BOARD OF PENSION TRUSTEES FOR THE CITY OF JACKSONVILLE RETIREMENT SYSTEM Thursday, June 25, 2020 at 2 PM Virtual Meeting Access Information Below AGENDA
1. CALL TO ORDER
2. PUBLIC COMMENT
3. MINUTES
a. Copy of May 28, 2020 Board of Trustees Minutes; RECOMMENDED ACTION: APPROVAL
4. NEW BUSINESS
a. GEPP April 2020 and May 2020 Consent; PAC RECOMMENDED ACTION: APPROVAL b. Disability retirement applications for LH and DD; PAC RECOMMENDED ACTION: APPROVAL
5. INVESTMENT AND FINANCIAL MATTERS
a. May 2020 Investment Performance Update b. Real Estate Update c. Staff Update
6. OLD BUSINESS
7. ADMINISTRATIVE
a. Pension Office Activity Update: Volumes, Staff Update, Notarizations, PAC Elections, ITD System Enhancements
8. INFORMATION
a. Next regular BOT meeting scheduled for Thursday, July 23, 2020, at 2 PM
9. PRIVILEGE OF THE FLOOR
10. ADJOURNMENT
BOARD OF PENSION TRUSTEES FOR THE CITY OF JACKSONVILLE RETIREMENT SYSTEM Thursday, June 25, 2020 at 2 PM Virtual Meeting Access Information Below AGENDA
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BOARD OF PENSION TRUSTEES FOR THE CITY OF JACKSONVILLE RETIREMENT SYSTEM May 28, 2020
MINUTES
2:00 P.M., held via Zoom
Members Present Jeffrey Bernardo, Chair Julie Bessent Ann Brackin Joey Greive, Vice-Chair Brian Hughes David Kilcrease, Secretary Diane Moser Richard Wallace
Members Not Present Patrick Johnson (online but not available to vote and speak)
Staff Present Randall Barnes, Treasurer Brennan Merrell, Manager Debt and Investments John Sawyer, OGC Tom Stadelmaier, Pension Administrator
Others Present Jordan Cipriani, RVK Kevin Schmidt, RVK Jim Voytko, RVK Kathy Rossi Matt McCue
1. CALL TO ORDER
Chair Bernardo called the meeting to order at about 2:04 PM and provided background on the virtual meeting platform.
2. PUBLIC COMMENT
None
1
3. MINUTES
Ms. Moser made a motion to approve the minutes. Mr. Greive seconded the motion. The Chair asked for discussion and there was none. The Chair took a vote and the minutes passed unanimously.
4. NEW BUSINESS
Consent agendas
No consent agendas for this meeting. The PAC and COPAC meetings were cancelled.
5. INVESTMENT AND FINANCIAL MATTERS
Mr. Merrell gave an update on our pending private equity provider, Adams Street Partners. They have identified a few good opportunities for our portfolio and there is a goal to get the contract done by June 30. Staff has moved forward with the Board’s request to enter the UBS Trumbull redemption pool for $61M and accept their loyalty program for $40M. In addition, future distributions will be in cash versus the current fund reinvestment. The full redemption may take up to 5 years and will be paid overtime.
Ms. Cipriani outlined the request and recommendation of Tortoise to increase their MLP universe, allowing more C corporations in the portfolio. The recommendation offers more flexibility and alignment with the current energy market. Mr. Greive made a motion to accept the recommendations, Ms. Moser seconded the motion. The Chair asked for any discussion and there was none. The Chair took a vote and the motion passed unanimously.
Ms. Cipriani reviewed Q2 performance, which was overall -14.76% driven by equity losses. The Fund return is below median during the quarter due to heavy equity exposure but performed better than our peers over the longer term. Chair Bernardo asked about the lagging private Real Estate valuation reports related to the current environment. Ms. Cipriani noted that many of the private real estate funds have delayed valuations and additional losses will be expected during the coming quarters. Mr. Voytko said that will wash-out over time but it may take up to a year. This sparked further discussion on real estate holdings. Mr. Greive asked if it was too soon to look at making real estate changes given the pandemic and a possible downturn in commercial holdings. Mr. Wallace agreed with the premise, mentioning Facebook moving to 50% work from home and other companies following the trend. Ms. Bessent asked about the makeup of the overall real estate allocation. Mr. Voytko commented that the entire landscape should be considered as this category is not monolithic--industrial real estate is booming for example. He also noted that our managers are aware of these trends and adjusting accordingly. Ms. Cipriani added that we are overweight in real estate (19% vs. 15% target and there is a plan to reallocate our real estate assets). Mr. Voytko added REITs are more liquid and provide an opportunity for quicker changes. Mr. Schmidt pointed out that individual
2 holdings in each fund matter. For example, our real estate manager Harrison Street, has no holdings in the senior skilled care facilities that have been hit with COVID19. Additionally, 86% of their student housing allocation are at schools that have announced a fall return. Ms. Bessent asked for an updated view of the real-estate portfolio and the relative opportunities in the current environment. Ms. Cipriani said RVK will provide a real estate update at the coming Board meeting. Ms. Cipriani closed by saying the Fund does have a healthy mix of sectors which is good for diversification.
Mr. Merrell covered the April flash which showed a strong bounce-back from Q1, up over 7%. Mr. Schmidt updated the Board on May, which is MTD up 2.65% with FYTD now at -1.8%, close to flat. He emphasized there is still a ton of daily volatility in the market. His additional commentary on real estate noted that rent collections are down from 98% to 77%, which is a good barometer along with lower occupancy rates.
Mr. Barnes provided a summary of staff recommendations on the private credit finalists. He said all three firms are supremely capable. Albourne and Cliffwater offer a non- discretionary approach with Albourne having a slight edge according to staff based on technology and demonstrated due diligence process. Hamilton Lane (HL) offers a discretionary approach with J-curve mitigation, very experienced staff, more assets under management and a full-service approach. Staff recommends HL based on it being the easiest way to get immediate access, scale and expertise that allow for the potential for the best negotiated terms, and a more efficient approach for COJ given their service delivery model with the proprietary strategic opportunities fund and the discretionary model. Mr. Merrell added that the discretionary model was key for allowing staff to focus on other needs and that HL will quickly diversify the portfolio.
Ms. Bessent appreciated the staff perspective on discretionary fund which she said was surprising and helped clarify the decision. Mr. Greive said he leans on the staff analysis heavily and asked about the financial commitment. Mr. Merrell said initially $130M but that will actually mean about $50M a year based on the growth of the Plan cash-flows distributions, and the need to overcommit to gain the needed investment. Chair Bernardo thanked staff and noted he initially favored Albourne for their less conflicted approach vs. HL but acknowledged the importance of ease of use offered by HL. Mr. Kilcrease also appreciated staff comments. He asked about final pricing. Mr. Merrell recapped CW came down to $200K/year, Albourne at $260K for year 1 and $240K for next 4 years and HL was at $250K/year flat. (HL does charge 10% for rates over 6% in the propriety strategic opportunities fund and the Board discussed that to clarify. Chair Bernardo said that it was not necessarily an increase in cost next to competitors but more represented a potential incentive for HL to have funds in that vehicle.)
Since HL invests alongside clients, Mr. Kilcrease wanted to ensure that HL could not exit from their own proprietary vehicle if the fund goes south and we were stuck in it.
Mr. Greive made a motion to move forward with staff recommendations and begin final negotiations with HL (subject to Mr. Kilcrease’s comment about HL’s own investment in their own vehicle). Ms. Moser seconded the motion. The Chair asked for discussion and
3
Mr. Voytko added that reviewing HL’s options regarding their own investment would provide the Board proper protection. The Chair took a vote and the motion passed unanimously.
6. OLD BUSINESS
None
7. ADMINISTRATIVE
Mr. Stadelmaier provided an update that activity in the Pension office has remained steady, even heavy, and we are up-to-date with processing and requests. The Pension office is compiling some further information to share with the Board. Mr. Barnes asked if pensioners and employees were making changes related to COVID19. Mr. Stadelmaier noted that many people have changed dates and been prompted to further understand their benefits based on different circumstances—some have delayed retirement due to being on paid leave, others have been prompted to extend time to complete certain activities related to the pandemic, and others have been prompted to consider an earlier departure. All leading to an increase in pension office requests.
8. INFORMATION
The next regular BOT meeting is scheduled for Thursday, June 25, 2020, at 2 PM.
9. PRIVILEGE OF THE FLOOR
None
10. ADJOURNMENT
Chair Bernardo adjourned the meeting at about 3:19 PM.
4
GENERAL EMPLOYEES PENSION ADVISORY COMMITTEE FOR THE BOARD OF PENSION TRUSTEES
April 2020
CONSENT AGENDA FOR RECOMMENDED BENEFITS
ALL CALCULATIONS AND DOLLAR AMOUNTS HAVE BEEN AUDITED IN ACCORDANCE WITH ACCEPTED PROCEDURES.
