June 27, 2013 - Public Employees Retirement Association of New ...

1. Pledge of Allegiance 

2. Roll Call 

3. Approval of Agenda 

4. Approval of Consent Agenda 

5. Current Business 

PUBLIC EMPLOYEES RETIREMENT ASSOCIATION BOARD 

MONTHLY MEETING 

PERA Building 

Senator Fabian Chavez, Jr. (PERA) Board Room 

33 Plaza La Prensa 

Santa Fe, New Mexico 87507 

June 27, 2013 

1:30 p.m. 

Time (estimated) 

1:35 p.m. A. Presentation of Service Pins to: 

(1) Angel Lujan (10 years) 

(2) Brenda Cordova (15 years) 

1:40 p.m. B. Investments Division. 

1. Chief Investment Officer’s Performance Report 

2. May Hedge Fund Performance Report 

3. Presentations by Active Domestic Small Cap Managers 

a. TimesSquare Capital Management, LLC 

b. RBC Global Asset Management (U.S.) 

4. Action Item: 

Alternative Asset Recommendations to be Funded 

According to the Cash Plan and Subject to Review by 

General Counsel. 

PRESENTER 

Wayne Propst 

Executive Director 

Joelle Mevi 

PERA CIO 

Jason Goeller 

PERA Portfolio Manager 

Jeffrey Braemer 

Senior Vice President 

Product Manager 

Growth Equity Group 

Kenneth A. Tyszko, CPA, 

CFA, Managing Director 

Senior Portfolio 

Manager 

Bridget Tompkins 

Managing Director, 

Client Services Manager 

Susan Biernacki 

Investments Chair 

Joelle Mevi 

PERA CIO

a. £26 Million Commitment to DRC Capital European 

Real Estate Debt Fund II, LP, a European 

Commercial Real Estate Fund for the Real Estate 

Portfolio 

b. $35 Million Commitment to Lime Rock Resources 

Fund III, LP, an Energy Fund for the Real Asset 

Portfolio 

3:00 p.m. C. Approval of Resolution No. 13-06 Declaring a Vacancy 

on the Public Employees Retirement Association Board 

Joaquin Lujan 

PERA Portfolio Manager 

Julian Baca 

Deputy CIO 

Patricia French 

Board Chair 

3:10 p.m. D. SB 27 Implementation – Legislative Changes Greg Portillos 

PERA CIO 

Vince Jaramillo 

User Administrator 

3:30 p.m. E. Trustee Report on Conference Loretta Naranjo-Lopez 

3:45 p.m. F. Executive Director’s Report Wayne Propst 

Executive Director 

4:00 p.m. G. Executive Session 

a. Attorney Reports 

Administrative Appeals (The Board will go into 

Executive Session under NMSA 1978, Section 

10-15-1(H)(3) to discuss this item) 

a. Bernard Raymond 

b. Andres S. Vargas 

Zachary Shandler 

Assistant Attorney 

General 

and/or 

Mark Reynolds 

Assistant Attorney 

General 

6. Other Business 

7. Adjournment 

Any person with a disability who is in need of a reader, amplifier, qualified sign language 

interpreter, or any other form of auxiliary aid or service to attend or participate in the 

hearing or meeting, please contact Judy Olson at (505) 476-9305 at least one week prior to 

the meeting, or as soon as possible. Public documents, including the agenda and minutes, 

can be provided in various accessible formats. Please contact Ms. Olson if a summary or 

other type of accessible format is needed.

PUBLIC EMPLOYEES RETIREMENT ASSOCIATION 

MONTHLY MEETING 


CONSENT AGENDA 

1. Approval of Minutes: May 14, 2013 Special Board Meeting 

May 30, 2013 Board Meeting 

2. Ratification of Retirements – Benefits processed through June 21, 2013. 

a. Normal d. Non-Duty Death 

b. Deferred e. Non-Duty Disability 

c. Reciprocity to ERA f. Reciprocity to PERA 

3. Affidavits for Free Military Service: 

a. Christopher Baca, 10 months of Free Military Service 

b. John Zamora, 10 months of Free Military Service 

c. Damien Horne, 10 months of Free Military Service 

4. Duty and Non-Duty Death Determinations: 

a. Kenneth Griego, Non-duty death 

b. Vincent Sanchez, Non-duty death 

c. Rudolfo Rivera, Non-duty death 

d. Michael Baca, Non-duty death 

e. Kenneth Baca, Non-duty death 

5. Resolutions: 

1. A Resolution Authorizing a 24.39% Pick-Up of PERA Municipal Police 

Member Contributions for Police Non-Bargaining Unit Members Only, for 

the City of Hobbs. 

2. Carrizozo Soil and Water conservation District, Resolution No. 05-2012- 

2013. A Resolution to Adopt the State of New Mexico Deferred 

Compensation Plan. 

3. Southwest Solid Waste Authority, Resolution No. R-13-10. A Resolution 

to Adopt the State of New Mexico Deferred Compensation Plan. 

4. Albuquerque Bernalillo County Water Utility Authority, Resolution No. 

R-13-10. A Resolution to Adopt the State of New Mexico Deferred 

Compensation Plan. 

5. Albuquerque Bernalillo County Water Utility Authority Resolution 

Establishing Water Authority Policy Concerning the PERA Employees’ 

Contribution Rate (Bill No. F/S R 13-12) approved June 19, 2013.

Setting of Meetings – July, 2013 

a. Special Board Meeting 7/9/2013 9:00 a.m. 

b. Investments Committee 7/9/2013 After Special Board Meeting 

c. Legislative Committee 7/9/2013 After Investments Committee 

d. Audit & Budget Committee 7/9/2013 After Legislative Committee 

e. Rules & Administration 

Committee 

7/9/2013 After Audit & Budget Committee 

f. Disability Review Committee 7/9/2013 2:00 p.m. PERA Board Room 

g. PERA Board – New Board 

Member Orientation 

7/29/2013 1:00 p.m. 

Red River Conference Center 

101 West River Street 

Red River, New Mexico 87558 

h. PERA Board Retreat 7/30/2013 8:30 a.m. Red River Conference Center 

i. PERA Board Retreat 7/31/2013 8:30 a.m. Red River Conference Center 

j. Monthly Board Meeting 8/1/2013 9:00 a.m. Red River Conference Center

PERA Executive Investment Summary 

May 2013 

Market Review: 

After touching an all-time high in the middle of the month, comments by Federal Reserve chairman 

Bernanke that alluded to the eventual wind-down of the current quantitative easing unnerved 

investors, causing equity markets to decline and interest rates to rise. Despite the sell-off, the US 

equity markets managed to finish higher than the previous month’s close with the S&P 500 up 

2.34% (15.37% CYTD and 22.24% FYTD). The EAFE index reversed the previous month’s gains by 

declining -2.31% (8.29% CYTD and 23.5% FYTD) while the EMF index declined -2.52% (-3.29% CYTD 

and 10.19% FYTD). The Barclays core bond index fell -1.78% (-0.91% CYTD and 0.89% FYTD) while 

High Yield bonds returned -0.58% (4.15% CYTD and 12.45% FYTD). 

US data releases during the month showed that consumer spending fell 0.2% m/m, retail sales 

climbed 0.1% (core was up 0.5%), consumer confidence rose to 76.2 in May from 68.1 in April, while 

the ISM manufacturing index declined to 50.7 from 51.3 and the ISM nonmanufacturing index fell to 

53.1 from 54.4. Nonfarm payrolls increased 165,000 while Gross Domestic Product grew by 2.4% in 

the first quarter. At its May meeting, the Federal Open Market Committee left the Fed funds rate 

unchanged at a range of 0 to 0.25%. It also maintained its program of buying $40 billion of 

mortgage-backed securities and $45 billion of Treasury securities each month. In the 

accompanying statement the FOMC said that it “is prepared to increase or reduce the pace of its 

[securities] purchases to maintain appropriate policy accommodation as the outlook for the labor 

market or inflation changes.” There were also modest changes to the economic summary 

paragraph – labor market conditions have shown signs of improvement “on balance,” while fiscal 

policy “is restraining growth” (rather than “has become somewhat more restrictive”). 

Outside the US, the Euro area GDP contracted 0.2% in the first quarter, Japan’s GDP rose 3.5%, the 

Bank of England made no changes to its existing asset purchase program (375 billion) or official 

interest rate (0.5%), and the Reserve Bank of Australia cut the cash rate 25 basis points to 2.75%. 

The PERA Fund has returned 15.76% for the FYTD and 0.02% in the month of May, bringing the Fund 

market value to $13.268 billion. 

Pension Systems Update: 

Fed data show public DB plans rise, corporate DC disappoints 

According to the Federal Reserve's Financial Accounts of the United States report issued June 6, 

defined benefit state and local government public pension assets rose 6.81% in the quarter ending 

March 31, 2013 to $3.41 trillion. U.S. corporate retirement plan assets rose just 2.78% in the 

quarter, to $6.82 trillion; corporate defined benefit plan assets totaled $2.57 trillion, up 0.73% 

from the previous quarter, and defined contribution plans had $4.26 trillion in assets, an increase 

of 4.06%. The real story, according to plan experts, was the level of net asset flows. A modest $4.4 

billion in net asset inflows for defined contribution plans was a surprise in light of strong market 

returns. Comparing the 4.06% increase in defined contribution assets to a typical return of 5% 

based on a composite portfolio tracked by J.P. Morgan Asset Management (JPM), “it appears that 

they underperformed the market,” said Mr. Barron. “If that is a trend, it would be disappointing. If 

defined contribution is going to replace defined benefit, this pattern has to be continuously on the 

upswing.” On the public plan side, the latest Federal Reserve data “show that state and local 

government retirement fund assets have rebounded since the financial crisis,” said Paul Zorn, 

director of governmental research for actuarial firm Gabriel, Roeder, Smith & Co., Southfield, 

Mich. 

~Read more http://www.pionline.com/. 

Quote for the Month: 

“ Bernanke may be driving in a fog…” 

~Bill Gross, the “Bond King of PIMCO,” at a June 19 th Bloomberg press conference 

following the release of the FOMC meeting minutes. 1



Market Values, Asset Allocation & Performance Data: 

TABLE I: Fund Market Values (in millions $) 

Asset Class 5/31/2013 Prev. Month's Chg 

Total Equities 7,297 -8.01 

Domestic Equity 4,015 64.62 

Large Cap 2,732 6.26 

Small/Mid Cap 1,283 58.36 

International Equity 3,282 -72.63 

Total Fixed Income 3,363 -2.41 

Total Alternatives 2,441 3.33 

Absolute Return 1,133 8.91 

Private Equity 539 8.70 

Real Estate 428 -11.07 

Real Assets 341 -3.21 

STIF/STO Cash Balances 167 18.91 

TOTAL FUNDS 13,268 11.82 

TABLE II: Fund Asset Allocation Comparison 

Asset Class Actual Target Variance Ranges $ in Millions 

Total Equities 55.0% 49% 6.0% - 795.6 

Domestic Equity 30.3% 29% 1.3% 24-34% 166.9 

Large Cap 20.6% 20% 0.3% - 38.1 

Small/Mid Cap 9.7% 9% 1.0% - 128.8 

International Equity 24.7% 20% 4.7% 15-25% 628.7 

Total Fixed Income 25.3% 26% -0.7% 23-29% -86.7 

Liquid Alpha 0.0% 5% -5.0% 0-7% - 

Total Alternatives 18.4% 20% -1.6% - -212.5 

Absolute Return 8.5% 7% 1.5% 5-9% 204.0 

Private Equity 4.1% 5% -0.9% 3-7% -124.0 

Real Estate 3.2% 3% 0.2% 1-5% 30.1 

Real Assets 2.6% 5% -2.4% 3-7% -322.5 

STIF/STO Cash Balances 1.3% 0% 1.3% - 167.0 

TABLE III: PERA Performance for Month and Fiscal Year to Date (in percent %) 

5/31/2013 Fiscal YTD 1 Year 3 Year 

Total Domestic Equity 3.28% 26.47% 31.18% 18.25% 

Russell 3000 Index 2.36% 23.06% 27.88% 16.82% 

Value Added 0.92% 3.41% 3.31% 1.43% 

International Equity -2.16% 19.86% 26.15% 10.16% 

MSCI ACWI ex-US Index -2.18% 19.71% 26.83% 9.75% 

Value Added 0.02% 0.15% -0.68% 0.41% 

Fixed Income -2.12% 5.47% 6.52% 6.91% 

85/15 Barclays Index -1.95% 0.47% 0.51% 4.45% 

Value Added -0.17% 5.00% 6.01% 2.46% 

Alternative Assets 0.78% 10.42% 11.17% 9.46% 

Cash Equivalents 0.23% 3.29% 3.92% 5.88% 

TOTAL FUND 0.02% 15.76% 18.92% 11.46% 

Custom Benchmark -0.13% 13.29% 16.62% 10.53% 

Value Added 0.15% 2.47% 2.30% 0.93% 

2



Market Values, Asset Allocation & Performance: 

Market Value & Asset Allocation: 

The US equity markets were higher in May with the Total Fund market value up $12 million over 

the previous month to $13,268,240,000. The Board ratified a new strategic asset allocation in 

November by approving revisions to its IPS, which increased the target US equity allocation by 2% 

to 29%, reduced the Non-US equity allocation by 7% to 20%, added the 5% Liquid Alpha bucket, 

reduced hedge funds by 2% to 7%, and increased the Real Assets target by 2% to 5%. Based on 

current market values and the new strategic asset allocation targets, the non-US allocation is 

overweight by 4.7%, but still within the allowable range, pending the GTAA implementation. Along 

the same lines, the Absolute Return portfolio is overweight and the Real Assets portfolio is 

underweight pending an AR portfolio rebalance and the expansion of the RA portfolio. 

Asset Transfers: 

PERA transferred $30 million at month-end from the STIF account to supplement beneficiary 

payments and to pay refunds and agency expenses, including investment manager fees. For the 

fiscal-year-to-date, PERA has transferred $368 million to the PERA General account, $16.5 million 

to the Magistrate account, and $3 million to the Judicial fund to cover potential shortfalls in 

employer and employee contributions. PERA has made no transfers to the Volunteer Fire Fighter 

account for the fiscal-year-to-date. Excess cash of $70 million in the beta overlay account was 

rebalanced to core bond managers MacKay Shields and BlackRock. Hedge fund redemptions 

totaling $9.5 million were received in the month. 

Private partnerships called $10 million in the month of May, distributing $19.8 million. In the 

current fiscal year, capital calls have averaged $19 million per month and have totaled $210 

million. In fiscal year 2012 capital calls averaged $22.5 million per month and totaled $270 million. 

Fund Returns & Performance: 

The Total Fund returned 0.02% for the month with active management in the domestic equity 

composite added value on both an absolute as well as a relative basis across most public market 

mandates. Hedge funds also generated a positive return on an absolute basis. Over the trailing 

one-year and three-year periods, the Fund has returned 18.92% (1YR) and 11.46% (3YR) compared 

to the Custom Index return of 16.62% (1YR) and 10.53% (3YR). 

The PERA Fund ranked 29 th for the quarter and 21 st for the year ending March 31, 2013 in the 

Wilshire TUCS universe of public funds > $1 billion. 

Watch List Update: 

None of PERA’s active domestic equity and fixed income managers are on the Watch List. The 

Wellington Emerging Markets Equity mandate is on Watch at present. The Investment Committee 

voted to terminate SSgA International Alpha Select at the August 2012 meeting. This account was 

held since late September with an interim manager and transitioned in early April to the Northern 

Trust passive ACWI ex-US account. The Board approved a recommendation to add Schroder 

International Equity Small Cap mandate to the watch list at the April meeting. Four of PERA’s 

alternative investments are on Cliffwater’s Watch List. 

3



Portfolio Manager Views: 

Public Equity: 

In May, small cap stocks outperformed large cap with the S&P 500 posting 2.34% and the Russell 

2000 Index posting 4.00%. The U.S. equity markets continued positively due to better than 

expected U.S. employment data and corporate earnings. May was the 7 th consecutive monthly rise 

in the S&P 500. NMPERA’s small cap value managers, DFA and MetWest both exceeded their 

benchmark in excess of 150 basis points, both managers underweighted REITS and utilities which 

helped since both sectors did poorly for the month. International equity saw a negative return for 

the month; the NMPERA managers had mixed results although the international small cap managers 

held up the best. Small and Smid Cap growth managers, RBC and TimesSquare, whose contracts 

were recently renewed, fared well for the month. For the 5 year return, both managers have 

exceeded their benchmarks by at least 350 basis points. 

