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HomeMy WebLinkAboutAgenda - Pension Advisory Committee - 04/25/2023_____________________________________________________________________________________ Pension Advisory Committee (PAC) Quarterly Meeting Tuesday, April 25, 2023 2:00 p.m. City Hall Conference Room 301, 180 Market Street Attend Virtually: https://meet.goto.com/SouthBurlingtonVT/pensionadvisorycommitteemeeting04-25-2023 You can also dial in using your phone. Access Code: 743-498-885 +1 (571) 317-3112 A G E N D A ______________________________________________________________________________ 1)Welcome & Introductions 2)Additions, deletions, or changes to agenda 3)*** Approve prior meeting minutes from January 17, 2023 PAC Meeting 4)Appoint member to record minutes 5)***SEI review of Q1 Net Performance Report. Discuss performance and status of asset allocation- Dan Cappell 6)Other business 7)Choose a day and time for the next meeting in July 8)Adjourn *** Attachments Pension Advisory Committee (PAC) Quarterly Meeting Tuesday, January 17, 2023 2:00 p.m. City Hall Conference Room 301, 180 Market Street MINUTES ______________________________________________________________________________ Attendees: Martha Machar, Daisy Brayton, Tom Hubbard, Dan Chappell, Erik Schait, Tim Barrit, Dan Boyer, and Larry Kupferman and Spencer Baker. Absent: Todd Gregory, Donna Kinville, Pat Blizzard, Marc Hachey 1)Welcome & Introductions 2)Additions, deletions, or changes to agenda – There were no additions, deletions or changes to the agenda. 3)Approve prior meeting minutes – There were no prior minutes to approve. 4)Appoint member to record minutes – Daisy Brayton, agree to record the minutes. 5)SEI review of Q4 Net Performance Report – Pat Blizzard – SEI Dan Cappell, from SEI, gave an overview of the 2022 Fourth Quarter. Overview – Markets have not performed well in 2022. From an economic point of view, this is the worst market drop since 1931. Feds expect to continue raising interest rates in 2023. 6)Pension valuation Report, 2022 – Erik Schait, Newport Group Overview - Portfolio in 4th quarter is up 7.15%, which for the entire year is up 11.65%. There are still contributions from current employees who were in the fund before May 2019. 7)Other business – The group discussed potentially having Erik Schait come back in October to discuss lowering from 7.25% to 7.0%. 8)Adjourn – Meeting was adjourned at 3:30 p.m. Respectfully submitted, Daisy Brayton, Human Resources Director For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.1©2023 SEI Dan Cappell, CAIA dcappell@seic.com OCIO partnership review First Quarter 2023 April 25, 2023 City of South Burlington For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.2©2023 SEI Agenda •Executive Summary •Market & Economic Review •Portfolio Review •Core Property Commentary •Appendix For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.3©2023 SEI SEI’s OCIO support model: Extending our commitment beyond investments 1Optional service. 2As of 6/30/22. Custody services provided by SEI Private Trust Company, a federally chartered limited purpose savings association and an affiliate of SIMC. Client Portfolio Management •Portfolio management technology •Rebalancing to strategic targets •Daily processing (Automated trade calculations) Custody and Operations1 •Dedicated middle office with 20+ years average industry experience2 •Client and benefit payment websites •Q/Cs, call-backs as part of process •Detailed statements & reporting (including tax) Audit and Government Filing Support •Asset and transaction confirmations •ROA, 5500 support •SPTC SOC 1 report •Auditors: Website access and direct interaction by SEI Governance •Fiduciary education •IPS development and review Solutions •Investor dashboard •Administration capabilities •Performance reporting •Funded status monitoring Mitigate financial risk Time savings More integration and transparency Improved governance support For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.4©2023 SEI Please refer to the important disclosures accompanying your portfolio performance in this presentation for information on performance calculations. Executive summary Economic Point of View We believe that recent events in the banking sector have likely accelerated the end of the rate hiking cycle and raised the odds of recession in the U.S. beginning later this year or in early 2024. We still anticipate further volatility across asset classes as investors face familiar headwinds: inflation rates exceeding the targets of major central banks; further interest rate increases; quantitative tightening; and, for many countries, stagnant or recessionary economies through 2023, and perhaps, into 2024. We remain convinced that a portfolio diversified across asset classes and managed with an appropriate level of risk, still has the greatest chance for delivering on a client’s long-term goals and objectives. Portfolio Perspectives In Q1 2023, the City of South Burlington Pension Plan generated a positive absolute return of 4.33%, driven by a broad-based rally in risk assets amid improved investor sentiment. The Plan’s assets were $41,048,538 as of March 31, 2023. The 6-month rally