Board reviews investment performance, asset‑allocation progress; securities‑lending program reports $3.75M net revenue for FY2025

Wilshire and staff presented the quarterly investment performance package for the period ending Sept. 30, 2025 and discussed implementation of the strategic asset allocation approved in 2024. Key takeaways:

Performance and attribution: The portfolio’s 10‑year annualized return was presented as strong relative to the discount rate and peer universe, though the total fund underperformed its policy benchmark over the three‑year horizon. Staff and Wilshire explained most of the multi‑year relative shortfall stems from private‑equity benchmarking effects and private‑equity underperformance versus public markets (private equity accounted for roughly 7.4 percentage points of the attribution shortfall in the three‑year window). Excluding private equity, selection in public markets showed modest underperformance.

Strategic allocation implementation: Staff described progress toward the board’s targets since the June 2024 allocation: private equity has fallen from about 28.5% to ~26%, real assets are moving toward the 10% target, and treasuries have been used to improve liquidity. Staff reiterated they are using an interim policy benchmark while implementation continues and said the interim benchmark has produced comparable return characteristics to the full strategic target.

SFDCP updates: Staff reported the stable value fund’s credited rate for Q1 will be 3.51% (an increase of 9 bps). Secure 2 (mandatory Roth contributions for certain catch‑up contributions) is being implemented, affected participants (deemed MRCs) will be notified in January, and Voya has onboarded a new key account manager for participant counseling.

Securities lending program: Staff and BNY Mellon reviewed the securities‑lending program, which generated $3,750,000 in net revenues for FY2025 and more than $1,000,000 in the latest quarter. The program held roughly $7 billion of lendable securities with about 30% utilization; average gross spread was ~27 basis points (16 bps from lending fees and 11 bps from reinvestment yield). Staff described the program’s conservative design — segregated cash collateral account, tight reinvestment guidelines and indemnification by BNY Mellon — and credited increased Treasury demand for a large share of yield.

Closed investment and operational notes: Under delegated authority the CIO read into the record a $50,000,000 commitment to GEN 9 LP (classified as a real asset), closed 2026‑01‑09. Staff noted continued work on liquidity, leverage and the portable alpha framework; discussions included private‑market pacing, uncalled capital treatment and interim benchmark behavior.

The board posed questions about selection in public equities, uncalled private‑market capital, and participant communications; staff and consultant responses were recorded. No votes were taken on asset‑allocation policy at this meeting.