Fresno County Employees Retirement Association State Street - - PowerPoint PPT Presentation

Fresno County Employees’ Retirement Association

State Street Securities Finance Program Review

December 3, 2008

2

Securities Finance

Global Presence

Full Service Center Sales/Account Management Office Trading Location Information as of September 30, 2008.

• Boston, Massachusetts

(World Headquarters)

• Los Angeles, California
• Montreal, Quebec
• New York, New York
• San Francisco, California

Toronto, Ontario

• Dublin, Ireland
• Frankfurt, Germany
• London, England
• Luxembourg City, Luxembourg
• Milan, Italy

Europe/Middle-East/Africa

Hong Kong, China Sydney, Australia

• Tokyo, Japan

Asia/Pacific The Americas

– Over 30 years of securities lending experience – Lending as agent for 450 clients worldwide in more than 45 markets – Over 150 borrower relationships – 14 regional locations with 6 trading desks and 450 employees

3

Securities Finance

Program Size

Non U.S. Fixed Income 22% Non U.S. Equity 14% U.S Fixed Income 39% U.S Equities & Corp Bonds 25%

U.S. Fixed Income 13% Non U.S. Equity 21% Non U.S. Fixed Equity 17% U.S. Equities and Corp Bonds 49%

Assets Available for Loan More than $2.5 trillion On Loan Balances Approximately $600 billion

Currency reflected in US dollars. Information as of September 30, 2008.

4

> Lending with State Street since January 2008 > Acceptable Forms of Collateral

– Cash: U.S. currency only, reinvested in State Street Quality D Fund and a pool of assets purchased by FCERA’s prior securities lending agent – Non-Cash:

– Irrevocable bank letters of credit – Securities issued by the U.S. Government or its agencies – Supranational debt – Asset-backed securities – Agency and private label mortgage-backed securities – Corporate bonds – Municipal debt – Sovereign debt – Money market securities, commercial paper, and bankers’ acceptances

> Fee Split: 80% Fresno County / 20% State Street > Custom list of approved borrowers: ERISA eligible borrowers only > State Street provides indemnification against borrower default

Securities Finance

Fresno County Employees’ Retirement System Relationship Highlights

5

Securities Finance

Earnings & Performance: Fresno County Employees’ Retirement System

Funds Enrolled in Lending FCRA-Wellington FCRB-Brandywine FCRD-Aronson and Partners FCRE-Loomis, Sayles FCRF-Western Asset FCRG-Templeton FCRI-Intech S&P FCRL-Blackrock FCRM-Kalmar Mgmt FCRN-Artisan FCRP-Oechsle Intl FCRS-Bradford & Marzec

FY 2008* FY 2009**

• Wtd. Average/Total

Average Lendables ($) 1,351,538,916 $ 1,278,649,524 $ 1,322,383,159 $ Average On-Loan Balance ($) 455,903,225 327,058,948 404,365,514 Average Utilization 33.7% 25.6% 30.6% Earnings by Program US Equity ($) 1,571,350 $ 881,969 $ 2,453,319 $ Non-US Equity ($) 420,739 145,031 565,770 US Government ($) 314,976 211,387 526,363 US Corporate Debt ($) 160,985 55,050 216,035 Non-US Fixed Income ($) 3,397 65 3,462 Total ($) 2,471,447 $ 1,293,502 $ 3,764,949 $ Components of Spread *** Demand Spread (bps) 53.1 52.6 52.9 Reinvestment Spread (bps) 77.7 89.1 82.3 Net Spread (bps) 130.8 141.7 135.2 Return v. Lendable Assets (bps) *** 36.6 30.3 34.2 *FY 2008 data includes January 2008 (program inception) through June 2008. **FY 2009 data is through October 31, 2008. *** Risk-free rate is Fed Funds Open. All spreads are annualized. Arthrocare Corp $115,395 France Telecom SA 53,848 US Treasury Note , 3.25%, 12/31/2009 49,502 Life Time Fitness Inc 49,375 US Treasury Note, 4.875%, 6/30/2012 45,856 $313,976 Top 5 Earners Since Program Inception

