Colorado PERA · Capital Markets Review December 31, 2019 The announcement of a “phase one” U.S.-China trade deal, progress on the U.S.-Mexico-Canada agreement (USMCA) and easing

2019 Performance ReviewWith First Quarter 2020 Update

June 19, 2020

Colorado PERA

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Capital Markets Review

December 31, 2019

The announcement of a “phase one” U.S.-China trade deal, progress on the U.S.-Mexico-Canada agreement (USMCA)

and easing Brexit fears led to a resurgence in risk appetite and boosted equity markets. Accommodative monetary

policies from major central banks meanwhile continue to provide further support for risk assets.

During the fourth quarter of 2019, global equities returned 9.0% with non-U.S. stocks outperforming U.S. stocks.

Emerging Markets equities were the strongest performers over the quarter, benefiting from the “risk-on” environment

and the thawing of trade tensions. Within the U.S. equity market, information technology and health care were the top

performing sectors during the quarter. As economic data stabilized over the quarter, more defensive sectors

underperformed with Utilities (+1.5%) and Consumer Staples (+4.7%) being the worst performing sectors. Small cap

stocks, across both value and growth equity styles, outperformed relative to their large and mid-cap peers on a one-

year basis. Across all capitalizations, growth stocks outperformed value stocks over the fourth quarter of 2019.

The Bloomberg Barclays U.S. Universal Index returned 0.5% during the fourth quarter. Corporate bonds returned the

most while government bonds returned the least. High Yield bonds outperformed bonds across different credit qualities.

Short duration bonds outperformed all bonds of intermediate and longer maturities, as the yield curve steepened over

the quarter with yields falling at the short end of the curve and rising at longer maturities

ReturnsFourth

Quarter

One

Year

Three

Years

Five

Years

Ten

Years

U.S. Stocks 9.0% 30.9% 14.5% 11.2% 13.4%

Non-U.S. Stocks 9.2% 21.6% 9.8% 5.7% 5.2%

Global Stocks 9.0% 26.4% 12.1% 8.3% 8.9%

U.S. Bonds 0.5% 9.3% 4.3% 3.4% 4.1%

Notes:

U.S. Stocks = DJ U.S. Total Stock Market Index

Non-U.S. Stocks = MSCI All Country World ex-U.S. Index IMI

Global Stocks = MSCI All Country World Index IMI

U.S. Bonds = Bloomberg Barclays U.S. Universal Index

4

Total Fund Asset Growth12/31/2014 – 12/31/2019

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

($M

)

Asset Allocation History5 Years Ending 12/31/2019

Global Equity Fixed Income Real Estate Private Equity Opportunity Fund Cash

5

Total Fund Performance – Trailing PeriodsDecember 31, 2019

* March 31, 2004, represents the inception of the Policy Benchmark as the primary performance objective for PERA.

6.2%

20.3%

11.1%

8.4%9.1%

7.7%8.5%

6.0%

19.8%

10.2%

7.6%8.8%

7.2%

4.7%

16.4%

8.7%

6.4%

7.9%6.7%

8.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Fourth Quarter One Year Three Years Five Years Ten Years Since 3/31/2004* Since 1/1/1995

Total Fund Policy Benchmark Public Fund Universe (Mean)

Returns shown are net of fees.

6

Total Fund Performance – Calendar Year Periods

15.5%

18.8%

0.0%

-8.1%

-12.2%

23.8%

13.8%

9.6%

15.6%

10.0%

-26.0%

17.4%

14.0%

1.9%

12.9%

15.6%

5.7%

1.5%

7.3%

18.1%

-3.5%

20.3%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


7

Peer RankingsDecember 31, 2019

The rankings are based on a universe of 165 public pension funds over $1 billion with aggregate assets of $2,965.3 billion compiled by BNY Mellon

Performance & Risk Analytics in conjunction with Investment Metrics as of 12/31/2019.


