Investment Report – Fall 2013

First Quarter FY 2014, September 24
St. Paul Teachers’ Retirement Fund Association

Uncertainty, in August, both about when the Federal Reserve will begin its curtailment of bond buying and continuing Congressional haggles over the funding of the Government, caused securities markets to pause from their earlier “bullish” mood. As a result, a strong July trend was nearly erased by the August swoon. Since July and the start of a new fiscal year, the Fund’s portfolio is up about 1.4% (net of fees) but slightly trails its benchmark return of 1.9%. In August, the portfolio fell 2.3%, following July’s strong 3.7% advance. The portfolio’s annual target return stands at 8%. The Fiscal Year’s first quarter, through September 30, often sets the tone for the ensuing twelve month period.

A look at the portfolio indicates that domestic and non-US equities generally added value. However, emerging markets and real estate stocks were lower. On the fixed income front, the Plan’s high yield portfolio rose 1%, while investment grade global (US and non-US) bonds were down slightly over 1% for the two month period. Alternative holdings were mixed. Over the longer term, the three year return has generated a 12% return and the 10 year number stands at 9.1%. Total portfolio assets at the end of August were approximately $930 million.

The Board is continuing to make selective adjustments to the portfolio to bring the asset mix in line with its established longer term asset targets. The Policy calls for 55% equity, 20% fixed income, 11% real assets, 9% private equity/alternatives and 5% hedge funds.