~ LeAnne Larrañaga-Ruffy 

Fixed Income: 

In May, the fixed income markets were negative with the Barclays U.S. Aggregate bond index 

posting -1.78%. The Fed announced possible reduction of the quantitative easing stimulus which 

caused the Fixed Income markets to slide, with Treasuries being hit the hardest and riskier assets 

such as high yield and emerging markets also being impacted negatively. All of NMPERA’s managers 

struggled for the month, posting negative returns with only the global managers beating their 

respective benchmarks. Manulife, which was slow out of the gate after being hired in 2011, has 

exceeded their benchmark by 850 basis points for the one year return. In May they had an excess 

return of 101 basis points, due to their underweight exposure to U.S. Treasuries and a shorter 

duration. In addition their use of the British pound and Canadian dollar hedges, emerging market 

positions within Asia benefitted performance. 

~ LeAnne Larrañaga-Ruffy 

Real Assets: 

PERA’s Real Assets private partnerships called $1.7 million during the month of May. Distributions 

of $5.3 million were received during the month. Year to date the portfolio of sixteen partnerships 

drawn $243 million on $417 million in commitments. Cumulative distributions total $77.6 million, 

with an (unrealized) fair value of $208 million, resulting in an Internal Rate of Return of 10.43%, or 

1.22x cost since the inception of the program. Various areas of real assets provided modest results 

for the month of May. Crude oil, gold and natural gas in particular, provided divergent returns. WTI 

Brent spread increased to an eight month high given the increased geo-political volatility in the 

Middle East leaning towards possible reduced exports. Agriculture commodities were mixed with a 

couple of leaders: coffee, wheat and soybeans. 

~ Christina Keyes 

Private Equity: 

As of May 31, 2013 the Private Equity portfolio is 65% drawn ($628 million) on $887 million 

committed. Residual fair value ($543 million) plus cumulative distributions ($224 million) make for 

a total fair value of $768 million, or 1.22 times cost, and a net since inception IRR of +8.26%. 

PERA’s $40mm 2013 commitment to Carlyle VI buyout fund is in the last stages of closing. This is 

PERA’s first of four private equity commitments slated for 2013. 

~Joaquin Lujan 

4



Portfolio Manager Views, cont.: 

Hedge Funds: 

With the exception of a narrow (but volatile) decline in the Nikkei, May was a modestly good month 

for most developed market equities. The US S&P 500 led the way with a gain of +2.3% on 

improving US economic data and upbeat consumer confidence sentiment. Contributions came from 

all market capitalizations with sector strength from Technology, Financials and Healthcare. The 

real action for the month, however, came from fixed income. Trading in a huge range, the US 10 

year Treasury started May at a yield of 1.67% before rising to over 2.2% on May 29 th and then falling 

to 2.13% to finish the month, its worst since December 2009. It wasn’t only the US that suffered 

losses, as fixed income markets worldwide experienced large sell-offs, with participants fearing 

that the Federal Reserve would exit its quantitative easing programs sooner than previously 

anticipated. May was one of the worst months for global government bonds in the past two 

decades. May was also a difficult month for commodities, with the DJ UBS Commodities Index 

losing -2.2% for the month – primarily on large declines in precious metals. 

Despite the volatility in the broader markets during the month, hedge funds continued along their 

positive trajectory in May. The HFRI Fund Weighted Composite Index advanced +0.54%, with solid 

gains from equity-focused funds. The HFRI Equity Hedge Index returned +1.78%, outperforming 

global equity markets. Additional contributions came from Event Driven strategies, with positive 

performance coming from the continuation of a dynamic market for corporate transactions. The 

HFRI Event Driven Index posted a gain of +1.7%. Global macro managers as a whole were the worst 

performers during the month, with particular weakness in quantitative trend-following CTAs and 

Commodity-focused strategies. CTAs with significant long exposure to fixed income were 

especially hard hit as government bonds sold off sharply. The HFRI Systematic Diversified Index 

was down -2.22%. 

NM PERA’s Absolute Return portfolio fared relatively well, returning +1.32% (based on initial 

estimates) and outperforming both PERA’s benchmark of Libor + 4% and the broader HFRI indices by 

a fair margin. Consistent with the broader performance trend for May, PERA managers with 

significant equity exposure and dedicated Event Driven books performed strongly while the 

systematic trading strategies (CTAs) underperformed. PERA’s dedicated Market Neutral managers 

also posted notable positive returns. 

~ Jason Goeller 

Real Estate: 

As of May 31, 2013 the Real Estate portfolio excluding REITs is 58% drawn ($245 million) on $350 

million committed. Residual fair value ($192 million) plus cumulative distributions ($91 million) 

make for a total fair value of $283 million, or 1.17 times cost, and a net since inception IRR of 

+7.82%. The PERA IC committee has forwarded to the Board a recommendation to commit $40 

million to ERED II, a European commercial real estate fund. This will be first of two real estate 

commitments slated for 2013. 

~Joaquin Lujan 

5



Monthly Outlook: ‘Terra Incognita’ 

Over the course of the perilous climb out of the depths of the dark recession to the economic recovery 

during the last few years, the U.S. Federal Reserve’s fiscal policies and practices of quantitative easing 

(QE) have taken various twists and turns leading to a grey area of terra incognita (Latin: ‘uncharted 

territory’). The Fed has worked tirelessly since 2009 to provide unprecedented interest rate 

accommodations bringing the rates to negative real levels and creating extensive liquidity injections to 

stimulate the American economy. They have committed to battling deflation and held fast against 

economic slippage by purchasing billions of dollars of debt and risky mortgage assets through a buy-back 

program. Currently, the Fed is buying $85 billion of Treasuries and mortgage-back securities each month 

in order to put downward pressure on borrowing costs and to help spur economic growth. The average 

economic recovery expansion of a post-war period typically lasts 63-65 months. The U.S. is currently in 

the 47 th month of the current economic recovery, assisted by the bond purchasing program; the bond 

purchasing program that was never intended to be permanent, but as an emergency measure. Gauging 

the full impact of Quantitative Easing (QE) measures has required a steel reserve of calm and patience. 

In an attempt to foster a longer-term view for the remainder of the recovery and finding new techniques 

to keep inflation low while paring back on aggressive monetary stimulation, the Fed has taken on the 

discussion of tapering at their monthly bond purchases. Chairman Ben Bernanke told Congress’s Joint 

Economic Committee on May 22 nd that the Fed ‘could scale back stimulus efforts in the next few 

meetings’ if the employment outlook shows ‘sustainable’ improvement. He emphasized that any decision 

would hinge upon the economic data and that the Fed is prepared to stop tapering or even reverse it, if 

economic growth does not meet expectations. 

On June 18 th & 19 th , the Federal Open Market Committee met to focus on when and how they will tackle 

the process of retracting the QE and continuing the deleveraging process. The Fed has stated an 

unemployment rate of 6.5% as its threshold for pulling back on monetary policy. This level is interpreted 

as a healthy position in the recovery of the housing market and the economic impact of an improved 

labor market. At which time a reduction or ‘tapering’ of the bond purchase program should be 

implemented as an act of confidence in economic strength. Economic data has shown signs of a steady 

recovery in the U.S., which has led to robust discussions among Fed officials. The current talks have 

tentatively considered paring back the purchases from $85 billion to $65 billion per month possibly 

beginning in October, and eventually to $45 billion per month in late 2014. The steady decline in easing 

would last through 2015 in order to alleviate any potential spikes of inflationary reaction to the Fed’s 

attempts at a smooth adjustment. Since a reduction in bond purchases hinges upon the unemployment 

rate, movement towards the 6.5% threshold has been rather painfully slow thus far. The stock market 

and the housing market are resurgent and job market participation has been inching up, but the 

unemployment rate is still uncomfortably high. Even the most optimistic of economists hold the 6.5% rate 

as a target further out in the 2014 & 2015 calendar than the Fed. Importantly, once the tapering has 

been completed, only then will the Fed consider reassessing the interest rate and a possible move to 

increase it for the first time since 2006. 

The speculation over the unknown outcome of the discussions have led investors to recalibrate their 

interest rate expectations and outlook in various markets; domestic, international and in particular, 

emerging. Jim O’Neill, formerly of Goldman Sachs, has stated that concerns over changing Fed policy are 

especially front-and-center for emerging market investors. The global bond market stands to be exposed 

to high levels of market instability particularly for those countries with excessive account deficits and 

uncertainty over resolving them. Turkey, India, Brazil, South Africa, Indonesia and Thailand have all 

begun to feel the mounting volatility over U.S. interest rates. The market chatter over the Fed’s tapering 

process is leading to rising Treasury yields and strengthening USD, which is contributing to the early 

demise of the ‘great reach for yield’ trades which propped up the Emerging Markets. The emerging 

6



markets were the recipients of rampant interest from global investors through the relatively cheap 

liquidity which was created by the Fed’s aggressive monetary stimulation through its recovery program. 

One side effect in the shift in investor sentiment regarding the Fed’s recovery movements is a marked 

sell-off in emerging market stocks, bonds and currencies, thus causing a tightening of liquidity during a 

crucial time for EM economies with economic growth below potential, low levels of inflation, price 

dislocations and currencies near their strongest levels. This pain has also been compounded by the 

contraction in China’s economic growth projections and the subsequent slow-down of the commodities 

market super-cycle. Foreign investors world-wide have been pulling their money out of emerging markets 

en masse, ($2.94 billion out of emerging market equity funds during the week of May 29 th alone) creating 

one of the biggest declines in four years. 

Market jitters and panic in the bond market have caught people off guard and led to an increase in 

volatility. The U.S. Treasury market has declined dramatically with 10-year yields reaching nearly 2.25%, 

which will likely negatively impact global growth. Inflation expectations in the U.S. have lowered. 

Consumer Prices in May are seen rising by only 1.4% from a year ago, which is well below the Fed’s target 

2% inflation rate. Extensive sell-offs in German, British and Japanese fixed income markets reflected the 

U.S. markets contributing to the May performance as one of the worst for global government bonds in 20 

years. Investors are split on the outcome of the Fed’s future actions which presents a choppy market. 

As a cautionary measure, the leaders of the G-8 nations say that the worst has passed for the global 

economy. The Fed has stated that the tapering will only go into effect when they perceive the economy 

to be on stable footing. Despite the mood swings of the markets and extensive investor rumblings, in 

anticipation of the Fed’s future easing calendar, Treasuries are still near historic lows, the VIX is still 

below its long-term average and the Dow is still up nearly 16% YTD. The course of the year thus far has 

proven a strengthening economy which should continue down a moderately bouncy road while absorbing 

the Fed’s subtle economic taming attempts. 

~Christina Keyes, Alternative Investments Analyst 

Historical Fed Interest Rates 

Historical U.S. Inflation (Consumer Price Index) 

7

Manager Update Memorandum 

To: 

Susan Biernacki, PERA Investment Committee Chair 

PERA Board Members 

From: 

Ben Rotenberg, Cliffwater LLC 

Regarding: Manager Update – TimesSquare Capital Management 

Mandate/Strategy: U.S. Small/Mid Cap Growth Equity / TimesSquare Capital Management Small/Mid 

Cap Growth Strategy 

Meeting Date: June 27, 2013 

CC: 

Joelle Mevi, Chief Investment Officer 

Julian Baca, Deputy Chief Investment Officer 

LeAnne Larrañaga-Ruffy, Portfolio Manager 

Summary 

The Public Employees Retirement Association of New Mexico (“PERA”) hired TimesSquare Capital 

Management (“TSCM” or “TimesSquare” or “the firm”) to manage a U.S. small/mid cap growth equity 

mandate in 2005. TimesSquare is managing the portfolio in the style of the firm’s Small/Mid Cap Growth 

Equity strategy. PERA funded a separate account for TSCM in April 2005. 

TimesSquare manages $202.2 million for PERA as of April 2013, representing 16.5% of PERA’s 

Small/Mid Cap Equity Composite, and 1.5% of PERA’s total plan. 

The firm is stable, and grew overall firm assets and strategy assets in the Small/Mid Cap Growth Equity 

strategy by 12% in 2012 through strong market performance. The firm has seen some outflows of client 

assets, with $100 million of net outflows from one client in the Small/Mid Cap Growth Equity strategy. 

Recent performance in the strategy has been strongly positive relative to its benchmark. 

Relative performance for PERA has also been very good. According to PERA’s custodian, TSCM has 

outperformed its benchmark (Russell 2500 Growth) by 3.92% annualized since inception in April 2005 

through April 2013. 

Cliffwater believes that the firm is well positioned to continue to manage assets for PERA, and 

recommends no changes to the mandate at this time. 

Firm / Personnel Update 

The firm manages $16.6 billion as of March 31, 2013. The firm employs 49 professionals, including 22 

investment professionals. The investment professionals are comprised of four portfolio managers, 

fourteen research analysts, and four traders. The firm is stable, and grew assets under management by 

12% in 2012 through strong market performance. The firm and strategy experienced slight net outflows 

during 2012. The firm now manages $5.0 billion in the strategy, which has been closed to new clients for 

several years. 

TSCM’s Small/Mid Cap Growth team joined the firm in 2000 from their former firm, Fiduciary Trust 

Company International, where they had been managing the predecessor fund since 1985. The team is 

comprised of two portfolio managers, twelve research analysts, and three traders. This team has been 

fairly stable since Yvette Bockstein, the strategy’s founder, retired in 2007. Over the last three years, the 

team has added three research analysts, and has lost two research analysts. 

This report reflects information only through the date hereof. Our due diligence and reporting rely upon the accuracy and completeness of financial 

information (which may or may not be audited by the fund manager) and other information publicly available or provided to us by the fund manager, its 

professional staff, and through other references we have contacted. We have not conducted an independent verification of the information provided 

other than as described in this report. Our conclusions do not reflect an audit of the investment nor should they be construed as providing legal 

advice. Past performance does not guarantee future performance. The information contained herein is confidential commercial or financial information, 

the disclosure of which would cause substantial competitive harm to you, Cliffwater LLC, or the person or entity from whom the information was 

obtained, and may not be disclosed except as required by applicable law. 

© 2013 Cliffwater LLC. All rights reserved.

Overview of Investment Process 

TSCM believes that fundamental equity research skills can generate superior risk-adjusted returns in an 

inefficient asset class like small/mid cap growth. TSCM’s fundamental research places a particular 

emphasis on the assessment of management quality and an in-depth understanding of superior business 

models. The team’s goal is to build a diversified portfolio of small- and mid-cap growth stocks which will 

generate superior risk-adjusted returns. The foundation of TSCM’s research is frequent meetings with a 

company’s management to assess the quality of management and the business model. This review often 

includes on-site company visits, meetings with customers, competitors, and suppliers as well as 

investment conferences and discussions with venture capitalists. Approximately 90% of TSCM’s 

investment ideas are derived from internal research, while 10% come from their contacts at venture 

capital and regional sell-side research firms. The team’s dedicated analysts are all sector specialists. 

Performance 

Relative performance against the benchmark has been very strong. According to PERA’s custodian, 

TSCM has outperformed its benchmark (Russell 2500 Growth Index) by 3.92% annualized since 

inception in April 2005. 

TimesSquare has delivered a +12.28% annualized rate of return, compared to +8.36% for the benchmark 

Russell 2500 Growth Index, since inception of the PERA account in April 2005. Over longer periods of 

time, the strategy has also delivered very good absolute and relative returns as compared to its 

benchmark and peer group. 

Performance Notes: Please note that the PERA-specific performance comes from PERA’s custodian. All 

other performance data is shown gross of fees and comes from eVestment Alliance and/or the investment 

manager. This data is only shown through March 2013. 

