City of Miami General Employees’ and Sanitation Employees ... · FIRM OVERVIEW PHILOSOPHY & PROCESS INVESTMENT GUIDELINES PERFORMANCE RESULTS BOND MARKET REVIEW INVESTMENT STRATEGY

City of Miami General Employees’ and

Sanitation Employees’ Retirement Trust

Q4 2016

FIRM OVERVIEW PHILOSOPHY& PROCESS

INVESTMENT GUIDELINES

PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 2

Experience More than 25 years of institutionally-focused investment management across equities and fixed income

Total of 38 employees with an average professional-level tenure at Chicago Equity Partners of 16 years

$9.0 billion in assets under management for 96 institutional clients around the world

Discipline Focus on clearly-defined and process-oriented strategies which are repeatable and scalable

Deliberate approach to taking investment risks for which we believe our clients will be appropriately compensated

Long-standing commitment to continued innovation in our investment approach

Partnership Entire business platform built around delivering targeted solutions for sophisticated investors: we work with our clients to meet their investment objectives

Exceptional level of client service

Robust operational platform following industry best practices is the cornerstone of our long-term stability

As of December 31, 2016.

Experienced Firm that Partners with Clients to Provide Investment Solutions



PERFORMANCE RESULTS

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APPENDIX 3

Clients are Our Top Priority

• AAA Allied Group, Inc.• Advocate Health Care• Bryan Health System• Consolidated Edison• DTE Energy• Island Insurance Company, Ltd.• Marriott International, Inc.• NAMIC (National Association of Mutual Insurance

Companies)• Sherwin Williams Company• Tempel Steel• ThedaCare Operating Fund• United Airlines• United Technologies Corporation• University Hospitals Health System• Walgreen Company• Wooster Brush Company

• Batchelor Foundation• Catholic Theological Union• Children’s Care Foundation• Diocese of Joliet• Diocese of St. Petersburgh• Dominican Sisters of Kenosha• Elks National Foundation• Friends Fiduciary Corporation• Gottlieb Memorial Foundation• Hall-Perrine Foundation• Iowa Board of Regents• LaRabida Children’s Hospital• Lloyd A. Fry Foundation• Mennonite Education Agency• Misericordia Home Endowment• Missionary Servants of the Most Blessed Trinity• Moose Foundation

• Northwest Women’s Religious Investment Trust• Oklahoma Medical Research Foundation• Purdue University• Regents of the University of Colorado• Rush University Medical Center• Schoenstatt Sisters of Mary• Sisters of Charity of Saint Elizabeth New Jersey• Sisters of St. Casimir• Sisters of Saint Dominic• Sisters of Saint Francis of Assisi• Smith Center for the Performing Arts• SSM International Finance• St. Procopius Abbey• Virginia Mennonite Retirement Community• Wallace H. Coulter Foundation

• Association of Washington Cities • California State Teachers’ Retirement System• Chicago Housing Authority• City of Miami General Employees' and Sanitation

Employees' Retirement Trust• City of Springfield Police Pension Fund• Commonwealth of Massachusetts Deferred

Compensation Plan• Cook County Employees’ Annuity and Benefit Fund• Firemen’s Annuity and Benefit Fund of Chicago• Intergovernmental Risk Management Agency• Knox County Retirement System• Lake Forest Police Pension Fund• Los Angeles Fire & Police Pension System• Nevada Higher Education Pre-paid Tuition Program• Nevada State Treasurer• New Orleans (LA) Sewerage & Water Board Pension• Park Employees' Annuity & Benefit Fund of Chicago

• Public School Retirement System of the City of St. Louis

• Retirement Plan for CTA Employees• State Universities Retirement System of Illinois• WorkSafeNB

• Bakery Drivers & Salesman Local 194& Industry Pension Fund

• Chicago Area I.B. Of T. Benefit Trust Funds • Chicago Regional Council of Carpenters Millmen

Pension Fund• Des Moines Iron Workers Local 67• District #9 I.A.M.A.W. Pension Trust• Midwest Operating Engineers’ Welfare Fund• North Central Illinois Laborers Health & Welfare Fund• NYC Local 237 International Brotherhood of

Teamsters• Painters and Allied Trades District Council #35 Trust

Funds• Southern States Savings and Retirement Plan Trust• Teamsters Local #705 Pension and

Health & Welfare Funds• Uniformed Firefighter's Association (NYC)

• AMG Funds • Bank of Hawaii• Jackson National Asset Management, LLC

The above client list is a representative sample of clients with assetsof $5 million or greater under management who have given CEPpermission to use their name as of December 31, 2016. It is notknown whether the listed clients approve or disapprove ofChicago Equity Partners or the advisory services provided.

Corporations

Endowments & Foundations

Public Funds

Taft-Hartley

Mutual Funds / Subadvisory



PERFORMANCE RESULTS

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APPENDIX 4

CEP Fixed Income TeamCEP’s Fixed Income team employs an accomplished team of industry leading investment professionals who have spent an average of 16 years working together.