across equities and bonds has chipped away at the losses from Q1 –Q3 2022; maintaining diversified long-term investment discipline has been rewarded; The Plan maintains long-term outperformance vs. blended market benchmarks. Equity Markets: Long-term portfolio allocations are anchored by a well-diversified mix of active and passive equity strategies. In Q1, risk assets posted solid gains with growth outperforming value and tech outpacing energy, two trends that outperformed the broad market in 2022. Fixed Income Markets: In Q1, U.S. bonds posted their best quarter since the pandemic. Fixed income markets were volatile as interest rates rose in February before falling sharply in response to spasms within the US and Swiss banking systems. (Bond yields and prices tend to move inversely.) Private Real Estate Markets: Continues to provide diversification benefits and resiliency amid the more volatile public equity and bond markets.Core Property Fund returned - 3.31% in Q1 after generating +24.4% in 2022. Recent Actions In February 2023, Lazard Asset Management replaced McKinley Capital Management in the World Equity Ex US Fund to consolidate assets among higher conviction managers and crease exposure to momentum. For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.5©2023 SEI Market and economic review For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.6©2023 SEI Commodities = Bloomberg Commodity Index (USD), Inflation-Linked = Bloomberg 1-5 Year US TIPS Index (USD), Emerging Markets Debt = 50/50 JPM EMBI Global Div & JPM GBI EM Global Div, High Yield Bonds = ICE BofA US High Yield Constrained Index (USD), US Long-Duration Bonds = Bloomberg Long US Government/Credit Index (USD), US Investment-Grade Bonds = Bloomberg US Aggregate Bond Index (USD), Emerging Markets Equity = MSCI EFM (Emerging+Frontier Markets) Index (Net) (USD), World Equity x US = MSCI World ex-USA Index (Net) (USD), U.S. Small Cap = Russell 2000 Index (USD),U.S. Large Cap = Russell 1000 Index (USD). Sources: SEI, index providers. Past performance is no guarantee of future results. As of 3/31/2023. Market performance overview •Markets managed to rally further in the first quarter of 2023 despite wide swings in interest rates. •Equity market returns were broadly positive. Global developed equities outperformed as the economic backdrop was more positive than expected. US large caps were close behind, helped by megacap technology and other rate- sensitive components. US small caps trailed on banking worries but still finished in positive territory. •Fixed income markets were volatile as interest rates rose in February before falling sharply in response to spasms within the US and Swiss banking systems. (Bond yields and prices tend to move inversely.) Long duration performed best as a result. •Precious metals prices were higher but commodities had a challenging quarter overall. This was primarily due to lower energy prices, especially natural gas. Livestock prices were also down, led by volatility in lean hog prices as markets try to appropriately price infectious disease risks. Recession worries caused industrial metals to retreat from their China-reopening runup. -15%-10%-5%0%5%10% Commodities Inflation-Linked Emerging Markets Debt High Yield Bonds Long Duration Fixed Income Core Fixed Income Emerging Markets Equity World Equity x US U.S. Small Cap U.S. Large Cap Financial Markets Review One Year 2023 Q1 For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.7©2023 SEI Markets are inherently risky and uncertain…. 2019 short term portfolios, based on 2019 capital market assumptions, included 0% allocation to US large cap equities due to high valuations. 2019 Russell 1000 (A) –31.4% 2020 Russell 1000 (A) –21.0% -JP Morgan 2019 Capital Market Expectations “Fourteen of 20 market strategist surveyed by CNBC picked a Biden victory over Donald Trump. Half of 20 market strategists surveyed expected the S&P 500 to decline in the first month following the election.” -S&P 500 rose from 3,269 to 3,638 in month following the 2020 election -CNBC Nov 2, 2020 PNC asset class 2022 outlook view –most unfavorable asset class: commodities -Commodities up 26% in 2022, only asset class to be positive -PNC Strategy Insights First Quarter 2022 “In the U.K., equities remain a lose-lose proposition in 2019 as BREXIT looms.” FTSE 350 returned 9.7% -“10 year treasuries are predicated to rise from 2.69% to 3.2% by year end” 10 year treasuries fell to 1.90% -JP Morgan 2019 Market Outlook Moody’s downgrade Silicon Valley Bank from A3 to Baa1 (after announcing $1.8 Bn loss), then to junk March 10th after bank effectively collapsed Twenty-two analysts covering SVB Financial, the bank’s parent company, had an average price target on the stock of $261.85 per share -Wall Street Journal For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.8©2023 SEI Source: CNBC ….and not readily forecastable by institutions. Asset Mgmt Firm Target Variation vs Actual Target Variation vs Actual Target Variation vs Actual Target Variation vs Actual Bank of America 2,900 -10.2%3,300 -12.1%3,800 -20.1%4,600 20.1% Barclays 3,000 -7.1%3,300 -12.1%4,000 -15.9%4,800 25.4% BMO 3,150 -2.5%3,400 -9.5%4,200 -11.7%5,300 