HomeMy WebLinkAboutStaff Report 14829
City of Palo Alto (ID # 14829)
Finance Committee Staff Report
Meeting Date: 10/18/2022 Report Type: Action Items
City of Palo Alto Page 1
Title: Review Pension and Other Post -Employment Benefits (OPEB)/Retiree
Healthcare Trust Funds
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Finance Committee review and accept the status update of the
City’s irrevocable 115 Pension Trust Fund and the City’s California Employers’ Retiree Benefit
Trust (CERBT) Fund for the OPEB plans, discuss variables governing these plans, and provide
feedback on potential changes moving forward.
Note: Staff will have experts from both plans at this meeting for questions and additional
information. This feedback will assist in informing future meetings with the Committee
regarding the Pension Funding Policy, adopted by Council in 2020.
Background
The City of Palo Alto is highly engaged in continuing discussions and proactive efforts to address
the costs of current and forecasted pension and other post-employment benefits, including
strategies to pre-fund long-term obligations. In November 2020, the City Council formally
adopted a Pension Funding Policy (CMR #117221) after working on proactive measures since
2017.
This Pension Funding Policy sets the following goals and principles:
Funding Goal and Timeframe:
• a target of reaching a 90 percent funded status of the CalPERS determined liability
within fifteen years (FY 2036).
Funding Components:
• ‘pay go’ costs also known as Normal Cost of annual pension costs to be funded with a
discount rate of 6.2%, more conservative than CalPERS rate of 7.0%.
1 November 30, 2020 City Council Staff Report #11722 Adoption of a Pension Funding Policy:
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports-
cmrs/year-archive/2020-2/id-11722.pdf
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• Discretion to the City Manager to make additional contributions from excess Budget
Stabilization Reserve (BSR) above the City Council approved target BSR level.
Use of Funds:
• City Manager must identify the impacts on the funding goal and timeframe to modify
the transmission of contributions to the PARS Trust Fund.
• Any transmission of funds from PARS to CalPERS will require City Council approval.
Reporting:
• Every three years, staff will consult with an actuary to inform the City Council on the
progress the City has made towards its goal
• Staff will report to the City Council through the annual budget process on the status of
the PARS section 115 pension trust fund, recommended contributions to the PARS fund,
and potential transmission of any funds from PARS to CalPERS for the coming fiscal year
In alignment with the policy and Council direction, periodic reviews are to be conducted, to
assess and respond to changes impacting the City’s pensions and Other Post -Employment
Benefits (OPEB) plans and the funding available to meet those benefit costs. Staff expects as
part of this review to memorialize any practices adjusted since the adoption of the policy,
review progress towards policy goals, and discuss and review any modifications to the Pension
Policy or budgetary practices used to inform financial planning of these benefits. In order to
facilitate and complete this review staff have planned three steps for the Finance Committee
including: 1) Review of the most current Actuarial analysis as distributed by CalPERS (Fi nance
Committee September 20, 20222), 2) Review of the current status of both the Pension and
OPEB liabilities including the proactive contributions and discussion with plan providers, 3)
review revised actuarial analysis based on alternative assumptions as defined in the Pension
Funding Policy and recommended revisions to the Pension Funding Policy for Council
consideration and adoption.
Pension and Other Post-Employment Benefits (OPEB) Summary
The City of Palo Alto offers its eligible employees and retirees a defined pension plan and
retiree healthcare, which are managed and administered by the California Public Employees’
Retirement System (CalPERS), a State of California Benefit Trust Program. These benefits are
negotiated in labor agreements and part of a broader compensation package to provide
employee pension benefits as well as health benefits (medical, dental, and vision), and several
other benefits such as life insurance, an employee assistance program, and an employee
commute program. For retirees, the benefits other than pension are referred to as Other Post-
Employment Benefits (OPEB).
• Employee Pension: Eligible employees are entitled to receive income after retirement
based on the pension tier, years of service, and age at retirement. The CalP ERS program
2 September 20, 2022 Finance Committee Item #1 ‘Accept California Public Employees’ Retirement System
(CalPERS) Pension Annual Valuation Reports as of June 30, 2021’;
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/finance-
committee/2022/20220920/20220920pfcs.pdf
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maintains two pension plans for the City, one for safety employees (sworn fire and
police personnel) and another for miscellaneous employees (all other non -safety
personnel employed by the City, including field personnel, administrative support , and
managers). Income to pay this retiree benefit is generated through employer
contributions, employee contributions, and investment income.
• Other Post-Employment Benefits (OPEB)/Retiree Healthcare Benefits: The City
participates in the California Public Employees’ Medical and Hospital Care Act (PEMHCA)
program to provide health care benefits for retired employees. These benefits are
negotiated in labor agreements and vary according to the hire date, retirement date,
and employee group at the time of retirement. In 2007, the City established a Section
115 irrevocable trust fund with the California Employers' Retiree Benefit Trust (CERBT)
Fund Program, managed by CalPERS. Approximately 600 California public employers
participate in the CERBT program to pre-fund OPEB liabilities, such as retiree healthcare
benefits. The City uses the CERBT to generate investment returns to assist in funding the
costs of the retiree health program and may request CERBT disbursements to reimburse
the City’s costs. Income to pay this retiree benefit is generated through employer
contributions, the implied subsidy of healthcare costs3, and investment income.
Discussion
This report focuses on the funding mechanisms approved by the City Council to proactively
fund pension and retiree healthcare costs by investing additional (supplemental) contributions
above the required amounts to the City’s Section 115 Trust Funds:
• Pension Trust Fund, administered by the Public Agency Retirement Services (PARS); and
• California Employers’ Retiree Benefit Trust (CERBT) Fund for the OPEB plans.
Ultimately, the investments made in these funds are required to be used to pay retiree pension
and healthcare costs respectively. A detailed presentation of the City’s Section 115 Trust Funds
are attached to this report, and representatives from PARS and CERBT will provide an overview
of the investment strategy, performance, and status of these funds. Additionally, this report
includes several options for investment strategies looking forward, includin g shifting risk
profiles as the PARS and CERBT trust(s) reach higher funded status levels. Staff encourages
discussion of these variables and other options with the trust representatives in anticipation of
feedback and potential revisions and refinements to the current Pension Funding Policy. Any
direction or feedback will be used to inform continued Pension Policy discussions over the
coming months.
3 Health care premiums are contracted at a blended rate, they are the same regardless of age or active versus
retired status of a beneficiary, apart from Medicare premiums. The implied subsidy is calculated to recognize the
higher cost of medical services for retirees, which is reduced from the active employees’ health care costs. This is
intended to recognize that as people age, their medical costs increase; therefore, the actuary reports used to
determine the annual ADC include calculations to recognize the higher cost of medical services for retirees, which
is reduced from the active employees’ health care costs. This difference is known as the ‘implied subsidy.’ In FY
2024, the total Implied Subsidy will be $3.1 million.
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Proactive Actions to Prefund Long-term Pension Liabilities: Section 115 Pension Fund Trust
(Pension Trust)
The City has taken several proactive steps to address long-term pension liabilities, including
cost-sharing in labor agreements, contributing amounts beyond required levels to the City’s
Pension Trust, and adopting a Pension Funding Policy. As part of poli cy goals, the City seeks to
reach a 90 percent funded status by FY 2036 (15 -year time horizon from the adoption of the
pension funding policy).
The City established a section 115 irrevocable trust in 2017 with the Public Agency Retirement
Service (PARS) (CMR 7553). Funds placed in the trust are irrevocably committed for pension
obligations and cannot be used for other purposes. Contributions to the Pension Trust were
initially made on an ad-hoc basis, using one-time savings or excess revenues. In October 2018,
the City Council directed staff to include in budget assumptions the Normal Cost (NC) for
pension benefits at a more conservative discount rate as compared to CalPERS and a transfer of
the additional (supplemental) funding beyond CalPERS actuarial determined contribution levels
to the Pension Trust (CMR 9740). This practice was reinforced by the establishment of a
Pension Funding Policy in FY 2021 (CMR 11722).
Beginning in FY 2023, the City Council approved to reduce the discount rate for supplemental
contributions from 6.2 percent to 5.3 percent over two years, in alignment with the recent ALM
study4. The FY 2023 Adopted budget is a transitional year in which the budget is in the first of a
two-year phase in to reach the 5.3 percent discount rate, equivalent to an approximate rate of
5.8 percent. Additional one-time contributions continue to be made each year if excess
revenues or unspent savings are available, subject to City Council approval.
To date, the average annual contributions to the Pension Trust are $7.1 million ($4.6 million in
the General Fund). Through FY 2023, it is expected that $49.4 million ($31.8 million in the
General Fund) in principal contributions will be made to the Pension Trust. As of July 31, 2022,
this Pension Trust has a balance of $40.5 million. Supplemental contributions to the Pension
Trust are held separately from the CalPERS Trust. The annual CalPERS valuations5, including
funded status and minimum employer contributions, do not contemplate these funds.
Status update by Public Agency Retirement Services (PARS) administrator
The Public Agency Retirement Services (PARS) acts as the plan administrator for the City’s
Pension Trust, in coordination with Highmark Capital as the investment manager and US Bank
4 As part of this study, external asset managers and consultants were surveyed to gain expert projections on
market returns. The median expected returns of survey participants as of March 31, 2021 were 5.3 percent (10-
year) to 6.2 percent (20-year).
5 As of the June 30, 2021 valuation (CMR 14628), the City has a UAL of $391.9 million and funded status of 73.3
percent; the UAL is the difference between the total market value of CalPERS assets of $1.07 billion and the total
pension liability of $1.46 billion. For estimation purposes, if the $40.5 million balance in the Pension Trust is added
to the assets in the CalPERS plans, this would increase the funded status by approximately 3.0 percent. These
results do not consider the preliminary -6.1 percent loss incurred in the period ending June 30, 2022.
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as the trustee. Representatives from PARS will provide an overview of the detailed presentation
attached that provides the status of this fund, including historical performance, risk pr ofiles,
and investment strategies (Attachment A).