FIXED INCOMETEAM

QUANTITATIVERESEARCH

INDUSTRY ANALYSTS

Portfolio management Risk control

Model research and development Study academic and industry trends

Company specific analysis Industry specific analysis

Years with Years in Years with Years in Years with Years in Firm Industry Firm Industry Firm Industry

Curt Mitchell, CFA 13 31 Keith Gustafson, CFA 20 27 Robert Kramer, CFA, CPA 27 30Partner, CIO - Fixed Income Partner FounderMichael Budd 27 37 George Gao, CFA 12 23 Michael Lawrence, CFA 19 28Managing Director Director DirectorChristopher Ashbee, CFA, FRM 7 14 Abhay Munot, CFA 5 6 Martin Morris, CFA 23 23Director Director DirectorFeng Zhao, PhD, CFA, FRM 2 21 William Murray, CFA, CAIA 23 26Director DirectorTina Krauskopf 11 36 James Palermo, CFA 25 33Director DirectorKenny Kwan 7 27Associate Average Years with Firm = 16

Average Years in Industry = 26

December 31, 2016



PERFORMANCE RESULTS

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APPENDIX 5

Fixed Income Investment Philosophy

Our Core Beliefs Yield wins over time, but not all the time.Our rigorous research allows us to add value through sector allocation by identifying when we are being appropriately compensated for taking credit risk.

Changes in fundamentals drive security selection returns.The analysis of forward-looking measures of credit quality allows us to identify companies that we believe will outperform and avoid those that will underperform.

Risk management is critical to success.Minimizing downside risk and avoiding permanent loss of principal are primary goals.

Outcomes Our research-oriented and disciplined investment process focuses on fundamentals and valuations.

A countercyclical, value-driven approach produces excess returns primarily through sector allocation and security selection rather than a static overweight to risky positions or interest rate timing.

Returns are highly correlated to the overall bond market, but excess returns are generally often lowly or negatively correlated to bond manager peers.

We believe the role of fixed income is to provide principal preservation, income, and risk reduction through diversification.

This philosophy is the foundation of our investment process and makes our firm unique.



PERFORMANCE RESULTS

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APPENDIX 6

Fixed Income Investment Process

SectorAllocation

Sector and quality decisions incorporate fundamental, valuation, and momentum / sentiment market conditions.

Security Selection

Risk-budgeting framework measures magnitude of each excess return strategy on a forward-looking basis, while attribution provides real-time feedback.

2

Risk Management

3

1STRUCTURED

ANDDISCIPLINED

Security and industry selection research combines quantitative equity-based inputs with qualitative insight from analysts.

We combine multiple strategies in areas where we have repeatedly demonstrated skill to produce consistent results.

TOP DOWN BOTTOM UP

DOWNSIDE PROTECTION

Our investment process produces consistent returns while limiting risk.



PERFORMANCE RESULTS

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APPENDIX 7

Investment Guidelines

High Quality Intermediate Fixed Income

Benchmark Barclays Intermediate Government Credit Index

Fixed Income Securities

The fixed income portion of the Trust shall be invested in marketable, fixed income securities. Corporate bond issues shall be diversified by industry and in number so that no investment in the securities of a single issue shall exceed 7% (at market) of the value of the portfolio. Single industry weightings will be a maximum of 25%, except US Government and agency securities.

Fixed income investments are expected to preserve capital and provide a high level of income on a consistent basis.

The fixed income investments shall be appropriately diversified although the investment manager may engage in "active" bond management. It is therefore anticipated that there may be turnover as shifts are made between and within sectors, quality and maturity.

Average duration of the fixed income asset class will be targeted within a range of three to ten years. Each manager is expected to keep duration at +/- one year of the benchmark duration.

Permissible Direct Investments:

Commercial Paper of only the highest quality shall be used when invested on an individual basis Certificates of Deposit of the top 100 national banks, so long as they are stated on the Controller's list Bankers Acceptances United States Treasury Bonds, Notes and Bills



PERFORMANCE RESULTS

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APPENDIX 8


Permissible Direct Investments:

Repurchase agreements with U.S. Treasury Securities and agencies of the U.S. Government as collateral (marking to the market daily). The investment policy shall require all approved institutions and dealers transacting repurchase agreements to execute and perform as stated in the Master Repurchase Agreement. All repurchase agreement transactions shall adhere to the requirements of the Master Repurchase Agreement.

Debt instruments issued or backed by agencies of/or guaranteed by the U.S. Government All investment grade corporate debt issues including those rated Baa3/BBB- better by Moody's Investors

Services and/or Standard and Poors Corporation. In the case of a split rating, the higher rating shall apply. Securities downgraded subsequent to purchase resulting in violations of quality guidelines may be held at the manager's discretion subject to the high yield limitations indicated below.

Mortgages, including agency, non-agency, commercial backed securities and CMO’s (as long as all other provisions are met).

