +2% 104.0% 99-115%Total U.S.A. $23,068 15.6% 19.3% -3.8% 18.0 13-23%Non-U.S. Developed $19,178 13.0% 13.4% -0.5% 13.0 8-18%Emerging Markets $13,217 8.9% 9.0% -0.1% 9.0 4-14%Private Equity $23,650 16.0% 13.8% +2.2% 14.0 9-19%Global Equity $79,113 53.4% 55.6% -2.1% 54.0 47-61%Government Bonds $22,490 15.2% 16.4% -1.3% 16.0 0-21%Stable Value Hedge Funds $7,259 4.9% 5.0% -0.1% 5.0 0-10%Absolute Return (including OAR) $5,573 3.8% 0.0% +3.8% 0.0 0-20%Stable Value $35,322 23.9% 21.4% +2.4% 21.0 14-28%Real Estate $22,348 15.1% 13.5% +1.6% 15.0 10-20%Energy, Natural Resource and Inf. $8,838 6.0% 5.5% +0.4% 6.0 1-11%Commodities $196 0.1% 0.0% +0.1% 0.0 0-5%Real Return $31,382 21.2% 19.0% +2.2% 21.0 14-28%Risk Parity $11,180 7.5% 8.0% -0.5% 8.0 0-13%Risk Parity $11,180 7.5% 8.0% -0.5% 8.0 0-13%Cash $4,337 2.9% 2.0% +0.9% 2.0 0-7%Asset Allocation Leverage -$13,251 -8.9% -6.0% -2.9% -6.0 --Net Asset Allocation -$8,915 -6.0% -4.0% -2.0% -4.0 --Total Fund $148,082 100.0% --- 100.0% --

Note: Asset allocation information shown above is based upon PureView reporting. The excess returns shown above may not be a perfect difference between the actual and benchmark returns due entirely to rounding.


4. Total TRS Performance Ending 03/31/2020


5. Total Fund Attribution – One Quarter Ending 03/31/2020


5. Total Fund Attribution – One Year Ending 03/31/2020


6. Risk Profile: Total Fund Risk-Return vs. Peers

Note: Public Plan peer group composed of 40 and 40 public funds with total assets in excess of $10B as of 03/31/2020 respectively for the periods above. An exhibit outlining the asset allocation of the peer portfolios is provided in the appendix of this report.


6. Risk Profile: Trailing 3-Year and 5-Year Risk Metrics Peer Comparison


7. Global Equity: Performance Summary Ending 03/31/2020

Note: The excess returns shown in this presentation may differ from State Street statements due entirely to rounding. These differences are generally within a few basis points and are not material.

First Quarter One Year

ThreeYears

Total Global Equity -16.7% -8.2% 2.7%Global Equity Benchmark -16.2 -6.7 3.6Difference -0.5 -1.6 -0.9Total U.S. Equity -23.7 -14.3 1.1Total U.S. Equity Benchmark -20.9 -9.2 4.0Difference -2.7 -5.1 -3.0Non-U.S. Equity -23.2 -15.9 -1.9Non-U.S. Benchmark -23.3 -15.9 -1.8Difference +0.1 0.0 -0.1Non-U.S. Developed -23.3 -15.8 -2.4MSCI EAFE + Canada -23.2 -14.8 -2.0Difference -0.1 -1.0 -0.3

Emerging Markets -23.0 -16.2 -1.3MSCI Emerging Markets -23.6 -17.7 -1.6

Difference +0.6 +1.5 +0.3

Five Years

Ten Years

3.7% 6.6%4.3 6.6

-0.6 -0.1

3.4 8.45.8 10.1

-2.5 -1.8

-0.2 2.3-0.5 1.9

+0.3 +0.5

-0.8 3.1-0.7 2.4

-0.1 +0.6

0.4 1.4

-0.3 0.7

+0.8 +0.7


7. Global Equity: Performance Summary Ending 03/31/2020 (cont’d)First

Quarter One YearThree Years

Five Years

Ten Years

Total Public Equity -23.4 -15.3 -0.9 1.1 4.7

Public Equity Benchmark -22.2 -13.0 0.5 2.0 5.1

Difference -1.1 -2.3 -1.4 -0.9 -0.5

Total Private Equity 3.9 13.0 13.2 11.9 13.9

Private Equity Benchmark 3.5 13.7 13.1 11.6 11.9

Difference +0.4 -0.6 +0.1 +0.3 +2.0



8. Stable Value: Performance Summary Ending 03/31/2020First

QuarterOne Year

Three Years

Total Stable Value 11.7% 20.7% 9.9%Total Stable Value Benchmark 13.9 23.0 10.2

Difference -2.2 -2.3 -0.3

Total Government Bonds 21.2 34.3 14.3

Treasury Benchmark 20.9 32.6 13.4


Stable Value Hedge Funds -4.4 -0.9 2.6

Hedge Funds Benchmark -7.2 -4.3 0.2


Other Absolute Return -3.6 4.6 5.1

Other Absolute Return Benchmark 0.9 4.1 4.1

Difference -4.5 +0.5 +1.0Note: The excess returns shown in this presentation may differ from State Street statements due entirely to rounding. These differences are generally within a few basis points and are not material.

Five Years

Ten Years

6.1% 8.0%5.8 7.3

+0.3 +0.6

7.1 9.6

7.3 9.0

-0.2 +0.6

3.0 3.40.4 2.2

+2.5 +1.1

4.8 9.8

3.5 2.9

+1.3 +6.9


9. Real Return: Performance Summary Ending 03/31/2020First

QuarterOne Year

Three Years

Five Years

Ten years

Total Real Return 0.5% 5.8% 7.8% 7.9% 8.8%Real Return Benchmark 1.0 4.0 5.3 6.0 7.9

Difference -0.5 +1.8 +2.5 +1.9 +0.9

Real Estate 2.6 8.9 10.6 10.8 12.3

Real Estate Benchmark 1.3 4.4 6.1 8.0 10.4

Difference +1.3 +4.5 +4.4 +2.8 +1.9Energy, Natural Resource and Infrastructure

-3.7 -1.3 4.5 -- --

Energy and Natural Res. Benchmark 0.5 2.0 5.4 -- --

Difference -4.2 -3.2 -0.9 -- --



10. Risk Parity: Performance Summary Ending 03/31/2020First

QuarterOne Year

Three Years

Five Years

Ten years

Total Risk Parity -18.5% -8.9% 1.5% 1.9% --

Risk Parity Benchmark -14.1 -4.5 2.8 2.3 --

Difference -4.4 -4.4 -1.4 -0.4 --



11.Cash Equivalents: Performance Summary Ending 03/31/2020First

QuarterOne Year

Three Years

Cash Equivalents 0.1% 1.3% 2.1%

Cash Benchmark 0.6 2.3 1.8

Difference -0.4 -0.9 +0.3


Five Years

Ten Years

1.8% 1.6%

1.2 0.6

+0.6 +1.0


Appendix – Supplemental Reporting


TRS Commitment Levels vs. Peers (>$10 Billion) as of 03/31/2020

Note: The Public Plan peer universe had 40 observations for the first quarter 2020. TRS allocations may not sum to 100.0% which is entirely due to the impact of rounding

The chart below depicts the asset allocation of peer public funds with assets greater than $10 billion.

− The ends of each line represent the 95th and 5th percentile of exposures, the middle light blue and grey lines represent the 25th and 75th percentile of exposures, the purple square represents the median, and the green dot represents TRS exposure.


