Board Education Workshop: Investment Risk and Return Basics

Agenda Item 8a, Attachment 2, Page 1 of 55

Board Education Workshop: Investment Risk and Return Basics

Anne Simpson, Director, Board Governance & Strategy CalPERS

Jeffery V. Bailey, CFA Trustee, CFA Institute Research Foundation

May 13, 2019 1

CalPERS Board Education Risk and Return Basics Agenda Item 8a, Attachment 2, Page 2 of 55

Overview

? CalPERS Board Self-Evaluation Workstream: Board Curriculum

? Board delegation sets Investment Committee responsibilities

? Partnership with CFA Institute and Council of Institutional Investors

? Investment Risk and Return Basics Workshop

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CalPERS Board Education Risk and Return Basics Agenda Item 8a, Attachment 2, Page 3 of 55

The CalPERS Pension Buck

Why Investment Returns Matter

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CalPERS Board Education Risk and Return Basics Agenda Item 8a, Attachment 2, Page 4 of 55

Investment Committee Responsibilities

As Set by the Board's Delegation

Set: ? Investment beliefs ? Total fund and asset class policy benchmarks ? Investment risk appetite ? Criteria and triggers for information and metrics reported

Approve: ? Investment policies ? Asset class strategic plans and portfolio guidelines ? Initiation or settlement of litigation involving material sums

4

CalPERS Board Education Risk and Return Basics Agenda Item 8a, Attachment 2, Page 5 of 55

Investment Committee Responsibilities

As Set by the Board's Delegation

Conduct: ? Strategic asset allocation ? Selection and performance of board consultants

Oversee: ? Investment performance ? Fund liquidity management ? Selection and performance of partners, managers, and consultants ? Cost effectiveness of investment program ? Investment Office risk assessment and control environment ? Environmental, Social, and Governance program ? Management of risks

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