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SFERS Annual Report 2016

Published: June 30, 2016

The Retirement System’s investment objective is to maximize long-term rates of return on investments within prudent guidelines. 

The professional Investment Staff, supported by a group of professional consulting firms hired by the Retirement Board, analyzes, develops and recommends asset allocation mixes, manages investment portfolios, and monitors the activities and performance of external investment managers. For Fiscal Year 2016, the investment portfolio returned 1.29%. 

Under the authorization of the Retirement Board, and in line with the 2016 Annual Investment Plan, the investment team committed a total of $4.0 billion in new investments: $1.34 billion in Private Equity, $979 million in the Real Assets portfolio and $1.68 billion in fixed income (see the Investment Section for a detailed schedule of these investments).

Beginning in fiscal year 2014- 15 the Retirement Board approved a significant step up in resources. Over the past two years, the management team has been executing on the Board’s approved actions. At June 30, 2016, the team consisted of 16 investment professionals and two administrative assistants. In the past year, we hired six investment professionals, and promoted two members of our existing staff including: 

  • Managing Director of Absolute Return 
  • Senior Portfolio Manager for Public Equity 
  • Senior Portfolio Manager for Real Assets 
  • Senior Portfolio Manager of Natural Resources 
  • Security Analyst of Fixed Income 
  • Director of Private Equity 
  • Senior Portfolio Manager of Venture Capital

The additions to the investment team were made to enhance our research, strategy, and diversification, with the objective of improving total returns, returns in down markets, and overall risk adjusted returns, in a challenging market environment.

Over the past two years we have made important changes to our investment strategy, for both asset allocation and each asset class. Regarding asset allocation, we have reduced our exposure to long-only public equity and fixed income, increased our allocation to private equity and real assets, and adopted an allocation to absolute return.

Regarding the asset classes, in fixed income, we reduced our exposure to credit and increased our exposure to high quality debt and private debt. In private equity, we have reduced our exposure to large cap buyouts and increased our allocation to country, regional, and sector specialists. In real assets, we broadened our exposure from a real estate focus to include natural resources.