Historical Excess Performance Ending 03/31/2020

Quarterly and Cumulative Excess Performance Total Fund vs. Total Fund Benchmark


TRS Asset Growth

0

20

40

60

80

100

120

140

160

Mar

ket V

alue

(Billi

ons)

Total Fund Historical Growth (September 1997 - March 2020)

$148.1


External Manager Program: Public Equity Performance as of 03/31/2020

Allocation ($ in

billions)

FirstQuarter

OneYear

EP Total Global Equity $20.7 -23.1% -14.1%EP Global Equity Benchmark -- -19.2 -11.1Difference -- -3.8 -3.1EP U.S.A. $7.6 -23.2 -13.8EP U.S.A. Benchmark -- -20.9 -9.2Difference -- -2.3 -4.6EP Non-U.S. Developed $4.0 -22.1 -11.8MSCI EAFE + Canada Policy Index -- -23.3 -14.8Difference -- +1.1 +3.0EP Emerging Markets $4.1 -23.5 -15.7MSCI Emerging Markets Policy Index -- -23.6 -17.7Difference -- +0.1 +2.0EP World Equity $5.0 -23.1 -13.2EP World Equity Benchmark -- -21.3 -10.9Difference -- -1.8 -2.3


Three Years

-0.7%+0.8-1.51.14.0-2.9-0.9-2.0+1.1-1.4-1.6+0.21.01.8-0.8


External Manager Program: Stable Value/Total Program Performance as of 03/31/2020

Allocation ($ in

billions)

FirstQuarter One Year

Three Years

EP Total Stable Value $7.3 -4.4% -0.9% 2.5%EP Stable Value Benchmark -- -7.2 -4.3 0.2Difference -- +2.8 +3.4 +2.3EP Stable Value Hedge Funds $7.3 -4.4% -0.9% 2.6%

EP Stable Value Hedge Funds Benchmark ---7.2 -4.3 0.2

Difference -- +2.8 +3.4 +2.3Total External Public Program $27.9 -18.9 -10.9 0.3EP External Public Benchmark -- -18.2 -10.6 0.6Difference -- -0.6 -0.4 -0.3



Public Strategic Partnership Program (SPN): Performance Summary as of 03/31/2020

The Public SPNs in aggregate underperformed the benchmark during the first quarter, over the trailing one year period and over the trailing three-year period.

Allocation ($ in

billions)

FirstQuarter

OneYear

Three Years

Five Years

Public Strategic Partnership $8.0 -13.8% -4.3% 3.6% 3.3%Public SPN Benchmark -- -10.7% -0.9% 4.5% 4.2%Difference -- -3.1 -3.4 -0.9 -0.8

Blackrock $2.1 -12.4% -2.9% 5.0% 4.7%J.P. Morgan $2.1 -13.2% -3.8% 3.1% 3.4%Neuberger Berman $1.9 -13.0% -3.0% 3.9% 3.2%Morgan Stanley $1.9 -16.9% -7.8% 2.5% 2.1%



Total Fund Performance Benchmark – 19.3% MSCI U.S.A. IMI, 13.4% MSCI EAFE plus Canada Index, 9.0% MSCI Emerging Markets Index, 13.8% State Street Private Equity Index (1 quarter lagged), 16.4% Blmb. Barc. Long Term Treasury Index, 5.0% HFRI FoF Conservative Index, 2.0% Citigroup 3 Mo. T-Bill Index, 13.5% NCREIF ODCE Index (1 quarter lagged), 5.5% Energy and Natural Resources Benchmark, 8.0% Risk Parity Benchmark, and -6.0% Asset Allocation Leverage Benchmark.

Global Equity Benchmark – 34.8% MSCI U.S.A. IMI, 24.2% MSCI EAFE plus Canada Index, 16.2% MSCI Emerging Markets Index, and 24.8% State Street Private Equity Index (1 quarter lagged)– TF U.S. Equity Benchmark - MSCI U.S.A. Investable Markets Index (IMI)– Emerging Markets Equity Benchmark – MSCI Emerging Markets Index– Non-US Developed Equity Benchmark– MSCI EAFE + Canada Index– Private Equity Benchmark - State Street Private Equity Index (1 quarter lagged)

Benchmarks

Note: Returns and market values (based on account level) reported are provided by State Street. Net additions/withdrawals are reported on a gross (adjusted for expenses) total fund level as provided by State Street. All rates of return for time periods greater than one year are annualized. The excess returns shown in this presentation may differ from State Street statements due entirely to rounding. These differences are generally within a few basis points and are not material.


Benchmarks (cont’d) Stable Value Benchmark – 76.7% Blmb. Barc. Long Term Treasury Index and 23.3% HFRI FoF Conservative Index

– US Treasuries Benchmark – Bloomberg Barclays Long Term Treasury Index– Stable Value Hedge Funds – HFRI Fund of Funds (FoF) Conservative Index– Other Absolute Return Benchmark - 3 Mo. LIBOR + 2%– Cash Benchmark - Citigroup 3 Mo. Treasury Bill Index

Real Return Benchmark – 70.9% NCREIF ODCE Index and 29.1% Energy & Natural Resources Benchmark– Real Estate Benchmark – NCREIF ODCE Index (1 quarter lagged) – Energy and Natural Resources Benchmark – 75% Cambridge Associates Natural Resources Index (reweighted) and 25%

quarterly Seasonally-Adjusted Consumer Price Index (1 quarter lagged) – Commodities Benchmark – Goldman Sachs Commodity Index

Note: Returns and market values (based on account level) reported are provided by State Street. Net additions/withdrawals are reported on a gross (adjusted for expenses) total fund level as provided by State Street. All rates of return for time periods greater than one year are annualized. The excess returns shown in this presentation may differ from State Street statements due entirely to rounding. These differences are generally within a few basis points and are not material.


Description of Performance Attribution A measure of the source of the deviation of a fund's performance from that of its policy benchmark. Each bar on the attribution

graph represents the contribution made by the asset class to the total difference in performance. A positive value for a component indicates a positive contribution to the aggregate relative performance. A negative value indicates a detrimental impact. Themagnitude of each component's contribution is a function of (1) the performance of the component relative to its benchmark, and (2) the weight (beginning of period) of the component in the aggregate.

The individual Asset Class effect, also called Selection Effect, is calculated as Actual Weight of Asset Class x (Actual Asset Class Return – Asset Class Benchmark Return)

The bar labeled Allocation Effect illustrates the effect that a Total Fund's asset allocation has on its relative performance. Allocation Effect calculation = (Asset Class Benchmark Return –Total Benchmark Return) x (Actual Weight of Asset Class –Target Policy Weight of Asset Class).

The bar labeled Other is a combination of Cash Flow Effect and Benchmark Effect:– Cash Flow Effect describes the impact of asset movements on the Total Fund results. Cash Flow Effect calculation = (Total

Fund Actual Return – Total Fund Policy Return) – Current Selection Effect – Current Allocation Effect– Benchmark Effect results from the weighted average return of the asset classes' benchmarks being different from the Total

Funds’ policy benchmark return. Benchmark Effect calculation = Total Fund Policy Return – (Asset Class Benchmark Return x Target Policy Weight of Asset Class)

Cumulative EffectCumulative Effect calculation = Current Effect t *(1+Cumulative Total Fund Actual Return t-1) +Cumulative Effect t-1*(1+Total Fund Benchmark Return t)


Disclaimers and Notes


Disclaimers and NotesDisclaimers:

Please review this report and notify Aon Investments USA Inc. (Aon) with any issues or questions you may have with respect toinvestment performance or any other matter set forth herein.

The client portfolio data presented in this report have been obtained from the custodian. Aon has compared this information to the investment managers’ reported returns and believes the information to be accurate. Aon has not conducted additional audits and cannot warrant its accuracy or completeness. This document is not intended to provide, and shall not be relied upon for, accounting and legal or tax advice.

Refer to Hedge Fund Research, Inc. www.hedgefundresearch.com for more information on HFR indices

Notes:

The rates of return contained in this report are shown on an after-fees basis unless otherwise noted. They are geometric and time weighted. Returns for periods longer than one year are annualized.

Universe percentiles are based upon an ordering system in which 1 is the best ranking and 100 is the worst ranking.

Due to rounding throughout the report, percentage totals displayed may not sum up to 100.0%. Additionally, individual fund totals in dollar terms may not sum up to the plan totals.

http://www.hedgefundresearch.com/

FootnoteInvestment advice and consulting services provided by Aon Investments USA Inc. 29

Legal Disclosures and Disclaimers

Investment advice and consulting services provided by Aon Investments USA Inc. The information contained herein is given as of the date hereof and does not purport to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information set forth herein since the date hereof or any obligation to update or provide amendments hereto.

