HomeMy WebLinkAboutMINUTES - 09092014 - C.149RECOMMENDATION(S):
ACCEPT quarterly report of the Post Retirement Health Benefits Trust Agreement Advisory Body.
FISCAL IMPACT:
No specific fiscal impact. This is a quarterly report of the County's assets in the Public Agency Retirement Services
(PARS) Public Agencies Post-Retirement Health Care Plan Trust.
BACKGROUND:
On December 14, 2010, the Board of Supervisors directed the formation of a Post Retirement Health Benefits Trust
Agreement Advisory Body (consisting of the County Administrator, County Finance Director, Treasurer-Tax
Collector, Auditor-Controller, and Health Services Finance Director).
The Advisory Body meets quarterly. At its meeting of August 4, 2011, the body discussed and reviewed final report
formats with HighMark Capital Management and made recommendations regarding a final standardized quarterly
report. The attached report is in the standardized format. The following is the investment summary presented at the
August 7, 2014 quarterly meeting for the period ending June 30, 2014:
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On: 09/09/2014 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF SUPERVISORS
Contact: Lisa Driscoll, County Finance
Director (925) 335-1023
I hereby certify that this is a true and correct copy of an action taken and entered on the
minutes of the Board of Supervisors on the date shown.
ATTESTED: September 9, 2014
David Twa, County Administrator and Clerk of the Board of Supervisors
By: , Deputy
cc: Robert Campbell, Auditor-Controller, Russell Watts, Treasurer-Tax Collector, Patrick Godley, Chief Financial Officer/Health Services
C.149
To:Board of Supervisors
From:David Twa, County Administrator
Date:September 9, 2014
Contra
Costa
County
Subject:Quarterly Report of the Post Retirement Health Benefits Trust Agreement Advisory Body
BACKGROUND: (CONT'D)
Investment Summary Second Quarter 2014
Beginning Value $135,517,785.67
Net Contributions/Withdrawals 9,762,183.92
Fees Deducted -40,568.58
Income Received 518,297.17
Market Appreciation 3,190,388.86
Net Change in Accrued Income 70,501.12
Ending Market Value $149,018,588.16
Additional Materials -
A Post Retirement Health Benefits Trust Agreement Advisory Body web-page can be found at the following
address:
http://ca-contracostacounty.civicplus.com/index.aspx?NID=2915. The page describes the function of the body,
posts quarterly meeting materials, and all pertinent trust and plan documents.
CONSEQUENCE OF NEGATIVE ACTION:
None.
CHILDREN'S IMPACT STATEMENT:
None.
ATTACHMENTS
Second Quarter 2014
PARS: County of Contra CostaSecond Quarter 2014Presented byAndrew Brown, CFA
PARS: County of Contra CostaDISCUSSION HIGHLIGHTSU.S. Economic and Market OverviewEconomic signals were mixed during the second quarter. Many investors believed that the 1Q14 GDP reading of -2.9% (revised down from theprevious -1% reading) was mainly due to weather and not indicative of an economy headed into recession. That said, this was the lowest outputreading for the economy since the first quarter of 2009, when the economy contracted -5.4%, and was the 17thworst quarterly GDP return sincethe end of World War II. While the report was certainly weak, encouraging economic readings were seen in the automobile sector, broad gainswere realized in employment, and there were fairly positive retail sales figures. General consensus is that the macro slowdown experiencedduring the first quarter is unlikely to be repeated in the second quarter and that a rebound should continue during the second half of theyear. Nevertheless, HighMark’s 2014 GDP forecast has incorporated the impact of this negative print and, as a result, has been lowered to 2.0%from a previous forecast of 2.75%.While geopolitical volatility was abundant during the quarter (tensions continued to flare in the Ukraine, with Russia likely to receive sanctions,civil wars in Afghanistan, Iraq, Somalia, and Syria, violence in Libya, Nigeria, Kenya, Pakistan, and Sudan, not to mention the situation in