Exhibit 1 

TimesSquare Performance for New Mexico PERA 

As of April 30, 2013 

Portfolio Name Market Value % MTD 3 Mo FYTD YTD 1 Year 3 Year 5 Year 

Since 

Incep. Inception Date 

Times Square 202,206,260 1.53 (0.76) 5.71 24.24 12.65 19.61 17.38 11.44 12.28 01-Apr-2005 

Russell 2500 Grow th 0.35 5.36 20.58 12.59 15.08 13.77 7.83 8.36 

Excess Return (1.11) 0.35 3.66 0.05 4.53 3.60 3.62 3.92 

Exhibit 2 

TimesSquare Small/Mid Cap Growth Equity Strategy (gross of fees) 

Annualized Performance 

As of March 31, 2013 

Annualized Returns 

1 Yr 3 Yr 5 Yr 7 Yr 10 Yr Oct '00 

TSCM Small/Mid Growth 22.12% 19.25% 13.13% 10.37% 14.80% 8.31% 

Russell 2500 Growth 13.69% 14.95% 9.02% 6.04% 12.19% 3.62% 

Difference 8.43% 4.30% 4.11% 4.33% 2.61% 4.70% 

Manager Update Memorandum Page 2 of 7 


Exhibit 3 


Calendar Year Performance 


YTD 2013 2012 2011 2010 2009 2008 2007 

TSCM Small/Mid Growth 13.40% 22.44% 3.40% 24.69% 44.63% -35.13% 16.33% 

Russell 2500 Growth 12.20% 16.14% -1.59% 28.87% 41.64% -41.50% 9.68% 

Difference 1.20% 6.30% 4.99% -4.18% 2.99% 6.36% 6.65% 

2006 2005 2004 2003 2002 2001 Oct-Dec'00 

TSCM Small/Mid Growth 14.09% 12.51% 12.77% 37.06% -17.57% -10.70% -4.89% 

Russell 2500 Growth 12.27% 8.18% 14.59% 46.29% -29.10% -10.83% -19.34% 

Difference 1.82% 4.33% -1.83% -9.23% 11.53% 0.13% 14.45% 

Exhibit 4 


Risk Statistics vs. Russell 2500 Growth Index 


TSCM Small/Mid Growth 

vs. Russell 2500 Growth Index 

Return Risk 

Return / 

Risk 

Excess 

Return 

Excess 

Risk Info Ratio 

3 Yr 19.25% 18.11% 1.06 4.30% 3.76% 1.14 

5 Yr 13.13% 21.06% 0.62 4.11% 4.84% 0.85 

7 Yr 10.37% 18.79% 0.55 4.33% 4.42% 0.98 

10 Yr 14.80% 17.16% 0.86 2.61% 4.54% 0.57 

October 2000 (inception) 8.31% 18.96% 0.44 4.70% 6.36% 0.74 



Exhibits 5 and 6 are “skill charts” which attempt to discern whether or not the manager’s outperformance 

is attributable to luck or skill. The blue line represents the manager’s gross of fees rolling three or five 

year performance relative to the Russell 2500 Growth Index. If the blue line is above 0, the manager has 

outperformed the index 

and conversely, if the blue line is below 0, the manager has underperformed the 

index. The black lines represent confidence bands at the 80% level which incorporate the manager’s 

tracking error (standard deviation of excess return) relative too the index. If the blue line is above the top 

black line, their outperformance can be attributable to skill. . Conversely, if the blue 

line is below the 

bottom black line, their underperformance can be attributable to a lack 

of skill. If the blue line 

is in 

between the two black 

lines, it is unclear whether or not their r relative performance is attributable to either 

luck or skill. These charts demonstrate that TimesSquare has added alpha over most rolling threee year 

and five year periods and has done so with skill at times. 

Exhibit 5 


Rolling Three-Year Returns 

October 20000 through March 2013 


© 2013 Cliffwater LLC. All rights reserved. 

Page 

4 of 7

Exhibit 6 


Rolling Five-Year Returns 

October 20000 through March 2013 



Page 5 of 7

Exhibit 7 

Performancee Universe for 

Small/Mid Cap Growth Strategies 

Gross of Fees 


Source: Evestment Alliance. 

Exhibit 8 

MPT Statistics Universe for Small/Mid Cap 

Growth Strategies vs. Russell 2500 Growth Index 






Page 


Watch List Test 

As stated in PERA’s investment policy, the following represent guidelines to be used in making a 

recommendation to the Investment Committee with regards to placing a traditional manager on the Watch 

List: 

Test 1: If the manager’s rolling three-year return (gross of fees) falls below the rolling three-year 

return of the benchmark for three consecutive quarters. 

Test 2: If the managers rolling three year return for three consecutive quarters ranks in the bottom 

third of the Consultant’s peer group universe. 

As of March 31, 2013, the strategy did not pass either Watch List Test. 

Exhibit 9 

Watch List Test 1: 


Rolling Three Year Annualized Performance vs. Benchmark 

For Periods Ending 3/31/2013, 12/31/2012, and 9/30/2012 

3 Years 

ending 

3/31/2013 

3 Years 

ending 

12/31/2012 

Exhibit 10 



Rolling Three Year Annualized Performance vs. Peer Group Universe 


3 Years 

ending 

9/30/2012 

TSCM Smid Growth 19.25% 16.44% 18.25% 

Russell 2500 Growth 14.95% 13.78% 15.17% 

Difference 4.30% 2.66% 3.08% 

3 Years 

ending 


3 Years 

ending 

12/31/2012 

3 Years 

ending 

9/30/2012 

TSCM Smid Growth 19.25% 16.44% 18.25% 

eVestment Alliance Small/Mid Cap Growth Equity Universe Median 15.01% 13.54% 15.47% 

TSCM Rank in Universe 9 23 24 

Suggested Questions for the Investment Manager 

1) In what sectors are you currently finding opportunities? 

2) Are there any significant changes in portfolio positioning in the last year or so? 

3) What do you believe are the greatest risks in our portfolio today? What are the greatest 

opportunities? 

[As a reminder, we have not conducted full diligence on, or reviewed the legal documents for, this 

investment due to its legacy status in your portfolio.] 



Jeffrey D. Braemer, CFA 

25 Years Experience 

Jeff is a Senior Vice President, Product Manager in TimesSquare’s growth equity group. His 

responsibilities include client servicing as well as portfolio and attribution analysis and general 

investment research. Prior to joining the firm, Jeff was a Director, Client Service and Marketing 

at Jacobs Levy Equity Management where he co-led the client service and portfolio analysis 

department. In that capacity, he was a primary point person for all client needs. Prior to Jacobs 

Levy, Jeff was a Product Specialist at Batterymarch Financial Management for U.S. and non-U.S. 

equity portfolios. Jeff has a B.A. in Political Science from Washington University in St. Louis and 

an M.S. in Management from Boston University. He is a member of the CFA Institute and the 

New York Society of Security Analysts. He holds FINRA Series 7 and 63 licenses

TIMESSQUARE CAPITAL MANAGEMENT, LLC 

A Small/Mid Cap Growth 

Portfolio Review Presentation To 

Jeffrey D. Braemer, CFA, Senior Vice President, Product Manager 


1 1 7 7 A v e n u e o f t h e A m e r i c a s , 3 9 th F l o o r ● N e w Y o r k , N Y 1 0 0 3 6 ● P h o n e: 8 0 0 – 5 4 1 – 5 1 5 6

TABLE OF CONTENTS 

I. TimesSquare Capital Management, LLC (TimesSquare) 

Organization 

Assets Under Management 

Representative Client List 

II. TimesSquare Small/Mid Cap Growth Strategy 

Team 

Philosophy 

Process 

III. Portfolio Results & Characteristics 

IV. Appendix 

Additional Performance Information 

Biographies 

Disclosures 

2

TimesSquare Capital Management, LLC 

(TimesSquare) 

3


Investment manager focused on providing superior investment solutions 

exclusively to the institutional marketplace 

Experienced team of international and U.S. equity professionals 

Time-tested investment strategies driven by internally generated research 

Significant employee ownership 

We are growth equity specialists. 

4


Grant Babyak 

CEO, Portfolio Manager 

Management Committee 

Tony Rosenthal, CFA 

Portfolio Manager 

Stephen Green, CFA 

Head of Business Development 

International Equities 

U.S. Equities 

Trading 

Technology/Operations/ 

Administration 

Marketing & 

Product Management 

Magnus Larsson 

Head of International Equities/ 


Seth Bienstock 

Analyst 

Joshua Bischoff 

Head Trader 

Mark Aaron 

Chief Operating Officer 

& Chief Compliance Officer 

Jeffrey Braemer, CFA 

Client Service & 


David Hirsh 

Analyst - Europe 

Robert Madsen, CFA 

Analyst - Asia 

Matthew D’Alto 

Analyst 

Kenneth Duca, CFA 

Portfolio Manager/Analyst 

Keith Ferguson, CFA 

Analyst 

Dr. Weidong Huang, CFA 

Analyst 

Timothy Corliss 

International Trader 

Christina Mukofsky 

U.S. Trader 

Adam Salomon 

U.S. Trader 

Carl Jano 

Chief Financial Officer 

Fred Kramer 

Operations & Systems 

John Metzner 

Technology Support 

Joseph DeVera 



Siobhan Flannery 

Marketing & 


Brenda Le, CFA 

Marketing & 


Mark Grzymski 

Analyst 

Russell Newman 

International Trade Support 

Joy Ragland 



Michael Russell 

Analyst 

James Russo 

Analyst 

Valerie Vazquez 

Office Manager 

Michael Ray 



5

GROWTH EQUITY STRATEGIES 


International 

International Small Cap 

Total Assets ($M) 

$6 

U.S. 

Small Cap Growth 

(CLOSED) 

Small/Mid Cap Growth 

(CLOSED) 

Mid Cap Growth 

(CLOSED) 

FOCUS Growth 

$4,127 

$4,969 

$6,952 

$435 

All-Cap Growth 

$278* 

$16.77* Billion 

*Includes an All-Cap Growth account funded in April 2013 

6

REPRESENTATIVE CLIENT LIST 

Corporate 

Allergan 

AMETEK 

Barnes Group 

Baxter International 

Boeing 

Bombardier Trust Canada, U.K., U.S. 

Bowne & Co. 

Catholic Health Partners 

CBS Corporation 

CenturyLink 

Chevron Corporation 

Colgate-Palmolive Company 

Cox Enterprises 

Dell Inc. 

DuPont and Related Companies Defined 

Contribution Plan Master Trust 

General Mills 

Hallmark Cards 

Illinois Tool Works Inc. 

Invensys 

Jefferson Regional Medical Center 

Blue Cross and Blue Shield of Minnesota 

Nestlé 

Pacific Gas and Electric Company 

PCA Retirement & Benefits, Inc. 

Providence Health System 

Realdania 

Ricoh Americas Corporation 

St. Joseph Health System 

SCANA Corporation 

Textron 

UL 

Wells Fargo Advisors 

Public 

Arizona State Retirement System 

Colorado Public Employees’ Retirement Association 

HEB Manitoba 

Imperial County Employees’ Retirement System 

Indiana Public Retirement System 

Manhattan and Bronx Surface Transit Operating Authority 

Montana Board of Investments 

Public Employees Retirement Association of New Mexico 

Oakland County Employees’ Retirement System 

Oklahoma City Employee Retirement System 

Oklahoma Municipal Retirement Fund 

Metropolitan St. Louis Sewer District 

Regional Transportation Authority 

South Carolina Retirement Systems 

Stilllegungsfonds für Kernanlagen/Entsorgungsfonds für Kernkraftwerke 

Virginia Retirement System 

Worldwide Assurance for Employees of Public Agencies 

Taft-Hartley 

Carpenters Pension Trust Fund for Northern California 

Laborers’ District Council & Contractors Pension Fund of Ohio 

Maritime Association - I.L.A. Pension Fund 

Operating Engineers Pension Trust Fund of Washington, DC 

San Diego Electrical Industry Trust 

Twin City Iron Workers 

UFCW Denver Area Meat Cutters & Employers Pension Plan 

UFCW Rocky Mountain Unions & Employers Pension Plan 

Endowment/Foundation 

American College of Surgeons 

American Legacy Foundation 

UCLA Foundation 

Foundation for the Carolinas 

Cook Children’s Health Foundation 

Howard University 

Idaho Endowment Fund Investment Board 

Kansas Health Foundation 

Kemper & Ethel Marley Foundation 

Silicon Valley Community Foundation 

Spectrum Health Foundation 

Texas Tech University System 

University of Arizona Foundation 

Wichita State University Foundation 

Sub-Advisory 

Aon Group Trust 

GuideStone Capital Management 

Managers Investment Group 

Nestlé Capital Advisers 

Old Mutual Global Investors 

Prudential Financial 

Vantagepoint Funds 

Please see the Appendix for important disclosures regarding this list. 

7

TimesSquare Small/Mid Cap Growth Strategy 

8

SMALL/MID CAP GROWTH INVESTMENT TEAM 

Portfolio Managers 

Credentials 

Investment Focus 

Years of Experience 

Grant R. Babyak 

MBA/New York University 

BA/Yale University 

Generalist 

25 


MBA/Columbia Business School 

BA/Wesleyan University 

Generalist 

24 

Small/Mid Cap Analysts 

Credentials 

Investment Focus 

Years of Experience 

Seth M. Bienstock 

BS/Wharton School 

Financial Services 

16 

Matthew T. D’Alto 

MBA/University of Chicago 

BA/Fairfield University 

Energy 

15 

Kenneth C. Duca, CFA 

MBA/Rutgers University 

BA/Muhlenberg College 

Business Services, 

Transaction Processing 

23 

Keith E. Ferguson, CFA 

MBA/New York University 

BBA/Hofstra University 

Communications, Data Networking, 

Data Storage, Lodging, Transportation 

21 

Mark E. Grzymski 

MBA/Fordham University 

BSBA/Bucknell University 

Industrials, Materials & Processing, 

Machinery 

16 

Dr. Weidong Huang, CFA 

PhD/Harvard University 

AB/Princeton University 

Biotechnology, Pharmaceuticals, 

Medical Devices, Healthcare Services 

17 

Michael J. Russell 

MBA/Harvard University 

AB/Princeton University 

Consumer, Media, Marketing Services 

20 

James J. Russo 

BS/Boston College 

Semiconductor, Software, Internet, 

Computer Hardware 

10 

9

SMALL/MID CAP GROWTH INVESTMENT PHILOSOPHY 

“We believe that our proprietary fundamental Small/Mid cap 

research skills, which place a particular emphasis on the 

assessment of management quality and an in-depth understanding 

of superior business models, enable us to build a diversified 

portfolio of Small/Mid cap growth stocks that will generate 

superior risk-adjusted returns.” 