This document is not intended to provide, and shall not be relied upon for, accounting, legal or tax advice. Any accounting, legal, or taxation position described in this presentation is a general statement and shall only be used as a guide. It does not constitute accounting, legal, and tax advice and is based on Aon Investments’ understanding of current laws and interpretation.

Aon Investments disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Investments reserves all rights to the content of this document. No part of this document may be reproduced, stored, or transmitted by any means without the express written consent of Aon Investments.

Aon Investments USA Inc. is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aon Investments is also registered with the Commodity Futures Trading Commission as a commodity pool operator and a commodity trading advisor, and is a member of the National Futures Association. The Aon Investments ADV Form Part 2A disclosure statement is available upon written request to:

Aon Investments USA Inc.200 E. Randolph StreetSuite 700Chicago, IL 60601ATTN: Aon Investments Compliance Officer

© Aon plc 2020. All rights reserved.


Private Markets

Eric Lang, Senior Managing Director

July 2020


Overview

• Philosophy• Private Markets Role in the Trust• COVID-19 Update• Building the Fleet Status• TRICOT Update• Strategic Partnerships• Accomplishments and Priorities

2

Private Markets Philosophy

3

• Culture and Team: Demonstrating the TRS IMD culture through collaboration, openness, candor and meritocracy of ideas. Hire and retain great investors for internal capabilities

• World Class Investors through Partnership: Being the partner of choice for our managers using speed, consistency, predictability, and our people

• Transparency: Using improved transparency through reporting and communication both internally and externally

• Innovate: Utilizing unique partnership and investment structures. Focus on technology and data. Always evolving

• Value Driven: Finding value where others are not looking

• Industry Leadership: Maintaining industry leadership roles across all private asset classes

Private Markets Role in the TrustExecutive Summary ($M)

4

Source: State Street based on 12/31/19 valuations for IRR calculation and 3/31/20 cash adjusted valuations for TWR calculation; Activity based on TRS IMD dataNote: ENRI TWR reflects ENR performance from 10/01/13 through 9/30/2016 and ENRI (ENR plus Infrastructure) from 10/01/16 through 3/31/20 Note: ENRI IRR reflects performance from fund investments initially transferred to ENRI portfolio (inception date: 10/28/04)Note: Approval activity does not include Emerging Managers. Capital Plan Impact does include Emerging Managers. Principal Investment Vehicles (PIVs) and rebalances typically do not have an impact on the Capital Plan

PRINCIPAL INVESTMENTS (“PI”) PERFORMANCE

Portfolio Market Value% of

PortfolioNo.

(active)1-YearTWR

3-YearTWR

5-YearTWR

1-YearIRR

3-YearIRR

5-YearIRR

SIIRR

ENRI $ 3,058 34.7% 30 (1.2%) 6.3% 6.9% (1.9%) 5.1% 7.2% 10.4%Private Equity 6,751 28.6% 66 10.3% 14.7% 12.0% 12.1% 15.1% 12.8% 16.5%Real Estate 11,316 50.3% 93 10.5% 12.5% 13.0% 11.2% 12.6% 13.1% 15.5%Total $21,125 38.5% 189 8.3% 12.2% 11.9% 9.3% 12.3% 12.2% 15.2%

PORTFOLIO PERFORMANCE

Portfolio Market Value% of Trust

1-YearTWR

3-YearTWR

5-YearTWR

1-YearIRR

3-YearIRR

5-YearIRR

SIIRR

SAAMedian Return

Premier List Invested

ManagersEnergy, Natural Resources & Infrastructure (“ENRI”) $ 8,809 5.4% (1.3%) 4.5% 2.2% 1.6% 5.0% 5.7% 5.8% 7.3% 23Private Equity 23,565 14.5% 13.0% 13.2% 11.9% 13.4% 13.5% 11.6% 13.1% 8.4% 38Real Estate 22,483 13.8% 8.9% 10.6% 10.8% 9.5% 10.7% 10.7% 9.1% 8.5% 43Total $54,857 33.7% 8.9% 10.7% 10.4% 9.8% 11.0% 10.4% 10.7% 8.3% 87

2019 APPROVAL ACTIVITYNUMBER OF INVESTMENTS APPROVED

Portfolio Funds PIs TotalENRI 7 15 22Private Equity 15 49 64Real Estate 18 95 113Total 40 159 199

2019 APPROVAL ACTIVITYAMOUNT OF INVESTMENTS APPROVED

Portfolio Funds PIs TotalENRI $1,050 $598 $1,648 Private Equity 2,970 1,059 $4,030Real Estate 3,185 2,998 $6,183Total $7,205 $4,656 $11,861

2019 CAPITAL PLAN IMPACTAMOUNTS

Portfolio Funds PIs Total % PIENRI $1,075 $598 $1,673 36%Private Equity 2,881 898 3,796 24%Real Estate 2,459 2,851 5,310 54%Total $6,415 $4,347 $10,779 40%

Private Markets Role in the TrustPortfolio Detail Returns

5

Source: State Street based on 12/31/19 valuations for IRR calculation and 3/31/20 cash adjusted valuations for TWR calculation; Activity based on TRS IMD dataNote: ENRI TWR reflects ENR performance from 10/01/13 through 9/30/2016 and ENRI (ENR plus Infrastructure) from 10/01/16 through 3/31/20 Note: ENRI IRR reflects performance from fund investments initially transferred to ENRI portfolio (inception date: 10/28/04)Note: Approval activity does not include Emerging Managers. Capital Plan Impact does include Emerging Managers. Principal Investment Vehicles (PIVs) and rebalances typically do not have an impact on the Capital Plan

PORTFOLIO PERFORMANCE

Portfolio Measure1-YearReturn

3-YearReturn

5-Year Return Comments

ENRI IRR 1.6% 5.0% 5.7% • Performance has been challenged due to an overweight to energy component of the portfolio; in addition 20% to CPI has elevated benchmark in a down market

• The TWR includes valuations through 1Q2020 for the public energy portfolio• Infrastructure has helped the portfolio• ENRI does not have a TUCs Peer comparison

TWR (1.3%) 4.5% 2.2%

Benchmark 2.0% 5.4% 0.9%

Excess Return (3.3%) (0.9%) 1.3%

Private Equity IRR 13.4% 13.5% 11.6%• Achieved attractive absolute returns across all time periods• PE was top decile against peers (and was the top-rated Fund on 10-yr returns)• The benchmark is also top decile among peers across all time periods• Principal Investments continue to outperform Funds over longer time periods, but

underperformed on a one-year basis

TWR 13.0% 13.2% 11.9%

Benchmark 13.7% 13.1% 11.6%

Excess Return (0.6%) 0.1% 0.3%

TUCS Peer (Percentile) 2nd 10th 7th

Real Estate IRR 9.5% 10.7% 10.7% • Achieved attractive absolute returns across all time periods • Funds outperformed the ODCE benchmark by at least 450 bps on a 1 and 3-yr basis • PIs outperformed Funds by at least 300 bps over all time periods• Excess return has been exceptional over all time periods• Performance was top quartile versus peers across all time periods

TWR 8.9% 10.6% 10.8%

Benchmark 4.4% 6.1% 8.0%

Excess Return 4.5% 4.5% 2.8%

TUCS Peer (Percentile) 22nd 14th 14th

COVID-19 Update

• The IMD started working from home on March 16• 1Q 2020 preliminary returns are negative

o ENRI: down ~ 14.9%o PE: down ~11.9%o RE: down ~2.7%

• We expect a recovery in some returns in 2Q 2020 with the public market rebound

• We have had 500 interactions logged with our partners from March thru May which is double the previous 3 months• Top items learned

o New investment activity, except recapitalizations, came to a standstillo We are all in same situation and all systems workedo General Partners have been open and transparent