6

Securities Finance

Overview of Assets Held in FCERA’s Separate Account

Final Legal Average Life Security ID Security Name Maturity Date Jan 31 2008 Nov 14 2008 Difference in years Moody's S&P Fitch Assets brought to State Street from previous lending agent 16705WAD5 Cheyne High Grade ABS CDO 2004-1A A1D 11/10/2008 15,000,000

• (15,000,000)

202649AA7 Commodore CDO II 2003-2A A1MM 12/12/2038 14,313,794

• (14,313,794)

23910PBA2 Davis Square Funding 2004-2A A1E 5/6/2039 15,000,000

• (15,000,000)

46458KAH8 Islandsbanki HF Global 2/22/2008 15,000,000

• (15,000,000)

48247S001 KKR Atlantic Funding Trust Liquidity Note 3/13/2008 8,173,335

• (8,173,335)

52517PJ28 Lehman Brothers Hldgs Inc. 5/29/2008 15,000,000

• (15,000,000)

96524CAH1 Whitehawk CDO Fdg Ltd 2004-1A A1H 9/15/2008 15,000,000

• (15,000,000)

0673P2BK7 Barclays Bank PLC 8/10/2009 15,000,000 15,000,000

• 0.71

Aa1 /*- AA /*- AA 073928W82 Bear Stearns & Cos Inc 7/16/2009 8,000,000 8,000,000

• 0.64

Aa2 A+e AA- 38141ELL1 Goldman Sachs Group 3/24/2009 15,000,000 15,000,000

• 0.33

Aa3 NR NR 46623ECJ6 JP Morgan Chase & Co. 6/26/2009 3,299,104 3,299,613 509 0.58 Aa2 AA- NR 59018YSV4 Merrill Lynch & Co Inc. 2/6/2009 6,837,563 6,827,743 (9,820) 0.20 A2 /*+ A /* A+ /* 59018YWT4 Merrill Lynch & Co Inc. 1/30/2009 10,002,815 10,000,572 (2,243) 0.18 A2 /*+ NR A+ /* 61747YBJ3 Morgan Stanley 5/7/2009 10,000,000 10,000,000

• 0.45

A1 /*- A+ A 637432HW8 National Rural Utils Coop Fin (Extendible) 7/9/2009 18,000,000 18,000,000

• 0.62

A2 Ae A 694477JW1 Pacific Life Global Fdg (Extendible) 11/9/2009 15,000,000 15,000,000

• 0.70

Aa3 AAe AAe 929903EC2 Wachovia Corp 8/20/2009 9,000,000 9,000,000

• 0.74

A1 /*+ A+ /*+ A+ /*+ Total Assets brought to State Street 207,626,612 $ 110,127,928 $ (97,498,684) $ 0.53 State Street Quality D Fund Holdings 475,762,736 $ 175,305,712 $ (300,457,024) $ Total Assets held in FCERA separate account 683,389,348 $ 285,433,640 $ (397,955,708) $ Credit Rating As of November 14, 2008 Amortized Cost