Performance and Investment Overview:
The City’s Pension Trust is currently invested in a moderately conservative portfolio targeting
an asset allocation of 20-40% equity, 50-80% fixed income, and 0-20% cash with an
administration fee of 0.15%. This is the second most conservative option among five (5)
portfolios ranging from: conservative, moderately conservative, moderate, balanced, and
capital appreciation. The City’s Pension Trust experienced a gain of +11.55 percent for the one-
year period ending June 30, 2021, followed by a loss of -9.90 percent for the one-year period
ending June 30, 2022. Overall, the Pension Trust has experienced a cumulative net gain of +1.95
percent since its inception in 2017. For reference, a comparison of historical returns is provided
in the table below.
TABLE 1: HISTORICAL RETURNS - PARS AND CALPERS
Public Agency Retirement Services (PARS) CalPERS
Conservative
Moderately
Conservative Moderate Balanced
Capital
Appreciation Prelim
1-year -10.0% -10.7% -11.6% -12.2% -14.0% -6.1%
5-year 2.0% 3.1% 4.6% 5.3% 6.4% 6.7%
10-year 2.8% 4.1% 5.9% 6.7% 8.0% 7.7%
Investment Options for Consideration
The Pension Trust is an investment vehicle for public agencies to set aside funding for future
pension contributions or liabilities. The City has the discretion to select the investment risk
tolerance and control the inflow / outflow of funds. The Pension Trust may be used for a variety
of reasons, providing the City with additional methods to manage pension obligations,
discussed in detail below. The balance maintained and investment strategy(s) should depend
on the intended use of the funds. The Pension Funding Policy currently contemplates that funds
in excess of a single year of pension contribution may be transferred directly to CalPERS for an
ADP; the fund is anticipated to reach this level in the next 2-3 years.
• Investment Diversification: The City may select to invest in one or more portfolios with
varying asset classes, based on risk tolerance and investment goals. The City may select
a portfolio(s) with different asset classes to hedge against the risk that holdings in PARS
and CalPERS are impacted similarly by a negative event.
• Rate Stabilization: The Pension Trust may be used as a rate stabilization reserve, where
funds may be used to smooth volatility in employer contribution rates in any given year.
Additionally, these funds may be used as a “rainy day” reserve, acting as an emergency
source of funds in difficult budgetary or economic times.
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• Liability Payments: The Pension Trust may be used to pay down liabilities through
Additional Discretionary Payments (ADPs) to CalPERS. The City may elect to make
additional contributions, above and beyond the required employer contribution, at any
time and in any amount. However, payments made to CalPERS are permanent and
cannot be returned.
Proactive Actions to Prefund Long-term OPEB Liabilities: Section 115 California Employers'
Retiree Benefit Trust (CERBT) Fund
The City has taken several proactive measures to mitigate the long-term healthcare liabilities,
including supplemental contributions to the City’s CERBT Trust, cost sharing with employees ,
and various modifications to the retiree medical benefit o ver time. In addition, beginning in
2019, the employer contribution to all employee healthcare premiums has transitioned from a
90/10 percentage share to a flat dollar contribution that can be adjusted with each labor
agreement for active employees. Although not explicitly addressed in the Pension Funding
Policy, as directed by the City Council, staff have work to align the City’s policy goals for
pensions and OPEB liabilities since the adoption of the Pension Funding Policy. This alignment
is one of the expected recommended adjustments to the Pension Funding Policy.
The City established a Section 115 irrevocable trust fund in 2007 with the California Employers'
Retiree Benefit Trust (CERBT) Fund Program, managed by CalPERS. The total annual ADC was
initially calculated to fund the overall projected liability of the program based on assumptions,
such as the discount rate, used for the CERBT Strategy 1 portfolio. In FY 2021, the City Council
directed staff to calculate the ADC at a more conservative 6.25 percent discount rate as
compared to the 6.75 percent discount rate assumed for the Strategy 1 plan and transfer the
additional (supplemental) funding to the CERBT Trust , in alignment with the proactive measures
being taken with pension prefunding. The FY 2023 Adopted Budget was adjusted in alignment
with the June 30, 2021 OPEB valuation6. The results of this valuation had significant favorable
impacts due to 2020-21 investment returns of 27.5 percent and lower than anticipated
healthcare premiums. The City Council further adjusted funding to continue alignment with the
proactive pension funding assumptions as well as known variable such as FY 2022 market
returns. Below is a summary of the assumptions used to calculate FY 2023 and FY 2024
contributions:
• Zero percent return 2021-22 (one-time)
• 5.75 percent discount rate (6.25 percent assumed for Strategy 1)
• Shortened amortization (from 22 to 15 years)
Through FY 2023, it is expected that $8.0 million in supplemental principal contributions will be
made to the CERBT Trust. These supplemental contributions are used to directly pay down the
UAL. As of the July 31, 2021 valuation, the City has a UAL of $80.0 million and a funded status of
6 Finance Committee on June 7, 2022; (CMR 14112 as amended by CMR 14502). These reports are used to inform
the development of the FY 2023 and FY 2024 budgets. Based on these reports, the anticipated total ADC in FY 2024
is $16.8 million ($10.5 million in the General Fund).
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67 percent; the UAL is the difference between the total market value of CER BT assets of $164.2
million and the total OPEB liability of $244.2 million.
Status update by CERBT administrator
CalPERS acts as the plan administrator for the City’s CERBT Trust, with State Street Global
Advisors (SSGA) managing all underlying investments. As part of the Finance Committee
discussion, representatives from CERBT will provide an overview of the detailed presentation
attached that provides the status of this fund, including historical performance, risk profiles,
and investment strategies (Attachment B).
Performance and Investment Overview:
The City is currently invested in the CERBT Strategy 1 portfolio targeting an asset allocation
composed primarily of equity (49% equity, +/- 5%) and fixed income (23% +/- 5%) assets. This
offers the highest expected return among the three (3) portfolios: Strategy 1, Strategy 2, and
Strategy 3. The 20-year expected returns for these portfolios are 6.0 percent, 5.5 percent, and
5.0 percent respectively. The City’s Strategy 1 fund experienced a gain of +27.5 percent for the
one-year period ending June 30, 2021, followed by a loss of -13.5 percent for the one-year
period ending July 30, 2022. Overall, the City’s Strategy 1 fund has experienced a cumulative
net gain of +5.7 percent since its inception in 2007.
California Employers' Retiree Benefit Trust (CERBT)
Strategy 1 Strategy 2 Strategy 3
1-year -14.0% -13.7% -12.1%
5-year 5.5% 4.4% 3.6%
10-year 6.7% 5.5% 4.3%
20-year 6.0% 5.5% 5.0%
Investment Options for Consideration:
The CERBT Fund is an investment vehicle for public agencies to fund retiree healthcare
contributions or liabilities. These investments are intended to generate longer-term asset
growth through accumulated contributions, where returns are sufficient to contribute toward a
portion of the annual “pay go” benefits. The City has the discretion to select the investment risk
tolerance and control the inflow / outflow of funds. The balance maintained and investment
strategy(s) should depend on the intended use of the funds. As prefunding strategies move the
City closer to the goal of investment returns being sufficient to contribute toward a portion of
the annual benefit costs, it is expected that the City should revisit the investment strategy for
these funds.
When actuary valuations recommend disbursements or when the balance-maintained
approaches 75-80 percent funded status, the investment strategy should be diversified with an
intention of ensuring both stability and growth of the assets versus an only growth focused
goal. This strategy is intended to preserve assets and mitigate against volatility in the market
when the funds are expected to be disbursed. In consultation with CERBT representatives, staff
recommends setting aside 2-3 years of estimated disbursements at approximately $7 to $10
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million. This does not require additional budgetary action, as funds may be moved from
Strategy 1 to Strategy 2 and/or Strategy 3 at the City’s discretion.
To put this potential strategy in context of t he 10-year forecast from the most recent June 30,
2021 valuation, below highlights the approximate timelines this type of strategy to diversify and
reduce risk may become appropriate:
• Baseline Scenario results recommend disbursements from the CERBT Trust beginning in
FY 2023 and the fund is projected to reach a 75% funded status in FY 2028. As a
reminder this scenario does not reflect the true returns from FY 2022 but rather
assumed positive investment returns of 6.25%.
• Alternative Assumptions results, as approved by the Council, do not recommend
disbursements over the 10-year horizon. As a reminder this scenario does reflect
estimated investments returns of 0% in FY 2022 and adjusts funding goals to align with
pensions goals and is projected to reach a 75% funded status in FY 2029.
Timeline and Next Steps
Staff is engaged with the Finance Committee in a series of meetings this year to further review
the current status of the City, and its Council approved Pension Funding Policy. As part of the
policy and Council direction, periodic reviews are included to assess and respond to changes
impacting the City’s pensions and OPEB plans. Staff expects as part of this review to
memorialize any practices adjusted since the adoption of the policy, review progress towards
policy goals and discuss and review any modifications to the Pension Policy or budgetary
practices used to inform financial planning of these benefits.
Below is a list of expected reports and City Council updates over the coming months. Staff will
continue to update the City Council and incorporate information as it becomes available.
Nov/December 2022 - Pension Policy Check-in: Staff is engaged with an actuary to complete a
comprehensive analysis of pension plans including but not limited to funding policy, economic
and demographic assumptions, and other risk mitigation strategies. This analysis will be used to
inform the progress the City has made toward Pension Policy goals of meeting a 90 percent
funding level by FY 2036 (15 years).
Dec 2022/January 2023 - FY 2024 to FY 2033 Long Range Financial Forecast (LRFF): Annually,
staff brings forward a LRFF that projects the City’s financial outlook over the next 10 years
based on current City Council approved service levels and several alternative scenarios.
Resource Impact
This is an informational report and will be used to inform recommended revisions and updates
to the City’s Pension Funding Policy which will inform the development of the FY 2024–2033
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Long Range Financial Forecast (LRFF), the FY 2024 Adopted Operating Budget, and other long
term financial planning.