• Conducted the first virtual SPN Summit

• The teams have completed a deep dive review on all assets that have adverse exposure to the current environment and continue close monitoringo Real Estate has developed the Real Estate Asset Risk Monitor (“REARM”)o Private Equity has completed deep dive on all its principal investments (“PI Tracker”)o ENRI has been focused not only on the COVID crisis, but the energy crisis as wello We have reviewed all our exposures to assets that have adverse exposure to the current environment

• There has been limited activity for new principal investmentso As a reminder, we completed the first signature transaction after the Global Financial Crisis in June 2009 which was 10 months

after Lehman failedo We will be challenged to achieve our principal investment goals for 2020

COVID-19 Update

6

• Fleet hiring:o Hired 9 new team members for fleet through 2019 with an additional 5 hired or identified to date

for 2020• We continue our successful intern program

• Asset level Investment Committeeso Reviewing and approving all investments prior to Internal Investment Committeeo Approving “small deals” principal investmentso Approving opt-out investments in principal investment vehicles

• Achieving Build the Fleet savings through Principal Investmentso Over 40% of investments were Principal Investmentso 2019 Goal was 35%

• TRS London Officeo Targeting local hireso Increasing relationship management to include fund investments over next 5 years

• Integrated the Private Market Strategic Partnership

Building the Fleet

7

To be the preferred destination for all

attractive investment opportunities with our

partners in Europe

To provide alpha, diversification and deep, local market knowledge

to the Trust through investing in European

markets

Mission

Vision

Source and execute accretive investments, and monitor / manage

them actively

Develop strong, meaningful relationships

with all market participants

Develop local market knowledge to develop proactive viewpoints and

manage risks appropriately

Replicate the TRS culture and values, and integrate

into the broader Trust

Communicate effectively with Austin HQ and develop a strong

feedback loop

Focus on the European market,

not just the UK

TRICOTTRS London

8

This slide was intentionally left blank.

2019 ACCOMPLISHMENTS 2020 PRIORITIES

• Build the Fleeto Fleet Hiring

o Conduct first Boot Camp

o Review and update EPM Procedures and Guidelines

• Implement successful integration of Private SPN relationships and former SPR team members

• Work with Investment Accounting and Operations on Fee Validation

• Support data analytics initiatives

• Generated 9.8% 1-Year IRR and 11.0% 3-year for all of Private Marketso 9.3% 1-year IRR and 12.3% 3-year IRR for all

Principal Investments

• Fleet Hiring• 40% of Capital Plan in Principal Investmentso Estimated $61 million in management fee

savings since Building the Fleet

• Capital plan impact of approximately $10.5 billiono $6.2 billion to Fundso $4.3 billion to Principal Investments

Summary

Source: State Street as of 12/31/19 valuations10

Appendix

Private Markets OverviewOrganizational Structure

Note: TRS PE leverages a Blackrock secondee in London

TRICOT – TRS LONDON

Kimberly CareyTRICOT LeadInvestment Manager, REBBA, Texas A&M

Haley TrainorSr. Associate, REBS, Northwestern

PRIVATE MARKETS DATA ANALYTICS AND SUPPORT

Tim KoekSr. Investment ManagerBA, Griffith University LLB, Griffith University

Melissa KleihegeAnalystBS, Texas A&M

Jeff StaffordAssociateBS, Pepperdine University, Canberra

Barbara Woodard, CPASr. AssociateBBA, Texas A&M

Eric LangSr. Managing DirectorBBA, UT AustinMBA, U. of Houston

Neil RandallManaging Director BBA, Texas A&MMS, Texas A&M

Grant WalkerSr. DirectorBBA, BaylorMBA, St. Edwards

Carolyn HansardDirector BS, UT Austin MBA, UT Austin

Private Equity14% of Trust Benchmark

Real Estate15% of Trust Benchmark

Energy, Natural Resources, & Infra.6% of Trust Benchmark

Private Markets35% of Trust Benchmark

Sam ZedanSr. AnalystBA, U of Illinois

Nikhil MothukuriContractor B-Tech, JNTU, IndiaMS, U of Hartford

Sandra HindsContractor

Stephanie DaulAssociate, PEBBA, Texas State University

Alex HuangAnalystBS, New York University

Susan WhiteJr. AnalystBS, Penn State University

Justin WangInvestment Manager, PEBBA, UT Austin

12

Tyler KniskernContractorBBA, New Mexico State University

• Entering fourth year with solid results, sourcing principal investments throughout Europe

• Relocated office to better fit mission with added square footage with no additional cost

• Transitioned the leadership of the office• Developed the TRS London Office plan to be the

preferred destination for all investment opportunities with our partners in Europe

• Formed first investment in Real Estate Operating Companies

TRICOT SOURCING SUMMARY

FY 2019 FY 2018 FY 2017 FY 2016 TotalInvestment Opportunities 98 73 69 54 196Investments Executed 12 22 12 6 40

Capital Committed ($M) $331 $516 $476 $361 $1,353

TRICOT UpdateTRS London

14

Carolyn Hansard, Senior Director

July 2020

Energy, Natural Resources & Infrastructure (“ENRI”)


• ENRI in the Trust • 2019 Performance• Capital Plan• Market Conditions: ENRI trending towards a diversified portfolio• Summary: Accomplishments and Priorities

2

Overview

0%

3%

6%

9%ENRI % of Trust ENRI Target

Sept 2016: Infrastructure

transferred to ENR (+I)Sept 2013:

ENR established as a policy asset class

3Source: State Street as of 12/31/19Note: Per the TRS Investment Policy Statement, target allocation weights represent transitional benchmarks (2006-2014), long-term target allocations (2015-present)

Risk Parity 8%

ENRI6%

Global Equity54%

Stable Value21%

Risk Parity 8%

Net Asset Allocation Leverage (4%)

Real Return21%

ENRI TARGET % OF TRUST HISTORICAL TRUST ALLOCATION

5.4%

Role in the TrustEnergy, Natural Resources & Infrastructure (ENRI)

4

PORTFOLIO STRATEGY SUMMARY

StrategyTarget Portfolio

Weight % of Portfolio Investment Returns12/31/2019 12/31/2016 Change 1-Year TWR 3-Year TWR SI IRR

Core 10-20% 2.0% 0.5% 1.5% (2.5%) (0.5%) (1.7%)Value-Add 50-70% 59.1% 63.7% (4.6%) 5.5% 7.6% 6.9%Opportunistic 20-30% 38.9% 35.8% 3.1% (10.3%) 0.2% 3.6%ENRI TOTAL 100% 100.0% 100.0% 0.0% (1.3%) 4.5% 5.8%

Source: State Street based on 12/31/19 general partner valuations for IRR calculation and 3/31/20 cash-adjusted valuations for TWR calculationNote: SI IRR reflects performance from fund investments initially transferred to ENRI portfolio (inception date: 10/28/04)Note: TWR and Benchmark reflect ENR performance from 10/01/13 through 9/30/2016 and ENRI (ENR plus Infrastructure) from 10/01/16 through 3/31/20Note: Legal fees are included in the total aggregate IRR and TWR performance

PORTFOLIO PERFORMANCE PORTFOLIO GROWTH1-Year 3-Year 5-Year ENRI 1-Year 3-Year 5-Year

Asset Class Return Return Return Ending Value $8,809 $8,809 $8,809 ENRI IRR 1.6% 5.0% 5.7% less Starting Value 8,465 5,287 3,612 ENRI TWR (1.3%) 4.5% 2.2% less Contributions 1,522 5,532 8,360 ENRI Benchmark 2.0% 5.4% 0.9% plus Distributions 1,320 3,047 4,814 ENRI Excess Return (3.3%) (0.9%) 1.3% Investment Return $142 $1,037 $1,651

FUND AND PRINCIPAL INVESTMENTS PERFORMANCE

PortfolioMarket Value

% of Portfolio No. (active)

1-YearTWR

3-YearTWR

5-YearTWR

1-YearIRR

3-YearIRR

5-YearIRR SI IRR

Funds $5,751 65% 65 (1.1%) 3.7% 0.3% 3.6% 4.9% 5.1% 4.4%Principal Investments 3,058 35% 30 (1.2%) 6.3% 6.9% (1.9%) 5.1% 7.2% 10.4%ENRI TOTAL $8,809 100% 95 (1.3%) 4.5% 2.2% 1.6% 5.0% 5.7% 5.8%

