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Mellon briefs El Paso retirement trust on three index funds; S&P 500 fund tracks closely
Summary
BNY Mellon representatives reviewed performance and tracking details for three index funds held by the City of El Paso Employees Retirement Trust, reporting close benchmark tracking and small attribution effects from securities lending, fees and cash/futures.
BNY Mellon representatives reviewed the performance and structure of three index funds the City of El Paso Employees Retirement Trust holds during the trust’s July 16, 2025 meeting.
Mellon’s presentation covered the S&P 500 index fund, the All Country World ex-U.S. IMI index fund and an aggregate bond index fund and explained the drivers behind each fund’s trailing one‑year performance and tracking differences relative to benchmarks.
Mellon reported that the S&P 500 fund returned 15.155% for the one‑year period, trailing the benchmark by about 0.009 percentage points (roughly nine‑tenths of a basis point). Mellon attributed the small tracking difference to securities lending (+0.006 percentage points), composition differences (+0.014) and negative effects from fees and cash/futures (-0.023 and -0.006, respectively). Mellon said it uses a full‑replication approach for the S&P 500 fund and noted a temporary position created by a corporate spin‑off that was liquidated after month‑end.
The all‑country ex‑U.S. index fund returned 18.092% for the year and outperformed its benchmark by roughly 26.6 basis points. Mellon said the principal positive contributor was the fund’s ability to recoup certain overseas dividend tax withholdings, which added about 37.1 basis points; other factors (composition, securities lending and fees) partially offset that benefit.
The aggregate bond index fund returned about 6.08% for the year, outperforming the Bloomberg U.S. Aggregate index by roughly 0.004 percentage points, with securities lending and minor pricing/transaction effects cited as the main drivers of the small outperformance.
Speakers from Mellon emphasized that index management’s objective is to track benchmarks closely rather than take active bets, and they explained sampling and optimization approaches used for large, multi‑country benchmarks and for fixed‑income indexes where many securities trade infrequently.
The trust’s executive director acknowledged the presentation and thanked Mellon for answering committee questions. No formal action was taken on the Mellon presentation.