8

Risk-Adjusted ReturnDecember 31, 2019

9

Asset Class PerformanceDecember 31, 2019

Fourth

Quarter

One

Year

Three

Years

Five

Years

Ten

Years

Since

3/31/2004

Global Equity 9.8% 29.5% 14.1% 9.7% 10.5% 8.1%

Global Equity Custom Benchmark 9.1 26.8 12.3 8.4 9.7 7.5

Fixed Income 0.2% 9.2% 4.3% 3.4% 4.3% 4.6%

Fixed Income Custom Benchmark 0.2 8.7 4.3 3.4 4.1 4.4

Real Estate 3.5% 8.4% 9.7% 11.3% 12.7% 9.5%

Real Estate Custom Benchmark 1.4 4.9 6.7 8.5 11.0 7.5

Private Equity 3.4% 13.7% 13.0% 11.3% 12.2% 11.9%

Private Equity Custom Benchmark 9.5 28.3 18.4 13.9 16.2 12.6

Opportunity Fund 2.6% 6.4% 6.8% 5.4% 4.1% --

Opportunity Fund Benchmark 3.0 11.2 7.3 5.6 5.3 --

Cash 0.5% 2.4% 1.8% 1.2% 0.8% 1.7%

ICE BofAML U.S. 3-Month Treasury Bill Index 0.5 2.3 1.7 1.1 0.6 1.4


10

Performance AttributionDecember 31, 2019

11

Performance AttributionDecember 31, 2019

12

Global EquityDecember 31, 2019

13

Fixed IncomeDecember 31, 2019

14

Real EstateDecember 31, 2019

Fourth

Quarter

One

Year

Three

Years

Five

Years

Ten

Years

Real Estate 3.5% 8.4% 9.7% 11.3% 12.7%

Core 4.5 9.0 10.8 12.1 13.3

Value-Added 3.2 9.0 10.7 13.2 15.9

Opportunistic 3.4 12.9 12.1 11.5 12.4

Real Estate Custom Benchmark 1.4 4.9 6.7 8.5 11.0

*The other category consists of healthcare properties, land for development, and mixed use/other.

21.9%

32.7%

10.6%

28.9%

0.7%

5.2%

33.4%

25.7%

16.1%

20.3%

0.1%

4.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Office Apartment Retail Industrial Hotel Other*

Property Type Allocation

COPERA Actual NCREIF-ODCE

15

Private EquityDecember 31, 2019

Total Private

Equity

(10 Year)*

Total Private

Equity

(15 Year)*

Total Private

Equity

(Since 01/01/1983)

Internal Rate of Return (IRR) 14.4% 10.8% 10.5%

Custom Benchmark 10.7 8.4 7.4

*Vintage Years

16

Opportunity FundDecember 31, 2019

Fourth

Quarter

One

Year

Three

YearsFive Years

Ten

Years

Opportunity Fund 2.6% 6.4% 6.8% 5.4% 4.1%

Opportunity Fund Benchmark 3.0 11.2 7.3 5.6 5.3

Total Fund ex-Opp Fund Benchmark 6.1 20.2 10.4 7.7 9.0

Committed ($M) Invested ($M) % Funded

As of 12/31/2019 $ 2,978 $ 1,709 57%

$2,978

$1,709

3.6%

17

First Quarter 2020 Update

18

Capital Markets Review

March 31, 2020

A decade-long bull market came to an abrupt halt as the COVID-19 outbreak in China turned into a global pandemic.

After reaching all-time highs in mid-February, global equities sold off sharply as infection numbers grew and

governments worldwide ramped up virus containment measures. With much of the economy shuttered, a deep global

recession appears to be inevitable despite unprecedented fiscal and monetary stimulus measures.

During the first quarter of 2020, global equities returned -22.4%, with U.S. stocks outperforming non-U.S. stocks by

3.1%. Within the U.S. equity market, the information technology sector was the strongest performer, posting returns of -

12.1%. The energy sector was the weakest performer, falling 51.6%, as a result of the sharp drop in crude oil prices

amidst the coronavirus outbreak. Performance was negative across the market capitalization spectrum over the

quarter. Overall, both medium and small cap stocks underperformed large cap stocks. Over the last twelve months,

value stocks continued to lag their growth stock equivalents significantly.