1. TIME SERVICE RETIREMENTS Richard Basford, (JEA), effective March 13, 2020 in the amount of $6,377.79 at the rate of 80% (32 years, 1 month), BACKDROP $415,369.80 (60 months)
John Bell, (JSO), effective March 28, 2020 in the amount of $1,332.80 at the rate of 50% (20 years), 15% PLOP $37,607.35
Harold Davis, (Electrical Inspection), effective March 21, 2020 in the amount of $1,948.35 at the rate of 53.33% (21 years 4 months), 15% PLOP $25,316.26
Theodore Grant, (JSO), effective March 14, 2020 in the amount of $2,298.42 at the rate of 53.13% (21 years, 3 months)
Clara Hansell, (P&R), effective March 27, 2020 in the amount of $1,999.20 at the rate of 75% (30 years), BACKDROP $50,029.93 (24 months)
Max Harlow, (P&D), effective March 7, 2020 in the amount of $1,897.44 at the rate of 59.17% (23 years, 8 months)
Dale Hotaling, (PW), effective March 14,2020 in the amount of $3,085.36 at the rate of 76.46% (30 years, 7 months), 15% PLOP $115,700.93
David Kowalski, (JEA), effective March 14, 2020 in the amount of $7,366.43 at the rate of 75.42% (30 years, 2 months)
John Proctor, (ITD), effective March 14, 2020 in the amount of $3,894.63 at the rate of 57.5% (23 years) with a 14% reduction for early retirement
2. VESTED RETIREMENTS
New Commencements Mark Krieger, effective April 1, 2020 in the amount of $1,134.66
Roger Miller, effective April 19, 2020 in the amount of $581.16
Virginia Preston, effective April 1, 2020 in the amount of $2,501.83
1 04/30/2020 GEPP Consent Agenda
New Deferrals
3. SURVIVOR BENEFITS Linda Alvarez, (Oscar Alvarez), effective February 9, 2020 in the COLA base amount of $1,343.79
Doris Bailey (James Bailey), effective February 9, 2020 in the COLA base amount of $815.47
Jacqueline Brooks, (Joe Williams), effective March 8, 2020 in the COLA base amount of $1,924.24
Carmen Hester, (Terry Hester), effective March 21, 2020 in the COLA base amount of $1,133.28
Joan Matthews, (Hugh Matthews), effective March 21, 2020 in the COLA base amount of $1,481.72
Virginia Moore, (Stanley Moore), effective March 7, 2020 in the COLA base amount of $878.15
Linda K Oliver, (Robert Oliver), effective March 21, 2020 in the COLA base amount of $4,558.13
Marjorie Pound, (William Pound), effective March 21, 2020 in the COLA base amount of $1,179.76
4. RESTORATION OF SURVIVOR BENEFITS None
5. CHILDREN/ORPHAN/GUARDIANSHIP BENEFITS None
6. TIME SERVICE CONNECTIONS COMPLETED Olga Altshuler, (ITD), 16.13 months in the amount of $6,731.40
John Baskin, (JEA), 120 months in the amount of $37,063.00
John Bell, (JSO), 69.23 months in the amount of $18,421.00
Max Harlow, (P&D), 26.53 months in the amount of $9,135.10
Rachael Hautau, (Medical Examiner), 42.67 months in the amount of $8,620.30
7. TIME SERVICE CONNECTIONS COMPLETED PURSUANT TO ORDINANCE 2000- 624-E (Independent Agency) None
8. TIME SERVICE CONNECTIONS COMPLETED PURSUANT TO 2 04/30/2020 GEPP Consent Agenda
ORDINANCE 2003-573-E (Military) Michael Haynes, (JEA), 24 months in the amount of $32,360.90
William Turnbull, (JEA), 24 months in the amount of $31,179.20
9. REFUNDS Gina Cobb (Tax Collector), contributions in the amount of the $24,015.44
Maurice Martinez (Tax Collector), contributions in the amount of the $51,022.88
Brittany Morales (Tax Collector), contributions in the amount of the $25,667.21
10. DB TO DC TRANSFER None
11. OTHER PAYMENTS AND TIME CONNECTIONS None
12. RE-RETIREE None
13. DISABILITY None
______PAC Secretary Approval Date
______BOT Secretary Approval Date
Notes and Comments regarding Approval:
3 04/30/2020 GEPP Consent Agenda
GENERAL EMPLOYEES PENSION ADVISORY COMMITTEE FOR THE BOARD OF PENSION TRUSTEES
May 2020
CONSENT AGENDA FOR RECOMMENDED BENEFITS
ALL CALCULATIONS AND DOLLAR AMOUNTS HAVE BEEN AUDITED IN ACCORDANCE WITH ACCEPTED PROCEDURES.
1. TIME SERVICE RETIREMENTS Rose Alford, (ITD), effective April 4, 2020 in the amount of $5,654.79 at the rate of 80.00% (32 years, 0 months) BACKDROP (3 years, 10 months) $279,717.52
Aston Bowers, (P&R), effective April 1, 2020 in the amount of $666.40 at the rate of 25.42% (10 years, 2 months)
Christopher Brooker, (PW), effective May 2, 2020 in the amount of $1,999.20 at the rate of 75% (30 years), BACKDROP $50,029.93 (24 months)
Sharon Carpenter, (KHA), effective April 11, 2020 in the amount of $1,719.21 at the rate of 38.96% (15 years, 7 months)
Michael Haynes, (JEA), effective May 2, 2020 in the amount of $4,169.11 at the rate of 75% (30 years), BACKDROP $271,360.32 (60 months)
Carole Jackson, (JEA), effective May 9, 2020 in the amount of $3,135.30 at the rate of 45.83% (18 years, 4 months)
Derrick James, (Clerk of Courts), effective March 27, 2020 in the amount of $1,799.28 at the rate of 68.33% (27 years, 4 months)
Mary Moran, (JEA), effective April 25, 2020 in the amount of $6,673.14 at the rate of 75% (30 years), BACKDROP $255,624.20 (36 months)
Elaine Miller, (PW), effective May 2, 2020 in the amount of $1,202.07 at the rate of 43.96% (17 years, 7 months) PLOP $33,149.05
Jerome Mincey, (JEA), effective April 11, 2020 in the amount of $2,057.28 at the rate of 35.63% (14 years, 3 months)
David Roberts, (PW), effective May 9, 2020 in the amount of $1,807.41 at the rate of 52.92% (21 years, 2 months), 15% PLOP $52,096.16
Darrell C Turner, (JEA), effective April 8, 2020 in the amount of $3,453.99 at the rate of 75% (30 years, 0 months) BACKDROP (4 years) $178,478.69
1 5/31/2020 GEPP Consent Agenda
Katie Urban, (ERCC), effective April 1, 2020 in the amount of $1,888.49 at the rate of 50.63% (20 years, 3 months)
2. VESTED RETIREMENTS
New Commencements Robert Bernath, effective May 13, 2020 in the amount of $808.21
Marilyn Fenton-Harmer, effective April 25, 2020 in the amount of $1,368.10
Roger Miller, effective April 18, 2020 in the amount of $581.17
Winifred Tate, effective April 6, 2020 in the amount of $481.43
New Deferrals None
3. SURVIVOR BENEFITS Marguerite Abel, (Jay Abel), effective April 30, 2020 in the COLA base amount of $3,327.68
Nancy Brown, (Laurence Brown), effective April 25, 2020 in the COLA base amount $605.82
Valerie Glover, (Quan Glover, active employee), effective April 18, 2020 in the base amount of $1,615.46
Jeam Oatman, (Herbert Oatman), effective April 21, 2020 in the COLA base amount of $5,124.78
James Pruitt, (Sharon Pruitt), effective March 21, 2020 in the COLA base amount of $1,047.26
Ann Sallette, (R. Sallette), effective March 5, 2020 in the COLA base amount of $423.42
Catherine Wilson, (Herbert J Wilson), effective April 15, 2020 in the COLA base amount of $1,395.16
4. RESTORATION OF SURVIVOR BENEFITS None
5. CHILDREN/ORPHAN/GUARDIANSHIP BENEFITS None
6. TIME SERVICE CONNECTIONS COMPLETED Sharon Carpenter, (KHA), 64.77 months in the amount of $30,591.60
2 5/31/2020 GEPP Consent Agenda
Bary Davis, (P&D) 26.23 months in the amount of $6,573.24
Revlon Lewis, (Clerk of Court), 120 months in the amount of $15,649.40
Mary Ovshak, (Library), 60 months in the amount of $11,302.20
Clarence Wester, (P&D), 60 months in the amount of $13,960.70
7. TIME SERVICE CONNECTIONS COMPLETED PURSUANT TO ORDINANCE 2000- 624-E (Independent Agency) None
8. TIME SERVICE CONNECTIONS COMPLETED PURSUANT TO ORDINANCE 2003-573-E (Military) None
9. REFUNDS Tanisha Brown, $16,654.53
Estate of John D Mason, $26,879.87
Jaymin Maisura, $11,849.95
Gregory Sutton, $40,074.70
10. DB TO DC TRANSFER None
11. OTHER PAYMENTS AND TIME CONNECTIONS None
12. RE-RETIREE None
13. DISABILITY Brian Bailey, (JEA), effective April 9, 2020 in the amount of $2,947.51 at the rate of 50% (17 years, 7 months)
Michael Hilliard, (P&R), effective April 25, 2020 in the amount of $1,023.78 at the rate of 38.33% (10 years, 4 months)