10

SMALL/MID CAP GROWTH INVESTMENT PROCESS 

Research-Driven, Bottom-Up Discipline 

STEP 1 STEP 2 STEP 3 

Market Cap 

Criteria 

≥$300 million 

≤$5 billion 

2,500 stocks 

Growth Criteria 

3 Yrs. Projected 

EPS/Sales growth 

≥15% 

1,000 stocks 

PRIMARY 

REQUIREMENTS 

Exceptional 

management 

Distinct, sustainable 

competitive 

advantage 

Strong, consistent 

growth 

WORKING 

UNIVERSE 

400 STOCKS 

FURTHER 

IN-DEPTH 

ANALYSIS 

Management 

scrutiny 

Financial 

modeling 

Valuation 

Price 

targets 

PORTFOLIO 

CONSTRUCTION/ 

RISK MANAGEMENT 

Sector/security 

diversification 

Active 

oversight 

Sell 

discipline 

PORTFOLIO 

100 

STOCKS 

11


Identifying “Superior Growth Businesses” 

Exceptional management 

Clear goals and viable business model 

 

 

 

 

Alignment of interests with shareholders 

Experience and integrity 

Meaningful proportion of net worth tied 

to company 

Track record of success 

PRIMARY 

REQUIREMENTS 

Exceptional 

management 

Distinct, sustainable 

competitive 

advantage 

Strong, consistent 

growth 

WORKING 

UNIVERSE 

400 STOCKS 

Distinct, sustainable competitive advantage 

Proprietary products, services, 

distribution/manufacturing advantages 

 

 

 

 

 

Demonstrated franchise value 

High barriers to entry 

Relatively few competitors 

Brand name recognition 

Patents 

Strong, consistent growth 

Both top line (revenue) and bottom line (earnings) 

 

 

 

 

 

 

Strong probability of retaining or widening margins 

High proportion of recurring revenues 

Sales to many customers in multiple markets 

Strong balance sheet, conservative accounting, 

sufficient cash flow 

Visibility of earnings 

Growth rate potential unidentified 

12


Further In-Depth Analysis 

Management scrutiny 

Approximately 1,500 management 

meetings per year 

On site due diligence of manufacturing/ 

production facilities 

Further management discussions 

Financial Modeling 

Traditional financial analysis 

Models based on internally generated 

growth forecasts 

WORKING 

UNIVERSE 

400 STOCKS 

FURTHER 

IN-DEPTH 

ANALYSIS 

Management 

scrutiny 

Financial 

modeling 

Valuation 

Price 

targets 

Valuation tailored to industry 

Price/earnings at a discount to 

earnings growth 

Attractive price/earnings relative to 

industry group 

Price/revenue, price/cash flow, etc., 

as appropriate 

Establish targets for each stock 

25-50% price appreciation potential over 12 

to 18 months 

 

Re-evaluate based on evolving fundamentals 

and current market conditions 

13


Portfolio Construction/Risk Management 

Sector/Security Diversification 

Approximately 100 stocks in a portfolio 

 

 

 

 

No one issue greater than 5% at market 

No one major industry greater than 2x 

the index weight 

No one sector greater than 45% of portfolio 

market value 

Top 15 positions targeted to represent 

30% of the portfolio 

PORTFOLIO 

CONSTRUCTION/ 

RISK MANAGEMENT 

Sector/security 

diversification 

Active 

oversight 

Sell 

discipline 

PORTFOLIO 

100 

STOCKS 

Active Oversight 

Trading system with built-in 

pre-trade compliance 

 

 

 

 

Daily compliance review 

Formal weekly review versus 

client guidelines and peer group review 

Daily and weekly strategy/ 

research meetings 

Monthly attribution analysis 

Sell Discipline 

Operating objectives not met 

 

 

 

 

 

Management unable to sustain 

competitive advantage 

Anticipated deterioration in 

fundamentals 

Reasons for purchase changed 

Overvaluation 

Prudent profit-taking/trimming 

14

Portfolio Results & Characteristics 

15

PUBLIC EMPLOYEES RETIREMENT ASSOCIATION OF NEW MEXICO 

Total Returns for the Period Ending May 31, 2013 

33.3 

32.5 

Percent Return 

16.9 16.7 

17.2 

29.6 

22.2 21.3 

18.0 

11.7 

10.7 

12.8 

11.9 

8.8 

11.5 10.5 

7.6 

7.6 

YTD 1 YR 3 YR 5 YR 7 YR Since Ince ption 

(04/01/05) 

New Mexico (Gross) New Mexico (Net) Russell 2500 Growth Index 

Market Value as of May 31, 2013: $209,854,015 

Returns are Annualized greater than 1 YR 

16

RUSSELL 2500 GROWTH INDEX BREAKDOWN 

RUSSELL 2500 GROWTH INDEX 

(AS OF 5/31/13) 

MACRO GROUP 

Y-T-D 

RETURN (%) 

INDEX 

WEIGHT (%) 

New Mexico 

WEIGHT (%) 

Consumer Discretionary 24.1 20.3 12.1 

Consumer Staples 30.5 3.8 4.1 

Energy 16.1 5.2 5.8 

Financial Services 16.8 14.3 19.1 

Healthcare 19.0 15.1 12.8 

Materials & Processing 8.8 9.1 5.0 

Producer Durables 16.9 16.1 20.4 

Technology 11.0 14.6 20.8 

Utilities 11.6 1.5 0.0 

Index Total 17.2 100 100 

Source: FactSet 

17



(AS OF 5/31/12) 

MACRO GROUP 

INDEX 

WEIGHT (%) 


WEIGHT (%) 

Consumer Discretionary 16.8 12.4 

Consumer Staples 3.7 2.0 

Energy 7.5 7.1 

Financial Services 11.5 18.5 

Healthcare 16.3 15.0 

Materials & Processing 9.4 3.6 

Producer Durables 16.5 22.7 

Technology 16.9 18.7 

Utilities 1.2 0.0 

Index Total 100 100 


18


MACRO GROUP 


(AS OF 3/31/05) 

REPRESENTATIVE 

INDEX 

ACCOUNT 

WEIGHT (%) 

WEIGHT (%) 

Auto & Transportation 3.6 3.4 

Consumer Discretionary 26.1 26.5 

Consumer Staples 0.9 0.8 

Energy 5.4 6.5 

Financial Services 12.0 20.2 

Health Care 18.4 17.9 

Materials & Processing 5.7 4.1 

Producer Durables 8.6 3.8 

Technology 17.4 16.7 

Utilities / Telecom. 1.4 0.0 

Other 0.4 0.0 

Index Total 100 100 

Source: Vestek 

19


ATTRIBUTION HIGHLIGHTS: TRAILING 1 YEAR (5/31/2013) 

Performance Contribution by Sector 

Relative to Russell 2500 TM Growth Index 

SECTOR STOCK ACTIVE 

RUSSELL GLOBAL ECONOMIC SECTORS ALLOCATION SELECTION CONTRIBUTION 

Consumer Discretionary -0.46 0.07 -0.39 

Consumer Staples 0.05 -1.16 -1.11 

Energy 0.21 -0.28 -0.07 

Financial Services 0.15 1.90 2.06 

Health Care 0.04 1.78 1.81 

Materials & Processing -0.15 0.06 -0.09 

Producer Durables 0.05 0.94 0.98 

Technology -0.26 1.49 1.23 

Utilities 0.09 0.00 0.09 

TOTAL (Includes Cash & Equivalents) -1.05 4.80 3.75 

Greatest Contributors 

Greatest Detractors 

Contrib to Equity 

Contrib to Equity 

Security Sector Return % Security Sector Return % 

DaVita HealthCare Partners Health Care 1.64 Tempur-Pedic International Consumer Discretionary -0.55 

SBA Communications Corp. Technology 1.51 Green Dot Corp. Cl A Financial Services -0.39 

Genesee & Wyoming Inc. Producer Durables 1.45 VIVUS Inc. Health Care -0.33 

FleetCor Technologies Inc. Financial Services 1.39 Micros Systems Inc. Technology -0.30 

Apollo Global Management Financial Services 1.08 Volcano Corp. Health Care -0.26 


20


PORTFOLIO TEN LARGEST HOLDINGS 

YTD Thru 

5/31/2013 Cap 5/31/2013 Contribution 

% of Size Portfolio Portfolio 

Security Name Description (Year of Initial Purchase) Total Price ($ mil) Return (%) Return (%) 

SBA Communications Corp. Owns & operates wireless communications 

3.01 $75.27 9,582 6.02 0.23 

infrastructure in the U.S. (2006) 

Genesee & Wyoming Inc. Operates short line & regional freight railroads (2012) 2.04 $89.05 4,741 16.83 0.37 

Jack Henry & Associates Inc. Develops, markets, & installs integrated computer 

systems for in-house & service bureau data processing 

to banks & other financial institutions (2000) 

1.98 $46.93 4,040 20.35 0.37 

Alliance Data Systems Corp 

RenaissanceRe Holdings 

Clean Harbors 

WEX Inc. 

RPM International Inc. 

Qlik Technologies 

Ultimate Software Group 

Provides transaction services, credit services, & 

marketing services (2001) 

Provides reinsurance & insurance products & services 

worldwide (2009) 

Provides hazardous waste collection & disposal 

services (2009) 

Provides payment processing & information 

management services to the U.S. commercial & 

government vehicle fleet industry (2005) 

Manufactures & markets various specialty chemical 

products to industrial & consumer markets worldwide 

(2011) 

Designs business intelligence software that visually 

analyzes data from multiple sources in real time (2012) 

Designs, markets, implements & supports Web-based & 

client/server cross-industry human resource 

management & payroll software solutions (2012) 

1.97 $177.09 8,789 22.50 0.48 

1.84 $85.96 3,826 6.13 0.15 

1.81 $57.20 3,460 4.08 0.05 

1.72 $73.87 2,873 -1.93 -0.02 

1.64 $33.13 4,390 13.55 0.26 

1.63 $30.76 2,674 41.37 0.51 

1.55 $111.30 3,076 17.87 0.28 

19.21 2.68 


21


HISTORICAL TEN LARGEST HOLDINGS 

5/31/2012 Years of 3/31/2005 Years of 

% of Initial % of Initial 

Security Name Total Purchase Security Name Total Purchase 

DaVita 3.85 2000 DaVita 3.96 2000 

SBA Communications Corp. 3.13 2006 Alliance Data Systems Corp 3.18 2001 

Alliance Data Systems Corp 2.16 2001 SCP Pool 2.72 1997 

Solera Holdings Inc. 1.95 2009 Investors Financial Services 2.67 1998 

Wright Express Corp. 1.91 2005 Education Management 2.31 2000 

Clean Harbors 1.81 2009 Capital Source 2.14 2003 

CoStar Group Inc. 1.78 2005 Global Payments Inc. 2.04 2001 

Global Payments Inc. 1.62 2001 Getty Images 1.99 2001 

Genesee & Wyoming Inc. 1.61 2012 Markel 1.93 1998 

Jack Henry & Associates Inc. 1.55 2000 Corporate Executive Board 1.82 1999 

21.37 24.76 

Source:Vestek 

22


PORTFOLIO CHARACTERISTICS 

As of May 31, 2013 

Median Market 

Capitalization ($ Billions) 

Weighted Median Market 



3.2 

3.3 

Russell 2500 

Growth Index 

1.0 

3.2 

Weighted Average Market 


3.8 

3.7 

P/E (FY1 Forecast) 1 17.4x 

19.1x 

L.T. Earnings Growth Forecast 1 15.6% 

17.3% 

Number of Holdings 

98 

1,376 

Active Share 

86% 

- 

¹ Source: FactSet Estimates 

23

Appendix 

24

SMALL/MID CAP GROWTH HISTORICAL PERFORMANCE 

Calendar Year Gross-of-Fee Returns 

Calendar 

Years 

Small/Mid Cap 

Growth Composite 

Russell 2500 

Growth Index 

2012 22.44% 16.13% 

2011 3.41 -1.57 

2010 24.68 28.86 

2009 44.60 41.66 

2008 -35.13 -41.50 

2007 16.34 9.69 

2006 14.09 12.26 

2005 12.51 8.18 

2004 12.75 14.59 

2003 37.07 46.31 

2002 -17.57 -29.09 

2001 -10.71 -10.82 

2000 13.20 -16.09 

1999 82.72 55.48 

1998 15.44 3.10 

1997 27.86 14.76 

1996 24.33 15.07 

1995 50.99 33.56 

1994 1.78 -1.28 

1993 22.40 12.13 

⇒ Our team has outperformed the Russell 2500 Growth Index in 10 of the 10 negative benchmark quarters over the last seven years (100%) 

⇒ Our team has outperformed the Russell 2500 Growth Index in 11 of the 12 negative benchmark quarters over the last ten years (92%) 

Please see the Appendix for important disclosures regarding past performance. 

25

Biographies 

26

MANAGEMENT COMMITTEE 

Grant R. Babyak 


Grant is a Managing Director and Portfolio Manager in TimesSquare’s growth equity group. Prior to joining the firm, Grant managed small cap and mid cap 

portfolios at Fiduciary Trust Company International. He previously worked for six years at Avatar Associates as an institutional portfolio manager and for two 

years at U.S. Trust Company of New York as an analyst covering the consumer and basic industrial sectors. Grant has a B.A. in Political Science from Yale 

University and an M.B.A. in Finance from the Leonard N. Stern School of Business at New York University. 

Stephen Green, CFA 


Stephen is a Managing Director and Head of Marketing & Product Management at TimesSquare. Prior to joining the firm, Stephen was Senior Vice President and 

Head of Product Management at Fiduciary Trust Company International. In that capacity, he was in charge of Fiduciary’s product development efforts and global 

client servicing in the U.S., Asia, and Europe. Stephen’s investment background also includes institutional investment consulting experience at William M. Mercer 

Investment Consulting and Stratford Advisory Group. At both firms, he was a Senior Consultant & Director of Investment Manager Research and was responsible 

for major client relationships in the U.S., Europe, and Australia. Stephen has a B.S. in Finance and an M.B.A. from the University of Illinois. He is a member of 

the CFA Institute and the New York Society of Security Analysts. 



Tony is a Managing Director and Portfolio Manager in TimesSquare’s growth equity group. Before joining the firm, Tony held a similar position at Fiduciary 

Trust Company International. Prior experience includes three years at the Bank of New York as an equity portfolio manager and analyst and time at U.S. Trust 

Company of New York, where he conducted economic research. Tony has a B.A. in Economics from Wesleyan University and an M.B.A. from Columbia 

Business School. He is a member of the CFA Institute and the New York Society of Security Analysts. 

27

U.S. EQUITY INVESTMENT PROFESSIONALS 

Seth M. Bienstock 


Seth is a Director and Analyst in TimesSquare’s growth equity group and is responsible for research coverage of the financial services sector. Prior to joining the 

firm, Seth was a Senior Analyst at Second Curve Capital, a financial services hedge fund. Prior experience includes eight years in private equity with Conning 

Capital Partners and Securitas Capital. At Securitas, he also worked extensively on strategy and corporate development assignments for Swiss Re. Seth has a B.S. 

in Economics from the Wharton School at the University of Pennsylvania, with a dual concentration in Finance and Insurance/Risk Management. 

Joshua A. Bischoff 


Joshua is a Director and Head of Trading at TimesSquare. Joshua joined the firm from Loomis Sayles & Co. where he held a similar position. His previous 

experience includes trading for small capitalization equity products at Scudder Kemper and Dreman Value and working as a block trader for Bear Stearns where he 

concentrated on trading financial and energy stocks. Joshua has a B.S. in Business Administration from Providence College and holds FINRA Series 7 and 55 

licenses. 

Matthew T. D’Alto 


Matt is a Senior Vice President and Analyst in TimesSquare’s growth equity group, responsible for research coverage of the energy sector. Prior to joining the 

firm, Matt was a Senior Vice President/Senior Equity Analyst at J. & W. Seligman on their small- and SMID-cap growth equity team for eight years. Prior to J. & 

W. Seligman, Matt worked at Putnam Investments as an Investment Associate. Matt holds a B.A. in English writing with a Finance minor from Fairfield 

University, and an MBA from the University of Chicago Booth School of Business. 

Kenneth C. Duca, CFA 


Ken is a Director and Portfolio Manager/Analyst in TimesSquare’s growth equity group, responsible for covering the business services and transaction processing 

sectors. Prior to joining the firm, Ken held a similar position at Fiduciary Trust Company International. Before joining Fiduciary Trust, Ken spent 10 years with 

Prudential where, at the time of his departure, he was a senior equity analyst on the small cap growth team. Ken has a B.A. in Economics from Muhlenberg 

College and an M.B.A. from Rutgers University. He is a member of the CFA Institute and the New York Society of Security Analysts. 

Keith E. Ferguson, CFA 


Keith is a Director and Analyst in TimesSquare’s growth equity group. He is responsible for research coverage of the communications, data networking, data 

storage, lodging and transportation industries. Keith joined the firm from Alkeon Capital, a technology hedge fund, where he held a similar position. His previous 

research analyst experiences were as a Vice President at Loomis, Sayles and a Senior Analyst at Value Line, Inc. Keith has a B.B.A. in Banking and Finance from 

Hofstra University, and an M.B.A. from the Leonard N. Stern School of Business at New York University. He is a member of the CFA Institute and the New York 

Society of Security Analysts. 

28

U.S. EQUITY INVESTMENT PROFESSIONALS 

Mark E. Grzymski 


Mark is a Director and Analyst in TimesSquare’s growth equity group. He is responsible for research coverage of the industrial manufacturing, services, materials 

and processing industries. Prior to joining the firm, Mark was a Director at RBC Capital Markets covering industrial manufacturing and services companies. His 

previous research analyst experiences were as a Vice President at Needham & Company and as an associate analyst at Prospector Partners LLC. Mark has a 

B.S.B.A. in Management from Bucknell University, and an M.B.A. from the Graduate School of Business at Fordham University. 

