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

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INVESTMENT OPTION 4 r • Option 4: Alter Fixed Income Portfolio • By altering the composition of the Fixed Income portfolio a Plan Sponsor can move to address some of the challenges facing a traditional core Fixed Income manager in the current environment • We will look at 3 alternative methods for altering the composition of the Fixed Income portfolio Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 48
INVESTMENT OPTION 4-A r • Option 4 – A: Short-Term Lower-Quality • A portfolio composed of lower-quality investments that are short-term in nature can potentially mitigate some of the headwinds of the current interest rate environment. The lower-quality aspect allows the portfolio to earn a relatively high yield (4-6%) whereas the short-term nature limits the exposure to Duration risk (as well as default risk) • PCA has worked with a large Public Plan to implement a portfolio composed of 1/3 short-term term High Yield bonds, 1/3 Bank Loans, and 1/3 other short-term/floating rate instruments o o o Short-term High Yield benefits from the fact that securities with higher yields have less Duration risk; also, since they mature relatively soon there is less time for the business to deteriorate causing a default scenario. Bank loans have two great advantages: they have floating coupons and they are senior in the capital structure – since 1997 the S&P/LSTA Bank Loan Index has only lost money in one year (2008) The other category allows the investment manager to find value in other market segments depending on the manager’s expertise Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 49
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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
Page 29 and 30:
For example, as of the most recent
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Q1 - 2013 Preliminary Recent Invest
Page 33 and 34: Q1 - 2013 Preliminary Periods endin
Page 35: Q1 - 2013 Preliminary Fixed Income
Page 38 and 39: AGENDA ITEMS Section Tab Current In
Page 40 and 41: THE CURRENT INTEREST RATE ENVIRONME
Page 50 and 51: SECTION 2 LOOKING FORWARD Source: W
Page 52 and 53: LOOKING FORWARD: INTRODUCTION r •
Page 54 and 55: LOOKING FORWARD: POSSIBLE OUTCOMES
Page 56 and 57: 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 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 and 114: Modeling the Real Return Class •
Page 115 and 116: 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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