Futures (but must not exceed 15% without prior approval by the Board) and Options. However, these securities may not be used to leverage or hedge the portfolio.

Preferred Stock Municipal Bonds Asset backed securities Yankee bonds/foreign credits Commingled and mutual funds Eurodollar bonds 20% maximum of each manager’s portfolio may be invested in aggregate to Yankee bonds, Foreign credits,

Eurodollar bonds and Rule 144A Securities. 20% maximum of each manager’s portfolio may be invested in high yield securities (with ratings of CCC or

better).



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APPENDIX 9


Excluded Direct Investments:Private Placements

Debt to Equity exchanges

Investment managers are not authorized to use derivative securities, or strategies that do not comply with the basic investment objectives of this policy, i.e., an emphasis on the preservation of principal consistent with conservative growth of assets. Managers are specifically prohibited from using derivative or synthetic securities whose characteristics as implemented by the manager include potentially high price volatility and whose returns are speculative or leveraged (when considered together with liquid/short-term securities positions) or whose marketability may be severely limited, without written authority from the Board.

10FIRM OVERVIEW PHILOSOPHY& PROCESS


PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 10

Portfolio Performance

*Trailing periods ending December 31, 2016

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

Q4 2016 1 Year 3 Years 5 Years SinceInception

Portfolio -2.29% 1.09% 1.76% 1.21% 2.59%Benchmark -2.07% 2.08% 2.09% 1.85% 2.88%Excess -0.22% -0.99% -0.33% -0.64% -0.29%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

YTD2016 2015 2014 2013 2012 2011 2010 2009**

Portfolio 1.09% 1.24% 2.97% -2.05% 2.85% 6.98% 5.97% -0.21%Benchmark 2.08% 1.07% 3.13% -0.86% 3.89% 5.80% 5.89% -0.14%Excess -0.99% 0.17% -0.16% -1.19% -1.04% 1.18% 0.08% -0.07%

Calendar Year Returns

Portfolio Market Value: $37,238,737

Performance results are gross of fees. Periods over one year are annualized.Performance start date: October 31, 2009*Time weighted and year-to-date returns for periods ending December 31, 2016**Return is for partial period beginning October 31, 2009 and ending December 31, 2009

Bloomberg Barclays Capital Inter. Govt/Credit

City of Miami GESE



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 11

Bloomberg Barclays Excess Return – QTD

Sector Excess Returns

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Corporate CMBS U.S. Agency Mortgage Sovereign

Corporate Maturity Excess Returns

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

1-3 Yr 3-5 Yr 5-7 Yr 7-10 Yr 10 Yr > 25 Yr >

Corporate Industry Excess Returns

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

FinancialsIndustrialsUtilities

Quality Excess Returns

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Baa A AA

Note: Excess returns shown are for Index sectors within Bloomberg Barclays U.S. Aggregate Index relative to duration equivalent Treasuries. Source: Bloomberg Barclays for 10/1/16 – 12/31/16



PERFORMANCE RESULTS

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APPENDIX 12

Bloomberg Barclays Excess Return – YTD

Sector Excess Returns

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Corporate Sovereign CMBS U.S. Agency Mortgage

Corporate Maturity Excess Returns

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1-3 Yr 3-5 Yr 5-7 Yr 7-10 Yr 10 Yr > 25 Yr >

Corporate Industry Excess Returns

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

FinancialsUtilitiesIndustrials

Quality Excess Returns

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Baa A AA

Note: Excess returns shown are for Index sectors within Bloomberg Barclays U.S. Aggregate Index relative to duration equivalent Treasuries. Source: Bloomberg Barclays for 1/1/16 – 12/31/16



PERFORMANCE RESULTS

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PORTFOLIO REVIEW

APPENDIX 13

High Quality Intermediate Excess Return

High Quality Intermediate vs. Bloomberg Barclays U.S. Intermediate Govt/CreditRolling 5 year gross returns since inception (Q1 1996)*

1%

2%

3%

4%

5%

6%

7%

8%

9%

1% 2% 3% 4% 5% 6% 7% 8%

Hig

h Q

ualit

y In

term

edia

te

Bloomberg Barclays U.S. Int G/C

Outperformance

Underperformance

See attached disclosure in the Appendix. Supplemental information offered is in addition to our performance presentation data and disclosures. Past performance is not indicative of future results. * Data is based on quarterly five year rolling annualized returns since inception through 12.31.16.



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 14

Bond Market Review and Outlook

Fed Policy Ultra-easy monetary policy has increased the valuation of risk assets but done little to improve growth or inflation.

Markets have become very dependent on policymakers and when liquidity has been reduced, risk assets have fallen.

Central bank policies have distorted incentives and normal market signals have been clouded.

The Fed is no longer adding stimulus but withdrawing liquidity.

Policy tightening is occurring in a much slower growth environment and later in the economic cycle than past rate hikes.

This will likely produce greater uncertainty, increased risks, unintended consequences, and higher volatility.

Fundamentals Numerous indicators show we are late in the credit cycle.