Weidong Huang, Ph.D., CFA 


Weidong is a Director and Analyst in TimesSquare’s growth equity group with research responsibilities for biotechnology, pharmaceutical, medical device, and 

healthcare services stocks. Prior to joining the firm, Weidong held a similar position at Fiduciary Trust Company International since 1999. Weidong previously 

held analyst positions at both PaineWebber and Hambrecht & Quist where he covered the biotechnology industry. He also was a research scientist at SmithKline 

Beecham Pharmaceuticals where he conducted genomics research. Weidong has an A.B. in Molecular Biology from Princeton University and a Ph.D. in 

Molecular and Cellular Biology from Harvard University. He is a member of the CFA Institute and the New York Society of Security Analysts. 

Michael J. Russell 


Mike is a Director and Analyst in TimesSquare’s growth equity group with research responsibilities for the consumer, media and marketing services sectors. 

Before joining the firm, Mike was an Executive Director at Morgan Stanley covering media stocks since 1995 where he was a four year member of the Institutional 

Investor All-America Research Team and was rated the top broadcasting analyst in the Greenwich Associates survey in his last year on the sell-side. Mike 

graduated magna cum laude with an A.B. in Economics from Princeton University and has an M.B.A. from Harvard Business School. 

James J. Russo 


Jim is a Vice President and Analyst in TimesSquare’s growth equity group, responsible for research coverage of the semiconductor, software, internet, and 

computer hardware industries. Prior to joining the firm, Jim was an Equity Research Analyst at Adage Capital Management, L.P. for four years. Prior to Adage 

Capital Management, he worked at Fidelity Management and Research as an Equity Research Associate. Jim holds a B.S. in Management with concentrations in 

Finance and Economics from Boston College. 

29

KEY BUSINESS PROFESSIONALS 

Mark J. Aaron 


Mark is Chief Operating Officer and Chief Compliance Officer of TimesSquare. He leads the back office and operations team supporting the investment team and 

process. Mark was part of the initial team responsible for the development and implementation of TimesSquare’s systems, operations and control environment in 

1999. Prior to joining TimesSquare, Mark was Senior Vice President at Credit Suisse Asset Management from 1991 to 1999 where he managed the Global 

Infrastructure and Technology Group responsible for the implementation and management of their global network and technical infrastructure. Prior to Credit 

Suisse, Mark worked in network management and system development roles at Applied Business Technologies, Inc. and Selectronics, Inc. Mark has a B.A. from 

the University of Rochester. 

Jeffrey D. Braemer, CFA 


Jeff is a Senior Vice President, Product Manager in TimesSquare’s growth equity group. His responsibilities include client servicing as well as portfolio and 

attribution analysis and general investment research. Prior to joining the firm, Jeff was a Director, Client Service and Marketing at Jacobs Levy Equity 

Management where he co-led the client service and portfolio analysis department. In that capacity, he was a primary point person for all client needs. Prior to 

Jacobs Levy, Jeff was a Product Specialist at Batterymarch Financial Management for U.S. and non-U.S. equity portfolios. Jeff has a B.A. in Political Science 

from Washington University in St. Louis and an M.S. in Management from Boston University. He is a member of the CFA Institute and the New York Society of 

Security Analysts. He holds FINRA Series 7 and 63 licenses. 

Joseph B. DeVera 


Joe is a Senior Vice President, Product Manager in TimesSquare’s growth equity group. His responsibilities include client servicing as well as portfolio and 

attribution analysis and general investment research. Prior to joining TimesSquare, Joe was a Vice President, Director of Investment Strategy at Sentinel Asset 

Management where he was the product specialist for the firm’s products, including their Small Cap Growth and Mid Cap Growth products. Prior to Sentinel, Joe 

was a Director and Senior Client Portfolio Manager for the Small Cap and Mid Cap Growth portfolio management team at Deutsche Asset Management. He has a 

B.S. in Finance, Marketing and International Business from the Leonard N. Stern School of Business at New York University and holds FINRA Series 7 and 63 

licenses. 

30

KEY BUSINESS PROFESSIONALS 

Brenda N. Le, CFA 


Brenda is a Vice President, Marketing & Product Management at TimesSquare. Her responsibilities include consultant relations, marketing, and client servicing. 

She is also involved with written commentary and attribution analysis. Prior to joining the firm, Brenda was a Press Assistant in the New York State Executive 

Chamber where she assisted with media inquiries, reviewed television news summaries, and organized media requests for Governor George E. Pataki. Brenda 

graduated cum laude with a B.A. in Communications and a B.S.E. in Digital Media Design from the University of Pennsylvania and holds FINRA Series 7 and 63 

licenses. She is a member of the CFA Institute and the New York Society of Security Analysts. 

Michael B. Ray 


Mike is a Senior Vice President, Product Manager in TimesSquare’s growth equity group. His responsibilities include client servicing as well as portfolio and 

attribution analysis and general investment research. Prior to joining the firm, Mike was a Vice President, Client Service Manager at Goldman Sachs Asset 

Management. In that position, Mike worked closely with GSAM relationship and product managers with the common goal of deepening public fund client 

relationships. Prior to joining Goldman Sachs, Mike was a Vice President, Portfolio Specialist with Morgan Stanley Investment Management working with 

institutional and retail clients with a focus on the firm’s US Growth products. Mike has a B.S. in Accounting from St. John’s University and holds FINRA Series 7, 

63 and 3 licenses. 

31

Disclosures 

32

SMALL/MID CAP GROWTH DISCLOSURES 

Composite Disclosure: 

TimesSquare Capital Management, LLC (“TimesSquare”) is a registered investment adviser that is owned by the former equity management team of TimesSquare Capital Management, Inc. (“TimesSquare Inc.”) and Affiliated 

Managers Group, Inc. TimesSquare was formed to manage TimesSquare Inc.’s growth equity investment advisory business which was sold to TimesSquare in a transaction that closed on November 19, 2004. The members of 

TimesSquare’s Small/Mid Cap Growth team joined TimesSquare Inc. on September 7, 2000 after working together at Fiduciary Trust Company International (“FTCI”). While employed at FTCI, the team managed the Fiduciary 

Special Equity Fund, an ERISA-only commingled vehicle managed in the Small/Mid Cap Growth style. The team is currently led by Grant Babyak (and Tony Rosenthal), who served as co-manager of the Special Equity Fund 

starting in 1996 through September 6, 2000. There has been no change in investment strategy from the prior two firms. 

Effective October 4, 2000, the team began managing its first Small/Mid Cap Growth account at TimesSquare Inc. Five other Small/Mid Cap Growth accounts came to the team from the same client in the fourth quarter of 2000. 

The performance record we have submitted to the recipient of this presentation as indicated on the cover consists of the following: 

• From 12/31/85 to 9/30/00: Gross performance of the FTCI Special Equity Fund as published in the PSN database of manager returns. TimesSquare has not independently verified the accuracy of the performance published in the 

PSN database, all returns in which are submitted by the participating investment management firms. 

• From 10/4/00 to 10/31/00: Gross performance of the TimesSquare Inc. Small/Mid Cap Growth representative account. 

• From 10/31/00 to 11/18/04 and from 11/19/04 to present: Gross performance of all TimesSquare Inc. and TimesSquare, respectively, discretionary Small/Mid cap accounts with market values greater than $5 million that invested 

in stocks with market capitalizations generally between $300 million and $5 billion at time of purchase. 

The performance of the Fiduciary Special Equity Fund reflects a number of factors, including the contributions of Mr. Babyak and other members of the TimesSquare team such as the four dedicated research analysts (present as of 

9/7/00) as well as those of other persons who are not part of the TimesSquare team. Prior to September 7, 2000, the TimesSquare team also managed other accounts investing in Small/Mid cap growth stocks. Performance of those 

other accounts may have been higher or lower than that of the FTCI Special Equity Fund. TimesSquare, however, cannot independently verify that the Fund's performance is representative of the performance of those Small/Mid cap 

accounts managed by the TimesSquare team prior to September 7, 2000. Variations in performance, investments, strategies, allocation percentages among other things, can be attributed to a number of factors, including, but not 

limited to, cash flows, timing of purchases and sales of portfolio securities, and investment restrictions imposed by account holders. There can be no assurance that the future performance of an individual account will be the same as 

the performance of any other account, including those represented in the historical record we present. 

The performance figures shown are calculated in U.S. dollars on a size-weighted basis and reflect the reinvestment of dividends and other earnings, and the deduction of brokerage commissions and other transaction costs. 

Performance is provided on a gross basis (before the deduction of management fees) as well as net of the highest management fee of 1.00% charged by TimesSquare to separately managed institutional accounts in this composite. 

Investment advisory fees generally charged by TimesSquare are described in Part II of its Form ADV. To illustrate performance net of fees, assume $20,000,000 is placed under management for ten years sustaining 10% compound 

gross total return. If an advisory fee of 1.00% of average assets under management is charged per year, for each year of the ten-year period, the resulting compound annual return would be reduced to 9.0%. The ending dollar value 

of the account would be $47,347,274 compared with the unreduced account value of $51,874,849. 

The “linked” performance results included in this presentation are exclusively for the use of the recipient of this presentation as indicated on the cover, and are suitable for use exclusively in “one on one” institutional settings. The 

performance results of the Fiduciary Special Equity Fund and the TimesSquare Inc. and TimesSquare return series, for the respective time periods as represented in the linked performance results, are presented on the following 

pages. 

The opinions and information expressed and provided are for general information only and are not intended to provide specific advice or recommendations but rather, a basis from which strategies can be built, taking into account the 

specific objectives of each portfolio, in terms of return, time horizon, and risk constraints, as well as diverging investment perspectives and assumptions. All material has been obtained from sources believed to be reliable, but its 

accuracy and completeness are not guaranteed. 

Russell ® Disclosure: 

Performance is measured against the Russell 2500 Growth – a market capitalization-weighted index that measures the performance of those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth 

rates. All indexes, including the Russell 2500 Growth Index, are based on gross-of-fee returns. Russell Investment Group is the source and owner of the Russell Index data contained or reflected in this material and all trademarks 

and copyrights related thereto. 

Representative Client List Disclosure: 

The Representative Client List includes the clients of TimesSquare Capital Management, LLC that have consented to inclusion on this list, and is not based on performance criteria. Inclusion on this list does not represent an 

endorsement by or of these entities or of the services provided by TimesSquare or these entities. 

Portfolio Holdings: 

The holdings and weightings displayed represent a particular point in time. It should not be assumed that the securities continue to be held and/or continue to be held in the same percentage. In addition, the holdings and percentage 

weights of a particular client account may differ from the information shown. The sector weightings shown for TSCM reflect the Russell Global Sectors classification system of the securities within our portfolios. 

Representative Portfolio: 

The representative portfolio is an account that we believe most closely reflects the current portfolio management style for this strategy. Performance is not a consideration in the selection of the representative portfolio. The 

characteristics of the representative portfolio may differ from those of other managed accounts and from those of a start-up portfolio. The characteristics relate to the portfolio as of a particular point in time and should not be 

regarded as predictive. 

Notice to Consultants: 

Consultants may provide gross performance data to prospective clients only in one-on-one presentations and such performance must be accompanied by the disclosures set forth herein. 

33


Fiduciary Trust Company International Special Equity Fund, Quarterly Returns, Gross of Fees, 12/31/85 through 9/30/00 

FTCI 

Russell 2500 

Growth 

FTCI 

Russell 2500 

Growth 

FTCI 

Russell 2500 

Growth 

2000 

1999 

1998 

1997 

1996 

1st Quarter 19.22% 15.15% 

2nd Quarter -6.24 -6.91 

3rd Quarter 6.50 -2.94 

1st Quarter 4.20 -1.05 

2nd Quarter 8.97 16.81 

3rd Quarter 2.55 -3.47 

4th Quarter 56.92 39.36 

Year 82.72 55.48 

1st Quarter 14.03 11.15 

2nd Quarter 0.10 -4.88 

3rd Quarter -19.18 -22.21 

4th Quarter 25.14 25.35 

Year 15.44 3.10 

1st Quarter -9.40 -8.00 

2nd Quarter 18.51 16.25 

3rd Quarter 16.13 16.64 

4th Quarter 2.54 -8.01 

Year 27.86 14.76 

1st Quarter 7.66 7.00 

2nd Quarter 9.78 5.11 

3rd Quarter 3.40 1.37 

4th Quarter 1.74 0.93 

Year 24.33 15.07 

1995 

1994 

1993 

1992 

1991 

1st Quarter 10.78% 8.46% 


3rd Quarter 14.72 11.11 


Year 50.99 33.56 

1st Quarter -4.75 -2.94 

2nd Quarter -4.36 -6.47 


4th Quarter 1.72 -0.81 

Year 1.78 -1.28 

1st Quarter 3.39 -1.26 


3rd Quarter 16.51 8.06 

4th Quarter -0.53 2.59 

Year 22.40 12.13 

1st Quarter -0.05 -0.75 

2nd Quarter -4.89 -10.21 


4th Quarter 16.85 15.96 

Year 15.01 5.78 

1st Quarter 27.37 28.87 

2nd Quarter -0.24 -2.90 

3rd Quarter 16.16 11.46 

4th Quarter 20.69 11.14 

Year 78.14 55.01 

1990 

1989 

1988 

1987 

1986 

1st Quarter -3.83% -2.88% 


3rd Quarter -14.38 -24.09 

4th Quarter 11.30 10.84 

Year -1.13 -12.20 


2nd Quarter 14.89 8.06 

3rd Quarter 16.91 9.54 

4th Quarter 0.40 -2.27 

Year 48.14 24.52 

1st Quarter 9.72 14.09 


3rd Quarter -2.94 -2.91 

4th Quarter 3.37 -0.18 

Year 16.23 16.91 

1st Quarter 26.71 25.08 



4th Quarter -20.63 -27.17 

Year 9.95 -4.72 

1st Quarter 54.13 16.06 

2nd Quarter 32.84 8.85 

3rd Quarter -7.05 -13.35 


Year 102.19 12.06 

Please see the important disclosures regarding past performance. 

34


Small/Mid Cap Growth Composite, Quarterly Returns, Gross of Fees, Since 9/30/00 

2013 

2012 

2011 

2010 

Russell 2500 

TSCM Growth 

1st Quarter 13.41% 12.20% 

Year 13.41 12.20 

1st Quarter 13.69 14.60 

2nd Quarter -2.29 -5.38 



Year 22.44 16.13 


2nd Quarter -0.37 0.38 

3rd Quarter -19.52 -21.35 

4th Quarter 17.99 13.51 

Year 3.41 -1.57 


2nd Quarter -8.44 -9.77 

3rd Quarter 12.26 13.15 

4th Quarter 14.90 16.00 

Year 24.68 28.86 

2009 

2008 

2007 

2006 

2005 

Russell 2500 

TSCM Growth 

1st Quarter -4.45% -5.97% 

2nd Quarter 17.56 21.79 

3rd Quarter 18.66 17.17 


Year 44.60 41.66 

1st Quarter -9.37 -11.08 


3rd Quarter -9.33 -12.09 

4th Quarter -23.68 -27.77 

Year -35.13 -41.50 




4th Quarter 2.09 -2.09 

Year 16.34 9.69 

1st Quarter 11.74 11.83 

2nd Quarter -4.12 -6.13 

3rd Quarter -0.66 -1.20 


Year 14.09 12.26 

1st Quarter -2.84 -4.33 




Year 12.51 8.18 

2004 

2003 

2002 

2001 

2000 

Russell 2500 

TSCM Growth 

1st Quarter 3.68% 5.50% 


3rd Quarter -6.53 -5.61 

4th Quarter 14.85 14.91 

Year 12.75 14.59 

1st Quarter -2.49 -3.20 

2nd Quarter 19.78 -22.72 


4th Quarter 10.68 12.00 

Year 37.07 46.31 

1st Quarter 2.49 -2.95 

2nd Quarter -11.66 -16.63 

3rd Quarter -16.64 -19.06 


Year -17.57 -29.09 

1st Quarter -18.60 -19.91 

2nd Quarter 14.92 21.27 

3rd Quarter -20.42 -27.07 

4th Quarter 19.94 25.90 

Year -10.71 -10.82 

1st Quarter -4.91 -19.35 


35


Calendar Year Net-of-Fee Returns 

Calendar 

Years 

Small/Mid Cap 

Growth Composite 

Russell 2500 

Growth Index 

2012 21.24% 16.13% 

2011 2.38 -1.57 

2010 23.46 28.86 

2009 43.20 41.66 

2008 -35.80 -41.50 

2007 15.19 9.69 

2006 12.97 12.26 

2005 11.39 8.18 

2004 11.64 14.59 

2003 35.74 46.31 

2002 -18.42 -29.09 

2001 -11.69 -10.82 

2000 12.10 -16.09 

1999 81.13 55.48 

1998 14.32 3.10 

1997 26.65 14.76 

1996 23.16 15.07 

1995 49.63 33.56 

1994 0.77 -1.28 

1993 21.24 12.13 

The Russell 2500 Growth Index is based on gross-of-fee returns. 


