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1818 Society Annual Meeting PowerPoint PPT Presentation


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1818 Society Annual Meeting. Pension Plan Performance October 24, 2007. Road Map. Highlights 2006 Funded status Plan performance Real Estate update Hedge Fund update July/August 07 market stress Concluding Remarks. Highlights 2006. Staff Retirement Plan (SRP)

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1818 Society Annual Meeting

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1818 Society Annual Meeting

Pension Plan Performance

October 24, 2007


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Road Map

  • Highlights 2006

  • Funded status

  • Plan performance

  • Real Estate update

  • Hedge Fund update

  • July/August 07 market stress

  • Concluding Remarks


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Highlights 2006

  • Staff Retirement Plan (SRP)

    • Assets increased by $1.6 billion to $14.0 billion

    • Closed Group Liabilities increased by $0.8 billion to $14.3 billion

    • Return of 14.3% outperforming benchmark by 3.1%

    • Funded ratio improved from 92% to 97%

    • Bank contribution rate of 12.23% forFY08 (18.35% in FY07)

  • Retiree Staff Benefits Plan (RSBP)

    • Assets increased by $0.24 billion to $1.45 billion

    • Closed Group Liabilities increased by $0.11 billion to $1.85 billion

    • Return of 15.2% outperforming benchmark by 3.6%

    • Funded ratioimproved from 69% to 78%

    • Bank contribution rate of 6.54% for FY08 (7.82% in FY07)


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SRP - Funded Status

Funded ratio is (MV of Assets)/(Liabilities)


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Total Bank Contribution Rates for FY03 - FY08


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SRP - Asset Allocation as of December 31, 2006

US Equities

19%

Non-US Equities

16%

Private Equity

9%

Real Estate

5%

Hedge Funds

11%

Global Fixed Income

40%

Strategic Asset Allocation is currently under review


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Plan Performance (2006)

  • Second largest excess return on record for the plan

  • Alternative investments played a key role


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*Numbers are preliminary

  • Continued strong performance during 2007

  • Alternatives contribution likely to be revised upward at year-end

  • Plan weathered well the July/August market turmoil

*Plan Performance (Jan ‘07 – Sept ‘07)


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Real Estate Portfolio

  • Plan does not invest in residential homes/mortgages

  • Commercial RE has much better fundamentals than residential and is a great long-term diversifier

  • The industry is cyclical but subspaces/geographies follow different cycles

  • Strategy has a 33 year track record and takes advantage of differences in cycles across subspaces

  • RE portfolio is well diversified by geography, property type and investment strategy.


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Commercial RE Vacancy Rates by Sector


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I

II

III

IV

V

VI

U.S.

  • Office – CBD

  • Industrial

  • Northeast

  • Pacific (ex So. Cal)

  • Office – Suburban

  • Sunbelt

  • Hotels

  • Office – Midtown Manhattan & So. Cal

  • Apartments

  • Pacific – So. Cal

  • Retail – Malls

  • Retail – Strip Ctrs

  • Self Storage

  • Midwest

Bottoming

Recovery

Expansion

Balanced

Slowing

Correction

Europe

  • Germany

  • Netherlands

  • Italy

  • Belgium

  • Austria

  • Sweden

  • Finland

  • Norway

  • Denmark

  • London City & West End Office

  • France Office

  • Spain Office

  • UK Retail

  • Continental European Retail

  • Switzerland

Asia

  • East/Central Australia Residential

  • Japan Office

  • Tokyo Residential

  • Hong Kong

  • China Office

  • Singapore

  • Malaysia

  • China Residential

  • Australia Retail

  • Australia Industrial

  • West Australia Residential

  • Australia Office

  • Indonesia

  • Thailand

Global Cycle Chart, mid 2007

Source: Morgan Stanley


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Real Estate Portfolio by Property Type

Source: Morgan Stanley


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Hedge Funds Portfolio

  • There are many different types of HF portfolios with dramatically different risk/return profiles

  • WB’s HF portfolio is constructed to have low volatility and to seek positive returns across market environments by limiting downside risk

  • Portfolio rebuilt during 2000-2003--is now very diversified across strategies, geographies and number of managers

  • Equipped to deal with high profile losses but has avoided them so far

  • Hedge funds techniques permeate all asset classes nowadays--useful source of intelligence


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Hedge Fund Diversification

  • Very diversified portfolio: more than 40 managers across all strategies and geographies

Source: Morgan Stanley


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Hedge Fund Risk Adjusted Returns

  • HF provide substantially higher risk-adjusted returns compared with other public asset classes.

Performance and Risk of HF PortfolioJan 2003-2007 (Sept*)

* Numbers are preliminary


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Hedge Fund Performance: Consistency

Returns of SRP HF Portfolio, 2000-2007 (Sept *)

* Numbers are preliminary

  • HF portfolio produced consistent and positive absolute returns

  • Staff choices of managers added significant value

  • Return stream is excellent diversifier for plan

Source: Morgan Stanley


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Stress Test: The July/August 07 Episode

  • Market turmoil was triggered by failure of two funds that invested in CDOs

  • It resulted in a repricing of risk across markets

  • The HF portfolio showed great resilience

Performance of WB PortfolioJuly / August 07 (Sept *)

* Numbers are preliminary


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Concluding Remarks

  • Funded status of the plan continued to improve during 2006 and is currently well funded

  • In 2006: Large value added component from pension team

  • Real Estate and Hedge Funds: high risk-adjusted returns; great diversifiers

  • Plan weathered the July/August market stress well

  • Implications for Plan:

    • diversify

    • take advantage of changes in asset management

    • focus on long term trends


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