The Bloomberg Barclays U.S. Universal Index gained 1.3% during the first quarter. Government bonds were the best

performers, while corporate bonds were the worst performers. Performance was positive across higher credit qualities

with high yield bonds underperforming all credit qualities. Longer duration bonds outperformed all bonds of lower

maturities, as the yield curve shifted downward with yields falling across maturities.

ReturnsFirst

Quarter

One

Year

Three

Years

Five

Years

Ten

Years

U.S. Stocks -21.0% -9.3% 3.9% 5.7% 10.1%

Non-U.S. Stocks -24.1 -16.3 -2.3 -0.7 2.1

Global Stocks -22.4 -12.7 0.8 2.4 5.8

U.S. Bonds 1.3 7.2 4.4 3.4 4.0

Notes:

U.S. Stocks = DJ U.S. Total Stock Market Index

Non-U.S. Stocks = MSCI All Country World ex-U.S. Index IMI

Global Stocks = MSCI All Country World Index IMI

U.S. Bonds = Bloomberg Barclays U.S. Universal Index

19

Total Fund Performance – Trailing PeriodsMarch 31, 2020

* March 31, 2004, represents the inception of the Policy Benchmark as the primary performance objective for PERA.

-11.0%

-1.3%

5.2% 5.3%

7.5%6.8%

7.9%

-12.5%

-3.6%

3.9%4.3%

7.0% 6.2%

-11.8%

-4.1%

2.8%3.3%

6.2% 5.8%

7.3%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

First Quarter One Year Three Years Five Years Ten Years Since 3/31/2004* Since 1/1/1995

Total Fund Policy Benchmark Public Fund Universe (Mean)


Note: Real Estate, Private Equity, and certain Alternatives Investments market values and returns are reported on a quarter lag. The performance

numbers shown represent December 31, 2019, values. Real Estate, Private Equity, and certain Alternatives assets are generally revalued once a year in

the fourth quarter. As such, performance for time periods less than one year as reported in the first, second, or third quarter may show large

outperformance or underperformance for these asset classes that is not representative of performance over longer periods.

20

Asset Class PerformanceMarch 31, 2020

First

Quarter

One

Year

Three

Years

Five

Years

Ten

Years

Since

3/31/2004

Global Equity -20.2% -8.7% 3.5% 4.2% 7.5% 6.4%

Global Equity Custom Benchmark -22.4 -12.4 0.9 2.6 6.4 5.7

Fixed Income 3.0% 9.0% 5.0% 3.7% 4.4% 4.7%

Fixed Income Custom Benchmark 3.1 8.9 5.0 3.7 4.3 4.5

Real Estate(1) 3.5% 8.4% 9.7% 11.3% 12.7% 9.5%

Real Estate Custom Benchmark 1.4 4.9 6.7 8.5 11.0 7.5

Private Equity(1) 3.4% 13.7% 13.0% 11.3% 12.2% 11.9%

Private Equity Custom Benchmark 9.5 28.3 18.4 13.9 16.2 12.6

Alternatives(1) -0.7% 3.9% 5.7% 5.2% 4.1% --

Alternatives Custom Benchmark -7.7 -1.7 3.6 3.8 4.0 --

Cash 0.4% 2.0% 1.9% 1.3% 0.8% 1.7%

ICE BofAML U.S. 3-Month Treasury Bill Index 0.6 2.3 1.8 1.2 0.6 1.4

(1)Real Estate, Private Equity, and certain Alternatives Investments market values and returns are reported on a quarter lag. The performance numbers shown

represent December 31, 2019, values. Real Estate, Private Equity, and certain Alternatives assets are generally revalued once a year in the fourth quarter. As such,

performance for time periods less than one year as reported in the first, second, or third quarter may show large outperformance or underperformance for these

asset classes that is not representative of performance over longer periods.