36


To: 

Susan Biernacki, PERA Investment Committee Chair 

PERA Board Members 

From: 

Ben Rotenberg, Cliffwater LLC 

Regarding: Manager Update – RBC–Global Asset Management 

Mandate/Strategy: U.S. Small Cap Growth Equity / RBC-GAM US Small Cap Growth Strategy 

Meeting Date: June 27, 2013 

CC: 

Joelle Mevi, Chief Investment Officer 

Julian Baca, Deputy Chief Investment Officer 

LeAnne Larrañaga-Ruffy, Portfolio Manager 

Summary 

The Public Employees Retirement Association of New Mexico (“PERA”) hired RBC-Global Asset 

Management (“RBC-GAM” or “RBC” or “the firm”) to manage a U.S. small cap growth equity mandate in 

2005. RBC-GAM was founded in 1983 as Voyageur Asset Management; Voyageur was purchased by an 

affiliate of RBC in 2000. RBC-GAM is managing the portfolio in the style of the firm’s US Small Cap 

Growth strategy. PERA funded a separate account for RBC in April 2005. 

RBC-GAM manages $195.6 million for PERA as of April 2013, representing 16.0% of PERA’s Small/Mid 

Cap Equity Composite, and 1.5% of PERA’s total plan. 

The firm is stable; its assets under management have been at close to the same levels (within 10%) for 

the last four years. In the US Small Cap Growth strategy, assets grew over 10% due to market 

performance. Flows were slightly negative in the US Small Cap Growth strategy as one client departed. 

Recent performance in the strategy has been strongly positive relative to its benchmark. 

Relative performance for PERA has been very good, especially in the most recent five years. According 

to PERA’s custodian, RBC-GAM has outperformed its benchmark (Russell 2000 Growth) by 1.30% 

annualized since inception in April 2005 through April 2013. RBC-GAM has outperformed its benchmark 

by 3.65% annualized for the five year period ending April 2013. 

Cliffwater believes that the firm is well positioned to continue to manage assets for PERA, and 

recommends no changes to the mandate at this time. 

Firm / Personnel Update 

As of March 31, 2013, the firm manages $42.2 billion. The firm employs 118 professionals, including 28 

investment professionals. The investment professionals are comprised of 17 portfolio managers, 9 

research analysts, and 2 traders. The firm is stable, and assets under management have also been 

stable in recent years. The US Small Cap Growth strategy has experienced marginal growth in assets 

under management, primarily due to market performance. The firm now manages $1.2 billion in the 

strategy. 

RBC-GAM’s Small Cap Growth team is located in Chicago, and is comprised of three portfolio managers, 

one dedicated research analyst, and two traders. The team also utilizes an economist who works for an 

affiliate of RBC-GAM. This team has been very stable since 2009, when a senior portfolio manager 

departed the team. Since 2009, there have been no departures from the team, and one addition of a 

research analyst. 

This report reflects information only through the date hereof. Our due diligence and reporting rely upon the accuracy and completeness of financial 

information (which may or may not be audited by the fund manager) and other information publicly available or provided to us by the fund manager, its 

professional staff, and through other references we have contacted. We have not conducted an independent verification of the information provided 

other than as described in this report. Our conclusions do not reflect an audit of the investment nor should they be construed as providing legal 

advice. Past performance does not guarantee future performance. The information contained herein is confidential commercial or financial information, 

the disclosure of which would cause substantial competitive harm to you, Cliffwater LLC, or the person or entity from whom the information was 

obtained, and may not be disclosed except as required by applicable law. 


Overview of Investment Process 

RBC-GAM’s Small Cap Growth team believes that earnings drive stock prices. The team employs an 

investment process based on fundamental, bottom-up research, and builds diversified portfolios of 

profitable, high-quality, cash-flow rich companies for long term capital appreciation. The team begins with 

a universe of approximately 2,500 companies with market capitalizations of $200 million to $2.0 billion. 

They narrow this universe to a focus list of 300-400 securities, by identifying companies that are 

profitable, are industry leaders and have strong financial characteristics including: positive earnings 

growth, high return on equity and profit margins relative to peers, and strong balance sheets. Because 

the team’s primary thesis is that earnings growth drives stock prices, their research is focused on 

identifying market leaders with predictable and sustainable earnings growth. They seek companies led by 

strong management teams who can consistently grow revenue and EPS over several years. Once they 

have completed their research, the portfolio managers are attempting to build diversified portfolios with 

low portfolio volatility, below-average turnover, and sustainable risk-adjusted performance. With 65-80 

holdings, the portfolio has broad industry and sector exposure with no large sector bets. In sectors 

comprising at least 10% of the benchmark, the portfolio’s exposure is limited to 0.5-1.5 times the 

benchmark’s weighting. The team keeps exposure to smaller sectors within 300 basis points of the 

benchmark’s weighting. 

Performance 

Relative performance against the benchmark has been positive. According to PERA’s custodian, RBC- 

GAM has outperformed its benchmark (Russell 2000 Growth Index) by 1.30% annualized since inception 

in April 2005. 

Since inception, RBC-GAM has delivered a +8.92% annualized rate of return, compared to +7.62% for 

the benchmark Russell 2000 Growth Index. Over longer periods of time, the strategy has also delivered 

very good absolute and relative returns as compared to its benchmark and peer group. 

Performance Notes: Please note that the PERA-specific performance comes from PERA’s custodian. All 

other performance data is shown gross of fees and comes from eVestment Alliance and/or the investment 

manager. This data is only shown through March 2013. 

Exhibit 1 

RBC-GAM Performance for New Mexico PERA 

As of April 30, 2013 

Portfolio Name Market Value % MTD 3 Mo FYTD YTD 1 Year 3 Year 5 Year 

Since 

Incep. Inception Date 

Voyageur 195,557,113 1.48 (2.55) 4.49 19.31 9.97 17.44 16.75 11.46 8.92 01-Apr-2005 

Russell 2000 Grow th (0.66) 5.52 18.44 12.47 15.67 12.94 7.81 7.62 

Excess Return (1.90) (1.03) 0.88 (2.50) 1.77 3.81 3.65 1.30 

Exhibit 2 

RBC-GAM Small Cap Growth Equity Strategy (gross of fees) 

Annualized Performance 


Annualized Returns 

1 Yr 3 Yr 5 Yr 7 Yr 10 Yr Oct '01 

RBC-GAM Small Cap Growth 21.03% 19.51% 13.12% 7.56% 12.96% 12.14% 

Russell 2000 Growth 14.52% 14.74% 9.04% 5.19% 11.61% 8.43% 

Difference 6.51% 4.77% 4.09% 2.37% 1.35% 3.71% 



Exhibit 3 


Calendar Year Performance 


YTD 2013 2012 2011 2010 2009 2008 

RBC-GAM Small Cap Growth 12.79% 21.57% 5.21% 27.44% 33.94% -33.47% 

Russell 2000 Growth 13.20% 14.59% -2.92% 29.09% 34.47% -38.53% 

Difference -0.41% 6.99% 8.14% -1.65% -0.54% 5.06% 

2007 2006 2005 2004 2003 2002 Oct-Dec'01 

RBC-GAM Small Cap Growth 7.34% 6.69% 6.73% 19.53% 39.92% -9.30% 22.89% 

Russell 2000 Growth 7.02% 13.35% 4.15% 14.31% 48.53% -30.27% 26.17% 

Difference 0.32% -6.66% 2.58% 5.22% -8.61% 20.96% -3.28% 

Exhibit 4 


Risk Statistics vs. Russell 2000 Growth Index 


RBC-GAM Small Cap Growth 

vs. Russell 2000 Growth 

Return Risk 

Return / 

Risk 

Excess 

Return 

Excess 

Risk Info Ratio 

3 Yr 19.51% 16.61% 1.17 4.77% 5.33% 0.89 

5 Yr 13.12% 21.10% 0.62 4.09% 5.78% 0.71 

7 Yr 7.56% 18.82% 0.40 2.37% 5.62% 0.42 

10 Yr 12.96% 17.40% 0.75 1.35% 5.97% 0.23 

October 2001 (inception) 12.14% 17.48% 0.69 3.71% 6.75% 0.55 



Exhibits 5 and 6 are “skill charts” which attempt to discern whether or not the manager’s outperformance 

is attributable to luck or skill. The blue line represents the manager’s gross of fees rolling three or five 

year performance relative to the Russell 2000 Growth Index. If the blue line is above 0, the manager has 

outperformed the index 

and conversely, if the blue line is below 0, the manager has underperformed the 

index. The black lines represent confidence bands at the 80% level which incorporate the manager’s 

tracking error (standard deviation of excess return) relative too the index. If the blue line is above the top 

black line, their outperformance can be attributable to skill. . Conversely, if the blue 

line is below the 

bottom black line, their underperformance can be attributable to a lack 

of skill. If the blue line 

is in 

between the two black 

lines, it is unclear whether or not their r relative performance is attributable to either 

luck or skill. These charts demonstrate that RBC-GAM has added alpha over most rolling three year and 

five year periods and has done so with skill recently. 

Exhibit 5 

RBC-GAM Small Cap Growth Equity Strategy (grosss of fees) 

Rolling Three-Year Returns 

October 2001 

through March 2013 



Page 


Exhibit 6 

RBC-GAM Small Cap Growth Equity Strategy (grosss of fees) 

Rolling Five-Year Returns 

October 2001 

through March 2013 



Page 5 of 7

Exhibit 7 

Performance Universe for Small Capp Growth Strategies 




Exhibit 8 

MPT Statisticss Universe for 

Small Cap Growth Strategies vs. Russell 2000 Growth Index 






Page 


Watch List Test 

As stated in PERA’s investment policy, the following represent guidelines to be used in making a 

recommendation to the Investment Committee with regards to placing a traditional manager on the Watch 

List: 

Test 1: If the manager’s rolling three-year return (gross of fees) falls below the rolling three-year 

return of the benchmark for three consecutive quarters. 

Test 2: If the managers rolling three year return for three consecutive quarters ranks in the bottom 

third of the Consultant’s peer group universe. 

As of March 31, 2013, the strategy did not pass either Watch List Test. 

Exhibit 9 



Rolling Three Year Annualized Performance vs. Benchmark 


3 Years 

ending 


3 Years 

ending 

12/31/2012 

Exhibit 10 



Rolling Three Year Annualized Performance vs. Peer Group Universe 


3 Years 

ending 

9/30/2012 

RBC-GAM Small Cap Growth 19.51% 17.69% 19.22% 

Russell 2000 Growth 14.74% 12.82% 14.18% 

Difference 4.77% 4.87% 5.04% 

3 Years 

ending 


3 Years 

ending 

12/31/2012 

3 Years 

ending 

9/30/2012 

RBC-GAM Small Cap Growth 19.51% 17.69% 19.22% 

eVestment Alliance Small Cap Growth Equity Universe Median 16.02% 14.26% 15.85% 

RBC-GAM Rank in Universe 10 11 14 

Suggested Questions for the Investment Manager 

1) How do you think about diversification of the portfolio? Is a 75-stock portfolio concentrated 

enough? 

2) What interesting technological developments are providing investment opportunities in the 

healthcare and technology sectors? 

3) How has the portfolio changed in the last year? 

[As a reminder, we have not conducted full diligence on, or reviewed the legal documents for, this 

investment due to its legacy status in your portfolio.] 



Kenneth A. Tyszko, CPA, CFA 

Managing Director, Senior Portfolio Manager 

Ken Tyszko is responsible for Small Cap Growth and SMID Cap Growth research and portfolio 

management. He joined RBC GAM-US in 2001. Ken previously served as a portfolio manager for 

Oberweis Asset Management, ABN AMRO Asset Management (USA) Inc., ABN AMRO Incorporated and 

Sears Investment Management Company. His background also includes experience at Main Hurdman, 

an international accounting and consulting firm. Ken earned a BS in accountancy from the University of 

Illinois. He is a CFA charterholder. Ken is a member of the CFA Society of Chicago, the CFA Institute and 

the Illinois CPA Society. He has been a guest on Bloomberg Television, Bloomberg Radio, CNBC and 

WebFN. 

Bridget Tompkins 

Managing Director, Client Service Manager 

Bridget Tompkins is responsible for overseeing all aspects of the client experience for our public pension, 

corporate pension, and Taft-Hartley clients. Bridget has been with the firm since 1994. Before joining 

RBC GAM-US, she worked for formerly affiliated brokerage firm Dougherty, Dawkins, Strand & Bigelow. 

Bridget’s previous experience includes sales and marketing of various commodities. She has worked in 

the financial services industry since 1992. Bridget earned a BA from the College of St. Benedict.



Presented By: 



312-857-9533 

ken.tyszko@rbc.com 

Bridget A. Tompkins 

Managing Director, Client Service 

612-376-7056 

bridget.tompkins@rbc.com 

RBC Global Asset Management (U.S.) Inc. 

100 South Fifth Street, Suite 2300 • Minneapolis, MN 55402-1240 

612-376-7000 • 800-553-2143 • www.rbcgam.us

Firm Overview

Royal Bank of Canada 

Strength & Stability 

*Ratings: S&P: AA-, Moody's: Aa3 (Bloomberg, 3.31.13). Ranked 5 th largest bank in North America and 12 th globally based on market capitalization (Bloomberg, 3.31.13). 

Ranked 2 nd safest bank in North America and 15 th globally (Global Finance, April 2013). 

All other data in U.S. dollars as of 3.31.13. Refer to disclosure page for more information on RBC GAM and its affiliates. 

3

Breadth of Investment Capabilities 

Strategies that Allow Us to Create Customized Client Solutions 

Not all strategies presented are currently sold in the U.S. 

4

Small Cap Growth Equity

Investment Team 

Investment experience and number of professionals as of 3.31.13 

6

RBC GAM-US Small Cap Growth Equity Overview 

Philosophy and Style 

• Invest in profitable, high quality, small cap growth stocks 

• Long-term investment horizon (average annual turnover is approximately 15-20%) 

• Extremely focused on style consistency 

• Favorable upside/downside capture ratio 

Process 

• Bottom-up fundamental analysis focusing on industry leaders with strong financial characteristics 

• Focused sell discipline 

Portfolio Construction 

• Well diversified portfolio of 65-80 stocks 

• Broad industry and sector exposure 

• No portfolio dispersion 

7

Top Ten Holdings 

Small Cap Growth Equity 

Company Name 

% of Portfolio 

(excluding cash) 

Sector 

Company Description 

MWI Veterinary Supply Inc. 

2.9 

Health Care 

Veterinary product distribution 

Balchem Corp. 

2.4 

Materials 

Specialty chemicals 

United Natural Foods Inc. 

2.2 

Consumer Staples 

Food distribution 

PAREXEL International Corp. 

2.2 

Health Care 

Clinical research testing 

Medidata Solutions Inc. 

2.1 

Health Care 

Clinical research software 

Gulfport Energy Corp. 

2.0 

Energy 

Oil & gas exploration and production 

TreeHouse Foods Inc. 

2.0 


Private-label food products 

PriceSmart Inc. 

1.9 


Warehouse club retailer 

Forum Energy Technologies Inc 

1.9 

Energy 

Oil services 

Interactive Intelligence Group Inc. 