NorthKorea), investors generally ignored these concerns and tended to focus on the continued slow, but steady, economic rebound. Positive returnswere broad-based across the majority of sectors, regions, and asset classes. While domestic equities continued to lead all returns on an annualbasis (S&P 500 +5.24% during 2Q14 and +24.62% during the trailing 12-months), emerging markets posted a very strong quarter (+6.59% during2Q14 and +14.30% during the trailing 12-months). Mid-caps (+4.98%during 2Q14 and +26.87% during the trailing 12-months), small caps(+2.04% during 2Q14 and +23.63% during the trailing 12-months), and developed international (+4.08% during 2Q14 and +23.57% during thetrailing 12-months) all lagged on a relative basis, but still put up strong numbers for both the quarter and the trailing 12-months. Rounding out thereturns, and perhaps aided by some of the geopolitical volatility, fixed income delivered very strong returns given where interest rates currentlyreside (Barclays Aggregate Index +2.04% during 2Q14 and +4.38% during the trailing 12-months).The Federal Open Market Committee (FOMC) continued to reduce monthly asset purchases by $10 billion (to $35 billion from $45 billion)following their June 18th meeting. They have now reduced purchases by $10 billion at each of their prior four meetings, and June’s meetingincluded the announcement that the Fed plans to end purchases this fall, likely at either the October or December meeting. Despite a reduction inforecasted 2014 U.S. growth from 2.1% to 2.3% versus the 2.8% to 3.0% listed at the March meeting, Fed Chairwoman Janet Yellen said in lateJune that the brisk recovery from a tough winter as evidenced by improving employment, business investment, and household spendingsupported the continued curtailment of QE III. Further clarity as to the Fed’s timing to raise rates in 2015 was not discussed and the forecastedFed Funds benchmark rate 1.2% by the end of 2015 changed only slightly from the March meeting. We continue to believe that the Fed willtighten over the second half of 2015 and the decline in asset purchases over the balance of the year will continue to place upward pressure oninterest rates as asset demand on the part of the Fed diminishes.1
PARS: County of Contra CostaDISCUSSION HIGHLIGHTSMarket overview/Performance DiscussionTotal PlanThe County of Contra Costa OPEB Plan returned 2.59% in the second quarter, which underperformed the County’s Plan benchmark return targetof 3.21%. Underperformance from the large cap and mid-cap equity segments were the main drags on performance for the Plan. Alternativeinvestments outperformed their primary benchmark, the HFRI Fund of Funds Market Defensive Index, however, alternatives underperformed fixedincome in the quarter. For the fixed income segment, the Plan slightly underperformed the Barclays Aggregate Index in the second quarter, as thePlan’s duration was shorter than the index. The small cap and real estate segments performed ‘in-line’ with benchmark targets in the secondquarter. However, our underweight allocation to the real estate segment was a slight negative in the quarter, as REITs were the top performingasset class, returning 7.22% as measured by the DJ Wilshire REIT Index. The international/global equity segment offered mixed returns. Globalequities, as represented by the Templeton Global Opportunities Fund lagged the MSCI-ACWI Index during the quarter. However investments inboth emerging market equities and developed international equities offered positive investment contributions.Domestic EquityEquity returns during the quarter were strong and broad-based with large cap (S&P 500 +5.24%) outperforming mid-cap (Russell Midcap +4.98%)and small cap (Russell 200 Index +2.04%). Within the large cap universe, returns were approximately the same for the value and growth stylesduring the 2Q14, resulting in value holding on strongly to its year-to-date outperformance (+8.3% versus +6.3%). While all sectors of the S&P500 showed positive returns, there