Leverage is at record levels and credit fundamentals continue to weaken.

Ultra-easy monetary policy has produced negative side effects for creditors as problem-credits/defaults are increasing.

Shareholder enhancement activity has peaked which historically has been a sign of a turn in the credit cycle.

Given the current excesses in credit markets, the next downturn in the credit cycle could be severe and long-lasting.

Valuations Credit spreads are priced for perfection and do not reflect the risks in the current environment.

The recent dramatic backup in rates makes reaching for yield in credit less compelling.

Momentum /Sentiment

Without a recovery in underlying fundamentals, it will be difficult for the outperformance of credit to continue.

Risks are increasing as the factors that have driven outperformance in credit become less supportive.



PERFORMANCE RESULTS

BOND MARKET REVIEW

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APPENDIX 15

Fed Policy

Source: Bloomberg as of December 31, 2016. Economic data is from the latest quarter that was available before a rate decision.

Recession Recession Recession

0

1

2

3

4

5

6

7

8

9

Dec

-89

Dec

-90

Dec

-91

Dec

-92

Dec

-93

Dec

-94

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Dec

-16

Perc

ent (

%)

Fed Funds Rate

HIKING CYCLEFeb 1994 – Feb 1995

Unemployment Rate 6.5%Core Inflation 2.3%GDP Growth 3.4%

HIKING CYCLEJun 2004 – Jun 2006


HIKING CYCLEDec 2015 – Dec 2016


The Fed is attempting to raise interest rates in an environment where growth and inflation are much lower than in previous tightening cycles.



PERFORMANCE RESULTS

BOND MARKET REVIEW

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PORTFOLIO REVIEW

APPENDIX 16

Fed Policy

Sep-

16

120

140

160

180

200

220

240

260

20

40

60

80

100

120

140

160

Dec

-70

Aug

-72

Apr

-74

Dec

-75

Aug

-77

Apr

-79

Dec

-80

Aug

-82

Apr

-84

Dec

-85

Aug

-87

Apr

-89

Dec

-90

Aug

-92

Apr

-94

Dec

-95

Aug

-97

Apr

-99

Dec

-00

Aug

-02

Apr

-04

Dec

-05

Aug

-07

Apr

-09

Dec

-10

Aug

-12

Apr

-14

Dec

-15

Total N

onfinancial Deb

t to GD

P (%)To

tal S

tock

Ma

rket

Ca

p to

GD

P (%

)

Total Stock Market Cap to GDP

Total Nonfinancial Debt to GDP

Source: Bloomberg as of September 30, 2016. Note: Total nonfinancial debt includes government, household, and nonfinancial corporate debt.

Total Stock Market Capitalization to GDP vs. Total Nonfinancial Debt to GDP

The current extreme level of risk assets has been supported with debt.



PERFORMANCE RESULTS

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APPENDIX 17

Policy divergence has caused the dollar to rise, which has led to a significant tightening in global financial conditions.

50

60

70

80

90

100

110

120

130

140

150

Jan-

73

Aug

-75

Ma

r-78

Oct

-80

Ma

y-83

Dec

-85

Jul-8

8

Feb-

91

Sep-

93

Apr

-96

Nov

-98

Jun-

01

Jan-

04

Aug

-06

Ma

r-09

Oct

-11

Ma

y-14

Dec

-16

Implications of a Strong Dollar Lower earnings for U.S. multinationals Undermines financial stability of foreign banking system Increased deleveraging risk for $10 trillion dollar carry trade Higher servicing costs for $4 trillion in emerging market debt Increased deflation risk Potential for increased risk aversion / flight to quality

Sources: Bloomberg, Bank for International Settlements as of December 31, 2016

There is a strong positive relationship between the dollar and credit spreads.

Index Value

Trade Weighted U.S. Dollar

Latin American Debt Crisis

Asian/RussianDebt Crisis

Fed Policy



PERFORMANCE RESULTS

BOND MARKET REVIEW

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APPENDIX 18

Fundamentals



PERFORMANCE RESULTS

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APPENDIX 19

Fundamentals



PERFORMANCE RESULTS

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APPENDIX 20

Fundamentals

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Jun-

81

Jun-

82

Jun-

83

Jun-

84

Jun-

85

Jun-

86

Jun-

87

Jun-

88

Jun-

89

Jun-

90

Jun-

91

Jun-

92

Jun-

93

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Jun-

10

Jun-

11

Jun-

12

Jun-

13

Jun-

14

Jun-

15

Jun-

16

Chicago Fed National Activity Diffusion Index

Given where we are in the current credit cycle, we believe it is prudent to be cautious in the near-term but to be looking for opportunities over the intermediate-term.