21

Performance AttributionMarch 31, 2020

22

Appendix

23

Appendix: Definitions*

Policy Benchmark – A combination of 53.5% of the Global Equity Custom Benchmark, 23.5% of the Fixed Income

Custom Benchmark, 8.5% of the Real Estate Custom Benchmark, 8.5% of the Private Equity Custom Benchmark, 5%

of the Alternatives Custom Benchmark, and 1% ICE BofAML U.S. 3-Month Treasury Bill Index.

Global Equity Custom Benchmark – The MSCI All Country World Investable Markets Index (Net) with USA (Gross).

Fixed Income Custom Benchmark – The Bloomberg Barclays U.S. Aggregate Bond Index.

Real Estate Custom Benchmark – The NCREIF Fund Index – Open End Diversified Core Equity plus a performance

hurdle of 50 basis points annually.

Private Equity Custom Benchmark – The MSCI ACWI IMI (Net) with USA Gross plus 150 basis points annually.

Opportunity Fund Custom Benchmark – A market value weighted aggregate of the benchmarks of the HFRI FOF:

Market Defensive Index, CPI plus 400 basis points, and the Public Markets Benchmark plus 150 basis points,

determined by the respective aggregate market values at the beginning of the year of each of the sub-asset classes in

the Opportunity Fund.

Total Fund ex-Opp Fund Benchmark – A combination of 56.3% Global Equity Custom Benchmark, 24.7% Fixed

Income Custom Benchmark, 8.9% Real Estate Custom Benchmark, 8.9% Private Equity Custom Benchmark, and

1.1% BofA ML 3 Month Treasury Bill Index.

Cash Performance Benchmark – The ICE BofAML U.S. 3-Month Treasury Bill Index.

Public Fund Universe – A universe of public pension funds with aggregate assets over $1 billion compiled by BNY

Mellon Performance & Risk Analytics in conjunction with Investment Metrics.

Private Equity Investment IRR Benchmark – An opportunity cost benchmark that shows the return that would have

been achieved had the cash invested in a private equity portfolio been invested in the MSCI ACWI IMI (Net) with USA

Gross plus 150 basis points annually. Under this methodology, hypothetical shares in a public market index are

purchased on the same dates and in the same amounts as contributions made to the private equity fund, and

hypothetical shares are sold on the same dates and in the same amounts as distributions received from the fund. The

Benchmark IRR is calculated using the cash flows and residual value of the hypothetical public index shares.

*Only the current composition of benchmarks are shown above. The complete history of each benchmark can be found in the

quarterly performance report.

Benchmark descriptions shown reflect benchmarks as of December 31, 2019.

24

Canada

France Germany Italy

Japan

Spain

United_Kingdom

United_States_of_America

0

50

100

150

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100

Days Since 100th Case

7 D

ay M

AV

New

Cases p

er

1,0

00,0

00 P

ers

ons

Canada

France Germany

Italy

Japan

Spain

United_Kingdom

United_States_of_America

0

5

10

15

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Days Since 100th Case

7 D

ay M

AV

of D

eath

s p

er

Day p

er

1,0

00,0

00 P

ers

ons

Evolution of Daily COVID-19 Cases from 100th Case

US Starts Social Distancing Measures,

March 15 2020, and ramps up testing

The trajectory of COVID-19 cases will be key in determining how long containment

policies remain in place and how the economy fares.

Source: Aon, ECDC

US Starts Social Distancing Measures,

March 15 2020, and ramps up testing

Source: Aon, ECDC

Spike in US

deaths caused by

reclassification of

deaths

25

-40

-20

0

20

Feb Mar Apr May

Date

% D

eclin

e f

rom

Jan

13

20

20

Ro

uting

Re

qu

ests

Fro

m D

rive

rs

region

Canada

Germany

United States

An Economic Catastrophe

Q1 GDP figures are indicating a sharp economic

contraction, with worse expected in Q2

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

GD

P G

row

th

(Qo

Q U

na

nn

ua

lize

d)

US Eurozone Consensus Forecast

Source: Bloomberg

Source: Apple. 7-day moving average shown.

Apple data point to transport activity picking back up

as lockdowns ease

The “Great Lockdown” looked to have been effective

so far in containing the spread of COVID-19, but at

the expense of what’s likely to be the worst recession

in generations

The scale of the economic damage is apparent

The unemployment rate is 14.7% in the US,

the highest since The Great Depression.

