FROM: Lisa Sorani, Manager of HR Employee Services LS -

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Current Trends Concerning a Real Return Class • Several variations of this class are taking shape: • Real Return (New Jersey, Arizona, PSERS) • Tangible Asset (WSIB) • Real Asset (ABP) • Real Return (Kansas PERS) • Inflation-linked (CalPERS, OTPP) • Single-segment (such as commodities, infrastructure, timber as single strategic classes) • Key tradeoff: flexibility in structuring vs. complexity and perception of utilizing ad hoc approaches 20 20
Modeling the Real Return Class • Different plan sponsor blueprints for the class reflect different preferences and skill sets: Source: PCA Examples of Approved Plan Sponsor “Blueprints” CalPERS Inflation- Linked OTPP Inflation- Linked WSIB Tangible Assets KPERS Real Return Hawaii Real Return Asset Class Subcomponents TIPS 20% 0% 0% 50% 50% TIMBER 20% 20% 30% 25% 50% INFRASTRCTR 30% 60% 50% 0% 0% COMMODITIES 30% 10% 0% 0% 0% OIL&GAS 0% 0% 10% 0% 0% AGRICULTURE 0% 10% 10% 0% 0% HEDGE FOF 0% 0% 0% 25% 0% TOTAL 100% 100% 100% 100% 100% • Wide variation of structures, reflecting unique plan sponsor characteristics • Typically, market-driven opportunities will cause actual fundings to deviate significantly from proposed structure for modeling purposes • Policies and guidelines for this class typically allow for ample investment latitude 21 21
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M E M O R A N D U M Date: April 29,
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Recent Investment Performance Barro
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Additional Considerations Barrow Ha
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For example, as of the most recent
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Q1 - 2013 Preliminary Recent Invest
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Q1 - 2013 Preliminary Periods endin
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Q1 - 2013 Preliminary Fixed Income
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AGENDA ITEMS Section Tab Current In
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THE CURRENT INTEREST RATE ENVIRONME
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SECTION 2 LOOKING FORWARD Source: W
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LOOKING FORWARD: INTRODUCTION r •
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LOOKING FORWARD: POSSIBLE OUTCOMES
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POSSIBLE OUTCOMES: ALTERNATIVE SCEN
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Page 64 and 65: POSSIBLE OUTCOMES: ALTERNATIVE SCEN
Page 78 and 79: LOOKING FORWARD: CONCLUSIONS r •
Page 80 and 81: INVESTMENT OPTIONS r • In light o
Page 82 and 83: INVESTMENT OPTION 2 r • Option 2:
Page 84 and 85: INVESTMENT OPTION 4 r • Option 4:
Page 86 and 87: INVESTMENT OPTION 4-A r • Option
Page 88 and 89: INVESTMENT OPTION 4-B r • Option
Page 90 and 91: INVESTMENT OPTION 4-C r • Option
Page 92 and 93: CONCLUSIONS r • There are a few a
Page 95 and 96: Considering a Real Return Class Eas
Page 97 and 98: Defining Inflation • Inflation is
Page 99 and 100: Expert Views 5
Page 101 and 102: Expert Views: Inflation Doves • B
Page 103 and 104: Expert Views: Inflation Doves The E
Page 105 and 106: Expert Views: Inflation Hawks • B
Page 107 and 108: Expert Views: Inflation Hawks The E
Page 109 and 110: Expert Views: Summary • Experts a
Page 111 and 112: Institutional Investor Response •
Page 113: Modeling the Real Return Class •
Page 117 and 118: Implementing a Real Return Class
Page 119 and 120: Appendix 25 25
Page 121 and 122: Modeling a Real Return Class SUMMAR
Page 123 and 124: A Brief Description of Global Infla
Page 125 and 126: A Brief Description of Absolute Ret
Page 127 and 128: A Brief Description of Absolute Ret
Page 129 and 130: A Brief Description of Commodities
Page 131 and 132: A Brief Description of Oil & Gas RE
Page 133 and 134: A Brief Description of Oil & Gas RE
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FROM: Lisa Sorani, Manager of HR Employee Services LS -

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