were large dispersions of returns during the quarter: sector returns were strong in energy (+12.1%), utilities(+7.8%), and technology (+6.5%) and lagged in financials (+2.3%), consumer discretionary (+3.5%), telecom (+3.8%), and industrials (+3.9%).Valuation wise, at the end of 2Q14, the S&P 500 was trading at 15.6x forward P/E versus its 15-yr historical average of 15.8x. It should also benoted that the first half of the year was particularly difficult for large cap managers – as an example, a recent S&P Capital IQ report said that just27% of actively managed large cap core funds beat the S&P 500 in the first half of the year.The Plan’s large cap funds returned 4.23% in the quarter, which underperformed the Russell 1000 Index return of 5.11%.The Sentinel Common Stock Fund returned 3.81% in the quarter, which underperformed the benchmark. The Fund ranked in the 81stpercentile of the Morningstar Large Cap Blend Universe.The Columbia Contrarian Core Fund beat its benchmark with a 5.14% return. The Fund ranked in the 26thpercentile of the MorningstarLarge Cap Blend UniverseThe Harbor Capital Appreciation Fund returned 4.59% in the quarter, which underperformed the Russell 1000 Growth Index’s return of5.13%. The Harbor Fund ranked in the 38thpercentile of the Morningstar Large Cap Growth Universe.The T. Rowe Price Growth Stock Fund returned 4.03% in the quarter, which underperformed the Russell 1000 Growth Index. The Fundranked in the 58thpercentile of the Morningstar Large Cap Growth Universe.2
PARS: County of Contra CostaDISCUSSION HIGHLIGHTSDomestic Equity (Cont.)The T. Rowe Price Equity Income Fund returned 4.46%, which ranked in the 53rdpercentile of the Morningstar Large Cap Value Universe,and underperformed the Russell 1000 Value Index return of 5.10%.The Loomis Sayles Value Fund posted a 4.08% return which underperformed the Russell 1000 Value Index, and ranked in the 68thpercentile of the Morningstar Large Cap Value Universe.Mid-cap equities outperformed small cap stocks over the quarter, with the Russell Mid-Cap Index returning 4.98% and the Russell 2000 Indexposting a 2.04% return. Energy was the leading sector for both mid-cap and small cap equities. Value equities outperformed growth equities inthe quarter as the growth benchmarks were negatively impacted by a heavier weighting in the lagging consumer discretionary sector. Consumerdiscretionary earnings were dampened by the winter slowdown, which was evidenced by the -2.9% GDP print. Energy was the leading sector forboth mid-caps and small caps in the quarter, contributing +12.6% for the mid-cap index and +11.3% for the small cap index. Energy stocks wereboosted by an increase in global oil prices stemming from fears of Iraqi oil production disruptions.The mid-cap equity segment returned 4.19% in the quarter, which underperformed the Russell Mid-Cap Equity return of 4.98%The TIAA-CREF Mid-Cap Value Fund returned 5.19% in the quarter, which underperformed the Russell Mid-Cap Value Index return of5.62%. The Fund ranked in the 30thpercentile of the Morningstar Mid-Cap Value Universe of managers.The iShares Russell Mid-Cap Growth ETF returned 4.31% in the quarter.The small cap equity segment returned 2.09% in the quarter, which performed in-line with the Russell 2000 Index return of 2.04%.The T. Rowe Price New Horizons Fund returned 1.34%, and underperformed the Russell 2000 Growth Index return of 1.72%. Thisperformance ranked in the 41stpercentile of small cap growth managers as measured by Morningstar.The Columbia Small Cap Value Fund II return of 2.84% outperformed the Russell 2000 Value Index’s return of 2.05%. This ranked in the50thpercentile of Morningstar’s Small Cap Value Universe.3