Source: Bloomberg as of November 30, 2016

Mid-Cycle Slowdown Mid-Cycle Slowdown

Mid-Cycle Slowdown

Mid-Cycle Slowdown

RECESSION

Recession Threshold-0.35

Nov

-16

RECESSION

RECESSION

RECESSION



PERFORMANCE RESULTS

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APPENDIX 21

0

1

2

3

4

5

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

$Trillions

0

20

40

60

80

100

120

Jun-

88

Dec

-89

Jun-

91

Dec

-92

Jun-

94

Dec

-95

Jun-

97

Dec

-98

Jun-

00

Dec

-01

Jun-

03

Dec

-04

Jun-

06

Dec

-07

Jun-

09

Dec

-10

Jun-

12

Dec

-13

Jun-

15

Dec

-16

$Billions

Source: Standard & Poor’s Sources: CreditSights, Dealogic

Average Quarterly Buybacks M&A Volumes

The peak in stock buybacks and deal activity provide additional evidence the credit cycle has turned.

Fundamentals



PERFORMANCE RESULTS

BOND MARKET REVIEW

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APPENDIX 22

Valuations

0

100

200

300

400

500

600

700

Dec

-89

Dec

-90

Dec

-91

Dec

-92

Dec

-93

Dec

-94

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Dec

-16

Bloomberg Barclays Corporate Spread Index

Investment grade corporate spreads do not adequately compensate investors for global risks.Basis Points

Stock Market Crash

QE1

Source: Bloomberg Barclays as of December 31, 2016

Recession

Subprime Crisis

Worldcom

Recession

LTCMS&L CrisisQE29/11

QE3

GM/Ford Downgrades

QE3 Ends

$0

$1

$2

$3

$4

$5

$6

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Dec

-16

Ma

rket

Va

lue

(tril

lions

)

Corporates Outstanding by Quality

BAAAAAAAA

Corporate Index %1999 25%2008 33%2016 48%



PERFORMANCE RESULTS

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APPENDIX 23

ValuationsTreasury yields were only modestly higher in 2016 despite the dramatic bond sell-off in the second half of the year.

Source: Bloomberg as of December 31, 2016Note: Swedish 3Y Bond Yield is interpolated because no bond with that maturity exists

1 Year 3 Year 5 Year 10 Year 30 Year

12/31/15 0.77% 1.33% 1.79% 2.30% 3.01%

12/31/16 0.82% 1.46% 1.92% 2.43% 3.05%

Change in YTD Yields 0.05% 0.13% 0.13% 0.13% 0.04%

0%

1%

2%

3%

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

PCE Core Price Index (YOY% Change)Fed Inflation Target

Global Government Bond Yields PCE Core Price Index

As of 12/31/16 2Y 3Y 5Y 10Y

Switzerland -1.067 -0.956 -0.713 -0.224

Japan -0.185 -0.169 -0.114 0.041

Germany -0.800 -0.789 -0.543 0.204

Netherlands -0.751 -0.736 -0.374 0.350

Sweden -0.638 -0.468 -0.127 0.543

France -0.691 -0.508 -0.129 0.681

UK 0.044 0.094 0.471 1.235

Spain -0.305 -0.199 0.263 1.380

Italy -0.191 -0.068 0.596 1.812

US 1.196 1.458 1.920 2.431

U.S. Treasury Yield Curve

Nov

-16



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 24

Credit Sector Scorecard

Category Indicator Implications for Credit Spreads

Fundamentals Treasury Curve Slope Absolute Level Neutral

Treasury Curve Slope Relative Level Tighter

Credit Curve Slope Wider

Leverage Wider

Lending Standards Tighter

Valuations High Yield Market Pricing Tighter

Quality Spread Tighter

Momentum / Sentiment Credit Sector Excess Return Trend Tighter

Stock Market Volatility Wider

Our credit sector scorecard incorporates fundamental, valuation and momentum/sentiment factors.

As of December 31, 2016



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 25

Credit Sector Allocation Decisions: 2006 – Present

0

100

200

300

400

500

600

700

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Dec

-16

Bloomberg Barclays Investment Grade Corporate Spread

Our disciplined sector allocation process has been successful over full market cycles.

Trend reversal as market reacts to

end of QE

Beginning of Central Bank “whatever it

takes” policies

Our only sustained periods of

underperformance were when investors “reached for yield.”

UNDERWEIGHT OVERWEIGHT UNDERWEIGHT

Source: Bloomberg Barclays as of December 31, 2016



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 26

Investment Strategy and Portfolio Positioning

We will add to credit if valuations become attractive

Credit valuations have disconnected from fundamentals.

The recent tightening we have seen in corporate spreads is historic for this point in the cycle.

We will monitor inputs to our investment process for indications of improving conditions and opportunities.

Corporate holdings are focused on high quality, liquid issues

Energy has been underweighted and holdings emphasize the major integrated issuers.

Negative event risk from shareholder enhancement and M&A activity continues to be a headwind for credit investors.

Large capitalization issuers have been emphasized.

Underweights include bank, foreign/sovereign, lower quality, and illiquid issuers.

Governments provide liquidity and stability

Governments are overweighted to provide liquidity for opportunities in credit.

This will serve us well in an environment of greatly reduced liquidity.