1.8 

Information Technology 

Telecommunication software and equipment 

Total 

21.4 

As of 5.31.13 

Portfolio holdings are based on a representative account and are subject to change. Such data may vary for each client in the strategy due to asset size, market conditions, client guidelines and diversity of portfolio 

holdings. The representative account is the account in the composite that RBC GAM-US believes most closely reflects the current portfolio management style for this strategy. Supplemental information on this page 

complements the Small Cap Growth Equity Composite presentation as provided in the “Performance Presentation & Disclosures” appendix to these materials. 

8

Portfolio Characteristics 


 

 

Profitability 

Return on Equity (Trailing 12 Months) 

Net Profit Margin 

Fundamentals 

Long-Term Debt/Total Capitalization (Trailing 12 Months) 

Sales Growth (Trailing 5 Years) 

EPS Growth (Trailing 5 Years) 

Valuation 

Price/Earnings Ratio (Forward FY1) 

Price/Earnings Ratio (Forward FY2) 

Long-Term Future EPS Growth Rate 

Price/Earnings to Growth Ratio (Forward FY1) 

Price/Earnings to Growth Ratio (Forward FY2) 

Price/Cash Flow Ratio (Trailing 12 Months) 

Price/Sales Ratio (Trailing 12 Months) 

Other 

Weighted Average Market Capitalization (Millions) 

Median Market Capitalization (Millions) 

Number of Holdings (Excluding Cash) 


11.7% 

6.0% 

13.8% 

13.9% 

10.6% 

25.9x 

21.3x 

16% 

1.6x 

1.3x 

15.1x 

1.8x 

$1,891 

$1,461 

77 

Russell 2000 Growth Index 

11.0% 

6.3% 

33.2% 

14.5% 

11.0% 

22.4x 

19.3x 

16% 

1.4x 

1.2x 

10.8x 

1.8x 

$1,850 

$705 

1,105 


Source: FactSet, Russell 

Portfolio characteristics are based on a representative account and are subject to change. Such data may vary for each client in the strategy due to asset size, market conditions, client guidelines and diversity of portfolio 


complements the Small Cap Growth Equity Composite presentation as provided in the “Performance Presentation & Disclosures” appendix to these materials. 

9

Sector Weightings 


May 31, 2013 

June 30, 2012 

June 30, 2005 

Sectors 

PERA NM 

Russell 2000 

Growth 

PERA NM 

Russell 2000 

Growth 

NM PERA 

Russell 2000 

Growth 


28.5% 

21.1% 

26.1% 

22.1% 

23.2% 

24.7% 

Health Care 

21.0 

20.9 

24.8 

22.1 

23.2 

20.9 

Industrials 

18.5 

17.9 

16.3 

16.9 

15.5 

14.1 

Consumer Discretionary 

10.5 

16.3 

11.4 

16.1 

16.6 

17.3 


7.2 

4.7 

5.8 

4.9 

2.8 

2.4 

Financials 

6.7 

7.8 

6.2 

6.8 

11.4 

10.0 

Energy 

5.2 

5.4 

6.0 

5.5 

5.0 

6.6 

Materials 

2.4 

4.8 

3.4 

4.2 

2.3 

3.1 

Telecommunication 

Services 

0.0 

0.8 

0.0 

1.1 

0.0 

0.9 

Utilities 

0.0 

0.3 

0.0 

0.3 

0.0 

0.0 

Source: RBC GAM-US, Russell 

10

May-13 

Mar-13 

Jan-13 

Nov-12 

11 

Sep-12 

Total Active Share – May 2009 through May 2013 


94 

92 

90 

88 

May-09 

Jul-09 

Sep-09 

Nov-09 

Jan-10 

Mar-10 

May-10 

Jul-10 

Sep-10 

Nov-10 

Jan-11 

Mar-11 

May-11 

Jul-11 

Sep-11 

Nov-11 

Jan-12 

Mar-12 

May-12 

Jul-12 


All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed.

Portfolio Holdings 


Consumer Discretionary Financials Information Technology Health Care 

Buffalo Wild Wings Inc. 

Digital Generation Inc. 

Dorman Products Inc. 

Gentex Corp. 

Hibbett Sports Inc. 

K12 Inc. 

Monro Muffler Brake Inc. 

SHFL Entertainment Inc. 

True Religion Apparel Inc. 

Vitamin Shoppe Inc. 


Natural Grocers by Vitamin Cottage Inc. 

PriceSmart Inc. 

TreeHouse Foods Inc. 

United Natural Foods Inc. 

Energy 

Forum Energy Technologies Inc. 


Swift Energy Co. 

Unit Corp. 

First Cash Financial Services 

HCC Insurance Holdings Inc. 

Portfolio Recovery Associates Inc. 

Tower Group International Ltd. 

Industrials 

Actuant Corp. 

Advisory Board Co. 

Applied Industrial Technologies Inc. 

Healthcare Services Group Inc. 

Huron Consulting Group Inc. 

Knight Transportation Inc. 

Landstar System Inc. 

Mistras Group Inc. 

Mobile Mini Inc. 

Proto Labs Inc. 

Simpson Manufacturing Co. Inc. 

Teledyne Technologies Inc. 

Tetra Tech Inc. 

TriMas Corp. 

Woodward Inc. 

Materials 

Balchem Corp. 

Aruba Networks Inc. 

Bottomline Technologies Inc. 

Cardtronics Inc. 

Cavium Inc. 

CommVault Systems Inc. 

Comtech Telecommunications Corp. 

Digital River Inc. 

Diodes Inc. 

DTS Inc. 

Global Payments Inc. 

Interactive Intelligence Group Inc. 

Manhattan Associates Inc. 

NIC Inc. 

Open Text Corp. 

Pegasystems Inc. 

Perficient Inc. 

Plexus Corp. 

Rofin-Sinar Technologies Inc. 

ScanSource Inc. 

SciQuest Inc. 

Sourcefire Inc. 

SPS Commerce Inc. 

Ultimate Software Group Inc. 

Zebra Technologies Corp. 

Allscripts Healthcare Solutions Inc. 

Bio-Reference Labs Inc. 

Cantel Medical Corp. 

Cooper Cos. Inc. 

Integra LifeSciences Holdings Corp. 


Meridian Bioscience Inc. 


Neogen Corp. 

NuVasive Inc. 


Teleflex Inc. 

Vascular Solutions Inc. 

Volcano Corp. 

West Pharmaceutical Services Inc. 


Portfolio holdings are based on a representative account and are subject to change. Such data may vary for each client in the strategy due to asset size, market conditions, client guidelines and diversity of portfolio 


complements the Small Cap Growth Equity Composite presentation as provided in the “Performance Presentation & Disclosures” appendix to these materials. There is no guarantee that the holdings of an actual account 

will always be identical to the holdings presented here. This presentation should not be construed as a recommendation to buy or sell any financial instruments. The information contained herein should not be relied upon 

as the sole investment-making decision. 

12

Portfolio Performance 


35 

30 

31.3 30.9 

30.2 

31.1 

Market Value: $206,438,179 

Percentage (%) 

25 

20 

15 

10 

18.2 

16.1 15.6 16.5 

2.7 

12.812.6 

13.2 

12.4 

21.2 20.4 

17.5 

15.7 

11.1 10.4 

7.7 

7.2 

9.5 

9.0 

8.2 

7.4 

5 

2.9 

4.4 

3.6 

0 

YTD (5.31.13) 2QTD 1Q13 1 Year 3 Years 5 Years Since Inception 

(4.1.05) 

PERA NM (gross) PERA NM (net) Russell 2000 Grow th Index Russell 2000 Index 


Returns labeled “gross” are presented gross of management fees and include the reinvestment of all income. Returns labeled “net” are net of management fees and include the reinvestment of all income. All 

returns for periods greater than one year are shown on an annualized basis. Inception of the performance record is 4.1.05. Past performance is not a guarantee of future results. 

13

Returns Since Inception 


35 

30 

31.1 

30.9 

31.1 

Consistent outperformance versus 

the Russell 2000 Growth Index 

over a complete market cycle 

25 

21.3 


20 

15 

10 

5 

16.1 

18.2 

16.5 

2.9 

4.4 

3.6 

12.8 

13.2 

12.4 

17.5 

15.7 

11.1 

7.7 

7.2 

8.9 

7.0 

6.0 

11.9 12.2 

9.9 9.8 

8.7 

9.3 

0 

YTD 

(5.31.13) 

2QTD 1Q13 1 Year 3 Years 5 Years 7 Years 10 Years Since Inc. 

(10.1.01) 

Small Cap Growth Equity Composite (Gross) Russell 2000 Growth Index Russell 2000 Index 


Returns are presented gross of management fees and include the reinvestment of all income. The Russell 2000 Index is shown for illustrative purposes as representation of the broader market, but is not considered a 

benchmark for the strategy. All returns for periods greater than one year are shown on an annualized basis. Inception of the performance record is 10.1.01. The Small Cap Growth Equity composite is presented as 

supplemental to the “Performance Presentation & Disclosures” appendix to these materials. The appendix contains additional GIPS ® -required disclosures and important information regarding calculation of performance 

data and includes net of fees performance returns. Past performance is not a guarantee of future results. 

14

Transactions 


2013 Purchases: 

2013 Sales: 

1Q 

Cardtronics Inc. (consumer financial services) 

1Q 

Cymer Inc. (semiconductor equipment)* 

Natural Grocers by Vitamin Cottage Inc. (specialty retail) 

PSS World Medical Inc. (healthcare product distribution)* 

Raymond James Financial Inc. (diversified financial services)** 

Valspar Corp. (paints and coatings)** 

2QTD 

Proto Labs Inc. (custom molded machine parts) 

2QTD 

Berry Petroleum* (oil & gas exportation production) 

TriMas Corp. (diversified industrial products) 

Unit Corp. (diversified energy operations) 

* Takeover 

** Market Cap 


This should not be construed as a recommendation to buy or sell any financial instruments. 

15

Risk-Adjusted Performance Ranking 


3 Years 

5 Years 

7 Years 

10 Years 

Since 

Inc. 

3 Years 

5 Years 

7 Years 

10 Years 

Since 

Inc. 

Return 


Universe Median 

Percentile 

19.5 

15.9 

7 

13.1 

9.6 

12 

7.6 

5.8 

19 

13.0 

12.5 

39 

12.1 

9.8 

11 

Tracking Error 



Percentile 

5.5 

5.0 

40 

5.0 

6.5 

79 

4.8 

6.4 

75 

6.1 

6.2 

54 

7.3 

6.9 

43 

Alpha 



Percentile 

6.9 

1.1 

3 

4.7 

0.8 

9 

2.5 

0.8 

20 

2.8 

1.3 

17 

4.6 

1.7 

5 

Batting Average 



Percentile 

66.7 

50.0 

19 

70.0 

55.0 

6 

64.3 

53.6 

14 

57.5 

55.0 

31 

58.7 

54.4 

27 

Information Ratio 



Percentile 

Sharpe Ratio 



Percentile 

0.9 

0.2 

10 

1.0 

0.7 

3 

0.8 

0.1 

6 

0.6 

0.4 

6 

0.5 

0.1 

15 

0.3 

0.2 

13 

0.2 

0.2 

37 

0.6 

0.5 

9 

0.5 

0.2 

10 

0.5 

0.4 

1 

Standard Deviation 



Percentile 

Beta 



Percentile 

18.6 

23.8 

96 

0.78 

0.99 

95 

22.7 

26.7 

91 

0.85 

0.97 

85 

20.5 

24.1 

92 

0.86 

0.99 

87 

18.6 

22.5 

95 

0.81 

0.97 

94 

19.3 

23.4 

95 

0.78 

0.94 

94 

Repeatable process has generated 

superior risk-adjusted returns 

Downside Capture 



Percentile 

64.9 

96.7 

95 

77.9 

97.9 

89 

82.6 

100.6 

87 

78.4 

98.3 

87 

68.4 

93.1 

95 


Note: For definitions and additional information, see Definitions in the Appendix. 

Source: Zephyr StyleADVISOR, Universe is comprised of the eVestment Alliance (eA) Small Cap Growth Equity Universe. Percentile is based on the Universe. 

Performance rankings were calculated using RBC GAM-US returns that are presented gross of management fees and include the reinvestment of all income. All returns for periods greater than one year are shown on an 

annualized basis. Inception of the performance record is 10.1.01. The Small Cap Growth Equity composite is presented as supplemental to the “Performance Presentation & Disclosures” appendix to these materials. The 

appendix contains additional GIPS ® -required disclosures and important information regarding calculation of performance data and includes net of fees performance returns. Past performance is not a guarantee of future 

results. 

16

Risk vs. Return 


Since Universe inception through 3.31.13 

Source: Zephyr StyleADVISOR, Universe is comprised of the eVestment Alliance (eA) Small Cap Growth Equity Universe. 

Returns are presented gross of management fees and include the reinvestment of all income. All returns for periods greater than one year are shown on an annualized basis. Inception of the performance record is 

10.1.01. The Small Cap Growth Equity composite is presented as supplemental to the “Performance Presentation & Disclosures” appendix to these materials. The appendix contains additional GIPS ® -required disclosures 

and important information regarding calculation of performance data and includes net of fees performance returns. Past performance is not a guarantee of future results. 

17

Risk Characteristics vs. Small Cap Growth Universe 

5 th Percentile 

12.80% 

4.61% 

0.62 

0.50 

1.17 

29.33% 


11.05% 

3.00% 

0.40 

0.41 

1.02 

25.56% 

Median 

9.76% 

1.71% 

0.22 

0.35 

0.94 

23.37% 


8.48% 

0.45% 

0.01 

0.28 

0.89 

22.37% 


6.56% 

-1.50.% 

-0.25 

0.19 

0.77 

19.31% 

Small Cap Growth Equity (Gross) 

12.14% 

4.57% 

0.51 

0.54 

0.78 

19.28% 

Percentile 

11 th 

5 th 

10 th 

1 st 

94 th 

95 th 

Since inception through 3.31.13 

Source: Zephyr StyleADVISOR, Universe is comprised of the eVestment Alliance (eA) Small Cap Growth Equity Universe. 

Returns are presented gross of management fees and include the reinvestment of all income. All returns for periods greater than one year are shown on an annualized basis. Inception of the performance record is 

10.1.01. The Small Cap Growth Equity composite is presented as supplemental to the “Performance Presentation & Disclosures” appendix to these materials. The appendix contains additional GIPS ® -required disclosures 

and important information regarding calculation of performance data and includes net of fees performance returns. Past performance is not a guarantee of future results. 

18

Strong Downside Protection 

• The strategy has demonstrated lower volatility and downside protection by outperforming 

the benchmark 15 of the 17 quarters where the Russell 2000 Growth Index experienced 

negative performance since the strategy’s inception 

15% 

Down Quarters for the Russell 2000 Growth Index 

10% 

8.5% 

10.6% 

Small Cap Growth Excess Return vs. Index 

6.7% 

6.8% 

5% 

0% 

2.9% 

3.7% 

4.4% 

-0.4% 

0.5% 

-1.8% 

1.3% 

3.3% 

1.6% 

2.3% 2.2% 2.0% 

2.9% 

-5% 

1Q02 2Q02 3Q02 1Q03 3Q04 1Q05 2Q06 3Q06 4Q07 1Q08 3Q08 4Q08 1Q09 2Q10 2Q11 3Q11 2Q12 

Only down quarters illustrated above from 10/2001 through 3/2013 

Source: RBC, Russell 

The stated benchmark for the strategy is the Russell 2000 Growth Index. The Russell 2000 Index is shown for illustrative purposes as representation of the broader market, but is not considered a benchmark for the 

strategy. Returns are presented gross of management fees and include the reinvestment of all income. Inception of the performance record is 10.1.01. The Small Cap Growth Equity composite is presented as 

supplemental to the “Performance Presentation & Disclosures” appendix to these materials. The appendix contains additional GIPS ® -required disclosures and important information regarding calculation of performance 

data and includes net of fees performance returns. Past performance is not a guarantee of future results. 

