Joint Cotntnittee on Appropriations Fiscal Year 2013 South Dakota - PDF document

Joint Cotntnittee on Appropriations Fiscal Year 2013 South Dakota Investment Council February 8, 2012

u> .C CURR.E,'\"T COUNCIL \:!EMBERS: ~~,ith:\? Board J c,seph A. Anglir~ S pea..JJ sh ( Chm ) W es ley G. T «h ette,, Br ooking~ (Vice Chair) Hu gh !v l Barte! s, W atert own fon Hw1o te r: ~fadi ro n J im M oaru . Y .nh. i on Souttl.D-dota Jarrod JobJ~on~ S &PL Com:iillssioner Im .:- €- !tlfiln!C011ll d.l Ri chard S;:.ttg~~ S'bte Tr 2'.aSllll' o:r Rob Wylie, SD RS Admioistrator Bu.:: lir. ~ :S Se:retar\O' Officer Re:~jcctin ~. :ma.s:er l.aDie.Rfs s ..laANJ Cd ~ aF .m~ .:\s:t hl.;."ESt Officer . A.s n [oye :.1 O:ft1:er A::::t Icr i.'l: st Office 0 lob al! Eq I • .;xb:tt.ag: Fix~ ilh:01.'1e ' .Ji.lt llilv F ir....e.<tili.C-cm.i:,'0->" ... riv t'IL'I Fiigg~ Chr' .:.Nf' k.on Ta m: my Orr rn Br - Sr. Portfu Eo 1-fun3 g,:1 Portful:i o ). ~a:;icr Sr. PortfoliD l\1anaz:r Global Equjty G lob o.!Eq, .. 'ty Fix~ EntOU!.e.iHES P Secior In v e.:'W!.e!I.: s:,.·, S ,lwft. Me -1"i.ss a H. Wo i '{ l!l a Sr. Portfolio ti. ia.mE-:r .Sh s 7* _ \~·t.son . t.i..cCO" JD[at'.If: Sr,rl.lid C ap Equir:,· C inqt.. ' Plc lrc7 i "ng .Sc. orz He .s :; -~o~!.:l!ls gor PortfoU o ). larJa:;er G lolr- dEq,.c'ty -~oc P-Drtf olio ~. ::1 Global Equjty [n\'-,!~1m:l!lt C cm v Arb)Hj:::h Yi -ei.d Jal'l2t6d CaiuiiCrurfsr A.::.:oc Pm tf olio li. fu .l1.rc()"IJD[ant 5m&Iid Cap E quir, RtJz&D~!S ~JKangas Jarrod Edsis n A.:::Eoc Portfo lio • - m ~rn"o!!io:!\ wi..;:!S!;er Gl o bal Eqtriry Glolr- d F.q,L'ty - Im · i!:.11:l:!:.l!i t Dc:r c. i Hmi.g Ar',11r.J'ofl R e>ifE,!d! A.::.:oc Portfolio M ?J }1.(CQrlJD [:mt ·"' " Portfolio M er Sm1 1\ lid Cap Eqwr: , C cm v ArlvHi gh Y ield Peggy N aR ssig futPrar i 'er .Dan i. e l.! e ScY'..tr .. fr i! A!: · !"oc Pon fo l fo M gr A.:: .:oc Portfo lio M?I G lolr- .! Eq,_.'ty - Global Eqiljrf [O '\' i!;;ttl!:flt J,ff'El/ef.0n Rm$ 3pir.ar . il:wc Portfolio • fu .l1 .r c O" mrant Sml!, lid C ap Equi,y Re:::ea.rcb_~, :t ~V: .maJ Su.i' ey C cm v .iub .i J-ligh Yield .A.::i:2m Schu. =.a?.> (t:,;ie Dos . ~.f6 r •. k!"oc Portfolio ;,. _ ~ A!~ Portf olio l\. !a" G lolr- d Eq,.c'ty - Global Equjty P.er.ceP..ar.daJ lesJ1i eJ J- .e July 20 11