Stakeholder Engagement
Staff continues to use external consultants for updates on the status and forecast of long -term
liabilities associated with pension and retiree healthcare programs. As in prior years, these
results are used to inform funding policy discussions with the Finance Committee and City
Council. All communication is structured around public hearings to facilitate opportunities for
community input and provide guidance to staff in the budget development process.
Environmental Review
This report is not a project for the purposes of the California Environmental Quality Act.
Environmental review is not required.
Attachments:
• Attachment A: PARS Account Update
• Attachment B: CalPERS CERBT Account Update
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City of Palo Alto
PARS 115 Trust – Pension Rate Stabilization Program Client Review
October 18, 2022
City of Palo alto ڞ 2
Contacts
Mitch Barker
Executive Vice President
(949) 310-4876
mbarker@pars.org
Angela Tang
Senior Coordinator, Client Services
(800) 540-6369 x159
atang@pars.org
Andrew Brown, CFA
Director, Senior Portfolio Manager
(415) 705-7605
andrew.brown@highmarkcapital.com
ATTACHMENT A: PARS Account Update 1.a
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City of Palo alto ڞ 3
Pars 115 Trust Team
Trust Administrator & Consultant
38
Years of Experience
(1984-2022)
2,000+
Plans under
Administration
1,000+
Public Agency
Clients
$6.2 B
Assets under
Administration
500 K+
Plan Participants
Investment Manager
•Investment sub-advisor to trustee U.S. Bank
•Investment policy assistance
•Uses open architecture
•Active and passive platform options
•Customized portfolios (with minimum asset level)
103
Years of Experience
(1919-2022)
$17.6 B
Assets under
Management &
Advisement
Trustee
•5th largest commercial bank and one of the
nation’s largest trustees for Section 115 trusts
•Safeguard plan assets
•Oversight protection as plan fiduciary
•Custodian of assets
159
Years of Experience
(1863-2022)
$9.0 T
Assets under Trust
Custody
490+
115 Trust Clients
•Serves as record-keeper, consultant,
and central point of contact
•Sub-trust accounting
•Coordinates all agency services
•Monitors plan compliance
(IRS/GASB/State Government Code)
•Processes contributions/disbursements
•Hands-on, dedicated support teams
City of Palo alto ڞ 4
Subaccounts
OPEB and pension assets are
individually sub-accounted,
and can be divided by dept.,
bargaining group, or cost center.
Assets in the PARS Section 115
Combination Trust can be used
to address unfunded liabilities.
Financial Stability
Allows separate investment
strategies for OPEB and
pension subaccounts.
Flexible Investing
OPEB and pension assets
aggregate and reach lower fees
on tiered schedule sooner –
saving money!
Economies-of-ScaleAnytime Access
Trust funds are available
anytime; OPEB for OPEB
and pension for pension.
No set-up costs, no minimum
annual contribution amounts,
and no fees until assets are added.
No Set Up Cost or Minimums
Retiree Medical Benefits
Prefund OPEB GASB 75
OPEB
Reimburse agency; or
Pay benefits provider
Prefund Pension (PRSP)GASB 68
Reimburse agency; or
Pay retirement system
Assets can be used to:
Pension
$ M
Pension Rate Stabilization Program
Assets can be used to:
prefund
either or both
General Fund
PARS IRS-Approved Section 115 Trust
ATTACHMENT A: PARS Account Update 1.a
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City of Palo alto ڞ 5
PARS Pension Rate
Stabilization Program
for prefunding pension obligations
The
City of Palo alto ڞ 6
Plan Type:IRC Section 115 Irrevocable Exclusive Benefit Trust
Trustee Approach:Discretionary
Plan Effective Date:January 23, 2017
Plan Administrator:City Manager
Current Investment Strategy:Moderately Conservative Index (Passive) Strategy; Individual Account
Summary of Agency’s Pension Plan
AS OF AUGUST 31, 2022:
Initial Contribution:May 2017: $2,055,000
Additional Contributions:$36,273,602
Total Contributions:$38,328,602
Disbursements:$0
Total Investment Earnings:$1,407,736
Account Balance:$39,356,840
*Subaccounts: General Fund, Public Works, Utilities, Internal Services, Special Revenue
ATTACHMENT A: PARS Account Update 1.a
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City of Palo alto ڞ 7
Summary of Agency’s pension Plan
*Plan Year Ending June 2017 is based on 2 months of activity.
**Plan Year Ending June 2023 is based on 2 months of activity.
CONTRIBUTIONS, DISBURSEMENTS, AND TOTAL ASSETS AS OF AUGUST 31, 2022:
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23
Plan Year Ending
Contributions
Disbursements
Total Assets
Year Contributions Disbursements Total Assets
Jun-17*$2,055,000 $0 $2,056,840
Jun-18 $3,428,098 $0 $5,547,491
Jun-19 $7,971,728 $0 $14,030,033
Jun-20 $13,798,411 $0 $28,693,226
Jun-21 $5,012,259 $0 $37,089,037
Jun-22 $6,063,106 $0 $39,039,274
Jun-23**$0 $0 $39,356,840
City of Palo alto ڞ 8
Combined Miscellaneous
& Safety Groups
Valuation as of
June 30, 2020
Valuation as of
June 30, 2021 Change
Actuarial Liability $1,396.6 M $1,465.4 M 4.9% ↑
Assets $886.2 M $1073.5 M 21.1% ↑
Unfunded Liability $510.4 M $391.9 M 23.2% ↓
Funded Ratio 63.5% 73.3%15.4% ↑
Employer Contribution Amount $55.0 M
(FY 21-22)
$60.4 M
(FY 22-23)9.8% ↑
Employer Contribution Amount – Projected*---$50.8 M
(FY 28-29)15.9% ↓
Pension Funding Status
As of June 30, 2021, City of Palo Alto’s CalPERS pension plan is funded as follows*:
* Data through 2028-29 from Agency’s latest CalPERS actuarial valuation.
ATTACHMENT A: PARS Account Update 1.a
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PARS: City of Palo Alto
September 30, 2022
Presented by
Andrew Brown, CFA
City of Palo alto ڞ 9
Economic and Market Forecast
September 2022
Source: HighMark Asset Allocation Committee
2022 2023
Assumptions Assumptions
GDP 0.2% - 0.9% 0.4% - 0.9%
S&P 500 Earnings $215 - $225 $225 - $235
Unemployment 3.7% - 4.2% 4.1% - 4.6%
Core PCE Inflation 3.8% - 4.3% 2.4% - 2.9%
Fed Funds Target 3.50% - 4.00% 3.50% - 4.00%
City of Palo alto ڞ 10
ATTACHMENT A: PARS Account Update 1.a
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Preliminary
First contribution received into the Trust was on 6-7-2017. Performance inception begins 7-1-2017
Trust was initially invested into account 6746050105, PARS/PRSP Moderately Conservative, from 07/01/2017 to 05/31/2019. It was then transferred to its own proprietary account 6746062300,
PARS/City of Palo Alto PEB, from 6/2019 to present. Returns are gross of account level investment advisory fees and net of any fees, including fees to manage mutual fund or exchange traded fund
holdings. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of
future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value.
3 Months
Year
to Date
(9 Months)1 Year 3 Years 5 Years
Inception
to Date
07/01/2017
Cash Equivalents .28 .44 .45 .41 .96 .94
Total Fixed Income -4.07 -12.99 -13.18 -2.74 -.11 .02
Bloomberg US Aggregate Bd Index -4.75 -14.61 -14.60 -3.26 -.27 -.10
Total Equities -5.45 -24.57 -19.21 4.53 5.33 6.01
Large Cap Funds -4.97 -23.72 -15.47 7.77 8.84 9.30
S&P 500 Composite Index -4.88 -23.87 -15.47 8.16 9.24 9.69
Mid Cap Funds -3.48 -24.33 -19.43 5.04 6.30 6.69
Russell Midcap Index -3.44 -24.27 -19.39 5.19 6.48 6.86
Small Cap Funds -2.16 -25.45 -23.68 3.78 3.07 4.11
Russell 2000 Index -2.19 -25.10 -23.50 4.29 3.55 4.47
International Equities -10.78 -26.39 -25.19 -1.61 -.94 .14
MSCI EAFE Index -9.36 -27.09 -25.13 -1.83 -.84 .20
MSCI EM Free Index -11.57 -27.16 -28.11 -2.07 -1.81 -.29
RR: REITS -11.02 -29.58 -19.03 -1.61 3.05 3.03
Wilshire REIT Index -10.23 -29.66 -17.60 -2.17 2.88 2.86
Total Managed Portfolio -4.17 -16.07 -14.29 -.32 1.67 1.95
Selected Period Performance
City of Palo Alto
Period Ending: 9/30/2022
City of Palo alto ڞ 11
Asset Allocation
As of September 30, 2022
Current Asset Allocation Investment Vehicle
Equity 26.94%10,742,688
Large Cap Core 8.03% IVV iShares Core S&P 500 ETF 3,203,820
Large Cap Value 3.70% IVE iShares S&P 500 Value ETF 1,474,510
Large Cap Growth 3.19% IVW iShares S&P 500 Growth ETF 1,270,849
Mid Cap Core 2.72% IWR iShares Russell Mid-Cap ETF 1,082,839
Small Cap Value 1.91% IWN iShares Russell 2000 Value ETF 760,429
Small Cap Growth 1.97% IWO iShares Russell 2000 Growth ETF 784,009
International Core 2.73%IEFA iShares Core MSCI EAFE ETF 1,087,267
Emerging Markets 1.67% VWO Vanguard FTSE Emerging Markets ETF 666,490
Real Estate 1.03% VNQ Vanguard Real Estate ETF 412,475
Fixed Income 67.13%26,774,460
Short-Term 13.55% VFSUX Vanguard Short-Term Investment-Grade Adm 5,403,505
Intermediate-Term 52.56% AGG iShares Core US Aggregate Bond ETF 20,961,368
High Yield 1.03% VWEAX Vanguard High-Yield Corporate Adm 409,587
Cash 5.93%2,366,355
5.93%FGZXX First American Government Oblig Z 2,366,355
TOTAL 100.00%$39,883,503
City of Palo alto ڞ 12
ATTACHMENT A: PARS Account Update 1.a
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1-Month 3-Month Year-to- 1-Year 3-Year 5-Year 10-Year
Fund Name Return Return Date Return Return Return Return
iShares S&P 500 Growth ETF -9.99 -3.90 -30.49 -21.23 9.72 11.22 12.99
iShares Core S&P 500 ETF -9.21 -4.89 -23.88 -15.50 8.13 9.20 11.66
iShares S&P 500 Value ETF -8.48 -5.86 -16.69 -9.80 4.93 6.00 9.45
iShares Russell Mid-Cap ETF -9.28 -3.47 -24.35 -19.51 5.03 6.33 10.13
iShares Russell 2000 Value ETF -10.21 -4.62 -21.25 -17.87 4.53 2.70 7.80
iShares Russell 2000 Growth ETF -8.99 0.29 -29.25 -29.27 2.88 3.55 8.85
Vanguard Real Estate ETF -12.83 -10.98 -29.25 -18.71 -1.62 3.07 6.23
iShares Core MSCI EAFE ETF -9.65 -10.32 -28.05 -26.05 -1.90 -0.89 --
Vanguard FTSE Emerging Markets ETF -10.16 -10.75 -23.99 -24.28 -0.50 -0.66 1.45
iShares Core US Aggregate Bond ETF -4.31 -4.73 -14.50 -14.58 -3.29 -0.31 0.85
Vanguard High-Yield Corporate Adm -3.78 -0.85 -13.20 -12.74 -0.90 1.36 3.57
Vanguard Short-Term Investment-Grade Adm -2.01 -1.87 -7.35 -7.98 -0.74 0.75 1.34
Source: SEI Investments, Morningstar Investments
INTERNATIONAL EQUITY FUNDS
BOND FUNDS
Returns less than one year are not annualized. Past performance is no indication of future results. The information presented has been obtained from
sources believed to be accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value.