______PAC Secretary Approval Date
______BOT Secretary Approval Date 3 5/31/2020 GEPP Consent Agenda
Notes and Comments regarding Approval:
4 5/31/2020 GEPP Consent Agenda City of Jacksonville Employees' Retirement System
Period Ended: January 31, 2020 nCapital Markets Review As of January 31, 2020
General Market Commentary Treasury Yield Curve (%) • Global equity markets experienced a notable uptick in volatility during January. Equity markets started 3.50 the month off strong, but pulled back sharply in the second half of the month as fears of a global coronavirus pandemic increased. Investors worry that the spread of the coronavirus could restrict global travel, depress consumer demand, and limit trade between China and its trade partners. 3.00 • International equity markets ended the month down over 2.5% with emerging markets dropping even further. Most US equity indices returned close to 0% during January, as better-than-expected 2.50 corporate earnings and economic data helped limit market losses. • US Treasury interest rates dropped significantly in January as the yield curve flattened. A decrease in 2.00 forward-looking inflation expectations coupled with safe haven flows from equity markets into fixed income assets pushed rates lower. • Equity markets posted negative returns in January as the S&P 500 (Cap Wtd) Index returned -0.04% 1.50 and the MSCI EAFE (Net) Index returned -2.09%. Emerging markets returned -4.66% as measured by the MSCI EM (Net) Index. 1.00 • The Bloomberg US Aggregate Bond Index returned 1.92% in January, outperforming the 1.43% return by the Bloomberg US Treasury Intermediate Term Index. International fixed income markets returned 1.09%, as measured by the FTSE Non-US World Gov't Bond Index. 0.50 • Public real estate, as measured by the FTSE NAREIT Eq REITs Index (TR), returned 1.21% in January and 6.08% over the trailing five-year period. 0.00 • The Cambridge US Private Equity Index returned 7.76% for the trailing one-year period and 11.68% 3 M 6 M 1 Y 2 Y 5 Y 7 Y 10 Y 20 Y 30 Y for the trailing five-year period ending September 2019. 1/31/2020 12/31/2019 1/31/2019 1/31/2018 1/31/2017 • Absolute return strategies, as measured by the HFRI FOF Comp Index, returned 0.31% for the month and 6.04% over the trailing one-year period. • Crude oil's price fell by 15.56% during the month, and has decreased by 4.15% YoY. Treasury Yield Curve (%) Jan-20 Dec-19 Jan-19 Jan-18 Jan-17 Economic Indicators Jan-20 Dec-19 Jan-19 10 Yr 20 Yr 3 Month 1.55 1.55 2.41 1.46 0.52 Federal Funds Rate (%) 1.59 ▲ 1.55 2.40 0.63 1.77 6 Month 1.54 1.60 2.46 1.66 0.64 Breakeven Inflation - 5 Year (%) 1.60 ▼ 1.70 1.73 1.75 1.84 1 Year 1.45 1.59 2.55 1.90 0.84 Breakeven Inflation - 10 Year (%) 1.64 ▼ 1.79 1.86 1.99 2.03 2 Year 1.33 1.58 2.45 2.14 1.19 Breakeven Inflation - 30 Year (%) 1.73 ▼ 1.81 1.94 2.12 2.25 5 Year 1.32 1.69 2.43 2.52 1.90 Bloomberg US Agg Bond Index - Yield (%) 2.02 ▼ 2.31 3.15 2.50 3.77 7 Year 1.42 1.83 2.51 2.66 2.24 Bloomberg US Agg Bond Index - OAS (%) 0.44 ▲ 0.39 0.47 0.52 0.63 10 Year 1.51 1.92 2.63 2.72 2.45 Bloomberg US Agg Credit Index - OAS (%) 0.98 ▲ 0.90 1.21 1.31 1.45 20 Year 1.83 2.25 2.83 2.83 2.78 Bloomberg US Corp: HY Index - OAS (%) 3.90 ▲ 3.36 4.23 4.79 5.46 30 Year 1.99 2.39 2.99 2.95 3.05 Capacity Utilization (%) 76.78 ▼ 77.09 79.00 76.73 77.08 Market Performance (%) MTD QTD CYTD 1 Yr 3 Yr 5 Yr 7 Yr 10 Yr Unemployment Rate (%) 3.6 ▲ 3.5 4.0 6.2 5.9 S&P 500 (Cap Wtd) -0.04 -0.04 -0.04 21.68 14.54 12.37 13.90 13.97 PMI - Manufacturing (%) 50.9 ▲ 47.8 55.5 54.2 52.6 Russell 2000 -3.21 -3.21 -3.21 9.21 7.28 8.23 10.17 11.88 Baltic Dry Index - Shipping 487 ▼ 1,090 668 1,258 2,323 MSCI EAFE (Net) -2.09 -2.09 -2.09 12.10 7.76 5.12 5.25 5.76 Consumer Conf (Conf Board) 131.60 ▲ 128.20 121.70 91.98 92.52 MSCI EAFE SC (Net) -2.90 -2.90 -2.90 12.30 8.58 8.18 8.17 8.53 CPI YoY (Headline) (%) 2.5 ▲ 2.3 1.6 1.8 2.2 MSCI EM (Net) -4.66 -4.66 -4.66 3.81 7.88 4.48 2.36 3.78 CPI YoY (Core) (%) 2.3 ─ 2.3 2.2 1.8 2.0 Bloomberg US Agg Bond 1.92 1.92 1.92 9.64 4.62 3.01 3.10 3.79 PPI YoY (%) 2.5 ▲ 1.9 0.4 1.8 2.2 ICE BofAML 3 Mo US T-Bill 0.13 0.13 0.13 2.22 1.70 1.10 0.80 0.59 M2 YoY (%) 7.0 ▲ 6.7 4.2 5.9 6.2 NCREIF ODCE (Gross) N/A N/A N/A 5.34 7.09 8.97 10.17 11.42 US Dollar Total Weighted Index N/A N/A 90.82 90.53 82.94 86.03 FTSE NAREIT Eq REITs Index (TR) 1.21 1.21 1.21 14.11 8.53 6.08 9.12 12.67 WTI Crude Oil per Barrel ($) 52 ▼ 61 54 72 62 HFRI FOF Comp Index 0.31 0.31 0.31 6.04 3.66 2.41 3.16 2.90 Gold Spot per Oz ($) 1,589 ▲ 1,517 1,321 1,352 940 Bloomberg Cmdty Index (TR) -7.36 -7.36 -7.36 -5.38 -3.47 -4.74 -8.04 -4.74
NCREIF performance is reported quarterly; MTD and QTD returns are shown as "N/A" on interim-quarter months and until available. Data shown is as of most recent quarter-end. Treasury data courtesy of the US Department of the Treasury. Economic data courtesy of Bloomberg Professional Service.
Page 2 City of Jacksonville Employees' Retirement System As of January 31, 2020 Total Fund Asset Allocation by Asset Class, Asset Allocation vs. Target, and Schedule of Investable Assets Asset Allocation by Asset Class Asset Allocation vs. Target Allocation January 31, 2020 : $2,315,803,494 Market Value Allocation Min Target Max ($) (%) (%) (%) (%) Total Fund 2,315,803,494 100.00 - 100.00 - US Equity 795,081,904 34.33 20.00 30.00 40.00 International Equity 528,252,359 22.81 10.00 20.00 25.00 Fixed Income 456,260,539 19.70 10.00 20.00 30.00 Real Estate 389,414,393 16.82 0.00 15.00 20.00 Diversifying Assets 141,666,599 6.12 0.00 15.00 20.00 Cash Equivalents 4,328,286 0.19 0.00 0.00 10.00 Transition Account 799,414 0.03 0.00 0.00 0.00
Asset Allocation vs. Target Allocation Differences
Market Value Allocation ($) (%) US Equity 795,081,904 34.33 International Equity 528,252,359 22.81 Fixed Income 456,260,539 19.70 Real Estate 389,414,393 16.82 Diversifying Assets 141,666,599 6.12 Cash Equivalents 4,328,286 0.19 Transition Account 799,414 0.03 Schedule of Investable Assets Beginning Net Ending Periods Ending Gain/Loss ($) % Return Unit Value Market Value ($) Cash Flow ($) Market Value ($) CYTD 2,342,377,799 333,175 -26,907,480 2,315,803,494 -1.15 98.85
Market values and performance shown are preliminary and subject to change. Performance shown is net of fees. Allocations shown may not sum up to 100% exactly due to rounding.
Page 3 City of Jacksonville Employees' Retirement System As of January 31, 2020 Asset Allocation By Manager
January 31, 2020 : $2,315,803,494 Market Value Allocation ($) (%) Eagle Capital Large Cap Value (SA) 199,192,970 8.60 Mellon Large Cap Core Index (CF) 225,473,059 9.74 Loomis Sayles Large Cap Growth (CF) 162,029,061 7.00 William Blair Small Cap Value (SA) 98,445,097 4.25 Pinnacle Associates US SMID Cap Growth (SA) 109,941,717 4.75 Silchester International Value (CF) 260,275,160 11.24 Baillie Gifford International Growth (BGEFX) 141,807,576 6.12 Acadian Emerging Markets (CF) 126,169,623 5.45 Richmond Capital Core (SA) 141,740,412 6.12 Taplin Canida & Habacht Intermediate Duration (SA) 139,243,789 6.01 Franklin Templeton Global Multisector Plus (CF) 102,804,811 4.44 Loomis Sayles Multisector Full Discretion (CF) 72,471,527 3.13 Harrison Street Core Property, LP 105,742,052 4.57 PGIM Real Estate PRISA II (CF) 57,763,360 2.49 Principal US Property (CF) 123,945,330 5.35 UBS Trumbull Property (CF) 100,799,985 4.35 Vanguard RE Idx;ETF (VNQ) 1,163,666 0.05 Harvest Fund Advisors MLP (SA) 45,303,940 1.96 Tortoise Capital Advisors MLP (SA) 43,516,797 1.88 Hancock Timberland (SA) 52,845,863 2.28 Dreyfus Gvt Csh Mgt;Inst (DGCXX) 4,328,286 0.19 Transition Account 799,414 0.03
Market values shown are preliminary and subject to change. Allocations shown may not sum up to 100% exactly due to rounding.
