2 - SDIC Presentation - FY17 Friday, January 15, 2016 9:12 AM SDIC FY 2017 Budget & Investment Performance Presented to Appropriations Committee January 21, 2016 • Organization Chart • Assets • Cost Efficiency • Long-Term Plan • Budget Funding Sources • Compensation Overview • FY 2015 Budget Review • FY 2017 Budget Request • Investment Performance • Trust Fund Summary • Appendix
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~ ~t-,l ~ ~ ~ ~ ~ ~ p~ ~ ~ ~ ~ ~ §-~ 3 ~ ~;~r~i ~ )> FY 73 I $13} FY 74 D $2 11 V, •oo • o• • FY7S I $26 0 V, m FY 76 D $297 !S'l? X'f;' ~ if!S' :;,,;- 5 3 FY77 0 $337 C: c;; Cl C: :t~ g_ ~~s:s- ,-+ FY78 D $392 V, FY79 II $449 Q~~;;t;,~2 ;;o FYBO II $S17 ;;-2 ~~. ~:;,~. FY U DI $561 ~ :<"IP,-~~§~ [ ~ § §~~a.~ FYB 2 .. $611 ;: ! §0..a. 2' 2 FYU ... $791 "- :, :<l ~ ;. "- FYB4 ... $80 ~ ,: 3 [~ :, "- FYBS - $1 ,0 n F YB6 ... $1, 2'8 ... I ... ,. 0 ,. LU~ FYB7 .... $1 ,453 I',.,) UJ (.u ....... Lr1 '"'-.J pl, 000 0<:1'1 t...i.WO\ OOPIJI.P.O.P.-...JO'I oow:i:.. oo ;..., i..n ~ FY88 - S1,sn Sl ,803 b l $1,870 00 SZ,055 $1,2&3 $2, 605 $VU $3, 0 411, FYOS. FY06. $3,529 S• . lA• fYi7 - $4,&n F Y9' $$,53• FYOO $6,069 FYO l $6 ,111 FY 02 $5..831 FY03 $6,318 FY04 $7,168 - $7,872 FY~ $1 ,5.80 - FY~ $10 _ ,049 FYM $9 ,l GO FYM $7, 410 FY W $8,300 FYU $9 , 948 FYU $9,903 FYU $11,312 FY~ $13,049 FYB $13, 289 N
I Cost Efficiency Management Fees 1.7 0% •¥ 1.04% 0.68% 0.54% 0.40% • 0.10%* so:o st,IO :r.t:rr .:I : r.t :rr.:I & """ OJt!r.le M ?neg:r:. Difference between SDIC cost of .40% and benchmark cost of .68% is $37 million per year • SD IC projected expenses for FY 201 7 usi ng adjusted assets and expe c ted average perfor mance incenti ves •• Plus 20 % profit participation after preferred return 3
~ Long Term Pl an Executive Summary Projected LTP Budget mm .E:t.llUZ I NV E STMENT OFFICE BUDGET Persor1al Services N ber of Emp yees 3'2.25 3425 34 .25 Ba se Compen sa t: o.n - Tot al St s ff 5, 159.02.4.e~ 7, 008 , 82'3.39 G.5e2.;; 01.07 St ':l ff A:rnm e y( 1/4 FTE ) & lnt -=: rns 62,50 1. 4.3 72 ,4. :6.29 83 . 996 . 70 I nv es tm e rd Council 6,24o .O 7.8 5- . ilJ ,8 5. 00 Ftexib"liry fund s- Re tir e ments & R es ign stic ns 155,552.e6 160 .328.1 20s . a49 . 77 I vestme n..t l~ enii\'e Maxim um 8, 92 1, 54, . lr.l 12 ,92 4 , 52 . 37 16,605,918.22 Bene fits 2,23B,52ij_ i(!,J 3,11 0, 937 . 18 4.023.538.14 To!al Pers ona. I Se .rv ic es 16 .541,404. 00 23 , 30 4. W2-40 3D.4~ ,978.89 Opera ti ng Expenises Co nt rs ch.J sl Se rvic e=, 1,656.795 1. 954 1• 2 U3 J,72 Tra "J el 85,00 1ID .M8 120 ,052 Of e Supp li es & Posta ge 12,733 1 5.634 18, 18 2 Ca pi tsl A sse ts 44. 400 51 .4 2 c4.670 T o~ al Op erating E.x pe ns es 1,798,92; 2, 124 . 916 2.4-35 . 476 Tota l lnves bn en t Counc il Budge t 18,340 . 334 25.4?;,re-3 32 ;~'3. 