update on investment returns · 2010. 3. 15. · 9update on investment returns 9summary of actions...
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Update on Investment Returns Summary of Actions Taken Pursuant to Expanded Investment Authority Granted Under Senate 703 (S.L. 2009-98)2009 Debt Affordability Study, Funding the Pension System Additional Items To Consider
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PUBLIC FUND RISK/RETURN COMPARISON
RETURNS 1 Year 3 Year 5 Year 10 Year
25th Percentile 21.95% 0.01% 4.26% 4.48%
Median 19.20% ‐1.13% 3.71% 4.03%
75th Percentile 16.36% ‐2.07% 3.13% 3.44%
NCRS 15.47% 0.38% 3.87% 4.27%
RISK (Std. Dev.)
25th Percentile 13.07 13.9 11.44 10.77
Median 11.95 13.06 10.84 10.21
75th Percentile 10.06 12.04 10.02 8.91
NCRS 10.66 11.17 9.23 8.87
SOURCE: BNY Mellon Total Funds ‐ Public Funds $1+ Billion (Gross of Fees)
NCRS Has Experienced Above Median Returns and Below Median Risk
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North Carolina’s Target Investment Rate is One of the Most Conservative
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North Carolina Has A Higher Percentage of Fixed Income In Its Portfolio
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New Authority Has Not Significantly Altered Asset Allocation
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Credit Strategies Portfolio Rate of ReturnManagers 1-Year
AG Global Debt Strategy 48.02%
GSO Cap Opportunities 16.40%
AG Commercial RE Debt -50.40%AG TALF NAAG Cap Recovery V 8.79%AG Cap Recovery VI 16.78%
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Only seven states have the highest rating from the 3major rating agencies. They are: Delaware, Georgia,Maryland, Missouri, North Carolina, Utah and Virginia
AAA ratings are based on, but not limited to, the following factors: ◦ Level of reserves◦ Stability, diversity, and structural balance in the revenue
system◦ Debt management◦ Management of other long-term liabilities
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$-$100$200$300$400$500$600$700$800$900
2005 2006 2007 2008 2009
Years
Balance in RainyDay Fund = $150million at 6/30/09
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$(1,500)$(1,000)
$(500)$-
$500$1,000$1,500$2,000$2,500$3,000
2005 2006 2007 2008 2009
Years
UnreservedReserved
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Total General Obligation
Special Indebtedness
$1,901.0 million $487.7 million $1,413.3 million
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Maury Correctional Institution $ 16Biomedical Research Imaging Center $223 Repair & Renovation Projects $ 50
Subtotal $289Less project savings, etc. - 131Total net new authorizations $158
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4 % 2010 2011 2012 2013 2014
Total Capacity $18.1 $0 $91 $626 $361
Annual Capacity $9.1 $9.1 $9.1 $9.1 $9.1
4.75% 2010 2011 2012 2013 2014Total Capacity $1,644 $0 $177 $712 $415
Annual Capacity $575 $575 $575 $575 $575
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2010 2011 2012 2013 2014Total Capacity $0 $0 $33 $21 $299Annual Capacity $0 $0 $0 $0 $0Actual Ratios 3.92% 6.90% 6.41% 6.17% 5.94%
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2012 actual projection
TargetD.S. % Revenues*
Ceiling*
General Fund (3.99%) 4.0% 4.75%Transportation(6.41%) 6.0% 6.0%Combined Result (4.30%) 4.27% 4.92%
*Based on 2007 revenues
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TSERS
Estimated Salaries $10,193M (GF Only)
FY09-10 Actual 3.57% = $364M
Currently Appropriated
FY10-11 Rate
4.93% = $503M
FY10-11 ARC 6.71% = $684M ($181M more than $503M)
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Meeting The ARC is Still Only A Small Percentage of the Total Asset Losses
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Retirement Contribution as % of Pay
13.0%
10.4%9.4%
8.1%7.3%
6.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
VA GA TN SC LargePrivate
NC ARC
Source: FY 08 Public Fund Survey, VRS CAFR, Bureau of Labor Statistics
NC Employer Contribution Is Relatively Low Compared to Other Funds
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Employer, Employee and Normal Contribution Rates Compared
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Projected Contributions at Current Assumption of 7.25% Return
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What Happens if We Delay Making the Actuarial Required Contribution
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Projection of Contribution Rates with a Market Return of 6.25%
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•According to the N.C. Employment Security Commission, during 2009 North Carolina paid out $2.5 billion in Unemployment Insurance benefits.
•At current rates of borrowing, North Carolina will owe the federal government between $3.2 and $3.5 billion by the end of 2010.
•The borrowed funds are interest free until December 31st, 2010. After that an interest rate of 4.36% would apply.
•At that interest rate, North Carolina will owe an additional $153 million in interest to the Federal Government.
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We Are Accumulating Debt to Pay Unemployment