PORTFOLIO SECTOR SUMMARY

SectorTarget Portfolio

Weight % of Portfolio Investment Returns12/31/2019 12/31/2016 Change 1-Year TWR 3-Year TWR SI IRR

Energy Diversified - 49.3% 49.0% 0.3% (8.3%) (0.7%) (0.6%)Infrastructure - 44.7% 42.9% 1.8% 8.1% 10.3% 11.4%Natural Resources - 6.0% 8.1% (2.1%) (0.2%) 9.5% 12.9%ENRI TOTAL 100% 100.0% 100.0% 0.0% (1.3%) 4.5% 5.8%

Performance Summary($M)

TOTAL ENRI PORTFOLIO VERSUS BENCHMARK

Performance TRS Vintage Year Comparison

Source: State Street as of 12/31/19; Cambridge Associates as of 12/31/19

• ENRI outperformed the benchmark six out of the last 11 years

• ENRI’s outperformance has totaled 460 bps on average

• ENRI’s underperformance has totaled 330 bps on average

18.0%

3.9%

(3.3%)

8.4% 7.9% 7.9% 8.0%5.4%

12.9%

9.0%

(3.6%)

6.9%

2.0%

5.6% 6.0%4.2%

8.5% 7.5% 6.4%5.1%

9.9%

1.5%

-10%

-5%

0%

5%

10%

15%

20%

25%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TRS Vintage Year SI IRR ENRI Benchmark Vintage Year SI IRR

5

• ENRI continues to focus on Principal Investments with increased transaction volumes through innovative structures

• Capital Plan impact of approximately $598 million in 2019

83% 76% 73% 80% 75% 71% 65% 65%

17% 24% 27% 20% 25% 29% 35% 35%

0%

25%

50%

75%

100%

2012 2013 2014 2015 2016 2017 2018 2019

Funds Principal Investments

60%

40%


Performance SummaryENRI Principal Investments Program

Source: State Street as of 12/31/19Note: Target is the long-term target for Principal Investments 6

PRINCIPAL INVESTMENT MARKET VALUE OVER TIME TARGET

Attractive (To Buyer) Unattractive (To Buyer) ENRI TRENDING TOWARDS A DIVERSIFIED PORTFOLIO

Industry Fundamentals

Public TransactionMultiples

Private TransactionMultiples

PE $ Raised

Capital Markets Availability

Energy TelecommunicationsTransportation

• Infrastructure assets have generally performed well during COVID crises with the exception of some transportation. Energy continues to experience volatile and uncertain outlook.

• Public/Private Trading Multiples Present Mixed Opportunities

• Abundant Private Capital and Dry Powder targeting Infrastructure. Energy continues to struggle with new capital formation.

• Capital Markets Availability Promotes Deal Activity; Energy Markets Closed

Market ConditionsENRI

Source: FactSet, Preqin, Industry Research 8

Power & Renewables

2019 ACCOMPLISHMENTS 2020 PRIORITIES

• Performanceo Overall, generated a 1.6% 1-year IRR and 5.0% 3-year IRR

o Principal Investments returned (1.9%) and 5.1%, for 1- and 3-year IRR periods, respectively

• Team Updateo Filled one position in 2019

o Filled three positions in 2020

• Allocationo Slightly below the 6% target (5.4%)

• Capital Plan Impacto Approximately $1.7 billion

– $1.1 billion to Premier List manager funds– $0.6 billion to Principal Investments

• Portfolio Constructiono Implemented risk framework for overall portfolio

• Commit approximately $2.0 billion with 35% in Principal Investments

• Strategic Partnerso Implement successful transition of KKR/Apollo relationships from

former SPR team to ENRI team

• Build the Fleeto Continue to be a preferred global destination for attractive

investmentso Maintain focus on Principal Investments by increasing GP

outreach and usage of Principal Investment Vehicleso Continue to build out ENRI team

• Portfolio Constructiono Implement risk assessment tool for principal investmentso Enhance portfolio-level data analytics

• Organizational Structureo Implement ENRI Investment Committeeo Fully integrate SPR team members

Summary: Accomplishments and PrioritiesENRI

Source: Performance data from State Street as of 12/31/19 9

Appendix

Carolyn Hansard*Sr. DirectorBS, UT AustinMBA, UT Austin

Mary BishopContractorBA, Southwestern UniversityMBA, Texas State University

Daniel Judd, CFA*Sr. Investment ManagerBBus, Griffith UniversityMBA, Bond University

Matt LenzAssociateBBA, UT Austin

Chris FuscoAssociateBA, Bates CollegeMSF, Villanova University

Ryan Zafereo*Sr. Investment ManagerBBA, UT Austin

Eric Chang*Sr. Investment ManagerBBA, UT Austin

Emerson HalsteadSr. AssociateBS, UT AustinMBA, Indiana University BloomingtonMA, Harvard University

DeMarius McKeeAssociateBS, UT Dallas

Maddie KurapatiAssociateBS, Osmania University, IndiaMS, Stanford UniversityMBA, UT Austin

Emiliano De Leon1AnalystBBA, UT San Antonio

OrganizationENRI Team

11* ENRI investment committee (ENRI IC) members; ENRI IC also includes Eric Lang1 Effective September 1, 2020

MARKET VALUE BY RISK PROFILE MARKET VALUE BY GEOGRAPHY

MARKET VALUE BY INDUSTRY DIVERSIFICATION

Value Add, 59%Opportunistic, 39%

Core, 2%

North America, 89%

Europe, 7% Other, 4%

13.8%

6.5% 5.5% 3.2% 1.2%

14.4%

3.5%2.6%

1.6%

8.2% 12.1%

8.2%4.7%

3.5%

1.9%5.9%

0%

10%

20%

30%

Upstream Midstream Power Transportation Agriculture OFS Telecom Other

Resources PI

Resources Funds

Infra PI

Infra Funds

Energy PI

Energy Funds

Portfolio CompositionENRI Snapshot

Source: State Street as of 12/31/19; General Partner reporting as of 9/30/19 12


Private Equity

Neil Randall, Managing Director

July 2020

Overview

• Private Equity in the Trust• 2019 Performance• Capital Plan• Market Conditions: Potential changes on the horizon• Spotlight: Portfolio Target Allocations• Summary: Accomplishments and Priorities

0%

2%

4%

6%

8%

10%

12%

14%

16%

PE % of Trust PE Transition Target

Risk Parity 8%

Role in the TrustPrivate Equity (PE)

Source: State Street as of 12/31/19Note: Per TRS Investment Policy Statement, target allocation weights represent transitional benchmarks (2006-2014), long-term target allocations (2015-present)

PE TARGET % OF TRUST HISTORICAL TRUST ALLOCATION

PE 14%

Global Equity54%

Real Return21%

Stable Value21%

14.5%

Risk Parity 8%


3

PORTFOLIO PERFORMANCE PORTFOLIO GROWTH

Asset Class1-Year Return

3-Year Return

5-YearReturn Private Equity 1-Year 3-Year 5-Year

Private Equity IRR 13.4% 13.5% 11.6% Ending Value $23,565 $23,565 $23,565Private Equity TWR 13.0% 13.2% 11.9% less Starting Value 21,506 16,988 15,777Private Equity Benchmark 13.7% 13.1% 11.6% less Contributions 4,132 11,887 18,152Private Equity Excess Return (0.6%) 0.1% 0.3% plus Distributions 4,997 13,042 20,874TUCS Peer (Percentile) 2nd 10th 7th Investment Return $2,924 $7,732 $10,510


Style

Target Portfolio Weight % of Portfolio Investment Returns

12/31/2019 12/31/2016 Change 1-Year TWR 3-Year TWR SI IRR

Buyout 90.0% 72.2% 69.9% 2.3% 13.5% 13.4% 13.6%

Venture / Growth Equity 10.0% 17.9% 16.9% 1.0% 15.2% 16.2% 11.9%

Credit / Special Situations 0.0% 9.8% 13.1% (3.3%) 5.6% 8.4% 10.8%

PRIVATE EQUITY TOTAL 100.0% 100.0% 100.0% 0.0% 13.0% 13.2% 13.1%


Portfolio Market Value% of

PortfolioNo.

