COMPREHENSIVE ANNUAL FINANCIAL REPORT For Fiscal Year Ended March 31, 2020 NYSLRS New York State and Local Retirement System A pension trustN fundY ofS the StateLR of NewS York Office of the New York State Comptroller Thomas P. DiNapoli 2020 COMPREHENSIVE ANNUAL FINANCIAL REPORT For Fiscal Year Ended March 31, 2020 New York State and Local Retirement System Employees’ Retirement System Police and Fire Retirement System A pension trust fund of the State of New York Prepared by the staff of the NYSLRS New York StateN andY LocalS RetirementLR SystemS CONTENTS INTRODUCTION Professional Awards .............................................................................................................................9 Letter of Transmittal .......................................................................................................................... 11 Administrative Organization ................................................................................................................. 18 Advisory Committees ............................................................................................................. 18 New York State and Local Retirement System Organization Chart ....................................................... 23 Overview of the New York State and Local Retirement System ...................................................................... 24 By the Numbers ................................................................................................................................ 29 Members and Retirees ............................................................................................................ 29 Retirees in New York State ....................................................................................................... 30 Annual Benefit Payments Within New York State ........................................................................... 31 Annual Benefit Payments Within the United States ........................................................................ 32 Annual Benefit Payments Outside the United States ....................................................................... 32 Contents 2 New York State and Local Retirement System CONTENTS CONTINUED FINANCIAL Independent Auditors’ Report .............................................................................................................. 35 Management’s Discussion and Analysis (Unaudited) .................................................................................. 37 Basic Financial Statements................................................................................................................... 42 Combining Basic Statement of Fiduciary Net Position ..................................................................... 42 Combining Basic Statement of Changes in Fiduciary Net Position ....................................................... 43 Notes to Basic Financial Statements .......................................................................................... 44 Required Supplementary Information (Unaudited) .................................................................................... 72 Schedule of Changes in the Employers’ Net Pension Liability and Related Ratios (Unaudited) ................... 72 Schedule of Employer Contributions (Unaudited) .......................................................................... 74 Schedule of Investment Returns (Unaudited) ................................................................................ 74 Notes to Required Supplementary Information (Unaudited) ............................................................. 75 Other Supplementary Information (Unaudited) ............................................................................................................. 76 Schedule of Administrative Expenses (Unaudited) ......................................................................... 76 Schedule of Investment Expenses (Unaudited) .............................................................................. 77 Schedule of Consulting Fees (Unaudited) ..................................................................................... 78 Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ............. 79 Contents 2020 Comprehensive Annual Financial Report 3 CONTENTS CONTINUED INVESTMENT Overview of Investments ..................................................................................................................... 83 Corporate Governance ....................................................................................................................... 94 Investment Results ............................................................................................................................ 98 Investment Summary ......................................................................................................................... 99 Asset Allocation — March 31, 2020 .......................................................................................................100 Public Equity Performance ..................................................................................................................101 Public Equity Fund of Fund Performance ..................................................................................................................... 103 Domestic Equity Portfolio — Ten Largest Holdings ....................................................................................105 Fixed Income Portfolio and Comparison .................................................................................................106 Fixed Income Performance .................................................................................................................107 Fixed Income Portfolio — Ten Largest Holdings ........................................................................................108 Real Estate Portfolio ..........................................................................................................................109 Alternative Investments Summary ........................................................................................................110 Public Equity Management Fees ..........................................................................................................111 Public Equity Commissions — Internally Managed ....................................................................................112 Public Equity Commissions — Externally Managed ...................................................................................113 Global Fixed Income Management Fees .................................................................................................116 Long-Term Domestic Bond Transactions — Internally Managed ....................................................................117 Long-Term Domestic Bond Transactions — Externally Managed ...................................................................118 Short-Term Domestic Bond Transactions — Internally Managed ...................................................................119 Real Estate Management and Incentive Fees (Expensed) ............................................................................120 Real Estate Management and Incentive Fees (Capitalized) ..........................................................................121 Private Equity Management Fees (Expensed) ..........................................................................................122 Private Equity Management Fees (Capitalized) .........................................................................................123 Private Equity — Fee, Expense and Carried Interest Analysis .......................................................................124 Absolute Return Strategy Management and Incentive Fees .........................................................................125 Opportunistic Funds Management and Incentive Fees (Expensed) ................................................................126 Opportunistic Funds Management Fees (Capitalized) ................................................................................127 Real Assets Management Fees (Expensed) ..............................................................................................128 Real Assets Management Fees (Capitalized) ............................................................................................129 Consultant and Advisor Fees ...............................................................................................................130 Contents 4 New York State and Local Retirement System CONTENTS CONTINUED ACTUARIAL Statement of the Actuary ...................................................................................................................133 Actuarial Cost Method and Valuation ....................................................................................................135 Elements of the Actuarial Valuation ......................................................................................................137 Actuarial Valuation Balance Sheets .......................................................................................................141 Local Government Employers’ Final Contribution Rates for Select Plans .........................................................143