Page 4 City of Jacksonville Employees' Retirement System As of January 31, 2020 Asset Allocation & Performance (Net of Fees) Allocation Performance (%) Market 1 3 5 7 10 Since Inception % MTD QTD CYTD FYTD Value ($) Year Years Years Years Years Incep. Date Total Fund 2,315,803,494 100.00 -1.15 -1.15 -1.15 4.91 9.49 8.01 6.77 8.04 9.07 6.29 07/01/1999 Current Total Fund Policy Index -0.81 -0.81 -0.81 3.63 9.88 7.66 6.63 7.67 8.62 5.84 Difference -0.34 -0.34 -0.34 1.28 -0.39 0.35 0.14 0.37 0.45 0.45 Legacy Total Fund Policy Index -0.63 -0.63 -0.63 4.36 11.12 8.11 6.90 7.86 8.75 5.91 Difference -0.52 -0.52 -0.52 0.55 -1.63 -0.10 -0.13 0.18 0.32 0.38
Total Equity 1,323,334,262 57.14 -2.09 -2.09 -2.09 8.08 14.84 11.29 9.12 10.34 11.23 6.21 07/01/1999
US Equity 795,081,904 34.33 -0.81 -0.81 -0.81 9.05 19.19 13.36 10.86 12.63 13.22 6.72 07/01/1999 US Equity Index -0.11 -0.11 -0.11 8.98 20.53 13.82 11.85 13.49 13.82 6.69 Difference -0.70 -0.70 -0.70 0.07 -1.34 -0.46 -0.99 -0.86 -0.60 0.03
International Equity 528,252,359 22.81 -3.96 -3.96 -3.96 6.65 8.22 8.00 6.18 6.23 7.50 5.82 07/01/1999 International Equity Index -2.69 -2.69 -2.69 6.00 9.94 7.62 4.96 4.43 5.01 3.97 Difference -1.27 -1.27 -1.27 0.65 -1.72 0.38 1.22 1.80 2.49 1.85
Fixed Income 456,260,539 19.70 1.19 1.19 1.19 2.05 5.58 3.72 2.69 2.62 4.22 5.31 07/01/1999 Fixed Income Index 1.79 1.79 1.79 2.26 9.74 4.66 3.03 3.11 3.80 5.02 Difference -0.60 -0.60 -0.60 -0.21 -4.16 -0.94 -0.34 -0.49 0.42 0.29
Real Estate 389,414,393 16.82 0.09 0.09 0.09 1.34 3.87 6.23 7.55 8.45 8.84 5.72 12/01/2005 NCREIF ODCE Index (AWA) (Net) 0.00 0.00 0.00 1.27 4.39 6.13 7.98 9.17 10.39 6.11 Difference 0.09 0.09 0.09 0.07 -0.52 0.10 -0.43 -0.72 -1.55 -0.39
Diversifying Assets 141,666,599 6.12 -3.02 -3.02 -3.02 -3.39 -5.95 -1.71 -1.72 3.01 N/A 5.45 03/01/2011 Diversifying Assets Index -3.97 -3.97 -3.97 -5.86 -5.31 -2.03 -1.90 1.45 4.63 3.09 Difference 0.95 0.95 0.95 2.47 -0.64 0.32 0.18 1.56 N/A 2.36
Market values and performance shown are preliminary and subject to change. Performance shown is net of fees and is annualized for periods greater than one year. Allocations may not sum up to 100% due to the exclusion of managers in liquidation. Please see the addendum for custom benchmark definitions. Fiscal year for the COJ ends 09/30. Performance for Harrison Street Core Property LP, PGIM Real Estate PRISA II (CF), UBS Trumbull Property (CF), NCREIF ODCE Index (AWA) (Net) and NCREIF Timberland Index is available quarterly; interim months assume a 0.00% return. Page 5 City of Jacksonville Employees' Retirement System As of January 31, 2020 Asset Allocation & Performance (Net of Fees) Allocation Performance (%) Market 1 3 5 7 10 Since Inception % MTD QTD CYTD FYTD Value ($) Year Years Years Years Years Incep. Date US Equity Eagle Capital Large Cap Value (SA) 199,192,970 8.60 0.11 0.11 0.11 10.46 19.07 14.43 12.55 14.00 14.93 10.60 02/01/2007 Russell 1000 Val Index -2.15 -2.15 -2.15 5.10 14.88 8.63 8.70 10.85 11.87 6.34 Difference 2.26 2.26 2.26 5.36 4.19 5.80 3.85 3.15 3.06 4.26
Mellon Large Cap Core Index (CF) 225,473,059 9.74 0.11 0.11 0.11 9.15 N/A N/A N/A N/A N/A 10.91 05/01/2019 Russell 1000 Index 0.11 0.11 0.11 9.16 21.39 14.33 12.13 13.75 13.97 10.93 Difference 0.00 0.00 0.00 -0.01 N/A N/A N/A N/A N/A -0.02
Loomis Sayles Large Cap Growth (CF) 162,029,061 7.00 0.79 0.79 0.79 10.71 22.46 N/A N/A N/A N/A 15.76 08/01/2017 Russell 1000 Grth Index 2.24 2.24 2.24 13.09 27.94 20.04 15.49 16.59 15.99 18.48 Difference -1.45 -1.45 -1.45 -2.38 -5.48 N/A N/A N/A N/A -2.72
William Blair Small Cap Value (SA) 98,445,097 4.25 -4.44 -4.44 -4.44 0.31 3.97 2.13 5.83 N/A N/A 5.09 11/01/2014 Russell 2000 Val Index -5.39 -5.39 -5.39 2.64 4.38 3.10 6.71 8.37 10.28 5.98 Difference 0.95 0.95 0.95 -2.33 -0.41 -0.97 -0.88 N/A N/A -0.89
Pinnacle Associates US SMID Cap Growth (SA) 109,941,717 4.75 -3.23 -3.23 -3.23 12.51 20.44 13.45 10.30 11.95 N/A 13.71 03/01/2010 Russell 2500 Grth Index 0.11 0.11 0.11 10.69 18.67 14.32 11.21 13.05 14.50 14.06 Difference -3.34 -3.34 -3.34 1.82 1.77 -0.87 -0.91 -1.10 N/A -0.35
International Equity Silchester International Value (CF) 260,275,160 11.24 -4.06 -4.06 -4.06 4.68 5.58 5.87 5.93 7.15 8.35 9.45 06/01/2009 MSCI EAFE Val Index (USD) (Net) -3.62 -3.62 -3.62 3.92 4.87 4.16 2.84 3.36 4.09 5.25 Difference -0.44 -0.44 -0.44 0.76 0.71 1.71 3.09 3.79 4.26 4.20
Baillie Gifford International Growth (BGEFX) 141,807,576 6.12 -2.71 -2.71 -2.71 10.99 20.91 14.45 9.83 9.08 9.57 10.69 06/01/2009 Baillie Gifford Index -0.96 -0.96 -0.96 8.53 17.20 10.53 6.83 6.72 7.10 8.17 Difference -1.75 -1.75 -1.75 2.46 3.71 3.92 3.00 2.36 2.47 2.52 Baillie Gifford Spliced Index -2.69 -2.69 -2.69 6.36 12.58 7.92 5.21 5.32 5.80 6.91 Difference -0.02 -0.02 -0.02 4.63 8.33 6.53 4.62 3.76 3.77 3.78
Acadian Emerging Markets (CF) 126,169,623 5.45 -5.10 -5.10 -5.10 6.12 1.48 5.19 2.75 1.54 N/A 2.18 02/01/2011 MSCI Emg Mkts Index (USD) (Net) -4.66 -4.66 -4.66 6.62 3.81 7.88 4.48 2.36 3.78 1.89 Difference -0.44 -0.44 -0.44 -0.50 -2.33 -2.69 -1.73 -0.82 N/A 0.29
Market values and performance shown are preliminary and subject to change. Performance shown is net of fees and is annualized for periods greater than one year. Allocations may not sum up to 100% due to the exclusion of managers in liquidation. Please see the addendum for custom benchmark definitions. Fiscal year for the COJ ends 09/30. Performance for Harrison Street Core Property LP, PGIM Real Estate PRISA II (CF), UBS Trumbull Property (CF), NCREIF ODCE Index (AWA) (Net) and NCREIF Timberland Index is available quarterly; interim months assume a 0.00% return. Page 6 City of Jacksonville Employees' Retirement System As of January 31, 2020 Asset Allocation & Performance (Net of Fees) Allocation Performance (%) Market 1 3 5 7 10 Since Inception % MTD QTD CYTD FYTD Value ($) Year Years Years Years Years Incep. Date Fixed Income Richmond Capital Core (SA) 141,740,412 6.12 1.74 1.74 1.74 2.13 9.40 4.56 3.17 3.28 4.08 5.30 06/01/1999 Richmond Capital Index 1.92 1.92 1.92 2.11 9.64 4.62 3.01 3.10 3.78 5.00 Difference -0.18 -0.18 -0.18 0.02 -0.24 -0.06 0.16 0.18 0.30 0.30
Taplin Canida & Habacht Intermediate Duration (SA) 139,243,789 6.01 1.22 1.22 1.22 2.03 7.49 3.87 2.80 2.74 3.80 4.98 06/01/1999 ICE BofAML US Corp & Gov't 1-10 Yr Index 1.40 1.40 1.40 1.83 7.50 3.68 2.58 2.46 3.14 4.46 Difference -0.18 -0.18 -0.18 0.20 -0.01 0.19 0.22 0.28 0.66 0.52
Franklin Templeton Global Multisector Plus (CF) 102,804,811 4.44 -0.22 -0.22 -0.22 1.38 -3.80 0.99 0.68 0.85 4.05 6.05 09/01/2007 Frank. Temp. Global Multisector Index 1.19 1.19 1.19 1.84 6.61 4.40 2.79 1.82 2.76 3.70 Difference -1.41 -1.41 -1.41 -0.46 -10.41 -3.41 -2.11 -0.97 1.29 2.35
Loomis Sayles Multisector Full Discretion (CF) 72,471,527 3.13 2.09 2.09 2.09 2.89 9.50 6.06 4.59 4.68 6.94 6.70 10/01/2007 Bloomberg Gbl Agg Bond Index 1.28 1.28 1.28 1.77 6.58 4.32 2.60 1.66 2.57 3.32 Difference 0.81 0.81 0.81 1.12 2.92 1.74 1.99 3.02 4.37 3.38
Real Estate Harrison Street Core Property, LP 105,742,052 4.57 0.00 0.00 0.00 2.20 6.83 7.99 N/A N/A N/A 7.98 11/01/2015 NCREIF ODCE Index (AWA) (Net) 0.00 0.00 0.00 1.27 4.39 6.13 7.98 9.17 10.39 6.91 Difference 0.00 0.00 0.00 0.93 2.44 1.86 N/A N/A N/A 1.07
PGIM Real Estate PRISA II (CF) 57,763,360 2.49 0.00 0.00 0.00 1.86 6.29 7.09 9.15 N/A N/A 9.00 01/01/2015 NCREIF ODCE Index (AWA) (Net) 0.00 0.00 0.00 1.27 4.39 6.13 7.98 9.17 10.39 7.85 Difference 0.00 0.00 0.00 0.59 1.90 0.96 1.17 N/A N/A 1.15
Principal US Property (CF) 123,945,330 5.35 0.28 0.28 0.28 1.61 6.16 7.51 9.07 N/A N/A 9.63 01/01/2014 NCREIF ODCE Index (AWA) (Net) 0.00 0.00 0.00 1.27 4.39 6.13 7.98 9.17 10.39 8.43 Difference 0.28 0.28 0.28 0.34 1.77 1.38 1.09 N/A N/A 1.20
UBS Trumbull Property (CF) 100,799,985 4.35 0.00 0.00 0.00 -0.16 -2.90 2.70 5.15 6.49 8.20 5.13 12/01/2005 NCREIF ODCE Index (AWA) (Net) 0.00 0.00 0.00 1.27 4.39 6.13 7.98 9.17 10.39 6.11 Difference 0.00 0.00 0.00 -1.43 -7.29 -3.43 -2.83 -2.68 -2.19 -0.98
Vanguard RE Idx;ETF (VNQ) 1,163,666 0.05 1.23 1.23 1.23 1.77 16.57 8.61 5.90 8.89 12.15 14.26 12/01/2008 Custom REITs Index 1.18 1.18 1.18 1.84 16.82 9.40 6.43 9.42 12.96 15.17 Difference 0.05 0.05 0.05 -0.07 -0.25 -0.79 -0.53 -0.53 -0.81 -0.91
Market values and performance shown are preliminary and subject to change. Performance shown is net of fees and is annualized for periods greater than one year. Allocations may not sum up to 100% due to the exclusion of managers in liquidation. Please see the addendum for custom benchmark definitions. Fiscal year for the COJ ends 09/30. Performance for Harrison Street Core Property LP, PGIM Real Estate PRISA II (CF), UBS Trumbull Property (CF), NCREIF ODCE Index (AWA) (Net) and NCREIF Timberland Index is available quarterly; interim months assume a 0.00% return. Page 7 City of Jacksonville Employees' Retirement System As of January 31, 2020 Asset Allocation & Performance (Net of Fees) Allocation Performance (%) Market 1 3 5 7 10 Since Inception % MTD QTD CYTD FYTD Value ($) Year Years Years Years Years Incep. Date Diversifying Assets Harvest Fund Advisors MLP (SA) 45,303,940 1.96 -4.45 -4.45 -4.45 -5.53 -6.96 -5.40 -5.60 0.58 N/A 4.70 03/01/2011 S&P MLP Index (TR) -5.92 -5.92 -5.92 -8.83 -8.73 -5.98 -6.93 -2.37 4.38 0.78 Difference 1.47 1.47 1.47 3.30 1.77 0.58 1.33 2.95 N/A 3.92