Duration / Yield Curve

Increased interest rate volatility due to uncertainty regarding the Fed’s actions is likely.

This has led us to maintain duration and maturity distributions close to the benchmark.

We believe a resumption of credit spread widening will produce near-term outperformance and longer-term opportunities.



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 27

Portfolio Characteristics as of December 31, 2016

Sector +/-Treasury 25.02%U.S. Agency 1.05%Corporate -19.04%Other Credit -7.47%Cash 0.44%

City of Miami GESE

Yield-to-Maturity 1.78%

Duration 4.06

Average Quality Aa1

Number Of Issues 76 Other Credit category includes Local Authorities, Sovereigns, Supranationals and Foreign Agency.

Well-diversified

Bloomberg Barclays Capital Inter. Gov/Credit


+ / - 10%

City of Miami GESE Exposure

Exposure

Lower

Higher

2.09%

3.98

Aa2

5,172

Treasury80.85%

U.S. Agency4.80%

Corporate13.91%

Cash0.44%

Treasury55.83%

U.S. Agency3.75%

Corporate32.95%

Other Credit7.47%



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 28

Portfolio Characteristics as of December 31, 2016

*U.S. Government and Agency securities are currently classified as AAA.

City of Miami GESE


8.83%

4.35%

0.73%

18.82%

12.38%

1.75%

0%2%4%6%8%

10%12%14%16%18%20%

Industrials Finance Utilities

Corporate Distribution

1.98%

42.48%

22.57%17.71% 15.26%

1.08%

36.30%28.86%

17.02% 16.74%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

<1 year 1 to 3 years 3 to 5 years 5 to 7 years 7 to 10 years

Maturity Distribution

86.49%

4.08% 7.49%1.94%

64.58%

7.88%16.11%

11.43%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

AAA AA A BBB

Quality Distribution*



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX 29

Historical Sector Allocation

Chicago Equity PartnersPORTFOLIO APPRAISAL

CITY OF MIAMI GESE RETIREMENT TRUST HQISS ACCOUNT NUMBER: LE3H

December 31, 2016

Unit Total Market Pct. AnnualQuantity Security Cost Cost Price Value Assets Income Yield

CORPORATE FINANCIAL220,000 BANK AMER CORP 97.40 214,282.20 96.71 212,767.94 0.6 5,506.60 3.1

2.503% Due 10-21-22120,000 BANK NEW YORK

MTN BK ENT100.02 120,026.40 100.04 120,043.68 0.3 2,940.00 2.4

2.450% Due 11-27-20105,000 BANK OF

MONTREAL99.96 104,954.85 100.00 104,999.58 0.3 2,205.00 2.1

2.100% Due 12-12-19205,000 CHUBB CORP 122.64 251,409.95 105.53 216,330.76 0.6 11,787.50 1.7

5.750% Due 05-15-18105,000 GENERAL ELEC CAP

CORP MTN BE104.74 109,972.80 100.04 105,037.17 0.3 3,045.00 1.1

2.900% Due 01-09-17175,000 GOLDMAN SACHS

GROUP INC97.57 170,756.25 97.16 170,023.00 0.5 4,112.50 3.0

2.350% Due 11-15-21275,000 J P MORGAN CHASE

& CO MTN BE98.54 270,976.75 98.15 269,905.35 0.7 6,311.25 2.7

2.295% Due 08-15-21160,000 MORGAN STANLEY 99.06 158,500.80 98.80 158,073.92 0.4 4,200.00 2.9

2.625% Due 11-17-2145,000 TORONTO

DOMINION BANK101.65 45,740.70 100.59 45,267.75 0.1 1,012.50 2.0

2.250% Due 11-05-19125,000 VISA INC 99.91 124,893.75 100.31 125,388.62 0.3 2,750.00 2.1

2.200% Due 12-14-20300,000 WELLS FARGO & CO

NEW99.98 299,931.00 99.26 297,777.00 0.8 7,500.00 2.7

2.500% Due 03-04-21Accrued Interest 11,244.77 0.0

1,871,445.45 1,836,859.54 4.9 51,370.35 2.5

30



December 31, 2016


CORPORATE INDUSTRIAL60,000 3M CO 98.06 58,834.20 98.02 58,814.40 0.2 1,200.00 2.4

2.000% Due 06-26-2285,000 ALTRIA GROUP INC 102.91 87,471.80 101.14 85,968.66 0.2 2,231.25 2.2

2.625% Due 01-14-20185,000 AT&T INC 111.72 206,678.30 107.51 198,885.54 0.5 9,620.00 2.7

