Investment Update - July 2010

ACERA continues to monitor capital markets very closely.  July was a reversal of the previous month with many U.S. indices up about 7% after being down by 6% in June.  The S&P 500 Index increased 7.0% and long-term interest rates were relatively stable in the month of July. The 10 year Treasury note ended the month yielding 2.91% down from 2.93%, at the close of June.  At month-end, the 30 year Treasury bond yield was up 11 bps to 3.98% while the 3 month T- Bill was down 2 bps to 0.14%. The Barclays Capital US Aggregate Index was up by 1.07% in July.

Consumer prices fell in June while consumer sentiment tumbled to an 11-month low in July, underscoring the soft economic recovery in the U.S.  Deflationary forces appeared to be stronger than what was widely acknowledged just 1-2 months prior.

During July 2010, ACERA’s total Fund returned approximately $236 million or 5.52%, underperforming the Policy Index by 30 basis points, the Domestic Equity and Fixed Income asset classes outperformed their benchmarks by 4 and 41 basis points respectively. The International Equity asset class underperformed its benchmark by 71 basis points.  As of 7/31/10, the ending market value of the total Fund was $4,701,948,767.

ACERA is a long-term investor with a well-diversified and conservative portfolio.  In July, ACERA’s general investment consultant and ACERA investment staff presented a number of discussion items and reviews for the July Investment Committee meeting. One motion was passed, in accordance with the ACERA general investment guidelines, policies and procedures, to choose one of three finalists for ACERA’s U.S. small cap value manager search to replace one current ACERA U.S. small cap value manager.  Information items presented included; A report on ACERA’s Private Equity and Alternatives Return Leading Strategies (PEARLS) investments portfolio; the quarterly performance review for the first quarter of 2010 of ACERA’s equities and fixed income; the quarterly performance review for the first quarter of 2010 of ACERA’s real estate portfolio; and an oral status report on ACERA’s international small cap equity manager search.

ACERA will continue to provide Fund performance reports and keep you informed of market developments.