Tortoise Capital Advisors MLP (SA) 43,516,797 1.88 -5.05 -5.05 -5.05 -6.54 -9.68 -6.36 -5.92 0.12 N/A 3.40 03/01/2011 S&P MLP Index (TR) -5.92 -5.92 -5.92 -8.83 -8.73 -5.98 -6.93 -2.37 4.38 0.78 Difference 0.87 0.87 0.87 2.29 -0.95 -0.38 1.01 2.49 N/A 2.62
Hancock Timberland (SA) 52,845,863 2.28 0.02 0.02 0.02 1.39 -1.68 6.13 5.86 7.40 4.66 3.44 10/01/2006 NCREIF Timberland Index 0.00 0.00 0.00 -0.04 1.30 2.71 3.13 5.07 4.45 5.46 Difference 0.02 0.02 0.02 1.43 -2.98 3.42 2.73 2.33 0.21 -2.02
Dreyfus Gvt Csh Mgt;Inst (DGCXX) 4,328,286 0.19 0.13 0.13 0.13 0.54 2.03 1.69 1.11 0.82 0.61 1.43 04/01/2001 FTSE 3 Mo T-Bill Index 0.13 0.13 0.13 0.60 2.18 1.68 1.07 0.78 0.57 1.42 Difference 0.00 0.00 0.00 -0.06 -0.15 0.01 0.04 0.04 0.04 0.01
Market values and performance shown are preliminary and subject to change. Performance shown is net of fees and is annualized for periods greater than one year. Allocations may not sum up to 100% due to the exclusion of managers in liquidation. Please see the addendum for custom benchmark definitions. Fiscal year for the COJ ends 09/30. Performance for Harrison Street Core Property LP, PGIM Real Estate PRISA II (CF), UBS Trumbull Property (CF), NCREIF ODCE Index (AWA) (Net) and NCREIF Timberland Index is available quarterly; interim months assume a 0.00% return. Page 8 City of Jacksonville Employees' Retirement System As of January 31, 2020 Addendum Performance Related Comments: Performance is annualized for periods greater than one year. Performance and market values shown are preliminary and subject to change. The inception date shown indicates the first full month of performance following initial funding. The market value shown for the Transition Account includes residual assets from terminated managers. RVK began monitoring the assets of the City of Jacksonville Retirement System on 01/01/2019. Prior historical data was provided by the custodian and previous consultant. Franklin Templeton Global Multisector Plus (CF) performance prior to 03/2016 is represented by Templeton Global Total Return (SICAV).
Custom Composite Benchmark Comments: Current Total Fund Policy Index: The passive Current Total Fund Policy Index is calculated monthly and currently consists of 30% Russell 3000 Index, 20% MSCI ACW Ex US Index (USD) (Net), 20% Fixed Income Index, 15% NCREIF ODCE Index (AWA) (Net), and 15% Diversifying Assets Index. Prior to 11/01/2017, the Current Total Fund Policy Index consists of the Legacy Total Fund Policy Index. Legacy Total Fund Policy Index: The passive Legacy Total Fund Policy Index is calculated monthly and currently consists of 35% Russell 3000 Index, 20% MSCI ACW Ex US Index (USD) (Net), 19% Fixed Income Index, 15% NCREIF ODCE Index (AWA) (Net), 10% Diversifying Assets Index, and 1% FTSE 3 Mo US T-Bill Index. US Equity Index: The passive US Equity Index consists of 100% DJ US TSM Index through 06/2009 and 100% Russell 3000 Index thereafter. International Equity Index: The passive International Equity Index consists of 100% MSCI EAFE Index (USD) (Gross) through 01/2011 and 100% MSCI ACW Ex US Index (USD) (Net) thereafter. Fixed Income Index: The passive Fixed Income Index consists of 100% Bloomberg US Agg Bond Index through 10/2017 and 100% Bloomberg US Universal Bond Index thereafter. Diversifying Assets Index: The passive Diversifying Assets Index is calculated monthly and consists of 50% S&P MLP Index (TR)/50% NCREIF Timberland Index through 10/2017 and 67% S&P MLP Index (TR)/33% NCREIF Timberland Index thereafter.
Custom Manager Benchmark Comments: Baillie Gifford Index: The passive Baillie Gifford Index consists of 100% MSCI EAFE Grth Index (USD) (Net) through 10/2017 and 100% MSCI ACW Ex US Grth Index (USD) (Net) thereafter. Baillie Gifford Spliced Index: The passive Baillie Gifford Spliced Index consists of 100% MSCI EAFE Index (USD) (Net) through 11/2019 and 100% MSCI ACW Ex US Index (USD) (Net) thereafter. Richmond Capital Index: The passive Richmond Capital Index consists of 100% ICE BofAML US Domestic Master through 06/2011 and 100% Bloomberg US Agg Bond Index thereafter. Frank. Temp. Global Multisector Index: The passive Frank. Temp. Global Multisector Index consists of 100% ICE BofAML Gbl Hi Yld Index through 12/2009 and 100% Bloomberg Multiverse Index thereafter. Custom REITs Index: The passive Custom REITs Index consists of 100% MSCI US REIT Index (USD) (Gross) through 01/2019 and 100% Vanguard Spl Real Estate Index thereafter. Vanguard Spliced Real Estate Index: The Vanguard Spl Real Estate Index consists of MSCI US REIT Index (USD) (Gross) adjusted to include a 2% cash position (Lipper Money Market Average) through 04/30/2009, MSCI US REIT Index (USD) (Gross) through 01/31/2018, MSCI US IM Real Estate 25/50 Transition Index through 07/24/2018, and MSCI US IM Real Estate 25/50 Index (Gross) thereafter.
Page 9 Disclaimer of Warranties and Limitation of Liability - This document was prepared by RVK, Inc. (RVK) and may include information and data from some or all of the following sources: client staff; custodian banks; investment managers; specialty investment consultants; actuaries; plan administrators/record-keepers; index providers; as well as other third-party sources as directed by the client or as we believe necessary or appropriate. RVK has taken reasonable care to ensure the accuracy of the information or data, but makes no warranties and disclaims responsibility for the accuracy or completeness of information or data provided or methodologies employed by any external source. This document is provided for the client’s internal use only and does not constitute a recommendation by RVK or an offer of, or a solicitation for, any particular security and it is not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets. June 2020 Private Real Estate Review City of Jacksonville Employees’ Retirement System Agenda
1. Current COJ Real Estate Portfolio Review
2. Path Forward
3. Appendix
Page 2 Current COJ Real Estate Portfolio Review Real Estate Commitments Total Composite
Market Current Commitment Date Fund Name Sector Commitment Value Allocation (3/31/2020) 2015 Harrison Street Core Property Diversified – Niche Core $77M $107,394,108 27.41% 2014 | 2015 | 2016 PGIM Real Estate PRISA II Diversified – Core Plus $40M $58,360,378 14.90% 2013 | 2014 Principal US Property Account Diversified – Core $62M $124,108,796 31.68% 2005 | 2006 UBS Trumbull Property Diversified – Core $20M* $101,038,198 25.79% N/A Vanguard RE Idx; ETF (VNQ) REIT N/A $872,818 0.22% Total $199M $391,774,298 100.0%
REITS: 0.2% 0% 3% 4%
Core: 84.9% 12% Multi-tenant 6% 12% Housing
36% 22% 8%
Core Plus: 33% 14.9%
Office Industrial Retail 15.0% Target Self Storage Other Multifamily 19.6% Current Student Housing Senior Housing 0% - 20% Range
Sector allocations as of 3/31/2020. *Committed $50M in 2005 and $40M in 2006. Received $13.7M in 2016 and $56.3M in 2017. Page 4 Sector Exposure Total Composite COJ Real Estate Portfolio NFI-ODCE
6.9% 4.4%
12.4% 18.9% 32.6% 34.1%
26.5% 36.4% 11.5% 16.0%
Office Retail Multifamily Industrial Other Office Retail Multifamily Industrial Other
• COJ’s Real Estate Portfolio is underweight office, retail, and industrial sectors • COJ’s Real Estate Portfolio is overweight multifamily and other sectors
Data as of 3/31/2020 Page 5 Sector Exposure Fund Level
Harrison Street Core Property Principal US Property PGIM Real Estate PRISA II UBS Trumbull Property Fund Account
1% 1% Life Science 9% Other 9% 14% 17% Self Storage 9%
Retail 18%
Medical Office 31% 37% 27%
Office 36%
Senior Housing 30% 26% 36%
Multifamily 33%
Student 21% 22% Housing 19%
Industrial 4%
Data as of 3/31/2020. Other for PGIM Real Estate PRISA II consists of Land and Storage, for Principal US Property Account consists of Land, for UBS Trumbull Property consists of Hotel. Page 6 Sector Exposure General Outlook
Primary Sector Near Term* Pricing Outlooks
Office The longer offices stay closed the harder the office sector will be hit as companies re-think Negative to Neutral use of space.
Retail Likely the hardest hit primary sector of commercial real estate. Necessity based retail should Negative outperform the rest of the retail sector, but may still face negative re-pricing.
Apartments Historically apartments have proved to be a more defensive sector with demand driven by a Neutral necessity. Due to shelter in place orders the sector may see increased renewal rates.
Industrial Industrial will likely be the best performing sector of commercial real estate, with long term e- Neutral commerce trends potentially accelerating.
*Near Term is defined as the prospective 12 to 18 months.
