Comprehensive Annual Financial Report - Minnesota State ...

Notes
32
(Continued)
A detailed schedule
of fees and commissions
by brokerage firm,
along with the number
of shares traded, total
commissions, and commissions
per share may
be obtained from the
Minnesota State Board
of Investment.
Public Employees
Retirement Association
of Minnesota
master custodian for pension fund assets
are allocated to the funds participating
in the pooled investment accounts.
PERA’s share of these expenses in fiscal
year 2012 totaled $18,479,412 for
GERF, $7,851,258 for PEPFF, $1,078,730
for MERF, and $413,979 for PECF. A
detailed schedule of fees and commissions
by brokerage firm, along with the
number of shares traded, total commissions,
and commissions per share for
the pooled investment accounts may be
obtained from the Minnesota State Board
of Investment at the Retirement Systems
of Minnesota Building, 60 Empire Drive,
Suite 355, St. Paul, Minnesota 55103.
4. Cash
Cash on deposit consists of year-end
receipts not processed as of the investment
cutoff deadline on June 30. PERA
cash funds are held in the state treasury,
commingled with other state funds.
Minnesota Statutes, Section 9.031,
requires that deposits be secured by
depository insurance or a combination
of depository insurance and collateral
securities held in the state’s name by an
agent of the state. Such insurance and
collateral shall be in amounts sufficient
to ensure that deposits do not exceed 90
percent of the sum of the insured amount
and the market value of the collateral.
Throughout fiscal year 2012, the
combined depository insurance and
collateral was sufficient to meet legal
requirements and secure all PERA
deposits, eliminating exposure to custodial
credit risk.
5. Investment Risk
a) Credit risk is the risk that an issuer
or counterparty to an investment
will be unable to fulfill its obligations
to the holder of the investment.
The State Board of Investment has
policies designed to minimize credit
risk. They may invest funds in governmental
obligations provided the
issue is backed by the full faith and
credit of the issuer or the issue is
rated among the top four quality
rating categories by a nationally recognized
rating agency. They may invest funds in corporate
obligations provided the issue is rated
among the top four quality categories by a
nationally recognized rating agency. They
may also invest in unrated corporate obligations
or in corporate obligations that are not
rated among the top four quality categories
provided that:
Fig. 2 Credit Risk Exposure
Fair Value
Quality Rating (in thousands)
AA or Better $3,202,593
BBB to A 1,232,470
BB or Lower 257,386
Not Rated 916,842
Fig. 3 Interest Rate Risk
Weighted Average
Security Maturity (in years)
Cash Equivalents 0.22
Commercial Mortgage Backed Securities 1.48
Asset-Backed Securities 3.78
Mortgage Backed Securities 4.45
Collateralized Mortgage Obligations 4.63
Agency Securities 4.78
Yankee Bonds 6.77
Foreign Country Bonds 7.36
Corporate Debt Obligations 8.56
U.S. Treasuries 9.24
Energy Sector Debt 9.58
Private Placements 11.35
Municipal Debt Obligations 20.81
Preferred Stock 28.28
Fig. 4 Foreign Currency Risk (fair value in thousands)
Currency Cash Equity Fixed Income
Australian Dollar 993 172,121 0
Brazilian Real 229 35,694 0
Canadian Dollar 1,073 226,099 6,080
Danish Krone 212 32,556 0
Euro Currency 6,770 608,966 2,387
Hong Kong Dollar 1,285 165,731 0
Indian Rupee 60 51,834 0
Indonesian Rupiah 171 22,605 0
Japanese Yen 8,268 484,154 0
Malaysian Ringgit 58 19,177 0
Mexican Peso 74 17,336 0
New Taiwan Dollar 144 38,554 0
Norwegian Krone 332 22,112 0
Philippine Peso 1 18,370 0
Polish Zloty 24 11,352 0
Pound Sterling 2,626 501,565 12,419
Singapore Dollar 285 36,322 0
South African Rand 330 25,987 0
South Korean Won 33 87,346 0
Swedish Krona 968 53,083 0
Swiss Franc 1,523 174,265 0
Thailand Baht 30 16,283 0
Turkish Lira 22 11,034 0
Other 410 24,535 0
Total $25,923 $2,857,080 $20,886