5.200% Due 03-15-20110,000 BOEING CO 98.79 108,669.05 100.59 110,644.60 0.3 2,585.00 2.2

2.350% Due 10-30-2170,000 DR PEPPER SNAPPLE

GROUP INC99.96 69,973.40 100.02 70,016.10 0.2 2,191.00 3.1

3.130% Due 12-15-23145,000 EXXON MOBIL CORP 101.16 146,684.90 100.22 145,313.34 0.4 2,476.60 1.6

1.708% Due 03-01-1970,000 FORD MTR CO DEL 100.00 70,000.00 101.05 70,734.86 0.2 3,042.20 4.2

4.346% Due 12-08-26140,000 GENERAL ELECTRIC

CO106.32 148,845.20 103.59 145,030.90 0.4 7,350.00 1.3

5.250% Due 12-06-17110,000 GENERAL MLS INC 119.94 131,934.00 107.51 118,265.73 0.3 6,215.00 2.0

5.650% Due 02-15-19100,000 HOME DEPOT INC 102.80 102,798.00 101.35 101,352.00 0.3 2,250.00 1.4

2.250% Due 09-10-18125,000 KIMBERLY CLARK

CORP115.50 144,375.00 102.88 128,606.00 0.3 7,656.25 1.1

6.125% Due 08-01-17170,000 LOCKHEED MARTIN

CORP101.05 171,790.10 100.40 170,677.11 0.5 3,145.00 1.6

1.850% Due 11-23-18

31



December 31, 2016


205,000 MCDONALDS CORP MED TERM NT BE

107.05 219,460.70 104.21 213,636.44 0.6 10,967.50 1.7

5.350% Due 03-01-1890,000 MEDTRONIC INC 99.88 89,894.70 99.94 89,948.70 0.2 787.50 1.2

0.875% Due 02-27-17225,000 MERCK & CO INC

NEW99.60 224,104.50 99.80 224,539.20 0.6 2,475.00 1.3

1.100% Due 01-31-18125,000 PFIZER INC 99.93 124,910.00 99.91 124,882.12 0.3 2,125.00 1.7

1.700% Due 12-15-19120,000 PHILIP MORRIS INTL

INC119.85 143,820.00 105.40 126,479.04 0.3 6,780.00 1.7

5.650% Due 05-16-1860,000 SHELL

INTERNATIONAL FIN BV

99.45 59,673.00 97.77 58,663.02 0.2 1,125.00 2.4

1.875% Due 05-10-2195,000 SHERWIN

WILLIAMS CO100.16 95,156.75 99.83 94,835.17 0.3 1,282.50 1.5

1.350% Due 12-15-17170,000 SYSCO CORP 106.09 180,346.20 103.87 176,573.73 0.5 8,925.00 1.7

5.250% Due 02-12-18130,000 TYSON FOODS INC 102.38 133,094.00 100.95 131,239.16 0.4 3,445.00 2.3

2.650% Due 08-15-1980,000 UNION PAC CORP 99.78 79,820.80 104.40 83,518.00 0.2 2,916.80 3.0

3.646% Due 02-15-2480,000 UNITED PARCEL

SERVICE INC106.20 84,962.40 103.35 82,682.96 0.2 2,500.00 2.2

3.125% Due 01-15-21

32



December 31, 2016


186,000 VERIZON COMMUNICATIONS INC

100.31 186,568.01 100.96 187,784.48 0.5 4,882.50 2.3


3,069,865.01 3,026,641.55 8.1 98,174.10 1.9

CORPORATE UTILITY50,000 DOMINION RES INC

VA NEW110.17 55,084.50 106.85 53,423.85 0.1 2,225.00 2.7

4.450% Due 03-15-2195,000 MIDAMERICAN

ENERGY CO106.16 100,856.75 103.36 98,196.46 0.3 3,325.00 3.0

3.500% Due 10-15-24112,000 PROGRESS ENERGY

CAROLINA99.97 111,961.74 102.57 114,877.39 0.3 3,360.00 2.4


267,902.99 268,844.12 0.7 8,910.00 2.7

AGENCY55,000 FEDERAL HOME LN

MTG CORP103.78 57,081.47 101.64 55,902.38 0.2 1,306.25 2.0

2.375% Due 01-13-2275,000 FEDERAL HOME LN

MTG CORP98.13 73,597.50 99.22 74,418.45 0.2 1,031.25 1.6

1.375% Due 05-01-20565,000 FEDERAL NATL

MTG ASSN100.20 566,135.65 99.80 563,866.61 1.5 4,943.75 1.0

0.875% Due 03-28-18

33



December 31, 2016


115,000 FEDERAL NATL MTG ASSN

96.91 111,449.83 97.29 111,880.05 0.3 1,581.25 2.0

1.375% Due 10-07-21300,000 FEDERAL NATL

MTG ASSN98.39 295,179.00 98.62 295,852.80 0.8 3,000.00 1.5

1.000% Due 10-24-19570,000 FEDERAL NATL

MTG ASSN96.75 551,491.38 99.72 568,405.14 1.5 4,987.50 1.1

0.875% Due 05-21-1895,000 FEDERAL NATL

MTG ASSN100.82 95,777.35 101.22 96,157.19 0.3 1,781.25 1.3


1,750,712.18 1,770,667.47 4.8 18,631.25 1.3

