Investment Update

Investment Update – 1st Quarter 2011

Alameda County Employee Retirement Association (ACERA)continues to monitor capital markets very closely. The Dow Jones Industrial Average returned 7.1% during its best first quarter in percentage terms ins 12 years. The S&P 500 and NASDAQ stock indexes were up 5.9% and 4.8% respectively, for the quarter ending March 31, 2011.The MSCI EAFA was up 3.5% and Emerging Markets (EM) increased 2.1% over the same period. The quarter was not without its problems: the European debt crisis continues to simmer; the U.S.Housing market is showing significant renewed weakness; and, unrest continues in the Middle East North Africa region. Japan’s 9.0 earthquake and related damages shocked the country. Japan markets dropped precipitously 6.0% and 10.0% in the first two trading sessions, but stabilized in the following weeks. In addition to these unfolding events, various commodity prices (gold, food, and energy) have moved up significantly.

ACERA is a long-term investor with a well-diversified and conservative portfolio. For the first quarter in 2011, the preliminary results show that the total Fund was up 4.7% and ranked in the upper fifteenth percentile among public funds greater than $100 million. Domestic Equities were up 7.2% (with small caps showing a strong performance), International Equities were up 3.3% and Fixed Income increased by 2.5%. ACERA’s Japanese exposure, which was less than 4% of the total portfolio, has done well despite the devastation. Staff has been monitoring the exposure on a daily basis. The total Fund finished the year up 15.6% at $5,425,765,050.

During the period January-March 2011, The Retirement Board approved two new private equity and Alternatives Return Leading Strategies (PEARLS) investments. As part of the ongoing portfolio monitoring and due diligence, the Investment Committee reviewed several of the real estate and international equity portfolio managers. ACERA’s consultant, Strategic Investment Solutions, also provided education on hedge funds, an alternative asset class.

Special note for ACERA members about the “Investment Update” found here on this page of the website:
In order to provide ongoing information to ACERA participants, the investment staff will publish the Investment Update on the website on a quarterly basis versus a monthly basis. Because the total Fund is well diversified and maintains a long-term horizon, quarterly commentary is more appropriate and in alignment with any incremental changes in the portfolio. The ACERA “Portfolio Performance Report”, however, will continue to be published on a monthly basis.

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