Investment Plan - OPERS

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2 0 1 0 I N V E S T M E N T P L A N FUND STRATEGIES The table below shows the Health Care Fund’s projected June 30, 2010 allocation between active and passive asset management by asset class. The share of active management for OPERS will necessarily rise to reflect the new larger allocations to alternatives and liquid market strategies that cannot be effectively indexed, such as high yield and emerging market debt. Active Management Passive Management Asset Class OPERS OPERS Public Equity U.S. Equity 31.9% 68.1% Non-U.S. Equity Public Fixed Income 82.5% 17.5% Core Fixed 100.0% 0.0% TIPS 100.0% 0.0% Short Bonds 100.0% 0.0% High Yield 100.0% 0.0% Emerging Mkt Debt 100.0% 0.0% Liquidity Alternatives 100.0% 0.0% REIT 100.0% 0.0% Opportunistic/Hedge Funds 100.0% 0.0% Commodities 0.0% 100.0% Weighted Averages 74.0% 26.0% There is no peer universe for health care funds run by comparable large public pension plans. Passive management is utilized in the more-efficient U.S. Equity asset class and to a lesser extent in the Non-U.S. Equity asset class. The remainder of the fund is substantially actively managed. A much higher proportion of the Health Care Fund (78%) is actively managed than for the Defined Benefit Fund (71.2%). This primarily reflects a lower allocation to U.S. Equity in the Health Care Fund since this asset class is predominantly managed passively. The Health Care Fund has other asset allocation differences including that a higher proportion is allocated to publicly-traded asset classes and the Real Estate allocation within alternatives is accessed through actively managed public securities due to their greater liquidity. 39
2 0 1 0 I N V E S T M E N T P L A N FUND STRATEGIES 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 table shows expected returns for 2010 along with its ranges. These are the ‘beta’ returns expected from each asset class, without regard to over- or under-performance relative to the benchmarks. 2010 Policy Return Assumptions Asset Classes Pessimistic Base Optimistic Public Equity -10.0% 8.4% 28.5% U.S. Equity -10.1% 8.4% 28.5% Non-U.S. Equity -9.9% 8.4% 28.5% Public Fixed Income -1.5% 3.2% 11.4% Core Fixed -1.1% 3.2% 10.6% TIPS -0.1% 2.5% 10.2% Short Bonds -1.0% 2.8% 7.4% High Yield -11.0% 7.2% 28.2% Emerging Mkt Debt -8.7% 6.5% 22.7% Liquidity 0.3% 1.0% 2.3% Alternatives -4.6% 7.0% 18.7% REIT -4.4% 7.0% 18.6% Opportunistic/Hedge Funds -4.4% 7.0% 18.6% Commodities -13.2% 4.6% 24.3% Total Return -6.4% 6.5% 21.8% 40
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