DISCUSSION HIGHLIGHTSReal EstateREIT equities posted a second straight quarter of strong returns, outperforming all other broad equity market indices, with the Wilshire REIT Indexreturning 7.22%. All major REIT sectors posted gains in the quarter, led by manufactured homes (+10.2%), hotels (+10.8%), apartments (+8.5%),regional malls (+7.9%), and healthcare REITs (+7.5%). Apartment REITs performed well despite some signs of pressure in terms of new supplyof apartment units. Regional malls and shopping centers were aided by abounce back in consumer spending after the cold winter season. TheREIT sector continues to be supported by investors reaching for yield, seeking to invest in income oriented (average dividend yield of the FTSENAREIT Index 3.8%) investments in this low yield environment.The Nuveen Real Estate Securities Fund returned 7.34% in the second quarter, which outperformed the Wilshire REIT Index return of 7.22%.The Fund placed in the 19thpercentile of the Morningstar Real Estate Manager’s Universe.Global/International EquityGlobal equity markets posted strong returns in the second quarter, with both developed markets (MSCI-EAFE Index +4.08%) and emergingmarkets (MSCI Emerging Market Index +6.59%) posting solid returns in both U.S. dollar and local currency terms. Despite Japan being theleading contributor to returns for the MSCI-EAFE Index in the second quarter, it still remains one of the biggest laggards for the year to dateperiod. Investors are still wary of the near-term prospects for success from Japan’s push for structural reforms centering on immigration, farming,labor, and corporate governance and taxation. Europe saw mixed economic data points. Worries regarding the potential spill over impact of thecrises in both Ukraine and the Middle East has dampened consumer sentiment in the European region. Manufacturing activity showed mixedsigns as well in the quarter. However, European Central Bank (ECB) President Mario Draghi has recommitted the ECB to supporting negativeinterest rates on deposits, policy rate cuts, and targeted long-term refinancing operations in hopes of spurring a recovery in the region. Emergingmarket returns were the highlight in the quarter, after several quarters of lagging returns relative to developed markets. Leading regions includedTurkey (+15.1%), India (+12.7%), Brazil (+7.5%), and Korea (+6.4%). Investors were also encouraged by the new leadership in India and Chinalaunched a modest stimulus program in the quarter.The Plan’s international/global equity segment returned 3.43% in the quarter. This return underperformed the MSCI-EAFE Index(+4.08%).The Dodge & Cox International Stock Fund’s 5.0% return outperformed the MSCI-EAFE Index in the quarter, and ranked in the 14thpercentile of the Foreign Large Blend Universe as measured by Morningstar.PARS: County of Contra CostaDISCUSSION HIGHLIGHTS4
DISCUSSION HIGHLIGHTSGlobal/International Equity (Cont.)The Nationwide Bailard International Equity Fund registered a 2.73% return in the second quarter, and underperformed the MSCI-EAFEIndex. The Fundranked in the 80thpercentile of the Morningstar Foreign Large Blend Universe.The MFS International Fund’s return of 4.78% beat the index and the peer group in the quarter. The Fund ranked in the 25thpercentile forforeign large cap growth managers as measured by Morningstar.The Templeton Global Opportunities Fund’s return of 2.24% in the quarter significantly underperformed the MSCI-ACWI benchmark, andranked in the 88thpercentile of the Morningstar World Stock Index Universe.The Schroder Emerging Market Equity Fund returned 6.47% and ranked in the 57thpercentile of emerging market equity managers, andwas in-line with the MSCI Emerging Market Index return of 6.6%.PARS: County of Contra Costa5
