Investment Plan 2011 - OPERS

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Ohio Public Employees Retirement System 2011 Annual Investment Plan Return and Risk The Health Care Fund’s performance objective is to earn a long-term rate of return that exceeds the return of the Health Care Fund policy benchmark within an appropriately constrained risk framework. The following table shows expected returns and return ranges for 2011. These are the beta, or market returns, expected from each asset class, without regard to outperformance or underperformance relative to the benchmarks. 2011 Policy Return Assumptions Asset Classes Pessimistic Base Optimistic Public Equity -12.2% 8.2% 32.9% U.S. Equity -12.3% 8.1% 32.2% Non-U.S. Equity -12.0% 8.4% 33.7% Public Fixed Income -4.2% 0.5% 11.4% Core Fixed -3.9% -1.3% 9.4% TIPS -1.8% 0.4% 8.2% High Yield -4.7% 6.2% 18.5% Emerging Mkt Debt -8.8% 6.3% 24.1% Liquidity 0.1% 0.3% 0.3% Alternatives -8.2% 6.9% 25.4% REIT -7.4% 7.1% 24.3% Hedge Funds -7.8% 7.4% 26.7% Opportunistic -7.8% 7.4% 26.7% Commodities -12.2% 3.4% 24.1% Total Return -9.0% 5.5% 24.8% The return estimates in the table below were derived from the asset class return expectations developed by Mercer. The single-point estimate return of 5.84% is comprised of an expected return of 5.48% from the policy mix and an additional contribution of 0.36% from active management net of fees. 2011 Total Return Assumptions Sources of Return Pessimistic Base Optimistic Policy -9.05% 5.48% 24.85% Tactical -0.50% 0.00% 0.50% Active -0.54% 0.36% 1.26% Total Return -10.08% 5.84% 26.61% 2011 Total Risk and Risk Attribution Assumptions Sources of Variability Information Sharpe Risk Risk Ratio Ratio Policy 8.50% 0.64 Tactical 0.50% Active 0.90% 0.40 Total Risk 9.10% 0.61 Due to rounding, the total return may not appear to sum from the sources of return. Variability risk is measured by standard deviation for policy and total risk and by tracking error is used for active risk. Page 19
Ohio Public Employees Retirement System 2011 Annual Investment Plan Expected Asset Growth Defined Contribution Fund Since its inception on January 2, 2003 the Defined Contribution Fund’s assets have grown to $393 million. For the year through August 31, asset growth has been $33 million. Future growth of the Defined Contribution Fund assets is expected to be slightly above historical averages due to the addition of nearly 2,000 new participants each year. The following table shows the distribution of assets across the various OPERS investment options within the Defined Contribution Fund as of August 31, 2010. OPERS Investment Options Defined Contribution Fund Assets Total for 2011 Assets Under Management ($ millions) Page 20 Estimated Annual Fees ($ millions) Estimated Annual Fees (bps) Core Funds OPERS Stable Value Fund $37.6 $0.06 23 OPERS Bond Index Fund $24.4 $0.03 4 OPERS Stock Index Fund $34.9 $0.04 3 OPERS Large Cap Index Fund $26.3 $0.03 5 OPERS Small Cap Index Fund $22.8 $0.03 8 OPERS Non-U.S. Stock Index Fund $27.8 $0.04 10 Target Date Funds OPERS Target Payout Fund $8.8 $0.02 10 OPERS Target 2015 Fund $16.4 $0.02 7 OPERS Target 2020 Fund $27.3 $0.03 7 OPERS Target 2025 Fund $34.5 $0.04 8 OPERS Target 2030 Fund $42.3 $0.05 8 OPERS Target 2035 Fund $45.3 $0.05 8 OPERS Target 2040 Fund $46.2 $0.05 8 OPERS Target 2045 Fund $29.1 $0.04 8 OPERS Target 2050 Fund $10.5 $0.02 8 OPERS Target 2055 Fund $0.6 $0.01 8 Total $434.7 $0.57 13 Asset Allocation The target asset allocation and ranges for the Target Date Funds can be found in the Defined Contribution Fund Policy. Target asset allocations for the Target Date Funds migrate over time with the mix between equity-oriented allocations and fixed incomeoriented allocations becoming more conservative as the target date approaches the retirement date. The OPERS Target Date Funds were introduced on October 1, 2008. In December 2010, the OPERS Investment Options, including the Target Date Funds, will become primarily passive with the exception of the Stable Value Fund. Additionally, as part of normal progression, the OPERS Target 2010 Fund will transition into the OPERS Target Payout Fund. The asset allocation for several of the Target Date Funds will include TIPS and Long Duration as of December 2010 to improve risk-adjusted return expectations and enhance diversification.
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Page 52: 277 East Town Street Columbus, Ohio

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