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ South Dakota Investment Coun cil Assets Managed Fiscal Years 1973 to 2011 and Fi sca l Year 2012 through 12/31/11 OI .. X ' ... 0 0\ ... Ill ,;:; ... i ... ... ,;:; .. .. 0 .. - "' X .. :1 .. ... " 0 ... :g ... ~ " - ... ... Assets as of December 31, 2011 $ in Millio ns D Sout h D ak ot a Ret irement Syst em $ 7,453.0 78.l')' c, :I ... $ ... ... ::: ,,; Healthcar e Trus t Fu nd 10 1.l 1.0% ... "' ... "' q ,,; ... D Ed ucatioo Enh an ceme nt T rust Fund 3 67 .8 3.9% "l ... "' rll .. "' Cemen Plan t Retirement Fu nd 45 .5 0. 5% i,t .. a School & PUb ! ic Lands Fund .. 182 .0 1.9% ... .. - a D ak ota Cem ait T rust Fund ... 23 5.8 2.5 ~ ' c, .. South D ako ta Ca , sh Fl ow Fu nd 12 . . 1'% ... "' 5 9,538,3 100.0% "! ... ... ~ .. "' t 0 ~ ... ... 1:1 ::l, ... N .. ... "' ~ .. 0 ~* OI ..l ... .., I ~ .. 0 .. ..; ... .... ... ..l ... ., , l?l M .. "' ., ... .. .. .. \0 ... .. 0\ M .. \0 " .. 0\ ... ... ... ... ... ... ... .. .. .. .. co co .. .. .. .. 0\ OIOIOIOI ... ... 0 ... 0 ... .... \0 ... co 0\ ... "' 0 ... 0 ::: ~ M .. "' OI 0 ... N C'l"I N VI 0\ 0 0 0 0 0 0 0 0 0 Fiscal Year • Fiscal VBar as of 12 / 31/ 11 2

SOUTH DAKOTA INVESTMENT COUNCIL Budget Process & Long-Term Plan I. Investment Council Budget Process A) Budget approved by LRC Executive Board before presenting to Bureau of Finance and Management and Appropriations Committee - SDCL 4-5-22 B) Budget deducted from assets under management - no general fund appropriation - SDCL 4-5-30 II. Developed Long-Term Plan - began in 1987 A) Recommended by Appropriations Committee to encourage internal management and recognize the potential need for outside management B) Supported by LRC Executive Board 3

SO UTH DAKOTA INVESTMENT COUNCIL Long-Term Plan Executive Summary INVESTMENT OFF IC E BUDGET Personal Services Number of Employees [2 8) [ 301 [30] Compensa ti on w/0% Investme nt Perfo rm ance Incentive 3,949,267 6,109,015 8,289,744 Total Max imum Potent ial Investme nt Perf Incen ti ve 3,280,528 5,164,900 7, 223 , 88 3 s Compensation w/100% max poten ti al Invest Pert lnce nl iv e 7,229,795 11,273,9· 1 15, 51 3,627 Intern 20,481 23,743 27 ,524 Counc il 7,875 7,875 7, 87 5 Longevity 7,508 12, 091 19,473 Benefits 1,187,208 1,849,300 2, 543 , 893 Total Person al Se rvi ces 8,452,866 13,166,923 18, 11 2, 39 1 Operating Expenses Contr ac tu al - Investment Se r. rices 956 ,400 1,253, 019 1, 568 ,1 82 Contr ac tu al - Adm inistra ti ve Services 514,897 623,795 757,534 Travel 73,000 97,457 1 23 , 20 2 Office Supplies & Postage 12,733 17,246 21, 803 Capital Assets 28,242 41,240 50,018 Total Operating Expenses 1,585,272 2,032,757 2,5 20 ,738 Total Investment Council Budget 10,038,138 15,199,681 20,633,129 AS SET SUM MARY * Internal As sets 8,270,546, 08 5 10,767,420, 148 14,1 25 ,727 ,3 13 External Assets 2,756,848, 695 3,589,140, 049 4,708,575, 771 To ta l Re ti reme nt System Assets 8,997,377,074 12,165,670, 83 4 16,455,797,703 Total Assets 11 ,027,394,781 14,356,560,197 18,834, 303 ,084 EXPENSE SUMMARY Internal Expenses 10,038,138 15,199,681 20,633,129 External Ma nager Fees 30,325,336 39,480,541 51,794,333 To ta l Expen ses 40,363,474 54,680,221 72,427,463 UNIT COST SUMM ARY nt ernal Expenses as % of T ota l Assets 0. 091% Q _ 1 06% 0.110% 1 nt ernal Exp as % of To t al Assets (1 12 ass umed incentives) 0.076% 0.088% 0 .0 90% 1 Total Expenses as % of To tal Assets 0.366% 0.381% 0.385% • Projections b.as ed on long-term assuned retu rn s applied to 613011 1 asre1s. Updated eac h Jt.ne 30. 8 12 0 11 4