DISCUSSION HIGHLIGHTSFixed IncomeLong-term interest rates declined during the quarter as ten-year and thirty-year bond yields dropped 19 basis points, while short-term rateschanged very little. The decline in long rates was sufficient to produce a 5.2% gain for the thirty-year Treasury this quarter, and an impressive13.8% gain year-to-date. Investment-grade corporate bonds advanced 2.7%, outperforming U.S. Treasury securities by +70 basis points as riskassets benefited from better economic data, improving consumer sentiment and solid corporate profitability. High yield corporate bonds posted a2.4% gain, outperforming equivalent-duration U.S. Treasury securities by +135 basis points. Investors’ continued search for yield and supportfrom an improving U.S. economy helped high yield bonds extend their streak of positive excess returns dating back to the fourth quarter of 2011.Investment-grade corporate bond spreads ended the quarter at +109 basis points, the tightest level since July 2007, while high yield bondspreads finished at +353 basis points, significantly below the long-term average of +600 basis points. Both investment-grade and high yield bondissuance were strong during the second quarter as corporations took advantage of low interest rates to pursue mergers and acquisitions as wellas to fund stock repurchases.Agency mortgage-backed securities rose 2.4% during the quarter, outperforming equivalent-duration Treasuries by 90 basis points as option-adjusted spreads narrowed by 17 basis points. Agency mortgage-backed spreads remain significantly below long-term averages, supported bythe Federal Reserve’s low interest rate policy and continued purchases by the Federal Reserve. The Fed continues to reinvest principal andinterest payments from its existing portfolio into additional agency mortgage-backed securities, although the purchases made under thequantitative easing program are scheduled to end in the fourth quarter.Although the Fed is on track to end the quantitative easing program in October, the near-term outlook for interest rates remains mostlyunchanged. The Fed continues to emphasize that policy will remain accommodative well beyond the termination of their bond purchasingprogram due to continued concern over the pace of economic growth. While the unemployment rate has declined more quickly than anticipated,to its current level of 6.1%, the number of long-term unemployed and other measures of employment indicate there is still considerable slack inthe labor market. The Fed’s primary motivation for ending QE is not an expectation of robust economic growth, but rather concern over financialstability. Six years after the financial crisis, unconventional Fed policy has become more controversial as concerns grow that Fed policy may beleading to speculative excess and a misallocation of capital. Investors continue to add incremental risk to portfolios in an attempt to maintain adesired yield level, driving valuations to less and less attractive levels. In this environment we continue to be cautious with respect to high-yieldbonds, while investment-grade securities still appear relatively attractive. Although there is not much room left for spreads to tighten in the shortend of the curve, the extra income from investment-grade risk assets should still provide for better returns relative to Treasury securities.PARS: County of Contra Costa6
DISCUSSION HIGHLIGHTSFixed Income (Cont.)The Plan’s fixed income segment returned 1.85% in the quarter, which underperformed the Barclays Aggregate return of 2.04%.The separately managed fixed income portfolio returned less than the benchmark, gaining 1.77%.The Pimco Total Return Bond Fund gained 2.37% in the quarter, which placed it in the 23rd percentile of Morningstar’s Intermediate-TermBond Universe. The Fund outperformed the BC Aggregate Index.Alternative InvestmentsAlternative investments returned 1.10%, supported by our managers who posted a narrow band of positive returns, ranging from a high of 1.41%for the Arbitrage Fund, to a low of 0.83% for the Eaton Vance Global Macro Absolute Return Fund. Investment returns for the Arbitrage Fund(+1.41%) were bolstered by numerous opportunities resulting from resurging M&A activity. Globally, $1 trillion of deals were announced in thequarter, and year-to-date $1.83 trillion in deals have been announced. With companies finding organic growth difficult to achieve, merger andacquisition activity has flourished. Additionally, tax inversion strategies also have become a catalyst whereby a company seeks to re-domiciletheir business under a country with a