CITY OF PALO ALTO
For Period Ending September 30, 2022
LARGE CAP EQUITY FUNDS
MID CAP EQUITY FUNDS
SMALL CAP EQUITY FUNDS
REAL ESTATE FUNDS
City of Palo alto ڞ 13
Establish: Determine your Strategic Asset Allocation Strategy
Each Investment Objective reflects the associated PARS Diversified Portfolio as of 6/30/2022. A client’s portfolio construction may vary depending on the client's
investment needs, objectives, and restrictions as well as the prevailing market conditions at the time of investment.
Moderately Conservative
Moderate
Expected Standard Deviation (Volatility)
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Capital Appreciation
Efficient frontier of portfolios with varying ranges of equities and fixed income
Conservative
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Income Cash
Conservative 5-20% 60-95% 0-20%
Moderately Conservative 20-40% 50-80% 0-20%
Moderate 40-60% 40-60% 0-20%
Balanced 50-70% 30-50% 0-20%
Capital Appreciation 65-85% 10-30% 0-20%
14
ATTACHMENT A: PARS Account Update 1.a
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City of Palo alto ڞ 15
Strategy Allocation* (%)
Capital Appreciation
(65-85%Equity)5.83%
Balanced
(50-70% Equity)10.00%
Moderate
(40-60% Equity)37.50%
Mod. Conservative
(20-40% Equity)36.25%
Conservative
(5-20% Equity)4.17%
Other
(Custom)6.25%
TOTAL 100.00%
PRSP Strategy Allocation – Clients
HIGHMARK CAPITAL MANAGEMENT
Capital Appreciation
5.83%
Balanced
10.00%
Moderate
37.50%
Moderately
Conservative
36.25%
Conservative
4.17%
Other
6.25%
Active Platform: 54% / Passive Platform: 46%
As of June 30, 2022
*Allocations are based on agencies who have funded
City of Palo alto ڞ 17
HighMark Performance Sheets
ATTACHMENT A: PARS Account Update 1.a
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HighMark Plus Composite (Active)
Current Quarter* -6.46%
Blended Benchmark*,** -5.26%
Year To Date* -11.36%
Blended Benchmark*,** -9.66%
1 Year -10.88%
Blended Benchmark** -8.85%
3 Year 0.60%
Blended Benchmark** 0.89%
5 Year 2.15%
Blended Benchmark** 2.21%
10 Year 3.05%
Blended Benchmark** 2.83%
PARS DIVERSIFIED PORTFOLIOS
CONSERVATIVE
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — CONSERVATIVE PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
CONSERVATIVE PORTFOLIO?
Q2 2022
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 - Present: 7.5% S&P500,
1.5% Russell Mid Cap, 2.5% Russell 2000, 1% MSCI EM (net), 2% MSCI EAFE (net), 52.25% Bloomberg US Agg, 25.75% ICE
BofA 1-3 Yr US Corp/Gov’t, 2% ICE BofA US High Yield Master II, 0.5% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From
4/1/2007 – 9/30/2012, the blended benchmark was 12% S&P500; 1% Russell 2000, 2% MSCI EAFE (net), 40% ICE BofA 1-3 Year
Corp./Govt, 40% Bloomberg USAgg, 5%FTSE 1 Mth US T-Bill. Prior to April 2007: the blended benchmark was 15% S&P 500,
40% ICE BofA 1-3Yr Corp/Gov, 40% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide a consistent level of
inflation-protected income over
the long-term. The major portion
of the assets will be fixed
income related. Equity securities
are utilized to provide inflation
protection.
Conservative
Moderately Conservative
Moderate
Balanced
Capital Appreciation
Efficient Frontier
Risk (Standard Deviation)
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Strategic Range Policy Tactical
Equity 5 – 20%15%14%
Fixed Income 60 – 95%80%81%
Cash 0 – 20%5%5%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of
Embedded Fund Fees)
Index Plus Composite (Passive)
Current Quarter* -5.61%
Blended Benchmark*,** -5.26%
Year To Date* -10.67%
Blended Benchmark*,** -9.66%
1 Year -9.97%
Blended Benchmark** -8.85%
3 Year 0.66%
Blended Benchmark** 0.89%
5 Year 2.02%
Blended Benchmark** 2.21%
10 Year 2.76%
Blended Benchmark** 2.83%
PORTFOLIO FACTS
HighMark Plus (Active)
Composite Inception Date 07/2004
No of Holdings in Portfolio 20
Index Plus (Passive)
Composite Inception Date 07/2004
No of Holdings in Portfolio 13
(Gross of Investment Management Fees, but Net of Embedded
Fund Fees)
HighMark Plus Composite (Active)
2008 -9.04%
2009 15.59%
2010 8.68%
2011 2.19%
2012 8.45%
2013 3.69%
2014 3.88%
2015 0.29%
2016 4.18%
2017 6.73%
2018 -1.35%
2019 11.05%
2020 9.03%
2021 2.20%
Index Plus Composite (Passive)
2008 -6.70%
2009 10.49%
2010 7.67%
2011 3.70%
2012 6.22%
2013 3.40%
2014 4.32%
2015 0.06%
2016 3.75%
2017 5.52%
2018 -1.09%
2019 10.37%
2020 8.56%
2021 1.97%
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark®Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of
institutional money management experience with $8.8
billion in assets under management and $8.8 billion in
assets under advisement*. HighMark has a long term
disciplined approach to money management and
currently manages assets for a wide array of clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA ®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo
Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 16
Average Years of Experience: 27
Average Tenure (Years): 15
Manager Review Group
Number of Members: 7
Average Years of Experience: 22
Average Tenure (Years): 10
*Assets under management (“AUM”) include assets for which
HighMark provides continuous and regular supervisory and
management services. Assets under advisement (“AUA”)
include assets for which HighMark provides certain investment
advisory services (including, but not limited to, investment
research and strategies) for client assets of its parent company,
MUFG Union Bank, N.A.
The performance records shown represent size-weighted composites of tax exempt accounts that meet the following criteria:
Accounts are managed by HighMark with full investment authority according to the PARS Conservative active and passive objectives.
The adviser to the PARS portfolios is US Bank, and HighMark serves as sub-adviser to US Bank to manage these portfolios.
US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. US Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with US Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce
the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 millionafter fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management
and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s
policies and procedures for calculating and reporting performance results is available upon request. Performance results are
calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxesbut do reflect the deduction of trading expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced
monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float-
adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid-
cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S.
dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly
traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond
performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark), an SEC-registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit
and nonprofit organizations, public agencies, and public and private retirement plans. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does
not guarantee future results. Individual account management and construction will vary depending on each client’s
investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate,
and MAY lose value, including possible loss of principal.
350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
2.4%
Interm-Term Bond
61.9%
High Yield
1.1%
Short-Term Bond
18.0%
Large Cap Core
4.2%
Large Cap Growth
1.6%
Mid Cap
1.4%
Intl Stocks
2.4%
Cash
4.7%
Large Cap Value
1.8%Real Estate
0.5%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active)Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF
T. Rowe Price Growth Stock - I iShares Russell 2000 Value ETF
iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF
Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF
Vanguard Small Cap Growth ETF Vanguard Short-Term Invest-Grade Adm
DFA Large Cap International Portfolio iShares Core U.S. Aggregate
Dodge & Cox International Stock Vanguard High-Yield Corp Adm
MFS International Growth - R6 First American Government Obligations Z
Hartford Schroders Emerging Markets Eq
Vanguard Short-Term Invest-Grade Adm
PIMCO High Yield Instl
PIMCO Total Return Fund - Inst
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
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PARS DIVERSIFIED PORTFOLIOS
MODERATELY CONSERVATIVE
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — MODERATELY CONSERVATIVE PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
MODERATELY CONSERVATIVE PORTFOLIO?
