Investment Board Meeting Agenda Thursday, June 17, 2021 Conference Telephone #: 646-558-8656 Meeting ID: 880 9951 0401 8:30 a.m. – 12:00 p.m. 8:30 a.m. Call to Order 8:30 a.m. Approval of March 26, 2021, Board Meeting Minutes 8:35 a.m. CEO Report – Greg Samorajski 8:45 a.m. CEO Across-the-Board Salary Adjustment Greg Samorajski, IPERS 8:50 a.m. IPERS Investment Staff Reports Beta Report – Karl Koch Alpha Report – Investment Team Risk Report – Sriram Lakshminarayanan CIO Updates – Karl Koch 9:10 a.m. Private Markets Overview and Outlook Shawn Quinn, Wilshire Associates 9:25 a.m. Private Markets Program Annual Review Pat Reinhardt, IPERS 10:05 a.m. Break 10:15 a.m. Private Equity Program Review Doug LeBon, Richard Mazer and Jason Jenkins, Pathway Capital Management 10:45 a.m. Proposed Private Markets Investment Policy Revisions Pat Reinhardt, IPERS 11:00 a.m. Opportunistic Private Credit Manager Hiring Recommendations Pat Reinhardt, IPERS 11:15 a.m. Securities Lending Program Review Jina Bresson, State Treasurer’s Office 11:30 a.m. Securities Litigation Report Elizabeth Hennessey, IPERS 11:45 a.m. Public Comments 11:55 a.m. Other Business Confirm Next Board Meeting Dates of September 15–16, 2021 Next BAC Meeting is Monday, August 23, 2021 12:00 p.m. Adjourn IOWA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM INVESTMENT BOARD MEETING MINUTES Video / Telephonic Meeting March 26, 2021 The following people participated in the telephonic IPERS Investment Board meeting held on Friday, March 26, 2021. Members of the Board – Present Lisa Stange, Chair Representative Brian Lohse David Creighton, Vice Chair Representative Mary Mascher Mike Duncan Senator Pam Jochum Treasurer Michael Fitzgerald Senator Mark Lofgren Justin Kirchhoff Phyllis Peterson Kris Rowley Administration Greg Samorajski, CEO Luca Rassenti, Investment Officer Karl Koch, CIO Kevin Terdal, Investment Officer Sriram Lakshminarayanan, CRO Melinda McElroy, Executive Assistant Sheldon Lien, Senior Investment Officer David Martin, Chief Benefits Officer Pat Reinhardt, Senior Investment Officer Rick Hindman, Chief Information Officer Keith Scholten, Senior Investment Officer Shawna Lode, Director of Communications Consultants and Presenters Rose Dean, Wilshire Associates Ali Kazemi, Wilshire Associates Shawn Quinn, Wilshire Associates 2 Call to Order Lisa Stange, chair, called the meeting to order at 8:30 a.m. She began the meeting welcoming Representative Brian Lohse to the Board. Approval of Minutes from Previous Meeting David Creighton made the motion to approve the December 3, 2020, Investment Board meeting minutes. Phyllis Peterson seconded. The minutes were approved by unanimous roll call vote. Ayes: Lisa Stange, David Creighton, Mike Duncan, Treasurer Michael Fitzgerald, Justin Kirchhoff, Phyllis Peterson and Kris Rowley Nays: None Absent: None MOTION PASSED CEO Report – Greg Samorajski Greg Samorajski reported that the IPERS building continues to be closed to the public due to the COVID-19 pandemic and most employees are still working remotely. He next reviewed that IPERS has requested an incremental appropriation of $1.135 million in FY2022 and FY2023 to hire four new investment professionals. Governor Reynolds supported IPERS’ request, the next step is to get legislative support. Calendar Year 2020 Investment Performance Review – Rose Dean and Ali Kazemi Rose Dean and Ali Kazemi of Wilshire Associates reported that at December 31, 2020, the Total Fund performance for the calendar year was 13.5%, underperforming the policy benchmark return of 13.9%. The presentation also included a return/risk ranking, sources of risk and a performance review of each publicly traded asset class and the managers within each class. Internal Equity Management Update Discussions were held regarding developing an internal equity management program with a portion of IPERS’ assets. The Board will revisit the issue in September. IPERS Investment Staff Reports Beta Report Karl Koch reviewed the beta report, noting the Fund’s estimated market value of $39.528 billion as of March 12, 2021, the date of the report. All asset classes were within policy ranges. Alpha Report The investment staff reviewed the alpha report noting minor performance concerns continue with Janus Capital, a domestic equity manager, and IPM Informed Portfolio Management, a liquid absolute return strategy manager. 