Investment Plan 2011 - OPERS

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Ohio Public Employees Retirement System 2011 Annual Investment Plan Public Fixed Income The objective for the Public Fixed Income asset class is obtain global fixed income exposure with allocations to the following sub-asset classes. The Core Fixed allocation is benchmarked to the Barclays Aggregate Index and provides broad-based exposure to fixed income assets including treasury securities, corporate bonds, agency bonds and structured securities. Internal management is used for the majority of this exposure. The High Yield allocation is benchmarked to the Barclays High Yield Index and provides exposure to corporate non-investment grade bonds. External managers are employed to manage the high yield exposure. The Treasury Inflation Protected Securities (TIPS) portfolio is benchmarked to the Barclays TIPS Index and is managed internally. Emerging Market Debt portfolios provide exposure to international emerging market bonds and is currently managed utilizing two external managers. The Liquidity Funds, managed internally, are to provide liquidity during periods when the ability to liquidate other asset classes are constrained or too costly. Public Fixed Income Expected Performance and Tracking Error Performance Target Objectives Tracking Target (net of fees) Error Information Benchmark (bps) (bps) Ratio Core Fixed Barclays Agg 30 75 0.40 Long Bonds Barclays Long G/C 40 100 0.40 High Yield Barclays HY 100 250 0.40 Liquidity 3-Month T-Bill 0 0 NA TIPS Barclays TIPS 30 75 0.40 Emerging Market Debt Custom* 140 350 0.40 * 50/50 mix of the JP Morgan EM Bond Index Global & the JP Morgan Govt Bond Index-Emerging Markets Global Diversified The Defined Benefit and Health Care Funds each have allocations designed to meet their long-term obligations and have allocations to the above fixed income security types. See page 15 for the Defined Benefit Fund allocation and page 18 for the Health Care Fund allocations. Securities Lending The securities lending program uses a combination of lending agents to maximize lending revenue. OPERS uses agents who provide competitive fee splits, while providing adequate risk controls and expertise in the asset class being loaned. There is a bias toward lending assets in an auction environment so that borrowers are providing maximum revenue in a competitive environment on a regular basis. In 2011, Staff plans to begin lending the Treasury and Agency assets in-house. This change will increase revenue and necessitate the addition of another internal resource to assist with that process. The collateral from the securities lending program is managed internally. The combined lending revenue and investment income comprise the total securities lending performance. Page 27
Ohio Public Employees Retirement System 2011 Annual Investment Plan Cash Management The cash portfolios are managed with a low-to-moderate risk profile that results in principal preservation, while exceeding the performance of the respective benchmarks. The benchmark of the OPERS Short Term Investment Funds (STIF) is the 91-day Treasury bill. The benchmark for the Securities Lending STIF is the Fed Funds Open Rate. Each portfolio is run separately, with Staff targeting assets that are most likely to generate performance above the respective portfolio benchmarks. Staff is currently considering new guidelines and a new structure for the cash portfolios that would allow greater focus on the management of liquidity in this asset class. The general structure will incorporate new liquidity buckets that will be unitized for purchase by the individual cash portfolios. Page 28
Page 1 and 2: Defined Benefit Fund Ohio PERS Inve
Page 4 and 5: Ohio Public Employees Retirement Sy
Page 34 and 35: 2011 Appendix A
Page 42 and 43: 2011 Appendix B
Page 52: 277 East Town Street Columbus, Ohio

Investment Plan 2011 - OPERS

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