more favorable tax regime. And to accomplish this, a merger must be executed. The Eaton Vance GlobalMacro Fund returned 0.83%. Positive contributors to performance included long currency and credit allocations to Sri Lanka, long Sloveniancredit, and long Turkish credit and currency positions. Negatives for the Fund included a short position in Spanish credit, short positions to theCanadian dollar, and short currency and credit positions in Russia. The AQR Managed Futures Fund returned 0.9% in the quarter. Equity andfixed income futures positions added to gains in the quarter, while both currency and commodity positions detracted. The Fund ended the quarterwith a targeted volatility of 9%.The alternative investment segment returned 1.10% in the second quarter, which was ahead of the Hedge Fund Research InstituteMarket Defensive Index return of 0.39%.The Arbitrage Fund returned 1.41% in the quarter which ranked in the 21stpercentile of Morningstar’s market neutral universe.The JP Morgan Research Market Neutral Fund returned 1.29%, which placed the Fund in the 24thpercentile of the Morningstar marketneutral universe.The Eaton Vance Global Macro Absolute Return Fund posted a 0.83% return, which placed in the 66thpercentile of the Morningstar non-traditional bond universe.The AQR Managed Futures Fund’s return of 0.90% ranked in the 49thpercentile of Morningstar’s managed futures fund universe. PARS: County of Contra Costa7
PARS: County of Contra CostaDISCUSSION HIGHLIGHTSAsset Allocation/Portfolio TransitionsSeveral portfolio transitions took place in the quarter.A 2% allocation was established to the SPDR Euro STOXX 50 ETF, an international equity ETF targeting Eurozone companies.The Nationwide Geneva Mid-Cap Growth Fund was eliminated from the Plan due to performance considerations. The iShares Mid-CapGrowth ETF was selected as a replacement while due diligence is being conducted for an active manager replacement.The Pimco High Yield Fund was eliminated from the Plan due to concerns surrounding the valuations in the high yield market.8
INVESTMENT STRATEGY As of June 30, 2014Tactical Asset Allocation Asset Class% Portfolio WeightingRationaleTargetCurrent PortfolioOver/Under Weighting Cash1.0%4.1% +3.1%The cash allocation reflects a contribution received at the end of the quarter. Our target allocation for cash is 1%.Fixed Income38.0%36.0% -2%The fixed income allocation is positioned as an underweight. Our forecast for fixed income returns range between2-3% for intermediate-term bonds over the next three to five years.High Yield0.0%0.0% 0%We eliminated the high yield allocation during the quarter, based on valuation concerns.Alternatives10.0%9.7% -.3%As we invest the cash contribution in the quarter, we will target a 2% overweight to alternatives. Alternatives serveto mitigate the impact of a decline in the bond market, due to a potential rise in interest rates.Real Estate (REITS)4.0%1.9% -2.1%We continue to maintain an underweight to REITs due to concerns about valuation, as well as the impact of a risinginterest rate environment on the asset class.Global Equity7.0%8.7% +1.7%We have increased our allocation to global/international equities. Valuations look more appealing overseas with the MSCI-EAFE Index trading at 14 times forward earnings estimates and emerging markets trading at 11 times next year’s earnings. During the quarter, we added a tactical 2% allocation to European equities to further take advantage of the region’s reasonable valuations and accommodative ECB policy. We expect aggregate demand and employment to slowly improve in the area. Financial markets have generally stabilized and an early–stage recovery appears underway.International (Developed)9.0%10% +1%International (Emerging)0.0%1.5% +1.5%We maintain our allocation to emerging market equities. While valuations are attractive, the geopolitical riskspresent in many of these markets limit our willingness to increase the position.Total Domestic Equity31.0%28.1% -2.9%Large Cap17.0%18.4% +1.4%Large cap equity trades at roughly 15.6 times next year’s earnings, which represents a more attractive valueproposition relative to mid-cap or small cap equities.Mid Cap6.0%4.4% -1.6%Mid-cap equity is underweight due to valuation concerns, with the Russell Mid-Cap Index trading at an 18.5X PEratio.Small Cap8.0%5.3% -2.7%Small cap equity is underweight due to valuation concerns, with the Russell 2000 Index trading at a 20X PE ratio.PARS: County of Contra Costa9