19

Russell 2000 Growth Index 

Sector Performance 

35 

27.6 

25 


15 

5 

17.8 

14.2 

12.5 

11.1 

5.6 

8.5 

15.6 16.0 

16.8 

15.2 

14.1 

1.3 

18.5 

13.1 

11.0 

8.7 

16.2 

14.3 

10.4 

15.3 

13.4 

11.7 

5.0 

16.8 

12.9 

12.8 

11.2 

12.2 

10.8 

1.9 

18.1 

13 . 3 

10.3 

7.1 

8.1 

4.0 

1.0 

-0.4 

-5 

-11.2 

-15 

Consumer 

Discretionary 

Consumer 

Staples 

Energy Financials Health Care Industrials Information 

Technology 

Materials 

Telecomm 

Services 

Utilities 

QTD 1 Year 3 Years 5 Years 



All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. 

20

Attribution Analysis: 1 Year through 5.31.13 


Sector 

Sector 

Allocation 

Security 

Selection 

Total 

Effect 


-0.28 

-1.66 

-1.94 


0.02 

-0.09 

-0.07 

Energy 

0.17 

1.47 

1.64 

Financials 

-0.06 

0.60 

0.54 

Health Care 

-0.01 

1.62 

1.61 

Industrials 

-0.11 

-2.49 

-2.60 


-0.19 

1.52 

1.33 

Materials 

0.08 

0.39 

0.47 

Telecommunication Services 

0.02 

-- 

0.02 

Utilities 

0.15 

-- 

0.15 

Cash 

-0.71 

-- 

-0.71 

Total 

-0.92 

1.36 

0.44 



There is no guarantee that the holdings of an actual account will always be identical to the holdings presented here. This presentation should not be construed as a recommendation to buy or sell any financial 

instruments. The information contained herein should not be relied upon as the sole investment-making decision. 

21

Attribution Analysis: 1 Year through 5.31.13 


Top 5 Stock Contributors: 

Company Name 

Contribution 

Bottom 5 Stock Contributors: 

Company Name 

Contribution 


2.10% 

Tractor Supply Co. 

-0.18% 


1.92% 

Catamaran Corp 

-0.18% 


1.32% 

DTS Inc. 

-0.27% 

Balchem Corp. 

1.12% 


-0.32% 


1.07% 

Volcano Corp. 

-0.53% 

Contribution 

Sector Allocation 

-0.92% 

Security Selection 

1.36% 

Total Effect 

0.44% 





22

Attribution Analysis: Year Ended 12.31.12 


Sector 

Sector 

Allocation 

Security 

Selection 

Total 

Effect 


-0.05 

-0.47 

-0.52 


0.05 

0.66 

0.71 

Energy 

0.48 

0.82 

1.30 

Financials 

-0.01 

0.42 

0.41 

Health Care 

0.09 

2.88 

2.97 

Industrials 

-0.08 

1.53 

1.45 


0.02 

0.90 

0.92 

Materials 

0.02 

-0.05 

-0.03 

Telecommunication Services 

0.05 

-- 

0.05 

Utilities 

0.09 

-- 

0.09 

Cash 

-0.20 

-- 

-0.20 

Total 

0.46 

6.69 

7.15 





23

Attribution Analysis: Year Ended 12.31.12 


Top 5 Stock Contributors: 

Company Name 

Contribution 

Bottom 5 Stock Contributors: 

Company Name 

Contribution 

Catalyst Health Solutions Inc. 

2.19% 

Pegasystems Inc. 

-0.31% 


1.50% 

Gentex Corp. 

-0.45% 


1.28% 

True Religion Apparel Inc. 

-0.47% 

LKQ Corp 

1.16% 


-0.49% 


0.98% 

Allscripts Healthcare Solutions Inc. 

-0.53% 

Contribution 

Sector Allocation 

0.46% 

Security Selection 

6.69% 

Total Effect 

7.15% 





24

RBC GAM-US Small Cap Growth Equity 

Market Environment 

Positives 

• U.S. GDP growth has been positive for the last fourteen quarters, 

with full year 2013 growth expected to be approximately 2.0%. 

Corporate earnings growth, high profit margins, and low interest 

rates present a favorable backdrop for equity investors. 

• The Federal Reserve will continue its $85 billion monthly bond 

buying program to keep interest rates low and encourage 

spending, borrowing, and investing. The Fed indicated that an 

accommodative policy will be in effect until the U.S. reaches a 

target unemployment rate of 6.5%, which is not anticipated to 

occur until 2015. 

• Corporations have cash balances of approximately $2.0 trillion 

that can be used for capital expenditures, acquisitions, stock 

buybacks, or dividend increases. Management teams are highly 

desirous of growing their businesses and are awaiting clarity from 

Washington regarding fiscal and budget issues, possible 

changes to tax laws, and potential new regulatory issues. 

• Overall prospects for U.S. economic growth are among the best 

in the developed world, and our portfolio companies are generally 

expected to show positive revenue and earnings growth in 2013. 

Challenges 

• While the fiscal cliff saga reached a partial resolution at the end 

of 2012 with Congress agreeing to maintain existing income tax 

rates for close to 99% of all U.S. taxpayers, no agreement was 

reached on any type of entitlement reforms. 

• In 2013, Congress will once again need to raise the U.S. 

government's debt ceiling. A final resolution may not easily be 

reached, potentially rattling financial markets and prompting 

further possible downgrades of U.S. debt by credit rating 

agencies. 

• Many states and municipalities are under severe budget 

pressures. With spending levels growing at a faster rate than 

revenues, many states are increasingly looking to raise taxes and 

fees in order to make up the shortfall, which places additional 

financial burdens on consumers and corporations. 

• Many investors are wary of investing in U.S. equities and 

continue to seek safety in short-term U.S. Treasury securities 

despite miniscule yields. 


25

Portfolio Professionals 



Ken Tyszko is responsible for Small Cap Growth and SMID Cap Growth research and portfolio management. He joined RBC GAM-US in 

2001. Ken previously served as a portfolio manager for Oberweis Asset Management, ABN AMRO Asset Management (USA) Inc., ABN 

AMRO Incorporated and Sears Investment Management Company. His background also includes experience at Main Hurdman, an 

international accounting and consulting firm. Ken earned a BS in accountancy from the University of Illinois. He is a CFA charterholder. Ken 

is a member of the CFA Society of Chicago, the CFA Institute and the Illinois CPA Society. He has been a guest on Bloomberg Television, 

Bloomberg Radio, CNBC and WebFN. 

Ryan H. Smith, CPA, CFA 


Ryan Smith provides fundamental research and portfolio management for our Small Cap Growth and SMID Cap Growth strategies. Before 

joining RBC GAM-US in 2007, Ryan spent three years as an equity research associate with William Blair & Company. He was a manager at 

Ernst & Young prior to working at William Blair. Ryan began his career in the investment industry in 2004. He earned a BS in Accountancy 

from Lehigh University and an MS in Accountancy from the University of Notre Dame. Ryan is a CFA charterholder and a member of the 

CFA Society of Chicago and the CFA Institute. 

Richard J. Drage, CPA, CFA 


Rich Drage provides fundamental research for our Small Cap Growth and SMID Cap Growth strategies. Rich joined RBC GAM-US in 2009 

from Susquehanna International Group, where he was a senior research analyst. Before that, he was a senior equity analyst at Neuberger 

Berman. Rich’s previous experience also includes various research and portfolio management responsibilities at Highbar Capital 

Management, Whitebox Advisors, Fasciano Company, and First Analysis Corporation. He began his career in the investment industry in 

1994. Rich earned a BA in Economics from Northwestern University and an MS in Accountancy from DePaul University. He is a CFA 

charterholder and a member of the CFA Society of Chicago and the CFA Institute. 

26

Portfolio Professionals 

Jeff Nevins 

Senior Equity Analyst 

Jeff Nevins provides fundamental research for our small, SMID, and mid cap growth strategies. Before joining RBC GAM-US in 2013, Jeff was 

a buy-side equity research analyst at Neuberger Berman. He has also served as a public and private equity research analyst for First Analysis 

Corporation and as a credit analyst for LaSalle Bank (Bank of America). Jeff began his career in the investment industry in 1998. He earned a 

BS in Finance with Honors from DePaul University and an MBA from Northwestern’s Kellogg School of Management. Jeff is a CFA 

charterholder as well as a member of the CFA Society of Chicago and the CFA Institute. 

Ryan Larson 

Head of Equity Trading 

Ryan Larson is responsible for trade execution and management for the firm’s equity division. Ryan works to determine which brokers and 

trading vehicles will achieve best execution for our clients. He also serves as a spokesperson raising the firm’s media profile. Prior to joining 

RBC GAM-US in 2000, Ryan worked at Wells Fargo Investment Management & Trust. He began his career in the investment industry in 2000. 

Ryan earned a BS in Business Administration from Creighton University and an MBA from DePaul University Kellstadt Graduate School of 

Business. He is a member of the Security Traders Association of Chicago. Ryan has been quoted in national and international publications 

such as The Wall Street Journal, the Financial Times, and The New York Times, and has been a guest on Bloomberg Radio and Television. 

Kristen Patrie 

Equity Trader 

Kristen Patrie is responsible for trade execution and management for the firm’s equity division. Kristen joined the RBC GAM-US in 2006 from 

Investors Bank & Trust Company, where she was the manager of domestic settlements for equity products. Before that, she was responsible 

for equity trading and worked to achieve best execution for all equity strategies at Snyder Capital Management. Kristen also served as a senior 

account administrator for Babson Capital Management. She began her career in the investment industry in 1994. Kristen earned a BS in 

Business Administration from Roger Williams University. 

27

Appendix

Performance Presentation & Disclosures Appendix 

Small Cap Growth Equity as of March 31, 2013 

N/A – Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. 

Please note, on January 10, 2013 the Performance Presentation & Disclosure dated September 30, 2012 for the Small Cap Growth Equity composite was corrected. The composite returns were accurately presented, however, 

the disclosure on some marketing materials referenced a different composite. 

Effective January 1, 2012, RBC Global Asset management (U.S.) Inc. changed its firm definition for purposes of complying with the Global Investment Performance Standards (GIPS). These changes are reflected historically. 

Under the new definition, RBC GAM-US is consolidated under RBC Global Asset Management (RBC GAM). 

(Performance Presentation and Disclosures continued on the next page) 

29

Performance Presentation & Disclosures Appendix 

Small Cap Growth Equity as of March 31, 2013 

30

Definitions 

Alpha - measures the difference between an actual return for a stock or a portfolio and its equilibrium expected return. 

Batting Average - measures the success frequency of a manager. It is calculated by the number of periods when the manager returns 

are equal to or greater than the selected benchmark divided by the total number of periods in the analysis. The measure indicates a 

manager’s frequency of success, disregarding the degree of outperformance vs. the benchmark. 

Beta - measures the sensitivity of a stock’s return relative to the return of a selected market index. When beta is greater than one, it 

means a stock will rise or fall more than the market. 

Information Ratio - measures portfolio management’s performance against risk and return relative to a benchmark. 

Sharpe Ratio - measures the amount by which a set of values differs from the arithmetical mean, equal to the square root of the mean 

of the differences’ squares. 

Standard Deviation - measures the sensitivity of a stock’s return relative to the return of a selected market index. When beta is greater 

than one, it means a stock will rise or fall more than the market. 

Tracking Error - also known as the standard deviation of excess returns (both positive and negative), is a statistical measure of volatility 

and indicates ‘risk’ relative to a stated benchmark. A high Tracking Error indicates greater risk (but not necessarily greater return) 

relative to the stated benchmark. 

31

Disclosures 

This document (the “Presentation”) is being provided by RBC Global Asset Management to the party named on the cover page. Accordingly, this Presentation may 

not be reproduced in whole or part, and may not be delivered to any other person without the consent of RBC Global Asset Management. This Presentation is not a 

solicitation of any offer to buy or sell any security or other financial instrument or to participate in any investment strategy and should not be construed as tax or legal 

advice. 

RBC Global Asset Management is the name used in the United States for certain investment advisory subsidiaries of the Royal Bank of Canada. RBC Global Asset 

Management (U.S.) Inc. (“RBC Global Asset Management – US” or “RBC GAM-US”) is a federally registered investment adviser founded in 1983. 

Past performance is not indicative of future results. There can be no guarantee that any investment strategy discussed in this Presentation will achieve its investment 

objectives. As with all investment strategies, there is a risk of loss of all or a portion of the amount invested. No chart, graph, or formula can by itself determine which 

securities an investor should buy or sell or which strategies should be pursued. 

This Presentation contains the current opinions of RBC Global Asset Management and is not intended to be, and should not be interpreted as, a recommendation of 

any particular security, strategy or investment product. Not all products, services or investments described herein are available in all jurisdictions and some are 

available on a limited basis only, due to local regulatory and legal requirements. Unless otherwise indicated, all information and opinions herein are as of May 31, 

2013 and are subject to change without notice. 

RBC Global Asset Management (“RBC GAM”) is the asset management division of Royal Bank of Canada (“RBC”) which includes RBC GAM-US, RBC Global Asset 

Management Inc., RBC Alternative Asset Management Inc., and BlueBay Asset Management LLP, which are separate, but affiliated corporate entities. ®/ 

Trademark(s) of Royal Bank of Canada. Used under license. © 2013 RBC Global Asset Management (U.S.) Inc. 

32

RIO Legislative Change 

Implementation 

Vince Jaramillo, User Administrator 

Greg Portillos, Chief Information Officer 

June 27, 2013

RIO System Changes Required as 

a Result of Legislation 

PERA Staff are working with HP to ensure SB 27 changes 

are developed, tested and deployed into the RIO System 

by July 1 st . This is the most significant modification to RIO 

since the system went live in 2005. 

• Phase One: 

– Cost-of Living Adjustment 

– Wage and Contribution reporting (Tier 1 & Tier 2) 

– VFF – Increased pension amounts effective July 1st 

– 90% pension maximum effective July 1st

Outreach 

• Outreach Meetings and Employer Trainings: By July 1 st , PERA will have 

conducted 62 outreach meetings and employer trainings throughout the 

state. Preliminary numbers indicate that more than 1200 members have 

attended the meeting to date. 

• Member Correspondence: By July 1 st , PERA will have sent more than 

100,000 correspondence to our members with information about the 

changes resulting from SB 27, as well as updated member handbooks and 

our website with important information. 

• La Voz Newsletters Mailed 

• Website updated on continual basis.

Internal Planning 

• Change Requests (CCR) 

– COLA - Changes to be implemented by July 1, 2013. 

– SB 27 

• Stage 1 to be implemented prior to July 1, 2013 

• Stage 2 to be implemented after July 1, 2013 

• Weekly Conference Calls with HP 

• PERA Legislation Group 

– Weekly Meetings 

– Email Distribution List

Weekly 

Progress 

Reports

Weekly Progress Reports

Requirements Document

Testing Progress 

• COLA – Testing began May 17, 2013 and will continue thru 

June 28, 2013. Code will be deployed into RIO Production on 

June 29, 2013. 

• SB 27 – Stage 1 Wage and Contribution reporting, testing 

began June 10, 2013 and will continue thru June 28, 2013. Code 

will be deployed into RIO Production on June 29, 2013. DFA and 

City of Albuquerque were successfully posted in the Test 

environment. 

• VFF – New pension amounts have been successfully tested and 

are ready for implementation. 

• 90% Pension Max – The new pension maximum has been 

successfully tested for all plans and is ready for implementation.

Employer Reporting 

• The “Physical Interface: Employer 

Reporting File” has been updated. This 

document is the guide used by employers 

for online reporting. All plans have been 

updated and a copy of the document has 

been provided to DFA, City of Albuquerque 

and Bernalillo County.

Implementation 

Milestones 

• COLA 4/8/13 – 7/19/13 

– Letter to Return to Work Retirees 

– COLA Website Updates 

– COLA PERA Staff Training 

– COLA ERB Automation 

– COLA Testing 

– COLA Production Deployment 

• SB 27 4/8/13 – 6/28/13 

– SB 27 Website Updates 

– SB 27 PERA Staff Training 

– SB 27 Testing 

– SB 27 City of Albuquerque/Department of Finance and Administration 

– SB27 Testing 

– SB27 Production Deployment

June 27, 2013 - Public Employees Retirement Association of New ...

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