Investment Plan - OPERS

2 0 1 0 I N V E S T M E N T P L A N
INVESTMENT PROGRAM
Overview of 2010 Annual Investment Plan
As always, the Investment Division’s goals reflect the Board’s ongoing mandate to earn expected returns,
while managing to an acceptable level of risk.
Several of the Investment Division initiatives are listed below:
Implement Board-approved asset allocation changes in the Defined Benefit, Health Care and Defined
Contribution Funds.
Update Board investment policies, educate Staff and the Board regarding market conditions and
investment opportunities, design implementation plans, prepare, issue and evaluate responses to RFPs
and take steps necessary to make progress on the implementation of the changes in these asset
allocations in a cost-effective and considered manner.
Add resources and fill Staff vacancies to accommodate investment in new asset classes.
Further expand risk management capabilities and compliance systems.
Add a higher proportion of active management to Public Equity.
Develop improved forecasting capabilities of employer/employee cash receipts and pension/healthcare
payments to better manage fund asset allocation.
Evaluate an implementation plan for expanding the internally managed securities lending program to
include lending U.S. treasuries and Treasury Inflation Protected Securities (TIPS).
Research and develop trading, information technology, reporting and back office infrastructure to
internally manage Non-U.S. Equities, additional U.S. Equity mandates and commodities exposure.
Expand capabilities for implementing asset class or portfolio hedging strategies.
Evaluate the Opportunistic Core and Opportunistic Short Duration portfolio strategies and implement
modifications, as appropriate.
Asset Management
As prudent stewards of a public fund with a long-term investment horizon, the Investment Division will
continue to monitor and measure three distinct sources of return and risk: strategic (policy allocation),
tactical (investment implementation level) and active (manager level). Each source of return and risk
contributes to achieving overall investment results. The Defined Benefit and Health Care Funds sections
presented later in this Annual Investment Plan provide details about how policy, tactical and active returns
will be generated within a framework of managed risks.
In summary, the 2010 goals established for each source of return and risk for the Defined Benefit and
Health Care Funds are as follows:
The total expected return of the OPERS’ Defined Benefit Fund in 2010 is 7.56% and is comprised of the
expected policy return of 7.23% and active management return of 0.33%. The total risk that will be
taken to achieve this return is 10.70%, which is derived from the combination of the policy risk of
10.50%, tactical risk of 0.30% and active risk of 0.80%. Long term expected returns remain above 8%.
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