PARS: County of Contra Costa 3/31/20143/31/20146/30/20146/30/2014 TargetAsset AllocationMarket Value% of Total Market Value % of Total AllocationLarge Cap EquitiesColumbia Contrarian Core Z5,784,2484.3%6,811,3574.6% -Sentinel Common Stock I4,437,9443.3%4,651,0053.1% -T. Rowe Price Equity Income Fund3,034,8522.2%3,215,6892.2% -Loomis Sayles Value Fund4,414,4353.3%4,651,6903.1% -Harbor Capital Appreciation Instl3,728,7282.8%3,995,6022.7% -T. Rowe Price Growth Stock Fund3,705,7142.7%3,980,4382.7% -Total Large Cap Equities25,105,92118.6%27,305,78118.4% 17.0%RangeRange 13-32%Mid Cap EquitiesTIAA-CREF Mid-Cap Value Instl3,100,2592.3%3,233,7682.2% -iShares Russell MidCap Growth Fund-0.0%3,242,0722.2% -Nationwide Geneva Mid Cap Growth Fund3,077,6862.3%-0.0% -Total Mid Cap Equities6,177,9444.6%6,475,8404.4%6.0%RangeRange 2-10%Small Cap EquitiesColumbia Small Cap Value Fund II3,787,9352.8%3,975,8682.7% -T. Rowe Price New Horizons Fund3,762,3832.8%3,965,0772.7% -Total Small Cap Equities7,550,318$ 5.6%7,940,945$ 5.3%8.0%RangeRange 4-12%International Nationwide Bailard Intl Equities Fund4,425,6433.3%4,279,8372.9% -Dodge & Cox International Stock Fund4,776,8793.5%4,616,8393.1% -MFS International Growth Fund3,049,3862.3%3,218,6692.2% -Schroder Emerging Market Equity2,059,2631.5%2,172,0511.5% -SPDR EURO STOXX 50 ETF-0.0%2,834,1851.9% -Total International 14,311,171$ 10.6%17,121,580$ 11.5%9.0%RangeRange 4-16%GlobalTempleton Global Opportunities A LW12,251,4479.1%12,854,1338.7% -Total Real Estate12,251,447$ 9.1%12,854,133$ 8.7%7.0%RangeRange 4-12%Real EstateNuveen Real Estate Secs I Fund2,026,6971.5%2,863,0341.9% -Total Real Estate2,026,697$ 1.5%2,863,034$ 1.9%4.0%RangeRange0-8%Asset AllocationPeriod Ending June 30, 201410
PARS: County of Contra Costa3/31/20143/31/20146/30/20146/30/2014 TargetAsset AllocationMarket Value% of Total Market Value % of Total AllocationFixed IncomeCore Fixed Income Holdings43,323,513$ 32.0%45,393,35930.6% -PIMCO Total Return Instl Fund5,620,5904.2%7,973,4435.4% -PIMCO High Yield Instl1,325,8291.0%00.0% -Total Fixed Income50,269,932$ 37.2%53,366,802$ 36.0% 38.0% Range Range 30-50%AlternativesAQR Managed Futures I$5,074,7713.8%4,678,7443.2% -Arbitrage I$3,360,3252.5%2,878,0721.9% -Eaton Vance Glbl Macro Abs Ret I$5,024,2763.7%5,003,2743.4% -JP Morgan Research Market Neutral I$2,681,0702.0%1,801,0911.2% -Total Alternatives16,140,441$ 11.9%14,361,181$ 9.7% 10.0% Range Range 5-20%CashMoney Market1,423,192$ 1.1%6,153,1694.1% -Total Cash1,423,192$ 1.1%6,153,169$ 4.1%1.0%RangeRange0-5%TOTAL135,257,063$ 100.0% 148,442,465$ 100.0% 100.0%11
PARS: County of Contra CostaInvestment SummarySecond QuarterBeginning Value135,517,785.67$ Net Contributions/Withdrawals9,762,183.92 Fees Deducted-40,568.58 Income Received518,297.17 Market Appreciation3,190,388.86 Net Change in Accrued Income70,501.12Ending Market Value149,018,588.16$ Investment SummaryPeriod Ending June 30, 201412
Inception Date: 02/01/2011* Benchmark from February 1, 2011 to June 30, 2013: 18% Russell 1000 Index, 6% Russell Midcap Index, 8% Russell 2000 Index, 8% MSCI AC World ex US Index, 10% MSCI EAFE Index, 45% Barclays Aggregate Index, 4% DJ Wilshire REIT Index, 1% Citigroup 3 Month T-Bill Index. From July 1, 2013: 17% Russell 1000 Index, 6% Russell Midcap Index, 8% Russell 2000 Index, 7% MSCI AC World ex US Index, 9% MSCI EAFE Index, 38% Barclays Aggregate Index, 4% DJ Wilshire REIT Index, 10% HFRI Fund of Funds Market Defensive Index, 1% Citigroup 3 Month T-Bill IndexReturns are gross-of-fees unless otherwise noted. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value.PARS: County of Contra CostaSector3 MonthsYear to Date (6 Months) 1 Year 3 YearsInception to Date (41 Months)Cash Equivalents.00.01.02.02.02 iMoneyNet, Inc. Taxable.00.00.00.00.00Fixed Income ex Funds1.77 3.40 4.32 4.12 4.58Total Fixed Income1.85 3.46 4.56 4.34 4.73 BC US Aggregate Bd Index2.04 3.92 4.38 3.67 4.00Total Equities3.74 5.20 22.85 13.07 11.95Large Cap Funds4.23 5.25 24.96 16.23 13.95 Russell 1000 Index5.11 7.28 25.37 16.63 15.74Mid Cap Funds4.19 5.67 23.02 13.64 12.97 Russell Midcap Index4.98 8.68 26.87 16.08 15.90Small Cap Funds2.09 4.36 27.06 17.13 16.14 Russell 2000 Index2.04 3.18 23.63 14.57 14.77REIT Funds7.29 17.33 13.79 11.35 11.41 Wilshire REIT Index7.22 18.08 13.56 11.71 12.44International Equities3.43 4.39 22.51 7.89 7.71 MSCI EAFE Index4.08 4.77 23.57 8.10 7.87 MSCI AC World Index5.04 6.17 22.97 10.26 9.92 MSCI EM Free Index6.59 6.14 14.30-.40.71Alternatives1.10-.86.49-100.00 -100.00 HFRI FOF Market Def.39-.99-.15 -1.49 -2.43Total Account Net of Fees2.59 3.60 12.51 8.30 7.61 County of Contra Costa*3.21 5.02 13.47 8.50 8.55Selected Period PerformancePARS/COUNTY OF CONTRA COSTA PRHCPAccount 6746038001Period Ending: 06/30/201413
PARS: County of Contra Costa3-MonthYTD1-Year3-Year5-YearFund NameInception Return Rank Return Rank Return Rank Return Rank Return RankSentinel Common Stock I(7/13) 3.81 81 5.17 83 20.60 84 14.67 59 17.39 50Columbia Contrarian Core Z(7/13) 5.14 26 6.21 57 25.26 29 17.09 13 19.20 13T. Rowe Price Equity Income 4.46 53 6.13 73 20.66 74 15.27 48 18.06 32Harbor Capital Appreciation Instl 4.59 38 4.46 56 31.41 8 15.57 30 18.26 37Loomis Sayles Value Fund (7/11) 4.08 68 6.64 60 24.60 18 16.70 15 17.83 38T. Rowe Price Growth Stock4.03 58 2.74 82 28.68 27 16.96 11 19.63 14Idx: Russell 1000 5.12 -- 7.27 -- 25.35 -- 16.63 -- 19.25 --TIAA-CREF Mid-Cap Value Instl5.19 30 9.53 17 26.30 41 15.39 51 20.29 57Idx: Russell Mid Cap Value5.62 -- 11.14 -- 27.76 -- 17.56 -- 22.97 --iShares Russell Mid-Cap Growth4.31 15 6.40 22 25.74 23 14.31 9 20.91 40Idx: Russell Mid Cap Growth4.37 -- 6.51 -- 26.04 -- 14.54 -- 21.16 --Columbia Small Cap Value II Z2.84 50 5.12 40 25.85 19 15.27 38 21.16 28Idx: Russell 2000 Value2.38 -- 4.20 -- 22.54 -- 14.65 -- 19.88 --T. Rowe Price New Horizons1.34 41 3.07 21 28.08 7 19.36 1 26.14 1Idx: Russell 2000 Growth1.72 -- 2.22 -- 24.73 -- 14.49 -- 20.50 --Dodge & Cox International Stock5.00 14 7.90 4 29.31 1 10.41 5 14.89 4Nationwide Bailard Intl Eqs InSvc2.73 80 4.22 41 24.49 9 7.21 39 12.20 24MFS International Growth I4.78 25 3.80 42 17.45 72 6.46 57 12.74 45Templeton Global Opportunities A LW2.24 88 3.64 78 23.85 37 10.06 65 12.66 83Idx: MSCI EAFE4.09 -- 4.78 -- 23.57 -- 8.10 -- 11.77 --Idx: MSCI ACWI5.04 -- 6.18 -- 22.95 -- 10.25 -- 14.28 --Schroder Emerging Market Equity(11/12) 6.47 57 3.68 85 13.25 59 0.26 41 9.00 50Idx: MSCI Emerging Markets6.59 -- 6.14 -- 14.30 -- -0.40 -- 9.23 --SPDR EURO STOXX 50 ETF(6/14) 3.54 46 5.65 55 34.64 23 6.11 100 9.42 100Nuveen Real Estate Secs Y7.34 19 18.61 4 14.39 22 11.64 13 23.59 18Idx: Wilshire REIT 7.22 -- 18.08 -- 13.56 -- 11.71 -- 24.05 --Core Fixed Income Portfolio1.77 79 3.40 81 4.32 65 4.12 49 -- --Pimco Total Return Inst'l 2.37 23 3.70 71 4.88 50 4.32 41 6.39 39BarCap US Aggregate Bond2.04 -- 3.93 -- 4.37 -- 3.66 -- 4.85 --Arbitrage I(7/13) 1.41 21 0.86 54 2.10 59 1.65 39 2.31 38AQR Managed Futures (7/13) 0.90 49 -5.19 82 0.33 35 1.30 7 -- --Eaton Vance Glbl Macro Abs Ret (7/13) 0.83 66 0.89 79 0.44 86 1.08 80 3.07 78JPMorgan Research Market Neutral Instl (7/13) 1.29 24 1.88 30 3.23 42 0.84 55 0.68 56Data Source: Morningstar, SEI Investmentsbelieved accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value.Returns less than one year are not annualized. Past performance is not indicative of future returns. The information presented has been obtained from sourcesALTERNATIVE FUNDSREIT EQUITY FUNDSBOND FUNDSPARS/COUNTY OF CONTRA COSTALARGE CAP EQUITY FUNDSMID CAP EQUITY FUNDSSMALL CAP EQUITY FUNDSINTERNATIONAL EQUITY FUNDSFor Period Ending June 30, 201414