Q2 2022
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 - Present: 15.5% S&P500,
3% Russell Mid Cap, 4.5% Russell 2000, 2% MSCI EM (net), 4% MSCI EAFE (net), 49.25% Bloomberg US Agg, 14% ICE BofA 1-
3 Yr US Corp/Gov’t, 1.75% ICE BofA US High Yield Master II, 1% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From 4/1/2007 -
9/30/2012: the blended benchmark was 25% S&P500; 1.5% Russell 2000, 3.5% MSCI EAFE (net), 25% ICE BofA 1-3 Year
Corp./Govt, 40% Bloomberg USAgg, 5%FTSE 1 Mth US T-Bill. Prior to April 2007, the blended benchmark was 30% S&P 500,
25% ICE BofA 1-3Yr Corp/Gov, 40% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide current income, with
capital appreciation as a
secondary objective. The major
portion of the assets is
committed to income-producing
securities. Market fluctuations
should be expected.
Strategic Range Policy Tactical
Equity 20 - 40%30%29%
Fixed Income 50 - 80%65%66%
Cash 0 - 20%5%5%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of
Embedded Fund Fees)
HighMark Plus Composite (Active)
Current Quarter* -8.10%
Blended Benchmark*,** -7.44%
Year To Date* -12.84%
Blended Benchmark*,** -12.03%
1 Year -11.85%
Blended Benchmark** -10.30%
3 Year 1.82%
Blended Benchmark** 2.07%
5 Year 3.24%
Blended Benchmark** 3.37%
10 Year 4.32%
Blended Benchmark** 4.29%
Index Plus Composite (Passive)
Current Quarter*-7.28%
Blended Benchmark*,** -7.44%
Year To Date*-12.25%
Blended Benchmark*,** -12.03%
1 Year -10.69%
Blended Benchmark** -10.30%
3 Year 1.86%
Blended Benchmark**2.07%
5 Year 3.14%
Blended Benchmark**3.37%
10 Year 4.11%
Blended Benchmark**4.29%
PORTFOLIO FACTS
HighMark Plus (Active)
Composite Inception Date 08/2004
No of Holdings in Portfolio 20
Index Plus (Passive)
Composite Inception Date 05/2005
No of Holdings in Portfolio 13
Efficient Frontier
Risk (Standard Deviation)
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Moderately Conservative
Moderate
Capital Appreciation
Balanced
(Gross of Investment Management Fees, but Net of Embedded
Fund Fees)
HighMark Plus Composite (Active)
2008 -15.37%
2009 18.71%
2010 10.46%
2011 1.75%
2012 10.88%
2013 7.30%
2014 4.41%
2015 0.32%
2016 4.94%
2017 9.56%
2018 -2.60%
2019 13.73%
2020 10.76%
2021 5.15%
Index Plus Composite (Passive)
2008 -12.40%
2009 11.92%
2010 9.72%
2011 3.24%
2012 8.24%
2013 6.78%
2014 5.40%
2015 -0.18%
2016 5.42%
2017 8.08%
2018 -2.33%
2019 13.53%
2020 9.74%
2021 5.33%
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark®Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of
institutional money management experience with $8.8
billion in assets under management and $8.8 billion in
assets under advisement*. HighMark has a long term
disciplined approach to money management and
currently manages assets for a wide array of clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo
Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 16
Average Years of Experience: 27
Average Tenure (Years): 15
Manager Review Group
Number of Members: 7
Average Years of Experience: 22
Average Tenure (Years): 10
*Assets under management (“AUM”) include assets for which
HighMark provides continuous and regular supervisory and
management services. Assets under advisement (“AUA”)
include assets for which HighMark provides certain investment
advisory services (including, but not limited to, investment
research and strategies) for client assets of its parent company,
MUFG Union Bank, N.A.
The performance records shown represent a size-weighted composite of tax exempt accounts that meet the following criteria: Accounts are managed by HighMark with full investment authority according to the PARS Moderately Conservative active and passive objectives.
The adviser to the PARS portfolios is US Bank, and HighMark serves as sub-adviser to US Bank to manage these
portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. US Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory
agreement with US Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10
million initial value would grow to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it
may incur as a client. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do
not reflect the deduction of investment advisory fees, custody fees, or taxes but do reflect the deduction of trading
expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but
assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity
performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell 2000 Index
measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the
U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged
Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate &
Government Index, with a remaining term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark), an SEC-registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit
and nonprofit organizations, public agencies, and public and private retirement plans. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past
performance does not guarantee future results. Individual account management and construction will vary depending on
each client’s investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or
any Bank affiliate, and MAY lose value, including possible loss of principal.
350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap 4.4%
Interm-Term Bond
51.5%
High Yield 1.0%
Short-Term Bond
13.5%
Large Cap Core
8.2%
Large Cap Growth
3.3%
Mid Cap 2.7%
Intl Stocks 5.1%
Cash 5.4%
Large Cap Value
3.8%Real Estate 1.1%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active)Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF
T. Rowe Price Growth Stock - I iShares Russell 2000 Value ETF
iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF
Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF
Vanguard Small Cap Growth ETF Vanguard Short-Term Invest-Grade Adm
DFA Large Cap International Portfolio iShares Core U.S. Aggregate
Dodge & Cox International Stock Vanguard High-Yield Corp Adm
MFS International Growth - R6 First American Government Obligations Z
Hartford Schroders Emerging Markets Eq
Vanguard Short-Term Invest-Grade Adm
PIMCO High Yield Instl
PIMCO Total Return Fund - Inst
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
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PARS DIVERSIFIED PORTFOLIOS
MODERATE
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — MODERATE PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
MODERATE PORTFOLIO?
Q2 2022
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 – Present: 26.5% S&P500,
5% Russell Mid Cap, 7.5% Russell 2000, 3.25% MSCI EM (net), 6% MSCI EAFE (net), 33.50% Bloomberg US Agg, 10% ICE BofA
1-3 Yr US Corp/Gov’t, 1.50% ICE BofA US High Yield Master II, 1.75% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From
4/1/2007 – 9/30/2012: the blended benchmark was 43% S&P500; 2% Russell 2000, 5% MSCI EAFE (net), 15% ICE BofA 1-3 Year
Corp./Govt, 30% Bloomberg USAgg, 5%FTSE 1 Mth US T-Bill. Prior to April 2007: the blended benchmark was 50% S&P 500,
15% ICE BofA 1-3Yr Corp/Gov, 30% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide current income and
moderate capital appreciation.
It is expected that dividend and
interest income will comprise a
significant portion of total return,
although growth through capital
appreciation is equally important.
Strategic Range Policy Tactical
Equity 40 - 60%50%48%
Fixed Income 40 - 60%45%46%
Cash 0 - 20%5%6%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of
Embedded Fund Fees)
HighMark Plus Composite (Active)
Current Quarter* -10.16%
Blended Benchmark*,** -9.86%
Year To Date*-14.71%
Blended Benchmark*,** -14.34%
1 Year -12.97%
Blended Benchmark** -11.49%
3 Year 3.51%
Blended Benchmark**3.77%
5 Year 4.77%
Blended Benchmark**4.92%
10 Year 6.01%
Blended Benchmark**6.19%
Index Plus Composite (Passive)
Current Quarter* -9.45%
Blended Benchmark*,** -9.86%
Year To Date* -14.32%
Blended Benchmark*,** -14.34%
1 Year -11.58%
Blended Benchmark** -11.49%
3 Year 3.48%
Blended Benchmark** 3.77%
5 Year 4.59%
Blended Benchmark** 4.92%
10 Year 5.85%
Blended Benchmark** 6.19%
PORTFOLIO FACTS
HighMark Plus (Active)
Composite Inception Date 10/2004
No of Holdings in Portfolio 20
Index Plus (Passive)
Composite Inception Date 05/2006
No of Holdings in Portfolio 13
Efficient Frontier
Risk (Standard Deviation)
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Conservative
Moderately Conservative
Moderate
Capital Appreciation
Balanced
(Gross of Investment Management Fees, but Net of Embedded
Fund Fees)
HighMark Plus Composite (Active)
2008 -22.88%
2009 21.47%
2010 12.42%
2011 0.55%
2012 12.25%
2013 13.06%
2014 4.84%
2015 0.14%
2016 6.45%
2017 13.19%
2018 -4.03%
2019 17.71%
2020 12.92%
2021 9.31%
Index Plus Composite (Passive)
2008 -18.14%
2009 16.05%
2010 11.77%
2011 2.29%
2012 10.91%
2013 12.79%
2014 5.72%
2015 -0.52%
2016 7.23%
2017 11.59%
2018 -4.03%
2019 17.52%
2020 11.23%
2021 10.18%
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark®Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of
institutional money management experience with $8.8
billion in assets under management and $8.8 billion in
assets under advisement*. HighMark has a long term
disciplined approach to money management and
currently manages assets for a wide array of clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo
Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 16
Average Years of Experience: 27
Average Tenure (Years): 15
Manager Review Group
Number of Members: 7
Average Years of Experience: 22
Average Tenure (Years): 10
*Assets under management (“AUM”) include assets for which
HighMark provides continuous and regular supervisory and
management services. Assets under advisement (“AUA”)
include assets for which HighMark provides certain investment
advisory services (including, but not limited to, investment
research and strategies) for client assets of its parent company,
MUFG Union Bank, N.A.
The performance records shown represent size-weighted composites of tax exempt accounts that meet the following criteria: Accounts are managed by HighMark with full investment authority according to the PARS Moderate active and
passive objectives.
The adviser to the PARS portfolios is US Bank, and HighMark serves as sub-adviser to US Bank to manage these portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. US Bank pays
HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with
US Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-
advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other
income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment
advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are
rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but
assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is
a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance
of the mid-cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT
index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate &
Government Index tracks the bond performance of the ICE BofA U.S. Corporate & Government Index, with a remaining
term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark), an SEC-registered investment adviser, is a wholly owned subsidiary of
MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, and public and private retirement plans. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past
performance does not guarantee future results. Individual account management and construction will vary depending on each client’s investment needs and objectives. Investments employing HighMark strategies are NOT insured by the
FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any
Bank affiliate, and MAY lose value, including possible loss of principal.
