Gestión Logística: Herramienta Indispensable para la Competitividad

Asset Class Summary

0% 3% 6% 9% 12% 15% 13.0 11.1 13.6 9.1 Actual Policy Private Investments Real Assets

Alternative Investment Allocation

Policy vs. Actual (As a Percentage of the Total Fund)

As of June 30, 2013, the alternative investments portfolio had a market value of approximately $2.0 billion, which accounted for 24.1% of the total fund. Performance for the fiscal year was 13.8%, net of fees and expenses.

Alternative Investments Correlation Table - 5 Year Period

Sub-Asset Class Real Estate Commodities Timber Private Equity Private Debt

Real estate 1.00

Commodities 0.39 1.00

Timber 0.02 (0.09) 1.00

Private equity 0.58 0.41 0.24 1.00

Market Overview

The alternative investments portfolio contains a variety of asset types which are expected to perform quite differently from an investment standpoint. The following narrative provides a high level description of each market as well as some return data on how each performed during the past year.

Commodities, in general, refer to a group of tangible assets that are used as inputs to produce an end product. MOSERS uses an index that contains more than 20 individual commodities, each with its own distinct market. This broad set of commodities can be grouped into five categories: agriculture, livestock, energy, industrial metals and precious metals. While the returns for the commodities in each group tend to move together, each individual commodity possesses its own set of supply and demand characteristics, which can lead to returns that vary significantly from one another.

The Standard & Poor’s GSCI (S&P GSCI) is one of the major indexes used to track the performance of commodities. This index contains 24 individual commodities in five diverse sectors. The S&P GSCI assigns each commodity a weight

based on world production statistics in an effort to reflect the relative significance of each commodity in the world economy. Given this methodology, the index has a 69% allocation to the energy sector and is represented by six of the 24 commodities. Over the fiscal year, the S&P GSCI returned 2.0%, on a total return basis. During this period, the returns of the sectors varied greatly. The precious metals component experienced the largest loss over the year, declining 25.1%. The best performing sector, and the driver of the positive return for the overall index, was energy which increased by 8.2%. As mentioned earlier, returns within a sector can also vary significantly. For example, the commodities within the agriculture sector had the widest range of returns: cotton was up almost 15%, while coffee fell by over 35%.

Real estate is another asset type with a great deal of differentiation. Properties vary by geography, type, stage of

development, use of leverage and whether or not it is publicly traded. The institutional real estate market, a sub-set of the real estate universe, contains a variety of property types: office, industrial, retail, multi-family and hotel. A well-known indicator of real estate performance is the Dow Jones U.S. Select REIT Index, which tracks the performance of publicly traded domestic real estate investment trusts (REITs). The index contains a number of individual REITs that were formed to invest in large institutional quality properties within a specific property-type. For year ended June 30, 2013, the Dow Jones REIT Index returned 7.7%.

The final component within real assets is timber. Timber plays an interesting role in a portfolio since it possesses a number of characteristics that differentiate it from other assets. Timber, given its extended growth cycle, has a long term investment horizon. Once mature, timberland has the potential to generate significant cash flows over time. With proper management, these cash flows can be timed to help meet the liquidity needs of the investor. As an example, managers of mature timberlands can plan harvests in order to generate a targeted amount of cash. Additionally, managers can alter harvest schedules to take advantage of strong markets or to avoid weak markets. Another benefit, in the event that a harvest is postponed, is that the tree remains on the stump where it continues to grow and add volume. The NCREIF Timberland Index, which is maintained by The National Council of Real Estate Investment Fiduciaries, is used to measure the performance of private timberlands in a number of regions within the U.S. Over the most recent fiscal year the index returned 9.4%, which was the highest among the benchmarks used to measure performance of the components within the real assets portfolio.

Private equity and private debt are the two components included in the private investments sub-asset class. Benchmarking this sub-asset class has always been a challenge. In order for a benchmark to be meaningful it should satisfy a number of criteria. A quality benchmark should be: identifiable in advance, investable, able to be calculated frequently and consistent with the manager’s investment style. When dealing with assets in private markets these criteria are not met. The lack of an appropriate benchmark leads investors to use a variety of other methods, despite several shortfalls. One common method is to add a risk premium to an index of publicly traded equities, such as the S&P 500 Index. The rationale behind this approach is that an investor in private securities should expect to receive a premium above the return provided by the public markets. This incremental return is expected to compensate investors for the added risk and illiquidity associated with private investments. For the fiscal year, the private investments benchmark, the S&P 500 Index plus a 3% premium, returned 23.6%.

The alternative investments portfolio is comprised of a number of strategies. The performance of this portfolio is discussed in the next section.

95 Performance

The alternative investments portfolio returned 13.8% for the fiscal year, which matched the

policy benchmark return. The portfolio trailed the strategy benchmark return of 16.7% over the same time period.

The performance of the alternative investments portfolio reflects the blended return of the real assets (real estate, timber and commodities) and private investments (private equity and private debt) portfolios. For the fiscal year, the real assets portfolio returned 13.6%, while the private investments portfolio returned 13.9%. The 1-year return of the five components ranged from 21.8% to 1.2%. The 1-year result for each component falls within the expected range of outcomes. Results for the alternative investments portfolio and its benchmarks, for the latest 1-, 3-, 5- and 10-year periods, are illustrated in the bar chart to

the right.