(active)1-YearTWR

3-YearTWR

5-YearTWR

1-YearIRR

3-YearIRR

5-YearIRR SI IRR

Funds $16,814 71.4% 199 14.0% 13.1% 12.0% 13.9% 13.0% 11.3% 12.7%

Principal Investments 6,751 28.6% 66 10.3% 14.7% 12.0% 12.1% 15.1% 12.8% 16.5%

Total $23,565 100% 265 13.0% 13.2% 11.9% 13.4% 13.5% 11.6% 13.1%


Source: State Street based on 12/31/19 valuations; TWR and TUCS as of 3/31/20Note: Legal fees are included in the total aggregate IRR and TWR performanceNote: Since Inception IRR reflects performance from fund since June 1992 and principal investments since December 2009

4

PerformanceTRS Vintage Year Comparison

TOTAL PE PORTFOLIO VERSUS BENCHMARK

• PE outperformed the benchmark 12 out of the last 20 years

Source: State Street as of 12/31/19

23.3%21.1%

12.4%

28.3%

13.5%

10.8%

8.0% 8.6%

15.0% 14.4%

9.9%

14.1% 14.5%

10.9%

15.4%

17.6%

16.6%

21.5%

15.7%

(1.5%)

9.7%

16.6%18.7%

17.5%

13.2%

9.1%

6.4%

10.0%11.2%

13.6%12.4%

14.9%17.1%

12.3%

15.8%16.1%

16.6%15.8%

15.2%

(8.6%)-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TRS Vintage Year SI IRR PE Benchmark Vintage Year SI IRR

5

$0.2 $0.3 $0.4 $0.9 $1.2 $1.3 $1.7

$3.1 $3.3 $5.3

$7.3 $8.0

$9.2 $10.1 $9.6

$8.0 $8.7 $10.1 $9.3

$11.1

$0.2 $0.3 $0.5 $0.9 $1.5 $2.0

$2.9

$4.9 $5.2

$7.2

$10.1

$12.0

$14.0 $14.9

$15.8 $15.4 $17.0

$19.6 $21.5

$23.6

$-

$5

$10

$15

$20

$25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

($ b

illio

ns)

Market Value - Public Market Market Value - Private Market

PerformancePE Value Added

• $12.5 billion of value added net of fees in 2019• Since inception alpha versus MSCI All World Index: 633 bps

Source: State Street as of 12/31/19Note: Public Market values calculated by assuming investments were made in the MSCI All World index in the same size and timing as TRS Private Equity cash flows

PRIVATE EQUITY PERFORMANCE RELATIVE TO PUBLIC MARKETS

6

PerformancePE Principal Investments Program

• PE continues to focus on Principal Investments with increased transaction volumes through innovative structures

Source: State Street as of 12/31/19Note: Target is long-term target for Principal InvestmentsNote: IIC approved the PE Small Deals program in March 2018

PRINCIPAL INVESTMENT MARKET VALUE OVER TIME

65%

35%

Principal Investments Funds

TARGET

91% 88% 85% 83% 79% 77% 74% 71%

9% 12% 15% 17% 21% 23% 26% 29%

0%

25%

50%

75%

100%

2012 2013 2014 2015 2016 2017 2018 2019Funds Principal Investments

7

Source: Preqin; Pitchbook; S&P Leveraged Commentary Data; Bloomberg; Credit SuisseNote: As of 3/31/20

Market ConditionsPE

9

Attractive (To Buyer) Unattractive (To Buyer)

• Early indications of Covid-19 impact on macro PE metrics are beginning to flow through in 1Q 2020 data

• All metrics have shifted slightly towards the more attractive zone (for buyers), but the shape of the recovery will determine how meaningful these shifts ultimately become

• We anticipate seeing distributions, invested capital, and fundraising have the most substantial shifts over the course of 2020

Price Multiple

2019 2007 (Peak) 2009 (Trough)

Leverage Multiple

$ Distributed

$ Invested

$ Raised

$ Dry Powder

Current Rates

Q1 2020 (Today)

Summary: Accomplishments and PrioritiesPE

2019 ACCOMPLISHMENTS

• Performanceo Generated a 11.6% 5-year IRR – top decile TUCS performanceo Added 5-year alpha of 30 basis pointso Returned 13.4% and 13.5%, respectively for 1- and 3-year

periods – top decile TUCS performance for both periods

• Team Updateo Filled seven positions in 2019

• Capital Plan Impacto Approximately $4.0 billion $2.9 billion to Premier List Funds $900 million to Principal Investments $225 million to Emerging Managers

o Completed secondary sale in December

2020 Priorities

• Commit approximately $2.8 billion with 30% in Principal Investments

• Strategic Partnerso Implement successful transition of KKR/Apollo relationships from former

SPR team to PE team

• Build the Fleet o Continue to be a preferred global destination for attractive investments

o Maintain focus on Principal Investments by increasing GP outreach and usage of Principal Investment Vehicles

o Continue momentum with Phase Two hiring

• Complete sub-strategy allocation and evaluate appropriate benchmark

• COVID-19 Responseo Created tracker tool in Principal Investments to monitor all follow-

on equity needso Establishing playbook for fund terms when/if COVID impact leads

to greater negotiating power for LPso Frequent communications with GPs and LPs to monitor

portfolio impacts and responsesSource: Performance data from State Street as of 12/31/19; TUCs as of 3/31/2011

Appendix

OrganizationPE Team

Beth BookerContractorBA, Texas State University

Team members work across Funds & Principal Investments

Note: TRS PE leverages Blackrock secondees in Austin and London* Private Equity Investment Committee (PEIC) members; PEIC also includes Eric Lang

Scott Ramsower*Co-Head of FundsSr. Investment ManagerBBA, Texas A&M

Shelby Wanstrath, CFA*Co-Head of FundsSr. Investment ManagerBBA & MS, SMUMBA, London Business

Neil Randall*Managing DirectorBBA, Texas A&MMS, Texas A&M

TRS LONDON (PE)

Michael Lazorik*Head of TechnologyDirectorBBA, UT Austin

Tamara Polewik*Head of Consumer/Internet DirectorBA, Dartmouth CollegeMBA, University of Chicago

Samuel DobberpuhlAssociateBA, Pepperdine University

Justin WangPI Lead - LondonInvestment ManagerBBA, UT Austin

Yemi OjutikuSr. AssociateBA, University of N. CarolinaJD, Georgetown Law SchoolMBA, The Wharton School

Deniz OranAssociateBBA, College of William & Mary

Kaitlin MilesInvestment ManagerBBA, University of Richmond

Mikhael Rawls, CFAInvestment ManagerBA, Harvard University

Stephanie DaulAssociate BBA, Texas State University

Thomas Albright, CFA Head of FinancialsInvestment ManagerBA, Dartmouth College

Will Carpenter, CFA*Head of IndustrialsSr. Investment ManagerBBA, Texas A&MMS, Texas A&M

Caitlyn MacdonaldAssociate BA, Williams College

FUNDS PRINCIPAL INVESTMENTS

Travis GaunttAssociate BBA, Texas Christian UniversityMBA, UT Austin

D’Oncee BrockingtonSr. AnalystBBA, UT Austin

Edward StroudSr. AnalystBA, Washington & Lee University

Chase DaughtridgeAssociate BA, University of North CarolinaMBA, UT Austin

Courtney VillaltaSr. Investment ManagerBA, St. Edward’s

Heidi PiperAssociateBA/BS, McGill UniversityMBA, NYU SternMS, DePaul University

To Be AnnouncedSr. Analyst

Starts Sept 2020

13

Portfolio CompositionPE Snapshot

Source: State Street as of 12/31/19; General Partner reporting as of 9/30/19

MARKET VALUE BY INDUSTRY DIVERSIFICATION

MARKET VALUE BY STRATEGY MARKET VALUE BY GEOGRAPHIC DIVERSIFICATION

Buyout, 72%

Venture/ Growth Equity, 18%

Credit/ Special Situations, 10%

Domestic, 77%

International Developed, 16%

International Emerging, 7%

26%

18%

11% 13

% 14%

3% 4%

3%

7%

1% 0%

25%

14%

15%

13%

9%

10%

4% 3% 4%

1% 1%

0%

5%

10%

15%

20%

25%

30%

InformationTechnology

ConsumerDiscretionary

Industrials Health Care Financials Energy Materials Consumer Staples Other Utilities TelecommunicationServicesTRS Value SSPEI