Page 7 General Real Estate Trends
Rent Collections Recent Rent Collection Trends* • The industry is paying heightened attention to where rent 98% 97% collections levels are as an indicator to gauge the level of 100% 96% impact to income returns and future cash flow assumptions. 95% 90% 85% 83% • April rent collections for the NFI-ODCE were approximately 80% 75-80% of billings. May rent receipts have thus far beat 75% expectations with focus now shifting towards lower 70% collections in June. 65% 60% 55% • Collections varied across sectors with multifamily holding up 50% best whilst retail lagged other sectors. Jan-20 Feb-20 Mar-20 Apr-20 Occupancy Occupancy Trends: NFI-ODCE
• The NFI-ODCE entered the crisis from a point of strength Occupancy 20yr Avg with occupancy at 93%, vs the long term average of 91%. 94.0% 93.0% 92.0% • Low vacancy and steady income streams should, to an 91.0% extent, offset the drag from return volatility in the short-term. 90.0% 89.0% 88.0% • Managers have been taking on less non-core investments in 87.0% the later stages of the cycle which has helped boost overall 86.0% 85.0% occupancy levels. Non-core investments generate little to no 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 current income. Debt Markets NFI-ODCE Leverage • The market dislocation of March 2020 was one of the most NFI-ODCE Leverage 2020 Q1 21.9% challenging environments for mortgages since the GFC, and NFI-ODCE Leverage 2008 Q1 21.7% temporarily shut down the real estate lending market. Peak NFI-ODCE Leverage 2009 Q4 33.5% • NFI-ODCE leverage took close to two years following the GFC to reach peak levels. *Data from RVK surveyed managers Page 8 Manager Playbook
Managers Actions and Considerations
Capital Flows: Open-end real estate funds are expected to face net capital outflows for the second and third quarters of 2020.
Fund Liquidity Liquidity: Managers are taking a conservative approach with respect to re-evaluating fund cash flows, this could mean reduced near term liquidity for redeeming investors. With many managers re- evaluating where to spend capital while also looking to protect their dividend.
Step 1: Actively communicate with tenants to make sure they are aware of resources available to them.
Step 2: If rent relief request received, verify hardship through requests for financial statements to Rent Relief Requests ensure tenants are not being opportunistic.
Step 3: If warranted, work with tenant on rent deferment, abatement is the last option. Opportunistically look to increase term or re-writing the lease.
2020 Q1: Valuations for the first quarter did not universally incorporate significant adjustments to either the cap rate or discount rate due to lack of transactional data and structural appraisal delay.
Adjustments: Broadly, managers made incremental valuation adjustments mostly to retail sector assets to account for potential impacts from: increased credit losses, reduced NOI growth assumptions, unanticipated vacancy, deferred rent collections and extended lease up projections. Valuations Price Discovery: Due to transactions in the real estate market coming to a halt, the market has had little to no price discovery since the onset of COVID-19. Furthermore, price discovery is not expected to happen until travel bans are lifted and managers can resume asset due diligence. Once transactions recommence we can expect property values to reflect more meaningful impacts from COVID-19.
Page 9 Key COJ Manager Updates
Rent Collections: The niche sectors that HSRE invests in generally saw higher levels of rent collections. Portfolio level rent collects for April were 92% vs the ODCE at 78-79%.
Senior Housing: This sector has seen many negative and misleading headlines in recent months, however most Harrison Street COVID-19 related deaths have been in skilled nursing facilities. HSRE does not invest in skilled nursing. Core Property Additionally, their portfolio saw a remarkable 78% reduction in the number of cases in their communities over the Fund last month. The sector has been challenged by the “front door” being closed to new prospective residents and has led to reduced backfilling of vacancy. This is expected to diminish as states and counties begin reopening and prospective residents are able to tour buildings and move-in, thereby increasing occupancy. The industry is expecting to see increased demand in the coming quarters as Americans continue to age and require higher levels of care needs of daily tasks.
Rent Collection: PRISA II experienced stronger April rent collections than the NFI-ODCE (83% vs 79%). PGIM PRISA II Self Storage: The fund has a 4.5% exposure to self storage, which is a sector we expect to be less impacted than the broader real estate market in the short term.
Rent Collection: The fund experienced stronger April rent collections than the NFI-ODCE (85% vs 79%). Principal US Property Change in Fund Liquidity: In the first quarter of 2020 Principal announced that the US Property Account would Account be shifting from offering daily liquidity to the more traditional quarterly liquidity, similar to NFI-ODCE peers. Principal took similar action during the GFC, while eventually reverting to daily liquidity. Redemption Queue: The Fund has experienced meaningful underperformance over the last year which has been a large driver to the exit queue. The queue is currently at $8.6 bn.
UBS Fund Restructure: In the first quarter of 2020 UBS announced it would be restructuring TPF to address the large exit queue. This plan would see a pool of non-strategic assets that no longer fit TPF’s strategy being earmarked Trumbull for disposition. The non-strategic assets will have their own dedicated portfolio manager, Mario Maturo, while Property Fund allowing Paul Canning to focusing on the long term strategic assets and the total portfolio.
Separately, Nolan Henry will transition as a TPF Portfolio Manager over to UBS’ Trumbull Property Income Fund. This is to backfill the open position from when Rod Chu was promoted to Head of Acquisitions.
Page 10 Path Forward
11 Real Estate Recommendations Core and Non Core Recommended Portfolio Recommended Recommended Fund Name Sector Commitment / Current Portfolio* Allocation Redemption Market Value Current Harrison Street Diversified – Fund Name Sector $47,536,171 3.00% (3/31/2020) Allocation Core Property Niche Core Harrison Street Diversified – PGIM Real Diversified – $107,394,108 5.38% $8,338,736 2.50% Core Property Niche Core Estate PRISA II Core Plus PGIM Real Estate Diversified – Principal US $58,360,378 2.92% Diversified – PRISA II Core Plus Property $74,100,503 2.50% Core Principal US Diversified – Account $124,108,796 6.21% Property Account Core UBS Trumbull Diversified – $61,117,935 2.00% UBS Trumbull Diversified – Property Core $101,038,198 5.06% Property Core Vanguard RE REIT $872,818 0.00% Vanguard RE Idx; Idx; ETF (VNQ) REIT $872,818 0.04% ETF (VNQ) Future Non-Core Consistent $30M Non-Core 5.00% Total $391,774,298 19.62% Commitments commitments Total 15.00% Current: REITS: 0.04% Recommended: Core: 16.7% Core: 7.5%
10.0% Core 19.6% Core
Core Plus: 2.5%
Core Plus: 2.9% 5.0% Non-Core Non-Core: 5.0%
15.0% Target (10% Core, 5% Non-Core) 15.0% Target (10% Core, 5% Non-Core)
*Data as of 2020 Q1. Page 12 Non Core Commitment Schedule & Strategic Plan
Commitment Schedule
Number of Non-Core Vintage Core Non-Core Commitments
2020 Reduce $30M 1-2
2021 Reduce $30M 1-2
2022 Reduce $30M 1-2
Strategic Plan
• Reduce commitments to core open-ended funds as a source of capital to fund non-core allocation Core • Use (VNQ) as a ‘conduit’ or ‘revolver’ between redemptions and non-core capital calls
Non-Core • Potentially 1 to 2 non-core commitments in 2020
Page 13 Non Core Investing Approach Moving Forward Current Environment
• Despite current market dislocations from COVID-19, we remain bullish on the long-term benefits of commercial real estate in an institutional portfolio construct. • The search for yield continues to drive greater real estate allocations with significant capital inflows creating record levels of dry powder across geographies and strategies. Valuations • The combination of lower yields, the uncertainty with current valuations and capital inflows suggest lower expected future returns. • Even with current real estate valuations, long term operating fundamentals remain intact and the spread between cap rates and the 10yr US Treasury should soften any permanent valuation impact.
Sector-Level Cap Rates & Aggregate Transaction Volume 9.50% $450 9.00% $400 8.50% $350 • Cap rates across 8.00% $300 7.50% $250 sectors continue to Cap Rates 7.00% $200 compress, with 6.50% $150 Apartments and 6.00% $100 5.50% $50 Industrial 5.00% $0 surpassing pre Great Financial 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Crisis levels. Volume (USD Bn) US Office US Industrial US Retail US Apartment Source: RCA
Page 14 Non Core Investing Approach Moving Forward Opportunity Set
Given the later stages of the real estate cycle, we favor strategies that offer greater cyclical resistance and are positioned to benefit from demographic tailwinds as well as offer higher levels of current income. While we are cognizant of the near-term challenges, the long-term fundamentals remain. Some of the more compelling opportunities lay within: • Senior Housing represents an attractive investment opportunity with the potential for continued growth. The sector’s economic fundamentals are supported by favorable demographic tailwinds from a growing elderly US population base. Attractive Opportunities • Multifamily is positioned to take advantage of several demographic and economic tailwinds. There has been an increase in renter demand that has been driven by multiple factors including: job growth, below average home ownership rates relative to historical averages, and an increase in new rental household formations during the economic recovery.
• Medical Office continues to benefit from strong fundamentals, structural shifts, and demographic trends. Paired with a highly fragmented industry, this has created a compelling investment opportunity with attractive downside protection characteristics.
2010Q4 NPI Annualized Trailing Period Returns (%) 15.0 13.1 Captures GFC • Alternative sectors have shown to hold up better 10.0 8.8 8.8 8.6 7.1 during broad market 5.2 corrections. 5.0 3.5 • This chart shows the 3- Defensive Sectors 2.1 and 5-year returns for the 0.0 NCREIF Property Index, which capture the effects -5.0 -4.2 of the Great Financial 1 year 3 years 5 years Crisis. NPI - Senior Housing NPI - Medical Office NPI Total
Source: NCREIF
Page 15 Next Steps – Status Update
Below please find an update on the steps forward RVK and Staff outlined at the April 2020 Board Meeting:
Submit partial redemption request for proportion of UBS TPF shares not part of long-term hold (~$61 million). Completed. o Please note, UBS has indicated it will take a number of years to receive full redemption proceeds. The City has opted to receive future Fund dividends in cash.
Participate in UBS’ TPF voluntary four year Loyalty Incentive proposal with the City’s long-term hold position of ~$40 million. Completed.
RVK will continue to monitor and evaluate steps UBS is taking to address TPF’s redemption queue. In Progress.
