Defined Benefit Fund Non-U.S. Equity

The Non-U.S. Equity sub-asset class invests in publicly traded stock issued by companies located outside of the United States across more than 100 countries worldwide. The policy has allocation targets to four market categories including developed markets (excluding the U.S.), developed markets small capitalization (excluding the U.S.), emerging markets and emerging markets small capitalization. Exposure to those categories uses both externally managed portfolios and internally managed portfolios. All internally managed portfolios are generally index-oriented and provide rebalancing flexibility. As of December 31, 2016 the sub-asset class is approximately 78 percent actively managed and 22 percent index-oriented.

The performance benchmark for the Non-U.S. Equity sub-asset class is a custom benchmark composed of the MSCI World Index ex U.S. Standard Index, the MSCI World Index ex U.S. Small Cap Index, the MSCI Emerging Markets Standard Index, and the MSCI Emerging Markets Small Cap Index. It is expected that active management will add value versus the index in the less-efficient non-U.S. markets.

The focus of the actively managed portion is on selecting a diverse group of managers, each of whom has the potential to add value over the long-term. The aggregation of the managers results in a diversified portfolio that has no major structural mismatches or tilts that would cause the returns or volatility to dramatically differ from the custom benchmark. The types of managers include:

Staff monitors non-U.S. markets and evolving strategies within those markets to identify potential improvements to the program.