350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
7.3%
Interm-Term Bond
34.8%
High Yield
1.0%
Short-Term Bond
10.7%
Large Cap Core
14.0%
Large Cap Growth
5.6%
Mid Cap
4.5%
Intl Stocks
7.9%
Cash
6.0%
Large Cap Value
6.4%
Real Estate
1.8%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active)Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF
T. Rowe Price Growth Stock - I iShares Russell 2000 Value ETF
iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF
Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF
Vanguard Small Cap Growth ETF Vanguard Short-Term Invest-Grade Adm
DFA Large Cap International Portfolio iShares Core U.S. Aggregate
Dodge & Cox International Stock Vanguard High-Yield Corp Adm
MFS International Growth - R6 First American Government Obligations Z
Hartford Schroders Emerging Markets Eq
Vanguard Short-Term Invest-Grade Adm
PIMCO High Yield Instl
PIMCO Total Return Fund - Inst
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
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PARS DIVERSIFIED PORTFOLIOS
BALANCED
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — BALANCED PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
BALANCED PORTFOLIO?
Q2 2022
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: From 10/1/2012 – Present: 32% S&P500, 6%
Russell Mid Cap, 9% Russell 2000, 4% MSCI EM (net), 7% MSCI EAFE (net), 27% Bloomberg US Agg, 6.75% ICE BofA 1-3 Yr US
Corp/Gov’t, 1.25% ICE BofA US High Yield Master II, 2% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill. From 4/1/2007 –
9/30/2012: the blended benchmark was 51% S&P 500; 3% Russell 2000, 6% MSCI EAFE (net), 5% ICE BofA 1-3 Year Corp./Govt,
30% Bloomberg US Agg, 5% FTSE 1 Mth US T-Bill. Prior to April 2007: the blended benchmark was 60%S&P 500, 5% ICE BofA
1-3Yr Corp/Gov, 30% Bloomberg US Agg, and 5% FTSE 1 Mth US T-Bill.
To provide growth of principal
and income. While dividend and
interest income are an important
component of the objective’s
total return, it is expected that
capital appreciation will
comprise a larger portion of the
total return.
Strategic Range Policy Tactical
Equity 50 – 70%60%57%
Fixed Income 30 – 50%35%36%
Cash 0 – 20%5%7%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of
Embedded Fund Fees)
HighMark Plus Composite (Active)
Current Quarter* -11.24%
Blended Benchmark*,** -11.09%
Year To Date* -15.71%
Blended Benchmark*,** -15.55%
1 Year -13.63%
Blended Benchmark** -12.19%
3 Year 4.28%
Blended Benchmark** 4.58%
5 Year 5.51%
Blended Benchmark** 5.67%
10 Year 6.90%
Blended Benchmark** 7.13%
Index Plus Composite (Passive)
Current Quarter* -10.66%
Blended Benchmark*,** -11.09%
Year To Date* -15.47%
Blended Benchmark*,** -15.55%
1 Year -12.17%
Blended Benchmark** -12.19%
3 Year 4.28%
Blended Benchmark** 4.58%
5 Year 5.26%
Blended Benchmark** 5.67%
10 Year 6.68%
Blended Benchmark** 7.13%
PORTFOLIO FACTS
HighMark Plus (Active)
Composite Inception Date 10/2006
No of Holdings in Portfolio 20
Index Plus (Passive)
Composite Inception Date 10/2007
No of Holdings in Portfolio 13
Efficient Frontier
Risk (Standard Deviation)
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Conservative
Moderately Conservative
Moderate
Capital AppreciationBalanced
(Gross of Investment Management Fees, but Net of Embedded
Fund Fees)
HighMark Plus Composite (Active)
2008 -25.72%
2009 21.36%
2010 14.11%
2011 -0.46%
2012 13.25%
2013 16.61%
2014 4.70%
2015 0.04%
2016 6.81%
2017 15.46%
2018 -4.88%
2019 19.85%
2020 13.85%
2021 11.44%
Index Plus Composite (Passive)
2008 -23.22%
2009 17.62%
2010 12.76%
2011 1.60%
2012 11.93%
2013 15.63%
2014 6.08%
2015 -0.81%
2016 8.26%
2017 13.39%
2018 -5.05%
2019 19.59%
2020 12.07%
2021 12.63%
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark®Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of
institutional money management experience with $8.8
billion in assets under management and $8.8 billion in
assets under advisement*. HighMark has a long term
disciplined approach to money management and
currently manages assets for a wide array of clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo
Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 16
Average Years of Experience: 27
Average Tenure (Years): 15
Manager Review Group
Number of Members: 7
Average Years of Experience: 22
Average Tenure (Years): 10
*Assets under management (“AUM”) include assets for which
HighMark provides continuous and regular supervisory and
management services. Assets under advisement (“AUA”)
include assets for which HighMark provides certain investment
advisory services (including, but not limited to, investment
research and strategies) for client assets of its parent company,
MUFG Union Bank, N.A.
The performance records shown represent size-weighted composites of tax exempt accounts that meet the following criteria:
Accounts are managed by HighMark with full investment authority according to the PARS Balanced active and passive objectives.
The composite name has been changed from PARS Balanced/Moderately Aggressive to PARS Balanced on 5/1/2013. The adviser to the PARS portfolios is US Bank, and HighMark serves as sub-adviser to US Bank to manage these portfolios. US
Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. US Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with US Bank. The
0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the
portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow to $12.53 million
after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional information regarding the firm’s
policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment advisory fees, custody fees, or taxesbut do reflect the deduction of trading expenses. Returns are calculated based on trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced
monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index
is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float-
adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure
equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S.
dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond
performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark), an SEC-registered investment adviser, is a wholly owned subsidiary of
MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit
and nonprofit organizations, public agencies, and public and private retirement plans. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does
not guarantee future results. Individual account management and construction will vary depending on each client’s investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate,
and MAY lose value, including possible loss of principal.
350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
8.6%
Interm-Term Bond
27.6%
High Yield
0.9%
Short-Term Bond
7.5%Large Cap Core
17.0%
Large Cap Growth
6.8%
Mid Cap
5.5%
Intl Stocks
9.4%
Cash
7.0%
Large Cap Value
7.7%
Real Estate
2.0%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active)Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation - Retirement Vanguard Real Estate ETF
T. Rowe Price Growth Stock - I iShares Russell 2000 Value ETF
iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF
Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF
Vanguard Small Cap Growth ETF Vanguard Short-Term Invest-Grade Adm
DFA Large Cap International Portfolio iShares Core U.S. Aggregate
Dodge & Cox International Stock Vanguard High-Yield Corp Adm
MFS International Growth - R6 First American Government Obligations Z
Hartford Schroders Emerging Markets Eq
Vanguard Short-Term Invest-Grade Adm
PIMCO High Yield Instl
PIMCO Total Return Fund - Inst
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
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PARS DIVERSIFIED PORTFOLIOS
CAPITAL APPRECIATION
INVESTMENT OBJECTIVE
ANNUAL RETURNS
ASSET ALLOCATION — CAPITAL APPRECIATION PORTFOLIO
Comprehensive Investment Solution
HighMark® Capital Management, Inc.’s (HighMark)
diversified investment portfolios are designed to
balance return expectations with risk tolerance.
Key features include: sophisticated asset allocation
and optimization techniques, four layers of
diversification (asset class, style, manager, and
security), access to rigorously screened, top tier
money managers, flexible investment options, and
experienced investment management.
Rigorous Manager Due Diligence
Our manager review committee utilizes a rigorous
screening process that searches for investment
managers and styles that have not only produced
above-average returns within acceptable risk
parameters, but have the resources and commitment
to continue to deliver these results. We have set high
standards for our investment managers and funds.
This is a highly specialized, time consuming
approach dedicated to one goal: competitive and
consistent performance.
Flexible Investment Options
In order to meet the unique needs of our clients,
we offer access to flexible implementation strategies:
HighMark Plus utilizes actively managed mutual
funds while Index Plus utilizes index-based
securities, including exchange-traded funds. Both
investment options leverage HighMark’s active asset
allocation approach.
Risk Management
The portfolio is constructed to control risk through
four layers of diversification – asset classes (cash,
fixed income, equity), investment styles (large cap,
small cap, international, value, growth), managers
and securities. Disciplined mutual fund selection and
monitoring process helps to drive return potential
while reducing portfolio risk.
WHY THE PARS DIVERSIFIED
CAPITAL APPRECIATION PORTFOLIO?
Q2 2022
* Returns less than one year are not annualized. **Breakdown for Blended Benchmark: 39.5% S&P500, 7.5% Russell Mid Cap,
10.5% Russell 2000, 5.25% MSCI EM (net), 10.25% MSCI EAFE (net), 16% Bloomberg US Agg, 3% ICE BofA 1-3 Yr US
Corp/Gov’t, 1% ICE BofA US High Yield Master II, 2% Wilshire REIT, and 5% FTSE 1 Mth US T-Bill.
To provide growth of principal.
The major portion of the assets
are invested in equity securities
and market fluctuations are
expected.
Strategic Range Policy Tactical
Equity 65 - 85%75%72%
Fixed Income 10 - 30%20%20%
Cash 0 - 20%5%8%
ANNUALIZED TOTAL RETURNS (Gross of Investment Management Fees, but Net of
Embedded Fund Fees)
Consolidated Composite
Current Quarter* -12.59%
Blended Benchmark*,** -12.84%
Year To Date* -17.12%
Blended Benchmark*,** -17.27%
1 Year -14.04%
Blended Benchmark** -13.26%
3 Year 5.30%
Blended Benchmark** 5.59%
5 Year 6.42%
Blended Benchmark** 6.60%
10 Year 8.03%
Blended Benchmark** 8.36%
PORTFOLIO FACTS
Consolidated Composite
Composite Inception Date 01/2009
No of Holdings in Portfolio 20
Efficient Frontier
Risk (Standard Deviation)
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Conservative
Moderately Conservative
Moderate
Capital Appreciation
Balanced
(Gross of Investment Management Fees, but Net of Embedded
Fund Fees)
Consolidated Composite
2008 N/A
2009 23.77%
2010 12.95%
2011 -1.35%
2012 13.87%
2013 20.33%
2014 6.05%
2015 -0.26%
2016 8.79%
2017 16.72%
2018 -5.82%
2019 22.62%
2020 14.50%
2021 14.96%
HIGHMARK CAPITAL MANAGEMENT
350 California Street
Suite 1600
San Francisco, CA 94104
800-582-4734
ABOUT THE ADVISER
HighMark®Capital Management, Inc. (HighMark) has
over 100 years (including predecessor organizations) of
institutional money management experience with $8.8
billion in assets under management and $8.8 billion in
assets under advisement*. HighMark has a long term
disciplined approach to money management and
currently manages assets for a wide array of clients.