3 Risk Report Sriram Lakshminarayanan presented IPERS’ risk monitoring reports. He noted that active risk is back down to normal levels. CIO Updates Karl Koch updated the Board on several matters including the status of implementing ARP strategies and two upcoming RFPs. The first RFP will be for private markets investment tracking software, and the second for investment consulting services. The investment consultant search is required because the contract with Wilshire Associates expires September 30, 2021. Opportunistic Private Credit Manager Hiring Recommendations – Pat Reinhardt Pat Reinhardt explained that the opportunistic private credit search is being completed in two parts. In the first part of the search, multi-strategy and mezzanine submissions were evaluated. In the second part, the remainder of the submissions (specialty finance, real assets, special situations and other) will be evaluated. Staff requested the Investment Board approve the following hiring recommendations for the first part of the search: • Hire Marathon Asset Management and Crestline Investors each for $250 million allocations in multi-strategy opportunistic credit mandates subject to final due diligence and successful contract negations. Magnetar, CarVal Investors and Varde Partners will serve as bench managers for potential future funding if authorize by the Board at some future date. • Hire Ares Management and Audax Group each for $100 million allocations in mezzanine opportunistic credit mandates (and up to $25 million co-investment allocations for each), subject to final due diligence and successful contract negotiations. Blackstone (GSO) will serve as a bench manager for potential future funding if authorized by the Board at some future date. David Creighton made the motion to approve the hiring recommendations. Treasurer Fitzgerald seconded. Ayes: Lisa Stange, David Creighton, Treasurer Michael Fitzgerald, Justin Kirchhoff, Phyllis Peterson and Kris Rowley Nays: None Absent: Mike Duncan MOTION PASSED IPERS Staff Updates David Martin reviewed the member demand measures report for February 2021 and noted that member annual benefit statements will begin mailing on Monday, March 29. Shawna Lode reported on the 2021 Legislative session. 4 Public Comments Pat Deluhery inquired if IPERS was seeing an increase in member’s double dipping due to the COVID-19 pandemic. David Martin answered no and explained that double dipping is a term used to describe the act of receiving pension benefits while also accepting a salary, oftentimes from the same employer. Confirm Next Meeting Date The next regularly scheduled Investment Board meeting is Thursday, June 17, 2021, beginning at 8:30 a.m. Adjourn With no further business to come before the Investment Board, the meeting adjourned at 11:38 a.m. 5 June 8, 2021 MEMORANDUM TO: IPERS Investment Board Members FR: Greg Samorajski, CEO RE: Across-the-Board Salary Adjustment For fiscal years 2022 and 2023, Governor Reynolds authorized an across-the-board (ATB) salary increase of 1.10% for state of Iowa employees not covered by a collective bargaining agreement. However, for those directors whose salaries are set by a governing board other than the Governor, the salary adjustment must be approved by the appropriate governing body. The Investment Board sets the salary for IPERS’ chief executive officer, within the state of Iowa’s 000-pay plan, See §97B.3(1). Therefore, I request the Investment Board approve application of the Governor approved ATB to IPERS’ CEO position effective July 1, 2021 and July 1, 2022. 6 BETA REPORT IOWA PUBLIC EMPLOYEES' RETIREMENT SYSTEM PORTFOLIO PRELIMINARY (Unreconciled) MARKET VALUES AT 6/4/2021 Actual Overlay Total Policy Difference PUBLIC MARKETS Domestic $ 9,123,348,502 $ 24,041,758 $ 9,147,390,261 $ 9,115,877,138 $ 31, 513,123 International $ 7,317,002,737 $ 13,259,710 $ 7,330,262,447 $ 7,251,834,557 $ 78, 427,890 Global Smart Beta $ 2,516,301,492 $ 2,516,301,492 $ 2,489,560,225 $ 26, 741,267 Total Equities $ 18,956,652,731 $ 18,993,954,199 $ 18,857,271,920 $ 136, 682,280 Core Plus $ 10,520,464,615 $ 200,320,340 $ 10,720,784,955 $ 10,771,413,836 $ (50,628,882) Public Credit $ 1,632,052,707 $ 1,632,052,707 $ 1,655,536,699 $ (23,483,992) Cash $ 636,253,145 $ (237,621,808) $ 398,631,337 $ 412,841,645 $ (14,210,308) PRIVATE MARKETS $ 9,955,753,094 $ 9,955,753,094 $ 10,004,112,193 $ (48,359,098) Private Equity $ 6,702,415,020 $ 6,702,415,020 $ 6,734,739,971 $ (32,324,951) Private Credit $ 1,110,844,142 $ 1,110,844,142 $ 1,117,591,525 $ ( 6,747,383) Private Real Assets $ 2,142,493,933 $ 2,142,493,933 $ 2,151,780,697 $ ( 9,286,764) TOTAL FUND $ 41,701,176,293 $ 41,701,176,293 $ - Actual Overlay Total Policy Difference PUBLIC MARKETS Domestic 21.88% 0.06% 21.94% 21.86% 0.08% International 17.55% 0.03% 17.58% 17.39% 0.19% Global Smart Beta 6.03% 6.03% 5.97% 0.06% Total Equities 45.46% 45.55% 45.22% 0.33% Core Plus 25.23% 0.48% 25.71% 25.83% -0.12% Public Credit 3.91% 3.91% 3.97% -0.06% Cash 1.53% -0.57% 0.96% 0.99% -0.03% PRIVATE MARKETS 23.87% 23.87% 23.99% -0.12% Private Equity 16.07% 16.07% 16.15% -0.08% Private Credit 2.66% 2.66% 2.68% -0.02% Private Real Assets 5.14% 5.14% 5.16% -0.02% TOTAL FUND 100.00% 100.00% 0.00% 7 BETA REPORT IOWA PUBLIC EMPLOYEES' RETIREMENT SYSTEM PORTFOLIO PRELIMINARY (Unreconciled) MARKET VALUES AT 6/4/2021 PUBLIC PORTFOLIO 76.13% $ 31,745,423,198 Manager % of Manager % of Manager Name Asset Class Total Market Value Manager Name Asset Class Total Market Value Blackrock R2000 SAE 2.88% $ 262,424,597 Western 16.45% $ 1,730,091,738 Blackrock - U.S.