TREASURY1,895,000 UNITED STATES

TREAS NTS99.80 1,891,231.15 98.69 1,870,202.03 5.0 16,581.25 1.4

0.875% Due 09-15-19550,000 UNITED STATES

TREAS NTS100.60 553,288.95 100.55 553,007.95 1.5 8,250.00 1.2

1.500% Due 02-28-191,110,000 UNITED STATES

TREAS NTS101.73 1,129,169.70 100.78 1,118,671.32 3.0 18,037.50 1.3


TREAS NTS102.34 1,212,730.20 99.73 1,181,806.42 3.2 22,218.75 1.9


TREAS NTS99.76 698,317.99 97.33 681,296.70 1.8 14,000.00 2.4

2.000% Due 02-15-25

34



December 31, 2016


1,880,000 UNITED STATES TREAS NTS

99.42 1,869,047.55 98.96 1,860,464.92 5.0 25,850.00 1.7


TREAS NTS101.77 1,043,155.14 98.11 1,005,581.37 2.7 17,937.50 2.1


TREAS NTS99.20 595,173.89 99.52 597,093.60 1.6 5,250.00 1.1


TREAS NTS99.92 1,129,076.83 98.40 1,111,945.99 3.0 15,537.50 1.8


TREAS NTS97.77 1,940,667.12 93.44 1,854,734.37 5.0 32,256.25 2.4


TREAS NTS98.79 1,076,847.01 97.30 1,060,578.72 2.8 12,262.50 1.8


TREAS NTS100.90 781,965.49 97.69 757,108.35 2.0 9,687.50 1.8


TREAS NTS97.70 2,203,035.98 93.25 2,102,787.50 5.6 36,643.75 2.4


TREAS NTS104.49 653,078.67 100.16 625,976.25 1.7 12,500.00 2.0


TREAS NTS100.84 655,438.93 98.53 640,452.80 1.7 11,375.00 2.0

1.750% Due 05-15-22

35



December 31, 2016


760,000 UNITED STATES TREAS NTS

99.84 758,755.67 98.84 751,182.48 2.0 6,650.00 1.3


TREAS NTS100.17 1,367,266.88 98.96 1,350,763.05 3.6 13,650.00 1.4


TREAS NTS100.41 507,067.77 97.32 491,467.51 1.3 8,206.25 2.1


TREAS NTS100.01 1,330,108.36 98.80 1,313,998.77 3.5 13,300.00 1.4


TREAS NTS98.24 225,961.74 99.84 229,622.57 0.6 1,725.00 0.9


TREAS NTS105.32 384,420.60 99.18 361,991.67 1.0 7,300.00 2.1


TREAS NTS97.61 409,959.37 99.71 418,785.78 1.1 3,150.00 1.0


TREAS NTS93.06 628,178.56 97.40 657,439.20 1.8 11,812.50 2.2


TREAS NTS100.56 1,563,744.86 100.47 1,562,289.84 4.2 21,381.25 1.1


TREAS NTS100.02 970,231.99 101.77 987,201.98 2.7 24,250.00 2.2

2.500% Due 08-15-23

36



December 31, 2016


1,295,000 UNITED STATES TREAS NTS

104.78 1,356,941.98 103.30 1,337,694.85 3.6 35,612.50 2.2


TREAS NTS101.78 717,579.67 101.50 715,547.50 1.9 17,625.00 2.3


TREAS NTS100.10 1,481,475.19 100.46 1,486,821.32 4.0 22,200.00 1.3


TREAS NTS99.62 941,364.47 99.68 941,973.16 2.5 8,268.75 1.1


TREAS NTS100.52 95,497.62 99.93 94,936.92 0.3 1,543.75 1.6


30,170,779.35 29,828,513.05 80.1 455,062.50 1.8

CASH AND EQUIVALENTSGeneral Classification

MONEY MARKET FUND

507,211.47 507,211.47 1.4 101.44 0.0

507,211.47 507,211.47 1.4 101.44 0.0

MISCELLANEOUSNot Classified

INCOME CASH FOR WITHDRAWAL

12,153.12 12,153.12 0.0 2.43 0.0

12,153.12 12,153.12 0.0 2.43 0.0

TOTAL PORTFOLIO 37,650,069.57 37,250,890.34 100.0 632,252.07 1.8

37



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX

Annual Performance Disclosure



PERFORMANCE RESULTS

BOND MARKET REVIEW

INVESTMENT STRATEGY

PORTFOLIO REVIEW

APPENDIX

Contact Information

Today’s Presenters

Chicago Equity Partners180 N. LaSalle Street, Suite 3800

Chicago, Illinois

Mike Budd

Managing Director

p: 312.629.8506

e: [email protected]

James A. DeZellar, CFA

Managing Director

p: 312.629.5725

e: [email protected]

Documents

City of Miami General Employees’ and Sanitation Employees ... · FIRM OVERVIEW PHILOSOPHY & PROCESS INVESTMENT GUIDELINES PERFORMANCE RESULTS BOND MARKET REVIEW INVESTMENT STRATEGY