The policy benchmark return for the alternative

investments portfolio is a weighted average of the allocation mix and the policy benchmark return of each component. In order to determine the amount of value-added, the actual return is compared with the policy benchmark. During FY13, the overall alternative investments portfolio performed in line with the policy benchmark. At the sub-asset class level, the real assets portfolio outperformed the policy benchmark for the fiscal year by returning 13.6%, compared to the 7.5% for the benchmark. This outperformance was offset by the underperformance of the private investments portfolio, which achieved a 13.9% return, versus a 23.6% return for the benchmark.

A review of the sub-asset classes within the real assets portfolio shows that the outperformance of the real estate portfolio was more than enough to offset the underperformance turned in by the timber and commodities allocations. Within the private investments portfolio, both the private equity and private debt portfolios found it difficult to keep up with the 23.6% return of the equity based benchmark, although the private debt component was very close. Over a longer timeframe, like the latest 10-year period, the alternative investments portfolio returned 9.2%, annualized, which outperformed the policy benchmark return of 8.5%.

As described in the total fund review section, the strategy benchmark attributes performance to decisions made by staff. These decisions to either deviate, within parameters, from the policy asset allocation or to make specific investment

manager selections are tracked on an ongoing basis. The strategy benchmark utilizes a set of indexes that are appropriate given the characteristics of the underlying investments. During FY13, the return of the portfolio trailed the strategy benchmark by 2.9%. This underperformance was due to the timber, private equity and private debt components of the alternative investments portfolio. While each 1-year return is meaningful, given the long term nature of the asset class, measurement over longer periods is more relevant. Since its inception 11 years ago, the portfolio has achieved a return of 10.2%, which outperformed the strategy benchmark return of 9.4%.

0% 5% 10% 15% 20% 13.8 13.3 4.7 9.2 16.7 15.0 5.8 9.3 13.8 14.5 5.2 8.5

Alternative Investments ReturnStrategy Benchmark** Policy Benchmark*

10 Year 5 Year

3 Year 1 Year

Alternative Investments Return vs. Benchmark Returns

* As of 6/30/13, the alternative investments policy benchmark was comprised of the following components: 40% S&P 500+3%, 24% Dow Jones U.S. Select REIT Index, 24% NCREIF Timber, and 12% Goldman Sachs Commodity. ** As of 6/30/13, the alternative investment strategy benchmark was comprised of

the following components: 44.6% S&P 500 + 3%; 28.9% real estate consisting of NCREIF, STIF Return, S&P MLP TR Index, actual return of Bayview; 17.6% NCREIF Timber; and 8.91% commodities consisting of S&P GSCI TR

Brokerage Activity

The table below illustrates the brokerage activity occurring within the alternative investments portfolio during the fiscal year. The activity resulted from trading activity in the publicly traded MLP accounts.

Soft Dollar Expenditures

There were no commissions directed for soft dollar credits during the fiscal year ended June 30, 2013. Alternative Investments - Brokerage Activity

Commissions

Brokerage Firm Shares Traded $ Volume of Trades $ Amount Value Per Share

Baird, Robert W & Co., Inc. 28,236 $ 1,122,474 $ 847 $0.03

Barclays Capital 162,768 5,527,574 3,144 0.02

BMO Capital Markets Corp. 4,894 102,904 147 0.03

BNY Convergex 3,071 92,230 92 0.03

BTIG, LLC 138,049 5,071,812 4,141 0.03

Cantor Fitzgerald & Co., Inc. 23,431 764,910 703 0.03

Citigroup Global Markets, Inc. 106,406 3,490,484 3,192 0.03

Credit Suisse Securities 8,636 317,796 86 0.01

Dahlman Rose & Co., LLC 2,351 15,798 71 0.03

Deutsche Bk Secs, Inc. 8,686 410,632 261 0.03

Global Hunter Securities, Ltd. 8,046 319,609 241 0.03

Imperial Capital, LLC 2,265 53,388 68 0.03

Instinet Corp. 1,368,627 58,329,265 13,686 0.01

JP Morgan Securities, Inc. 15,706 523,699 255 0.02

Janney Montgomery Scott 18,960 798,033 569 0.03

Jonestrading Institutional Services, LLC 222,517 4,457,550 6,676 0.03

Liquidnet, Inc. 110,582 3,988,740 2,212 0.02

Merlin Securities, LLC 643,349 24,297,652 7,986 0.01

Merrill Lynch Pierce Fenner Smith, Inc. 19,666 893,623 590 0.03

Morgan Stanley & Co., Inc. 19,171 460,679 575 0.03

Oppenheimer & Co., Inc. 4,767 225,201 143 0.03

Pershing, LLC 88,893 3,760,116 1,315 0.01

Raymond James & Associates, Inc. 5,218 191,567 157 0.03

RBC Capital Markets, LLC 75,553 3,088,950 2,267 0.03

Scotia Capital (USA), Inc. 3,565 177,155 107 0.03

Stifel Nicolaus 2,988 140,529 90 0.03

UBS Securities, LLC 80,015 2,823,360 2,400 0.03

USCA Securities, LLC 34,958 1,309,065 1,049 0.03

Weeden & Co. 1,327 27,545 40 0.03

Wells Fargo Securities, LLC 156,273 5,658,693 2,817 0.02

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