Monitor core fund redemption queues for liquidity, redeem as appropriate in order to fund non- core investment opportunities RVK brings forward. In Progress.
RVK to bring forward non-core investment opportunities to the Board as they arise. In Progress.
RVK to closely monitor and adjust the pacing analysis and/or redemption framework as needed and in concert with Staff, particularly as markets evolve in the coming months. We’ll seek to keep the Board apprised of any relevant updates. Continuous.
Page 16 Appendix Refresher: Private Real Estate Categories
Private real estate investments can be broken into two “risk” categories:
1. “Core” – strategies focused on stabilized properties characterized by (i) fewer property-level risks, (ii) fewer “problems” that need to be fixed, and (iii) a greater reliance on income, but with lower absolute returns.
2. “Non-Core” – strategies generally focused on creating value by fixing property-level problems, characterized by (i) greater property-level risk, (ii) more reliance on capital appreciation, and (iii) higher total return potential.
Core Real Estate Non-Core Real Estate
Typical Fund Structure Open-End, Perpetual Life Closed-End, 8-10 Year Fund Life
Debt Limitations Typically < 40% Typically 50% - 70%
Asset Management Fees Fees Charged Asset Management + Incentive Fees (Limited, if any, incentive fees)
Net IRR: 6% - 8% Net IRR: 10% -14% Expected Returns (Typically 70%+ generated through income) (Majority generated through capital gains)
Return Volatility Lower Higher
Liquidity Moderate Low
Capital Expenditures Minimal Greater
Buy at discount and convert to Core RE through Buy and Hold; Maximize Operating Income; Minimal Typical Strategy repositioning, re-leasing, and/or redevelopment; Value-Add components Maximize capital appreciation potential
Page 18 Fund Comparisons
Harrison Street Core Principal US Property PGIM Real Estate PRISA II UBS Trumbull Property Property Account
Gross Return 9-10% annual return NFI-ODCE + 100 bps Outperform the NFI-ODCE Outperform the NFI-ODCE Expectations*
Meeting Return Expectations
Fund Structure Open-end Open-end Open-end Open-end
Investment Minimum $10.0 M $5.0 M $1.0 M $5.0 M
Leverage Limitations 40.0% / 25.3% 40.0% / 37.7% 33.0% / 19.8% 20.0% / 18.6% / Current Leverage
Size of Fund (GAV) $9.70 Bln $14.1 Bln $10.36 Bln $19.4 Bln
Entry Queue Under Review Under Review Paused / Under Review Under Review (Status)
Exit Queue*** $41.1 M $0.0 M $80.2 M $7,100.0 M
Tiered: 0.52% to 0.955% + Fees Tiered: 1.15% to 0.85% 1.20% 1.10% incentive fee**
Life Sciences, Medical Industrial, Multifamily, Office, Industrial, Multifamily, Office, Industrial, Multifamily, Office, Target Sectors Office, Self Storage, Senior Retail, Self-Storage Retail Retail, Hotel Housing, Student Housing
Value Add Limitations / Current 15.0% / 9.0% 35.0% / 25.0% 15.0% / 8.4% 15.0% / 5.5% Value Add Allocation
*Return expectations are over a full market cycle **Incentive fee is currently not being charged ***Funds are currently gating redemptions to preserve capital for remaining investors. Page 19 Geographic Exposure Total Composite & Fund Level
10% 8% 35% 36% 42% 31%
19% 19%
COJ Real Estate Portfolio NFI-ODCE
50% 45% 46% 45% 42% 42% 40% 38% 36% 35% 35% 33% 33% 31% 30% 28%
25% 23% 22% 21% 19% 20% 18% 19% 16% 16% 15% 13% 10% 10% 8% 4% 5% 2%
0% Mid-West East South West Harrison Street Core Property Fund PGIM - PRISA II Principal US Property Account UBS Trumbull Property COJ Real Estate Portfolio NFI-ODCE
Data as of 3/31/2020. Page 20 Leverage and Non-Core Investments Fund Level COJ Real Estate Portfolio Harrison Street Core Property Fund
30.0% 25.3% 25.4%
20.0%
10.0% 3.5% 4.5% 0.0% LEVERAGE NON-CORE 25.0% 23.7% 22.7% PGIM Real Estate PRISA II
40.0% 37.7% 20.0% 33.1% 25.7% 30.0% 21.4% 20.0% 15.0% 10.0% 0.0% LEVERAGE NON-CORE 10.0% 8.9% 8.8% Principal US Property Account
5.0% 30.0% 19.8% 20.0% 20.0% 8.4% 9.3% 0.0% 10.0% LEVERAGE NON-CORE 0.0% Current Long Term Average LEVERAGE NON-CORE UBS Trumbull Property
20.0% 18.6% 16.9% 15.0% 10.0% 5.5% 5.4% 5.0% 0.0% LEVERAGE NON-CORE Data as of 3/31/2020. Non-Core trend average from 2016-2020. Page 21 Non Core Pacing Summary
1 Current Plan Statistics* Total plan size $2.0 billion
Current real estate non-core target 5.0%
Current real estate non-core allocation 0.0%
Expected growth rate Approximately 1.32% (Net)
2 Recommendation 3 Expected Results Year Commitments Estimated - Valuation 2020 $30 million $160 os 2021 $30 million $140 $120 2022 $30 million $100 2023 $30 million $80 2024 $30 million $60 RVK recommends annual $40 commitments of $30 million $20
to achieve the target $0 allocation. 2020 2022 2024 2026 Estimated Market Value Non-Core Real Estate Target (5%)
*Data as of 2020 Q1. Page 22 Harrison Street Core Property Fund
Strategy Overview: The Harrison Street Core Property Product Snapshot Fund is an open ended core real estate fund that Strategy Type: Core Real Estate (Niche/Specialty Sectors) targets investment opportunities in: (i) Student Vehicle: Open End Fund Housing, both on and off campus, and other education Portfolio Approach: Core Income Producing Assets related real estate investments; (ii) Senior Housing, Strategy AUM: $9.3 Bln including, but not limited to, independent living facilities, Strategy Inception: November, 2011 Annual Fees (%): Tiered: 1.15% to 0.85% assisted living facilities, and memory care facilities; (iii) Liquidity Terms: Quarterly Medical Office Buildings and other healthcare-related RVK Rank: Positive real estate; (iv) storage properties, including, but not limited to Self-Storage, marinas, and boat storage Core Characteristics: facilities and (v) life sciences buildings. The fund • Primarily invests in Education, Healthcare and focuses is on primarily stabilized income-producing Storage sectors investments. On a limited basis the Fund may also • Modest leverage (30% long-term) invest in new development, renovations and • Strong emphasis on distributable income expansions of Primary Property Type facilities with the • Demographic-driven target sectors intent of generating consistent income returns.
Comparative Gross of Fee Performance (Period Ending March 31, 2020)
Firm/Product QTD YTD 1-Year 3-Year 5-Year 7-Year HSRE Total 1.8 1.8 8.2 8.8 9.5 10.0 NFI-ODCE 1.0 1.0 4.9 6.8 8.5 9.9 Difference 0.8 0.8 3.3 2.0 1.0 0.1 HSRE (Inc.) 1.3 1.3 5.1 5.3 5.6 5.8 NFI-ODCE (Inc.) 1.0 1.0 4.2 4.2 4.4 4.6 HSRE (Appr.) 0.5 0.5 3.0 3.3 3.8 4.1 NFI-ODCE (Appr.) -0.1 -0.1 0.7 2.5 4.0 5.1 The sum of income and appreciation returns may not equal total return due to rounding and/or the compounding of individual component returns to each other.
Page 23 PGIM Real Estate PRISA II
Strategy Overview: PGIM PRISA II is a broadly Product Snapshot diversified core-plus real estate portfolio that seeks to Strategy Type: Core Plus RE outperform the NCREIF ODCE Index by 100 basis Vehicle: Open End Fund Commingled Structure points over a complete market cycle by structuring Portfolio Approach: Core and Value-add assets with income focus Strategy AUM: $13.4 Bln investments to enhance risk-adjusted returns. Strategy Inception: July, 1980 (Oldest Active Core Plus Fund) Investments may be made through direct property Annual Fees (%): 1.20% ownership or indirectly through such vehicles as joint Liquidity Terms: Quarterly, 90 day notice ventures, general or limited partnerships, limited liability RVK Rank: Positive companies, mortgage loans and other loan types, including mezzanine debt, and debt secured by an Core Plus Characteristics: interest in the borrowing entity or interests in • Moderate leverage, target 30-35% with max of 40% companies or entities that directly or indirectly hold real • Non-core exposure capability, max of 35% estate or real estate interests. PRISA II’s strategy • Large dedicated allocation to self-storage provides for investing up to 35% of its gross assets in • Focused on coastal markets non-core assets.
Comparative Gross of Fee Performance (Period Ending March 31, 2020)
Firm/Product QTD YTD 1-Year 3-Year 5-Year 10-Year Prudential PRISA II Total 1.2 1.2 6.8 8.4 10.1 14.2 NFI-ODCE 1.0 1.0 4.9 6.8 8.5 11.4 Difference 0.2 0.2 1.9 1.6 1.6 2.8 Prudential PRISA II (Inc.) 0.9 0.9 4.1 4.0 4.3 4.7 NFI-ODCE (Inc.) 1.0 1.0 4.2 4.2 4.4 4.9 Prudential PRISA II (App.) 0.3 0.3 2.6 4.2 5.6 9.1 NFI-ODCE (App.) -0.1 -0.1 0.7 2.5 4.0 6.3 The sum of income and appreciation returns may not equal total return due to rounding and/or the compounding of individual component returns to each other.
Page 24 Principal US Property Account
Strategy Overview: Principal US Property Account is a Product Snapshot diversified open-end commingled real estate fund that Strategy Type: Core Real Estate is one of the top performing funds in the NFI – ODCE Vehicle: Open End Fund Commingled Structure Index. The Fund has a low to moderate risk profile and Portfolio Approach: Core Income Producing Assets Strategy AUM: $11 Bln invests in substantially leased assets across a broad Strategy Inception: January, 1982 range of Metropolitan Statistical Areas (MSAs) and Annual Fees (%): 1.10% property types (multifamily, office, retail, and industrial). Liquidity Terms: Quarterly The Fund places an emphasis on maintaining a high RVK Rank: Positive quality diversified portfolio of income producing Core Characteristics: properties and focuses on the stability and ability to • Conservative use of leverage, max 33% grow the income. In determining the relative sector and • Strong emphasis on income stability and growth geographic weightings, the research team ranks the • Research focus for geographic and sector allocation asset and geographic relative attractiveness to the • Long history of NFI-ODCE outperformance broader market which helps determine the relative position of each geographic market within each property sector.