ABOUT THE PORTFOLIO MANAGEMENT TEAM
Andrew Brown, CFA®
Senior Portfolio Manager
Investment Experience: since 1994
HighMark Tenure: since 1997
Education: MBA, University of Southern California;
BA, University of Southern California
Salvatore “Tory” Milazzo III, CFA®
Senior Portfolio Manager
Investment Experience: since 2004
HighMark Tenure: since 2014
Education: BA, Colgate University
J. Keith Stribling, CFA®
Senior Portfolio Manager
Investment Experience: since 1985
HighMark Tenure: since 1995
Education: BA, Stetson University
Christiane Tsuda
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2010
Education: BA, International Christian University, Tokyo
Anne Wimmer, CFA®
Senior Portfolio Manager
Investment Experience: since 1987
HighMark Tenure: since 2007
Education: BA, University of California, Santa Barbara
Asset Allocation Committee
Number of Members: 16
Average Years of Experience: 27
Average Tenure (Years): 15
Manager Review Group
Number of Members: 7
Average Years of Experience: 22
Average Tenure (Years): 10
*Assets under management (“AUM”) include assets for which
HighMark provides continuous and regular supervisory and
management services. Assets under advisement (“AUA”)
include assets for which HighMark provides certain investment
advisory services (including, but not limited to, investment
research and strategies) for client assets of its parent company,
MUFG Union Bank, N.A.
The performance records shown represent a size-weighted composite of tax exempt accounts that meet the following criteria: Accounts are managed by HighMark with full investment authority according to the PARS Capital Appreciation active and passive objectives.
The adviser to the PARS portfolios is US Bank, and HighMark serves as sub-adviser to US Bank to manage these
portfolios. US Bank may charge clients as much as 0.60% annual management fee based on a sliding scale. US Bank pays HighMark 60% of the annual management fee for assets sub-advised by HighMark under its sub-advisory agreement with
US Bank. The 0.36% paid to HighMark, as well as other expenses that may be incurred in the management of the portfolio, will reduce the portfolio’s returns. Assuming an investment for five years, a 5% annual total return, and an annual sub-advisory fee rate of 0.36% deducted from the assets at market at the end of each year, a $10 million initial value would grow
to $12.53 million after fees (Net-of-Fees) and $12.76 million before fees (Gross-of-Fees). Gross returns are presented before management and custodial fees but after all trading expenses and reflect the reinvestment of dividends and other income. A client's return will be reduced by the advisory fees and other expenses it may incur as a client. Additional
information regarding the firm’s policies and procedures for calculating and reporting performance results is available upon request. Performance results are calculated and presented in U.S. dollars and do not reflect the deduction of investment
advisory fees, custody fees, or taxes but do reflect the deduction of trading expenses. Returns are calculated based on
trade-date accounting.
Blended benchmarks represent HighMark’s strategic allocations between equity, fixed income, and cash and are rebalanced monthly. Benchmark returns do not reflect the deduction of advisory fees or other expenses of investing but
assumes the reinvestment of dividends and other earnings. An investor cannot invest directly in an index. The unmanaged S&P 500 Index is representative of the performance of large companies in the U.S. stock market. The MSCI EAFE Index is a free float-adjusted market capitalization index designed to measure developed market equity performance, excluding the
U.S. and Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell 2000 Index measures the performance of the small-cap
segment of the U.S. equity universe. The ICE BofA U.S. High Yield Master II Index tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Wilshire REIT
index measures U.S. publicly traded Real Estate Investment Trusts. The unmanaged Bloomberg U.S. Aggregate Bond
Index is generally representative of the U.S. taxable bond market as a whole. The ICE BofA 1-3 Year U.S. Corporate & Government Index tracks the bond performance of the ICE BofA U.S. Corporate & Government Index, with a remaining term
to final maturity less than 3 years. The unmanaged FTSE 1-Month U.S. Treasury Bill Index tracks the yield of the 1-month U.S. Treasury Bill.
HighMark Capital Management, Inc. (HighMark), an SEC-registered investment adviser, is a wholly owned subsidiary of MUFG Union Bank, N.A. (MUB). HighMark manages institutional separate account portfolios for a wide variety of for-profit
and nonprofit organizations, public agencies, and public and private retirement plans. MUB, a subsidiary of MUFG Americas Holdings Corporation, provides certain services to HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each client’s
investment needs and objectives. Investments employing HighMark strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by the Bank or any Bank affiliate,
and MAY lose value, including possible loss of principal.
350 California Street
Suite 1600
San Francisco, CA 94104
800.582.4734
www.highmarkcapital.com
HOLDINGS
STYLE
Small Cap
10.0%
Interm-Term Bond
16.1%
High Yield
0.8%
Short-Term Bond
3.3%
Large Cap Core
21.5%Large Cap Growth
8.3%
Mid Cap
6.9%
Intl Stocks
13.2%
Cash
8.5%
Large Cap Value
9.4%
Real Estate
2.0%
Holdings are subject to change at the
discretion of the investment manager.
HighMark Plus (Active)Index Plus (Passive)
Columbia Contrarian Core I3 iShares Core S&P 500 ETF
Vanguard Growth & Income Adm iShares S&P 500 Value ETF
Dodge & Cox Stock Fund iShares S&P 500 Growth ETF
iShares S&P 500 Value ETF iShares Russell Mid-Cap ETF
Harbor Capital Appreciation – Retirement Vanguard Real Estate ETF
T. Rowe Price Growth Stock - I iShares Russell 2000 Value ETF
iShares Russell Mid-Cap ETF iShares Russell 2000 Growth ETF
Vanguard Real Estate ETF iShares Core MSCI EAFE ETF
Undiscovered Managers Behavioral Value-R6 Vanguard FTSE Emerging Markets ETF
Vanguard Small Cap Growth ETF Vanguard Short-Term Invest-Grade Adm
DFA Large Cap International Portfolio iShares Core U.S. Aggregate
Dodge & Cox International Stock Vanguard High-Yield Corp Adm
MFS International Growth - R6 First American Government Obligations Z
Hartford Schroders Emerging Markets Eq
Vanguard Short-Term Invest-Grade Adm
PIMCO High Yield Instl
PIMCO Total Return Fund - Inst
PGIM Total Return Bond - R6
DoubleLine Core Fixed Income - I
First American Government Obligations Z
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CalPERS Prefunding Programs
CERBT Account Update
City of Palo Alto
October 18, 2022
2
CalPERS Prefunding Programs
OPEB Plan Summary
•Total OPEB Liability (TOL) as of 6/30/2021 is $244,197,000
using a 6.25% discount rate.
•CERBT assets as of 9/14/2022 were $145,866,012.
•Funded status as of 6/30/2021 was 67%.