15


Grant Walker, Senior Director

July 2020

Real Estate


• Real Estate in the Trust• 2019 Performance• Capital Plan• Market Conditions: More Questions than Answers• Accomplishments and Priorities

Overview

2

0%

2%

4%

6%

8%

10%

12%

14%

16%

RE % of Trust RE Target

Risk Parity 8%

Role in the TrustReal Estate (RE)

Source: State Street as of 12/31/19Note: Per the TRS Investment Policy Statement, target allocation weights represent transitional benchmarks (2006-2014), long-term target allocations (2015-present)

RE TARGET % OF TRUST HISTORICAL TRUST ALLOCATION

Real Estate15%

Global Equity54%

Real Return21%

Stable Value21%

Risk Parity 8%


13.8%

3

Chart1

RE % of Trust388983899039082391723926339355394473953839629397213981339903399944008640178402684035940451405434063340724408164090840999410904118241274413644145541547416394172941820419124200442094421854227742369424604255142643427354282542916430084310043190432814337343465435554364643738438309.7369976143277953E-42.1132192550083755E-33.1652011459788443E-37.1792780643303499E-39.0167278087637213E-31.2085341336599446E-21.7336083420800716E-22.2083847503250112E-22.4500485873961017E-23.2654603252352553E-23.4587551721711698E-23.8579496345091613E-24.149990192503706E-23.7610855654838148E-23.6354921441285222E-23.8013118114492879E-24.7276046799223051E-25.7784252587741475E-26.7382985677318638E-27.2200367437948346E-28.2217957520291693E-29.4611718066273859E-29.9433182922291322E-29.5838330971018862E-20.102113885072773080.104275240208396640.107632665277045610.109587783328182180.117675695501204210.114630790712375820.113196854058081080.111937997974974880.109676175209201850.11028696548870130.113507762022107230.112696149990095680.115774215930867670.122224111840335260.129600777495131660.130187724344898840.130907411400652230.128993773726630930.129612462077707350.126390787895579670.125904992712477460.122514668267509540.114717263660531660.117690535203532510.120326927581310960.122571794867978940.134919008728238480.133557182738479020.135232384168291390.140150495982863750.13828647647743877RE Target388983899039082391723926339355394473953839629397213981339903399944008640178402684035940451405434063340724408164090840999410904118241274413644145541547416394172941820419124200442094421854227742369424604255142643427354282542916430084310043190432814337343465435554364643738438300.030.033.09E-23.09E-23.09E-20.050.050.050.056.0000000000000005E-26.0000000000000005E-26.0000000000000005E-26.0000000000000005E-20.080.080.080.080.080.080.080.080.130.130.130.130.150.150.150.150.130.130.130.130.130.160.160.160.160.160.160.160.160.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.15

RE % of Trust

DateRE % of TrustRE TargetRE NAV (Power BITRS TRUST NAV (QTR Out)

6/30/060.1%3%$966/30/06$98,034

9/30/060.2%3%$2139/30/06$101,004

12/31/060.3%3%$33612/31/06$106,240

3/31/070.7%3%$7763/31/07$108,022

6/30/070.9%3%$1,0156/30/07$112,598

9/30/071.2%5%$1,3889/30/07$114,878

12/31/071.7%5%$1,96812/31/07$113,541

3/31/082.2%5%$2,3753/31/08$107,561

6/30/082.5%5%$2,6366/30/08$107,602

9/30/083.3%6%$3,1339/30/08$95,936

12/31/083.5%6%$2,78412/31/08$80,504

3/31/093.9%6%$2,8353/31/09$73,484

6/30/094.1%6%$3,4006/30/09$81,916

9/30/093.8%8%$3,4369/30/09$91,351

12/31/093.6%8%$3,42512/31/09$94,212

3/31/103.8%8%$3,6743/31/10$96,645

6/30/104.7%8%$4,3646/30/10$92,318

9/30/105.8%8%$5,7959/30/10$100,280

12/31/106.7%8%$7,09812/31/10$105,344

3/31/117.2%8%$7,8793/31/11$109,127

6/30/118.2%8%$9,0366/30/11$109,900

9/30/119.5%13%$9,5669/30/11$101,106

12/31/119.9%13%$10,34512/31/11$104,043

3/31/129.6%13%$10,5703/31/12$110,289

6/30/1210.2%13%$11,1226/30/12$108,921

9/30/1210.4%15%$11,7249/30/12$112,432

12/31/1210.8%15%$12,30912/31/12$114,365

3/31/1311.0%15%$12,8783/31/13$117,516

6/30/1311.8%15%$13,6436/30/13$115,941

9/30/1311.5%13%$13,7229/30/13$119,706

12/31/1311.3%13%$14,02012/31/13$123,852

3/31/1411.2%13%$14,1183/31/14$126,122

6/30/1411.0%13%$14,2806/30/14$130,203

9/30/1411.0%13%$14,2239/30/14$128,966

12/31/1411.4%16%$14,73912/31/14$129,853

3/31/1511.3%16%$14,9153/31/15$132,345

6/30/1511.6%16%$15,2206/30/15$131,466

9/30/1512.2%16%$15,3189/30/15$125,327

12/31/1513.0%16%$16,40212/31/15$126,554

3/31/1613.0%16%$16,6943/31/16$128,234

6/30/1613.1%16%$16,9406/30/16$129,401

9/30/1612.9%16%$17,1859/30/16$133,221

12/31/1613.0%14%$17,17912/31/16$132,539

3/31/1712.6%14%$17,4283/31/17$137,892

6/30/1712.6%14%$17,8836/30/17$142,039

9/30/1712.3%14%$17,9279/30/17$146,326

12/31/1711.5%14%$17,35112/31/17$151,252

3/31/1811.8%14%$17,8233/31/18$151,438

6/30/1812.0%14%$18,1916/30/18$151,182

9/30/1812.3%14%$18,7699/30/18$153,126

12/31/1813.5%14%$19,61912/31/18$145,409

3/31/1913.4%14%$20,3713/31/19$152,525

6/30/1913.5%14%$21,1516/30/19$156,403

9/30/1914.0%14%$22,0929/30/19$157,632

12/31/1913.8%15%$22,48312/31/19$162,585

RE % of Trust388983899039082391723926339355394473953839629397213981339903399944008640178402684035940451405434063340724408164090840999410904118241274413644145541547416394172941820419124200442094421854227742369424604255142643427354282542916430084310043190432814337343465435554364643738438309.7369976143277953E-42.1132192550083755E-33.1652011459788443E-37.1792780643303499E-39.0167278087637213E-31.2085341336599446E-21.7336083420800716E-22.2083847503250112E-22.4500485873961017E-23.2654603252352553E-23.4587551721711698E-23.8579496345091613E-24.149990192503706E-23.7610855654838148E-23.6354921441285222E-23.8013118114492879E-24.7276046799223051E-25.7784252587741475E-26.7382985677318638E-27.2200367437948346E-28.2217957520291693E-29.4611718066273859E-29.9433182922291322E-29.5838330971018862E-20.102113885072773080.104275240208396640.107632665277045610.109587783328182180.117675695501204210.114630790712375820.113196854058081080.111937997974974880.109676175209201850.11028696548870130.113507762022107230.112696149990095680.115774215930867670.122224111840335260.129600777495131660.130187724344898840.130907411400652230.128993773726630930.129612462077707350.126390787895579670.125904992712477460.122514668267509540.114717263660531660.117690535203532510.120326927581310960.122571794867978940.134919008728238480.133557182738479020.135232384168291390.140150495982863750.13828647647743877RE Target388983899039082391723926339355394473953839629397213981339903399944008640178402684035940451405434063340724408164090840999410904118241274413644145541547416394172941820419124200442094421854227742369424604255142643427354282542916430084310043190432814337343465435554364643738438300.030.033.09E-23.09E-23.09E-20.050.050.050.056.0000000000000005E-26.0000000000000005E-26.0000000000000005E-26.0000000000000005E-20.080.080.080.080.080.080.080.080.130.130.130.130.150.150.150.150.130.130.130.130.130.160.160.160.160.160.160.160.160.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.140000000000000010.15