455 AS SET SUMMARY ' I nt emal As =,et;. 11 03,988,5 9 13 , 912,0ilB.222 17 .6~}.1 14 ,826 Exte ,rn As se ts 3,474,943,743 4' ,393. ~.754 5, 5Se, , 2,.:2.050 T o:a i As =,e ts 14 . 478,932,215 18 ,305.273,9 6 23 , 2711,466 ,877 EXPENSE SU MMAR Y 18,340 , 3~ I nt ernal Expe n..s es 25,42,.e-3 ~ . 00-3.455 38,224, 381 48 . 325,Q23 61 ,449.373 Extern tanag er Fees n.7s.s.m To~ Expen .se_s 56,554.7 5 94~3.327 UN IT COS T SUMMARY " 0.094% 0. 1 1% .10· 3% Internal Expen ses ss % of Tota l Adju ste d A ssets To:s Expen 5e-S ss % of ot91 Adjusted Assets 0.3Q8 ~ ,; H E ~% 4 7% • Pro_i:ctio ns b:,.;;e j on 1o.ng .: ;;..n a" ure d rEn.mS ~i:lied to e/30/15 35 . s, : ..;; . l! pc b 1ed e :::::h Jl.ll: 30. '"\Jnit Cos, Sirnma.ry ba :ae d on ta:.a l ass.: :: a dj 1J s te d ro- lol'{l ·tE! mi e:,;p errse.s u;:"r.g assu med · avJ i nv pe l'ii iro:rnive :a 4 'IG'.LE &
I Budget Funding Sources • South Dakota Retirement Sys tem - 88.0% • Cash Flow Fund - 2.0% • Dakota Cement Trust - 2.6% • Ed uc a tio n Enhancement Trust - 4.1% • Heal th Care Tr ust - 1.1% • School & Public Lan ds - 2.2% Budget funded by assets under management 0% General Fund appropriation Note: S& PL sha re of SD IC e xp en ses paid from ea rn in gs of Cash f low Fund 5
Compensation Overview I • Long term results have significantly exceeded benchmarks - Added 35% beyond benchmark to SDRS asse ts in th e past 17 years • Conti nued success dependent on high caliber team - Internally manage most asse ts us in g internally generat ed re search • Future team depends on retention of talent pipeline and trainers Develop internally as cannot compete for top tier experienced talent • Compensation plan al igned with goal of adding value over long term - Motivate superior long -t erm performance and retain successful st af f • Compensation plan revised in 2006, updated in 2010 and 2013 - Council target is 70% of cost of living ad justed m ed ian industry pay to balance gett in g a good deal for So ut h Dakota without l os in g the good deal if we cannot keep our people - Incorporates performance in centi ves - Pay was increased to 70% target after 2006 study, and by 2013 study had fallen to 55 % 6
Compensation Overview, continued I • Council changes i mplemented in 2014 to get back to target - E xpa nded incentive compen sa ti on plan as opposed to ad justing base compensation - In ce ntiv es expanded to include longer term and s tr etch incen ti ves and expected to average 80% {0% to 200% ) - Incentives aligned with th e goa l of adding va lue and only paid if add va lue • Cost efficient due to internal management capabiliti es - Securing team to preserve internal capabiliti es best chan ce to re ma in cost efficient - Int ernal cos t .1% wi th expected average incent ives 7
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