ATTACHMENT B: CalPERS CERBT Account Update 1.b
Packet Pg. 25
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CalPERS Prefunding Programs
OPEB Liability Mitigation Strategies
•Discount rate of 5.75% used for CERBT contributions
–As opposed to 6.25% for liability calculations
–Save money later by investing more principal now
•Reduced amortization of UAL from 22 to 15 years
–Pay down debt faster
•0% return assumed for the 2021-22 fiscal year
–Took a conservative position after 2020-21
–Actual returns were even lower so this was helpful
•Contributing $400K more each year for new staffing
4
CalPERS Prefunding Programs
OPEB Plan Short Term Future
•Capital Market Assumptions (CMA’s) are less favorable
–Expected returns project lower
–Risk projects higher
–Discount rates will likely be lower making liabilities higher
•CERBT assets have declined due to unit devaluation
–Market volatility
•Funded statuses will almost certainly go down
•Contributions will go up or time horizon will get longer
ATTACHMENT B: CalPERS CERBT Account Update 1.b
Packet Pg. 26
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CalPERS Prefunding Programs
OPEB Valuation Report Summary
OPEB Actuarial Valuation Report by Bartel Associates, LLC
Valuation Date 6/30/2019 6/30/2021
Total Participants (Active + Retirees w/ Benefits + Retirees w/o Benefits = Total)930 + 974 + 0 = 1,904 874 + 1,009 + 134 = 2,017
Present Value of Benefits (PVB)$300,579,000 $301,169,000
Total OPEB Liability (TOL) (Includes Implicit Costs of $46,113)$241,469,000 $244,197,000
Valuation Assets $118,497,000 $164,170,000
Net OPEB Liability (NOL)$122,972,000 $80,027,000
Funded Status 49%67%
Actuarially Determined Contribution (ADC)$15,013,000 (fye 2022)$11,428,000 (fye 2023)
Normal Cost $7,099,000 (fye 2022) $6,196,000(fye 2023)
Amortization of Net OPEB Liability $7,816,000 (fye 2022) $5,112,000 (fye 2023)
Projected Retiree Premiums (Pay-Go Cost)$11,622,000 (fye 2022) $11,190,000 (fye 2023)
Implicit Rate Subsidy Credit $2,619,000 (fye 2022) $3,025,000 (fye 2023)
CERBT Asset Allocation Strategy Strategy 1 Strategy 1
Discount Rate 6.75%6.25%
6
CalPERS Prefunding Programs
CERBT Account Summary
As of September 14, 2022 Strategy 1
Initial contribution (3/17/2008)$32,843,883
Additional contributions $52,671,520
Disbursements ($1,882,623)
CERBT expenses ($1,116,553)
Investment earnings $63,349,785
Total assets $145,866,012
Money-weighted annualized net rate of return (3/17/2008 – 9/14/2022 = 14.50 Years)5.65%
In PEMHCA: Yes
CERBT agreement effective date: 2/27/2008
ATTACHMENT B: CalPERS CERBT Account Update 1.b
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CalPERS Prefunding Programs
Cash Flow Summary by Fiscal Year
Fiscal Year Contributions Disbursements
Cumulative
Net
Contributions
Cumulative
Investment
Gains (Losses)
Cumulative
Fees
Cumulative
Ending Assets
Fiscal Year Net
Rate of Return
Cumulative
Net
Rate of Return
2007-08 $33,843,883 $0 $33,843,883 ($597,526) ($9,004) $33,237,354 - -
2008-09 $700,000 $0 $34,543,883 ($8,055,948) ($31,009) $26,456,926 -22.44% -19.18%
2009-10 $3,531,911 $0 $38,075,794 ($4,001,078)($61,120) $34,013,596 15.20% -5.31%
2010-11 $2,447,794 $0 $40,523,589 $4,361,612 ($111,130) $44,774,071 24.77% 3.62%
2011-12 $4,419,066 $0 $44,942,654 $4,458,625 ($162,844) $49,238,435 0.22% 2.74%
2012-13 $5,247,991 $0 $50,190,645 $10,122,649 ($243,009) $60,070,285 11.54% 4.60%
2013-14 $4,294,949 $0 $54,485,594 $21,211,069 ($333,722) $75,362,941 18.50% 7.12%
2014-15 $3,371,016 $0 $57,856,609 $21,130,945 ($409,907) $78,577,647 -0.11% 5.87%
2015-16 $3,126,432 $0 $60,983,041 $22,079,721 ($474,657) $82,588,105 1.21% 5.15%
2016-17 $1 $0 $60,983,041 $30,734,955 ($547,642) $91,170,355 10.54% 5.86%
2017-18 $9,212,108 $0 $70,195,149 $38,284,311 ($633,773) $107,845,687 7.89% 6.11%
2018-19 $5,723,000 ($1,882,623) $74,035,526 $45,187,577 ($726,169) $118,496,935 6.37% 6.14%
2019-20 $3,747,155 $0 $77,782,681 $49,565,923 ($828,805) $126,519,799 3.66% 5.87%
2020-21 $1,588,241 $0 $79,370,922 $84,393,586 ($952,099) $162,812,410 27.53% 7.80%
2021-22 $4,261,858 $0 $83,632,780 $62,202,442 ($1,090,093) $144,745,130 -13.52% 5.68%
as of 9/14/22 $0 $0 $83,632,780 $69,022,296 ($1,116,553) $145,866,012 -5.65%
8
CalPERS Prefunding Programs
Funded Status Comparison
Measurement Date Total OPEB Liability CERBT Assets Funded Status
1/1/2007 $102,237,022 $0 0%
1/1/2009 $129,660,950 $24,616,071 19%
1/1/2011 $165,660,000 $40,213,000 24%
6/30/2011 $168,053,000 $44,774,000 27%
6/30/2013 $203,642,000 $60,070,000 29%
6/30/2015 $234,795,000 $78,578,000 33%
6/30/2017 $244,759,000 $91,250,000 37%
6/30/2019 $241,469,000 $118,497,000 49%
6/30/2021 $244,197,000 $164,170,000 67%
ATTACHMENT B: CalPERS CERBT Account Update 1.b
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CalPERS Prefunding Programs
CERBT Projected Returns & Volatility
2022 Capital Market Assumptions Strategy 1 Strategy 2 Strategy 3
Projected Compound Return 1-5 Years1
(General Inflation Rate Assumption of 2.4%)5.1% 4.2% 3.5%
Projected Compound Return 1-20 Years1
(General Inflation Rate Assumption of 2.3%)6.0% 5.5% 5.0%
Projected Compound Return 6-20 Years1
(General Inflation Rate Assumption of 2.3%)6.3% 5.9% 5.5%
Projected Volatility
(20-Year Standard Deviation of Projected Returns)12.1% 9.9% 8.4%
1 Projected Compound Return for each CERBT Strategy is time-weighted and net of all fees.
10
CalPERS Prefunding Programs
CERBT Portfolio Details
Asset Classification Benchmark CERBT
Strategy 1
CERBT
Strategy 2
CERBT
Strategy 3
Global Equity MSCI All Country World Index 49%
±5%
34%
±5%
23%
±5%
Fixed Income Bloomberg Capital Long Liability
Index
23%
±5%
41%
±5%
51%
±5%
Global Real Estate (REITs)FTSE EPRA/NAREIT Developed
Liquid Index
20%
±5%
17%
±5%
14%
±5%
Treasury Inflation Protected
Securities (TIPS)
Bloomberg Capital Global Real: US
TIPS Index
5%
±3%
5%
±3%
9%
±3%
Commodities S&P GSCI Total Return Index 3%
±3%
3%
±3%
3%
±3%
Cash 3-Month Treasury Bill 0%
+2%
0%
+2%
0%
+2%
Expected Return N/A 6.0%5.5% 5.0%
Standard Deviation N/A 12.1%9.9% 8.4%
ATTACHMENT B: CalPERS CERBT Account Update 1.b
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CalPERS Prefunding Programs
Investment Returns Outperform Benchmarks
CERBT OPEB Assets 1 Month 3 Months FYTD 1 Year 3 Years 5 Years 10 Years ITD
CERBT Strategy 1
(Inception June 1, 2007)$13,297,533,144 -3.80% -4.84% 1.94% -14.03% 5.21% 5.45% 6.67% 4.94%
Benchmark -3.80% -4.93% 1.91% -14.24% 4.94% 5.17% 6.31% 4.53%
CERBT Strategy 2
(Inception October 1, 2011)$1,735,829,562 -3.86% -4.43% 1.16% -13.66% 3.25% 4.40% 5.45% 6.30%
Benchmark -3.84% -4.48% 1.15% -13.77% 3.06% 4.17% 5.13% 6.03%
CERBT Strategy 3
(Inception January 1, 2012)$759,883,383 -3.77% -3.90% 0.69%-12.13% 1.98% 3.60% 4.29% 4.80%
Benchmark -3.76% -3.95% 0.66% -12.19% 1.84% 3.42% 3.97% 4.52%
CERBT Total $15,793,246,089
Time weighted return reports the performance of the investment vehicle, not of the employer assets. Returns are gross. Historical performance is not necessarily indicative of actual future investment performance or of future
total program cost. Current and future performance may be lower or higher than the historical performance data reported here. Investment return and principal value may fluctuate so that your investment, when redeemed, may
be worth more or less than the original cost. The value of an employer’s fund shares will go up and down based on the performance of the underlying funds in which the assets are invested. The value of the underlying funds’
assets will, in turn, fluctuate based on the performance and other factors generally affecting the securities market.
Periods Ended August 31, 2022
CEPPT PENSION Assets 1 Month 3 Months FYTD 1 Year 3 Years 5 Years 10 Years ITD
CEPPT Strategy 1
(Inception October 1, 2019)$65,054,989 -3.41% -3.66%1.25% -13.20% - - - 2.78%
Benchmark -3.42% -3.73% 1.28% -13.38% - - - 2.72%
CEPPT Strategy 2
(Inception January 1, 2020)$26,044,786 -3.22% -2.83%0.30% -12.11% - - - -0.34%
Benchmark -3.23% -2.86% 0.29% -12.19% - - - -0.47%
CEPPT Total $91,099,775
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CalPERS Prefunding Programs
Total Participation Cost Fee Rates
•Total all-inclusive cost of participation
–Combines administrative, custodial, and investment fees
–Separate trust funds
–Self-funded, fee rate may change in the future
–Fee is applied daily to assets under management
•10 basis points - CERBT
•25 basis points - CEPPT
ATTACHMENT B: CalPERS CERBT Account Update 1.b
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CalPERS Prefunding Programs
CEPPT/CERBT Consistently Low Fee Rate History
Fiscal Year CERBT CEPPT
2007-2008 2.00 basis points -
2008-2009 6.00 basis points -
2009-2010 9.00 basis points -
2010-2011 12.00 basis points -
2011-2012 12.00 basis points -
2012-2013 15.00 basis points -
2013-2014 14.00 basis points -
2014-2015 10.00 basis points -
2015-2016 10.00 basis points -
2016-2017 10.00 basis points -
2017-2018 10.00 basis points -
2018-2019 10.00 basis points -
2019-2020 10.00 basis points 25.00 basis points
2020-2021 10.00 basis points 25.00 basis points
2021-2022 10.00 basis points 25.00 basis points
2022-2023 10.00 basis points 25.00 basis points
14
CalPERS Prefunding Programs
620 contracting employers (598 CERBT and 76 CEPPT)
Prefunding Program Employers
State of California 157 Cities or Towns 10 Counties
81 School Employers 32 Courts 338 Special Districts &
Public Agencies
ATTACHMENT B: CalPERS CERBT Account Update 1.b
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CalPERS Prefunding Programs
Questions? Where to Get Trust Fund Information?
Name Title E-mail Desk Mobile
Matt Goss Outreach & Support
Program Manager Matthew.Goss@calpers.ca.gov (916) 795-9071 (916) 382-6487
Karen Lookingbill Outreach & Support
Manager Karen.Lookingbill@calpers.ca.gov (916) 795-1387 (916) 501-2219
Colleen Cain-Herrback Administration & Reporting
Program Manager Colleen.Cain-Herrback@calpers.ca.gov (916) 795-2474 (916) 505-2506
Robert Sharp Assistant
Division Chief Robert.Sharp@calpers.ca.gov (916) 795-3878 (916) 397-0756
Program E-mail Addresses Prefunding Programs Webpages
CERBT4U@calpers.ca.gov – Questions & Document Submittal www.calpers.ca.gov/CERBT
CEPPT4U@calpers.ca.gov – Questions & Document Submittal www.calpers.ca.gov/CEPPT
CERBTACCOUNT@calpers.ca.gov – Online Record Keeping System
ATTACHMENT B: CalPERS CERBT Account Update 1.b
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