Source: State Street based on 12/31/19 valuations; TWR and TUCS as of 3/31/20Note: Inception date of RE portfolio is April 2006 Note: Currency hedges and legal fees are included in the total aggregate IRR and TWR performanceNote: RE Portfolio Leverage from General Partner reporting as of 9/30/19

4

PORTFOLIO PERFORMANCE PORTFOLIO GROWTH

Asset Class1-Year Return

3-Year Return

5-Year Return Real Estate ($ millions) 1-Year 3-Year 5-Year

Real Estate IRR 9.5% 10.7% 10.7% Ending Value $22,483 $22,483 $22,483Real Estate TWR 8.9% 10.6% 10.8% less Starting Value 19,619 17,179 14,739Real Estate Benchmark 4.4% 6.1% 8.0% less Contributions 6,805 14,509 21,768Real Estate Excess Return 4.5% 4.5% 2.8% plus Distributions 5,948 14,974 23,108TUCS Peer (Percentile) 22nd 14th 14th Investment Return $2,007 $5,769 $9,084


Style

Target Portfolio Weight

RE Portfolio Leverage % of Portfolio Investment Returns

12/31/2019 12/31/2016 Change 1-Year TWR 3-Year TWR SI IRRCore 35% - 45% 33.0% 32.8% 35.8% (3.0%) 7.5% 9.1% 10.5%Value-Add 10% - 15% 51.0% 13.3% 16.2% (2.9%) 3.3% 10.2% 7.3%Opportunistic 30% - 40% 47.0% 38.1% 32.6% 5.5% 14.4% 14.0% 8.2%RASSOther Real Estate

10% - 15%-

60.0%2.0%

15.2%0.6%

13.8%1.6%

1.4%(1.0%)

6.6%( 0.1%)

8.2%(5.1%)

12.7%1.2%

REAL ESTATE TOTAL 100% 46.0% 100.0% 100.0% 0.0% 8.9% 10.6% 9.1%


PortfolioMarketValue

% of Portfolio

No.(active)

1-YearTWR

3-YearTWR

5-YearTWR

1-YearIRR

3-YearIRR

5-YearIRR

SIIRR

Funds $11,167 49.7% 137 7.4% 9.3% 9.7% 7.7% 9.2% 9.2% 7.1%Principal Investments 11,316 50.3% 93 10.5% 12.5% 13.0% 11.2% 12.6% 13.1% 15.5%Total $22,483 100% 230 8.9% 10.6% 10.8% 9.5% 10.7% 10.7% 9.1%

PerformanceTRS Vintage Year Comparison

• RE outperformed the benchmark 9 out of the last 14 years

Source: State Street and NCREIF data as of 12/31/19

TOTAL RE PORTFOLIO VERSUS BENCHMARK

5

1.9% 1.8%

3.8%

11.7% 11.1%

16.0%

8.1%

10.8%

5.8%

13.7%

7.7%

13.3%

6.6%

10.3%

5.4%4.4% 4.6%

9.7% 10.1% 9.3% 9.1% 8.7% 8.2%6.9%

6.3% 6.1%4.8%

5.2%

-5%

0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

TRS Vintage Yr TWR (SI) ODCE TWR Benchmark (SI)

Chart2

TRS Vintage Yr TWR (SI)

200620072008200920102011201220132014201520162017201820191.9E-21.7567550000000001E-23.8048649999999996E-20.117297420.111090610000000010.160427519999999998.1317319999999998E-20.107866510000000015.7604550000000004E-20.136980357.6811900000000002E-20.133039020000000016.6441169999999994E-20.1030427ODCE TWR Benchmark (SI)

200620072008200920102011201220132014201520162017201820195.3999999999999999E-24.4384237332352416E-24.6320279707853684E-29.7227306282850146E-20.101316358460629599.3066531024918797E-29.1471602034478572E-28.7027261352379259E-28.2030187084992656E-26.9126695599650123E-26.2531682421292922E-26.0554934863405352E-24.7525777812327252E-25.185879190806042E-2

Vintage Year-RE

YearTRS Vintage Yr TWR (SI)ODCE TWR Benchmark (SI)

2006-0.0%5.3%

20061.9%5.4%

20071.8%4.4%

20083.8%4.6%

200911.7%9.7%

201011.1%10.1%

201116.0%9.3%

20128.1%9.1%

201310.8%8.7%

20145.8%8.2%

201513.7%6.9%

20167.7%6.3%

201713.3%6.1%

20186.6%4.8%

201910.3%5.2%

Source: State Street and NCREIF data as of 12/31/19

TRS Vintage Yr TWR (SI)

200620072008200920102011201220132014201520162017201820191.9E-21.7567550000000001E-23.8048649999999996E-20.117297420.111090610000000010.160427519999999998.1317319999999998E-20.107866510000000015.7604550000000004E-20.136980357.6811900000000002E-20.133039020000000016.6441169999999994E-20.1030427ODCE TWR Benchmark (SI)

200620072008200920102011201220132014201520162017201820195.3999999999999999E-24.4384237332352416E-24.6320279707853684E-29.7227306282850146E-20.101316358460629599.3066531024918797E-29.1471602034478572E-28.7027261352379259E-28.2030187084992656E-26.9126695599650123E-26.2531682421292922E-26.0554934863405352E-24.7525777812327252E-25.185879190806042E-2

PerformanceRE Principal Investments Program

• RE has reached its target allocation of 50% Funds and 50% Principal investments. • Committed approximately $3 billion to 94 Principal Investments in 2019

Source: State Street as of 12/31/19Note: Target is long-term target for Principal Investments

PRINCIPAL INVESTMENT ALLOCATION OVER TIME

75% 75% 76% 70% 65% 61% 55% 50%

25% 25% 24% 30% 35% 39% 45% 50%

0%

25%

50%

75%

100%

2012 2013 2014 2015 2016 2017 2018 2019Funds Principal Investments

50%

50%


TARGET

6

Chart7

Funds

201220132014201520162017201820190.750.750.760.70.650.610.550000000000000040.5Principal Investments

201220132014201520162017201820190.250.250.240.30.350.390.450.5

Sheet1

20122013201420152016201720182019Target

Principal Investments25%25%24%30%35%39%45%50%50%

Funds75%75%76%70%65%61%55%50%50%

Total100%100%100%100%100%100%100%100%50%


Note: Target is long-term target for Principal Investments

Funds


201220132014201520162017201820190.250.250.240.30.350.390.450.5

Funds

Target0.5Principal Investments

Target0.5

Chart12

Funds


Target0.5

Sheet1

20122013201420152016201720182019Target

Principal Investments25%25%24%30%35%39%45%50%50%

Funds75%75%76%70%65%61%55%50%50%

Total100%100%100%100%100%100%100%100%50%


Note: Target is long-term target for Principal Investments

Funds


201220132014201520162017201820190.250.250.240.30.350.390.450.5

Funds


Target0.5

Market ConditionsRE

Source: Preqin, St. Louis Federal Reserve, CMAlert, Real Capital Analytics, Altus, Green Street, JP Morgan, CBRE Note: “Today” markers based on 3/31/20 data.

2020 (Today) 2007 (Peak) 2009 (Trough)

Attractive (To Buyer) Unattractive (To Buyer)What has stayed the same?• Dry Powder remains close to record highs

What to watch?• Investme