7

SSgA Global Collateral Management

Portfolio Characteristics as of October 31, 2008

Quality D 1-Day Net Yield (360 Basis) 3.50% Shares Outstanding 49,275,489,343.45 Floating Rate % 79.63 % Foreign Issuers 46.20 WAM 29.06 WAM to Call 29.06 Call v. Mat Spread — % Callables 0.00% Avg Life -Expected Maturity 381.68 Floating Index Breakdow n % of Fund Fed Funds 0.00 1 Month LIBOR 29.27 3 Month LIBOR 50.36 Prime 0.00 Floating Rate Reset Buckets % of Fund Next Business Day 0.11 2-7 Days 3.36 8-31 Days 48.97 1-2 Months 14.24 2-3 Months 12.90 Repo Collateral % of Fund Treasuries 0.51 Agencies 0.00 Agency MBS 4.82 Money Markets 0.00 Corporates 0.00 Asset-Backed 0.00 Equities 0.00 Whole Loans 0.00 Credit Quality Breakdow n LONG-TERM RATINGS % OF FUND AAA 58.19 AA 17.18 A 2.15 BBB 0.08 SHORT-TERM RATINGS % OF FUND A-1+/P-1 16.20 A-1/P-1 5.38 SPLIT — OTHER 0.83 Liquidity Schedule % of Fund Next Business Day 8.62 2-30 Days Liquidity 11.20 31-60 Days Liquidity 5.18 61-90 Days Liquidity 0.81 91-120 Days Liquidity 2.68 121-150 Days Liquidity 2.25 151-180 Days Liquidity 1.83 181-360 Days Liquidity 13.06 Greater than 360 Days Liquidity 54.37

CD 10.93% Asset-Backed 54.63% Bank Note 16.35% Repo 5.33% ABCP 6.25% TD 0.60% Corporate 5.91% *No SIV, No CDO, No Extendible Liquidity Note

8

Quality D Sector Characteristics

QD

Receivables and Securities 1.33% Structured Investment Vehicles 0.00 Hybrid 0.99 Credit Arbitrage 2.61 CDO 0.00 Single Seller 1.32 SLN 0.00 % Per Fund 6.25%

ABCP Conduit Sub-Sector Breakdow n As of 10/31/08

QD

Subprime 0.05% Alt - A 0.37 Second Lien (Wrapped) 0.00 HELOC 0.26 % Per Fund 0.68%

Home Equity Sub-Sector Breakdow n As of 10/31/08 ABS Sub-Sector Breakdow n As of 10/31/08

QD

AU Residential Mortgages 2.84% Auto Retail 0.30 CLO 4.36 CMBS 3.51 Credit Card 17.18 Floor Plan 0.82 Home Equity 0.68 Other 0.80 Student Loan 1.95 UK Residential Mortgages 22.19 % Per Fund 54.63%

9

0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50% 2.75% 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 10/1/2007 10/15/2007 10/29/2007 11/12/2007 11/26/2007 12/10/2007 12/24/2007 1/7/2008 1/21/2008 2/4/2008 2/18/2008 3/3/2008 3/17/2008 3/31/2008 4/14/2008 4/28/2008 5/12/2008 5/26/2008 6/9/2008 6/23/2008 7/7/2008 7/21/2008 8/4/2008 8/18/2008 9/1/2008 9/15/2008 9/29/2008 10/13/2008 FF Target FF Effective LIBOR 1M Quality D

Quality D Yield Profile: October 2007 through October 2008

10

Securities Finance

Biography

Angela Hill Assistant Vice President Account Management, Securities Finance Angela Hill is an assistant vice president and relationship manager in State Street’s Securities Finance division. She is responsible for ensuring

• verall service delivery and satisfaction for U.S. lending customers, predominantly in the U.S. public fund and not-for-profit sectors. She also acts

as the point of contact and advocate for Securities Finance-related matters for her customers.

• Ms. Hill joined State Street and the account management team in 2007. Prior to State Street, she was a vice president in the institutional sales

group at WaMu Capital Corp., where she distributed fixed income securities primarily originated by Washington Mutual Bank. She also worked as a senior auditor at Deloitte & Touche, LLP, where she serviced a variety of financial services companies, including mutual funds, hedge funds, investment advisors, banks and broker-dealers. She also participated in audits of pension plans and not-for-profit organizations.

• Ms. Hill graduated from Western Washington University with a Bachelor of Arts in accounting and a minor in business administration. She

previously held a license to practice public accounting in the state of Washington (retired in 2003) and is currently pursuing the Chartered Financial Analyst designation.