Comparative Gross of Fee Performance (Period Ending March 31, 2020)
Firm/Product QTD YTD 1-Year 3-Year 5-Year 10-Year Principal USPA Total 0.6 0.6 5.7 7.9 9.4 12.5 NFI-ODCE 1.0 1.0 4.9 6.8 8.5 11.4 Difference -0.4 -0.4 0.8 1.1 0.9 1.1 Principal USPA (Inc.) 1.1 1.1 4.3 4.5 4.7 5.3 NFI-ODCE (Inc.) 1.0 1.0 4.2 4.2 4.4 4.9 Principal USPA (Appr.) -0.5 -0.5 1.3 3.3 4.5 7.0 NFI-ODCE (Appr.) -0.1 -0.1 0.7 2.5 4.0 6.3 The sum of income and appreciation returns may not equal total return due to rounding and/or the compounding of individual component returns to each other.
Page 25 UBS Trumbull Property Fund
Strategy Overview: The Trumbull Property Fund is a Product Snapshot diversified open-end commingled core real estate fund Strategy Type: Core Real Estate invested primarily in well-leased, stabilized assets and Vehicle: Open End Fund Commingled Structure receives the majority of its return from its income Portfolio Approach: Core Income Producing Assets Strategy AUM: $20 Bln component. The ongoing, long-term strategy of the Strategy Inception: 1978 Fund is to produce attractive risk-adjusted returns by Annual Fees (%): Tiered: 0.52% to 0.955% + incentive fee* focusing on selective acquisitions, diversification, Liquidity Terms: Quarterly active portfolio management, and aggressive asset RVK Rank: Neutral management. Diversification for the Fund is Core Characteristics: consistently pursued on many levels, including • Conservative use of leverage, max 20% geographic region, property type, and economic sector. • One of the largest US Core Open Ended Funds The Fund also manages risk across investment • Typically regarded as the lower levered fund option in structure and life cycle. The Fund’s investment strategy ODCE, and will lag in appreciating markets is composed of five elements; Income focus, • Due to fund size, can take advantage of transacting in Diversification, Modest use of leverage, Strategic large premier core properties value-add (max 15%), and sustainability.
Comparative Gross of Fee Performance (Period Ending March 31, 2020)
Firm/Product QTD YTD 1-Year 3-Year 5-Year 10-Year UBS TPF – Total 0.4 0.4 -2.3 3.4 5.6 9.1 NFI ODCE – Total 1.0 1.0 4.9 6.8 8.5 11.4 Difference -0.6 -0.6 -7.2 -3.4 -2.9 -2.3 UBS TPF – Inc. 1.1 1.1 4.8 4.7 4.7 5.1 NFI ODCE – Inc. 1.0 1.0 4.2 4.2 4.4 4.9 UBS TPF – Appr. -0.6 -0.6 -6.9 -1.2 0.9 3.8 NFI ODCE – Appr. -0.1 -0.1 0.7 2.5 4.0 6.3 The sum of income and appreciation returns may not equal total returns due to rounding and/or the compounding linking of quarterly returns. *Incentive fee is currently not being charged. Page 26 Disclaimer of Warranties and Limitation of Liability - This document was prepared by RVK, Inc. (RVK) and may include information and data from some or all of the following sources: client staff; custodian banks; investment managers; specialty investment consultants; actuaries; plan administrators/record-keepers; index providers; as well as other third-party sources as directed by the client or as we believe necessary or appropriate. RVK has taken reasonable care to ensure the accuracy of the information or data, but makes no warranties and disclaims responsibility for the accuracy or completeness of information or data provided or methodologies employed by any external source. This document is provided for the client’s internal use only and does not constitute a recommendation by RVK or an offer of, or a solicitation for, any particular security and it is not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets.
Memorandum
To City of Jacksonville Employees’ Retirement System From RVK, Inc. (“RVK”)
Subject Private Equity Funding Review Date June 19, 2020
The purpose of this memo is to report to the City of Jacksonville Employees’ Retirement System (“City of Jacksonville ERS” or the “City”) Board an outline of the funding process for the private equity mandate to be managed by Adams Street Partners (“ASP”), as contract completion is nearly complete and capital calls are expected to begin in the coming months.
Background In the past twelve months, the City of Jacksonville ERS underwent a search process to identify an investment manager able to source, diligence, and implement a portfolio of private equity fund investments in a fund of one account structure. This allocation will assist the City of Jacksonville ERS in meeting its long-term target of 7% to private equity. Ultimately, the Board made the decision to hire Adams Street Partners to oversee a $105 million mandate which will include primary investments, coupled with smaller allocations to direct co-investments and secondary fund purchases.
While the contract continues to be reviewed by the City’s counsel, RVK and City Staff thought it was an opportune time to share with the Board an outline of our collective thoughts on the cash raising process as we approach the point where capital will begin to be called. Based on recent communications with ASP, our expectation is for the City to receive approximately one capital call per quarter, with the possibility of up to four additional calls, throughout the course of a year. In total, this would indicate an expected range of between four and eight calls each year, to the tune of approximately $35 million annually, until the target is achieved.
Process Outline A review of the Fund’s asset allocation as of May 31st, in the context of its strategic long-term policy targets, is outlined on the following page. In our view, this is a logical starting point to help guide the thought process behind where to source cash for upcoming capital calls.
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City of Jacksonville ERS: Asset Allocation vs. Target Allocation as of May 31, 2020
Current Target Difference vs. Asset Class Minimum Maximum Allocation Allocation Target
US Equity 33.6% 20.0% 30.0% 40.0% 3.6% International Equity 22.1% 10.0% 20.0% 25.0% 2.1% Fixed Income 20.9% 10.0% 20.0% 30.0% 0.9% Real Estate 17.7% 0.0% 15.0% 20.0% 2.7% Diversifying Assets* 5.4% 0.0% 15.0% 20.0% -9.6% Cash & Other 0.3% 0.0% 0.0% 10.0% 0.3% *Please note, the Diversifying Assets target reflects a 7% target to Private Equity, 5% target to Private Credit, and 3% target to MLPs.
What we observe is that there are currently a few key under- and over-weights intra the Fund, with the largest under-weight being to Diversifying Assets, which is where the Private Equity and Private Credit mandates will be held, in addition to the existing MLP allocation. Conversely, the largest over-weight is to US Equity, and to a slightly lesser extent, Real Estate and International Equity. The over-weights in particular are meaningful as they can be viewed as a preferred source from which to raise cash, and in doing so, simultaneously pulls those asset classes closer to their stated long-term policy targets.
In addition, we also want to be mindful of sourcing cash from areas of the Fund that possess optimal liquidity profiles, meaning we will be able to raise cash in a timely and cost-effective manner. In analyzing the notification and settlement dates offered by each of the City of Jacksonville ERS’ equity managers, we confirmed that all Domestic Equity managers should be able to make cash available within five days of a redemption request, with most managers closer to two to three days. Specific to the International Equity managers, while the notification periods tend to be a bit longer comparatively, cash can generally be made available within in a month or less from the notification date. The favorable liquidity profile of the US and International Equity asset classes, combined with their current over-weights, makes them the preferred source of cash for any upcoming private equity capital calls. At the manager level, RVK and Staff will look to raise cash in a manner that takes in to account any existing targets, market capitalization and/or style bias considerations for both the US and International Equity composites. However, we recognize that while this may be our current path, there will be a need for flexibility in the future as markets continually evolve, yet we remain grounded and guided by the long-term strategic policy targets.
Line of Credit It should be noted that ASP has offered to set up a line of credit for the City of Jacksonville ERS.
RVK · 2
Subscription lines of credit have become common within the private investing landscape, as general partners (“GPs”) seek to manage capital call frequency for their limited partners (“LPs”). As background, these subscription lines are essentially bank loans that will carry an interest rate (incurred by the LP or the City in this scenario), largely dependent on the size of the line and time of repayment. Interest rates may vary, but are typically between 3% and 6%. A line of credit can be useful in reducing the frequency of capital calls and providing a modest boost to a fund’s net internal rate of return due to the shorter duration between capital deployment and eventual realization. In turn, its utilization can lower the multiple of invested capital due to interest paid on the credit line. To reduce the frequency of cash flows, managers will typically “bridge” capital calls and fund investments with the line of credit for a period of time between three and 12 months, then call the full amount of capital from LPs. We do not believe it is necessary to establish a line of credit for the proposed fund of one. Our experience with multiple other clients, coupled with input from the City’s Staff, suggests the fund of one’s cash needs will be easily managed internally.
Next Steps
Upon completion of contracting, we expect ASP will commence capital calls in a timely manner, at which point Staff and RVK will look to work together collaboratively to raise cash as needed, following the path outlined above, and seek to update the Board, periodically, on sourcing activity. Relatedly, specific to the City of Jacksonville ERS’ recently awarded private credit mandate, we plan to bring forth details pertaining to the mechanics of that funding process, coupled with associated guidance for cash sourcing, once that contracting is complete and funding becomes nearer.
RVK · 3 Pension Office Update June 2020
• Volumes during COVID emergency period (approx. 11 weeks from March 16-June 1): responded to over 2,000 phone calls, over 500 e-mails and processed over 1,000 documents received. Office was staffed at about 9% of budgeted capacity. • Staff Update: Welcome Hannah Hicks to the team working as a Pension Associate. • Alternate verifications are being accepted instead of requiring notarizations. Based on PAC feedback, the Pension Office is proposing updates to the Board Rules to document the updated verifications. • PAC and COPAC Elections scheduled for this year. Planning now underway. Please encourage qualified candidates to contact the Pension Office. • ITD system release completed in June to correct multiple system problems and enhance functionality. Changes result in more accurate calculations, less manual intervention, reduced risk and increased customer service. Highlights include corrections to average salary calculations, minimum benefit calculations, retaining data for PLOP and BACKDROP calculations, further automated calculations for JEA, death and disability improvements, enhancements for reporting, direct deposit changes and 1099Rs. The Pension Office would like to recognize the work of the ITD team led by Mamta Gupta, Amal Velu and Bala Gunasekaran.