Eurozone GDP growth in Q1 was the worst on

record, with France recording its worst growth

figure since 1945

The length and severity of the recession will depend

on how quickly things can get back to normal

Germany, parts of the US, and a few other

countries have started to relax some of their

lockdown measures

Getting back to normal would likely take a

long time. Non-essential trips may continue to

be avoided even if official lockdown measures

ended

A severe “second wave” outbreak is a risk,

and if the virus starts escalating again another

lockdown may be needed

Sharp falls in trips outside

as the lockdown started

26

Central Banks to the Rescue? Not in a Public Health Crisis

Past performance is no guarantee of future results.

-1

-0.5

0

0.5

1

1.5

2

US UK Japan ECB Canada

Central Bank Policy Rates Through 2020

1/1/20

4/22/2020

12/31/20

Source: Aon, Bloomberg OIS Pricing

A second emergency rate cut by

the Fed on 3/15/2020 takes us

back to 0 to 25bps range

Where possible central banks around the world have eased policy, but with rates being low there is a

limit. Central Banks are also increasing liquidity operations as funding markets come under pressure.

On March 23, the Fed launched unlimited QE and expanding QE into bond markets where it has not

been deployed before.

UK cut rates by 50bps on

3/10/2020, and on 3/18/2020 cut

rates to 0.1% the lowest ever in

the UK.

Canada cut rates by

50bps on 3/4/2020, 50bps

on 3/13/2020, and 50bps

on 3/27/2020.

0

250

500

750

1,000

US UK Japan Eurozone

US

$bn

New Quantitative Easing MeasuresGovernment Bonds MBS Flexible

“QE Infinity”:

purchases of

unlimited amount of

treasuries, MBS,

corporate bonds

and student loans

The BoJ is extending

purchases of everything from

government and corporate

bonds to ETFs

Source: Aon

27

Fiscal Packages Are Large Across the G20

USA:

State of Emergency declared

releasing $50bn to states to

deal with virus

Payment of federal taxes

deferred by 90 days, freeing

up an estimated $300bn for 90

days.

Senate passes the Houses

stimulus package which

provides paid sick leave to

workers effected by COVID-

19, but there are some limits.

A $2 trillion stimulus package

approved in the US. Phase 4

is being discussed.

A further $400 billion has been

approved and signed into law

to replenish funds for small

businesses

28

Market Reactions

Equities are off their lows

Collapse in bond yields across the yield curve,

but yields are off their lows.

VIX has eased from spiking

Past performance is no guarantee of future results. Unmanaged index returns assume reinvestment of any and all distributions and do not reflect any fees

or expenses. Investors cannot directly invest in an index. Please see Appendix for index definitions and other disclosures.

29

Market Reactions

Credit spreads have come in

but still higher than average. High yield yields are moving higher,

investment grade yields are lower

The dollar has

been volatile



30

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

S&P 500 MSCI AC

World

US Credit

Spread

Int. Credit

Spread

Lng.

Credit

Spread

High yield

Spread

US Credit

Yield

Int. Credit

Yield

Lng.

Credit

Yield

High yield

Yield

US 10Y

Yield

US 30Y

Yield

20 Y

ear P

erce

ntile

Ran

k of

Val

uatio

n

Market Valuations Have Reacted to a Volatile Environment

5/22/2020

12/31/2019

Markets have re-rated extremely fast, but there is some uncertainty around how much value there is. Forward looking

measures of value may be using stale estimates, as the economic impact is so uncertain. These remain volatile.

Expensive

Cheap

Source: Aon, Factset

Notes: Valuations used: Equity markets = Next Twelve Month PE Ratio, Credit Spread = Option Adjusted Spread, Credit Yield = Yield To Worst, Treasury Yield = Yield To

Maturity



Documents

Colorado PERA · Capital Markets Review December 31, 2019 The announcement of a “phase one” U.S.-China trade deal, progress on the U.S.-Mexico-Canada agreement (USMCA) and easing