Management Fees $17.00 (per $1,000) $ 11 . 90 $8.95 $3.66 * $0.91 * 5010 $1 Billion Bendimark Median Med i an SDIO Internal& Mutual Internal Median (Similar Alternative Outside Funds Pension Size and Asset Cost Ma n age rs Flmd Asset Mix) Managers By Keeping Costs Low ... The cost difference between SO/O's $ 3. 66 and the Benchmark (similar size and asset mix) of $8.95 is approximately $52 million per year. Compounded over 30 years at projected asset growth, future wealth grows an EXTRA $7 billion by keeping costs fowl 5

SOUTH DAKOTA INVES TM ENT COUNCIL FISCAL YEAR 2011 Yea r End Bu dget Summary Received Actual Exp FY 201 1 FY 2011 Unexpended PERSONAL SERVICES Compensation with 0% Invest Performance Incentive 3, 314 , 44() 3, 253 , 787.54 60 , 652 .4 6 • Tot al Maximum Potential Incentive 2, 808 , 345 1, 575 , 352.85 1,232,992. 15 Compensation w/100% max potential Invest Perf lncent 4,829, 14 ().39 6 ,1 22,785 1,293,64 4 .6 1 In tern 19,884 0.00 19,884 .00 Council Compensati on 7,8 75 2, 550 . 00 5,325 _ 00 Longevity 6,335 6, 335 . 00 0. 00 Personal Benefits 1. 016 685 8 39 , 12 5.76 177 559.24 Total Personal Services 7, 17 3, 564 5,677, 151. 15 1,496 ,4 1 2.85 OPERATING EXPENSES Contractu al Services (see next page torl ine item deta il s) 1, 625,79() 1, 21 1, 444 .42 •• 414 ,34 5. 58 Tr avel 73, 000 46, 276.65 26,723-35 Office Suppli es & Postage 14 , 148 10 , 925 .63 3,222-37 Ca pi tal Assets 31,3 80 22 , 727 . 87 8,652 -1 3 Total Operating Expenses 1,744 ,318 1, 29 1, 374. 57 452 ,9 43 .43 TOT AL BUDGET 8. 917 8 82 6.96 8 525.72 1. 949 356.28 7, 689 _ 17 All i anz re im b tJSement & d el a ye d promotion i ncreas es • $4 for iowstment a ce ounta nts " . An additional S6 , 692. 13 in Bloomberg fees were inc m ed b ut waived due o securi · es transac ti ons executed ll rnug !he ir trad i ng system. FISCAL YEAR 2012 Budget Funding (SDCL 4-5-30) FY 2012 AUTHORIZED BUDGET 8,699,2 88.0() LE SS FY 2011 CASH BALANCE (1 ,949,356.28) REMA IN I NG FY20 12 BA LANCE TO BE FU DED 6 749 93 1 .72 6