38.4% Citi 3,100 -4.0%3,375 -10.1%3,800 -20.1%4,900 28.0% Credit Suisse 3,350 3.7%3,425 -8.8%4,050 -14.8%5,200 35.8% Deutsche Bank 3,250 0.6%3,250 -13.5%3,950 -16.9%5,250 37.1% Goldman Sachs 3,000 -7.1%3,400 -9.5%4,300 -9.6%5,100 33.2% JP Morgan 3,100 -4.0%3,400 -9.5%4,400 -7.5%5,050 31.9% Morgan Stanley 2,750 -14.9%3,000 -20.1%3,900 -18.0%4,400 14.9% UBS 3,200 -0.9%3,000 -20.1%4,100 -13.8%4,850 26.7% Wells Fargo 3,079 -4.7%3,388 -9.8%4,050 -14.8%4,715 23.1% Median 3,100 -4.0%3,375 -10.1%4,050 -14.8%4,900 28.0% Actual 3,230 3,756 4,756 3,829 2019 2020 2021 2022 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2018 2019 2020 2021 2022 2023 Fed 1 Year Forecast vs Actual Fed -Funds Rate Projected Fed Funds Rate Actual Fed Funds Rate Source: Federal Reserve For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.9©2023 SEI Sources: Bloomberg, Russell, Standard & Poor’s. US Large Cap = Russell 1000 Index, US Small Cap = Russell 2000 Index. Value and Growth represented by Russell 1000 Value Index and Russell 1000 Growth Index, respectively. Sectors represented by respective S&P 500 sector indexes. As of 3/31/2023. Past performance is not a guarantee of future results. U.S. equity market review •U.S. equities got off to a strong start in January, retreated in February on concerns that the Federal Reserve might have to keep interest rates higher for longer, and fell further in March on worries that pressure on bank deposits and capital could cause a credit crunch and eventual recession. They finished on a positive note in the last week of the quarter as bank worries receded. •Technology led the way in Q1 as megacap companies benefitted from a sharp drop in interest rates toward the end of the quarter. 2022’s other beaten down sectors, communications and discretionary, rallied as well. Banking worries and falling energy prices hurt the financial and energy sectors, respectively. •These sector dynamics led growth to outperform value during the quarter although value still leads over the trailing 12 months. -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% Dec '22 Mar '23Cumulative Total ReturnQTD Domestic Equity Market Returns U.S. Large Cap (7.4%)U.S. Small Cap (2.7%) 1.0% 14.4%21.8%20.5%16.0% 4.3%3.5%1.9%0.8% -3.2%-4.3%-4.7%-5.6%-6.0%-10.9%-4.6%-17.8%-19.7% -6.3% 0.1% -19.8% 1.2% -6.2%-3.7% 13.4% -14.3% -50% 0% 50% Value Growth Technology Communications Cons. Disc. Materials Industrials Real Estate Cons. Staples Utilities Healthcare Energy FinancialsTotal ReturnU.S. Large Cap Sectors First Quarter One Year For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.10©2023 SEI Source: Bloomberg, Russell, MSCI, SEI. U.S. = Russell 3000 Total Return Index, Developed (ex-US) = MSCI World ex-U.S Net Total Return Index, Emerging = MSCI Emerging Markets Net Total Return Index, Europe = MSCI Europe Net Total Return Index, Japan = MSCI Japan Net Total Return Index, Pacific ex-Japan = MSCI Pacific Ex Japan Net Total Return Index, EMEA = MSCI Emerging Markets Europe Middle East & Africa Net Total Return Index, Latin America = MSCI EM Latin America Net Total Return Index, Asia = MSCI EM Asia Net Total Return Index. All returns in USD. As of 3/31/2023. Past performance is not a guarantee of future results. International equity market review •Developed market equities outperformed emerging in the first quarter. •Europe led the way for a second straight quarter, as the global growth outlook continued to exceed subdued expectations. Many European bourses saw double digit returns in the quarter, and only Norway, an energy-and financials-heavy index, was negative. •Emerging markets were led by Taiwan (a tech-heavy index) and Mexico which helped Asia and Latin America outperform EMEA, as most Middle Eastern stock markets were flat to down. -2% 0% 2% 4% 6% 8% 10% 12% Dec '22 Mar '23Cumulative Total ReturnQTD International Equity Market Returns Developed (ex-U.S.) (8%)Emerging Markets (4%) 7.2%8.0%4.0%10.6%6.2%2.2%4.8%3.9% -1.1%-8.6%-2.7%-10.7% 1.4% -5.2%-7.4%-9.4%-11.1%-17.8% U.S.Developed (ex-U.S.) Emerging Europe Japan Pacific ex-Japan Asia Latin America EMEA Broad Regions Developed Regions Emerging RegionsTotal ReturnRegional Performance First Quarter One Year For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.11©2023 SEI Sources: Bloomberg, JP Morgan, SEI. Option-adjusted spreads over US Treasurys US Investment Grade = Bloomberg Barclays U.S. Corporate Index, US High Yield = Bloomberg Barclays U.S. Corporate High Yield Index, and Emerging Market Debt = JP Morgan EMBI Diversified Sovereign Index. As of 3/31/2023. Past performance is not a guarantee of future results. Fixed income review •The US yield curve was volatile during the first quarter of 2023. •The very short end of the curve moved higher on an additional rate hike by the Federal Reserve. Other points of the curve moved higher in February on inflation and tight labor market worries before falling sharply in March on banking system and recession fears. •The negative spread between 10-and 2-year yields deepened in February but that inversion was cut by more than half in March as recession worries drove two-year Treasury yields sharply lower. •Underlying volatility in rates and recession worries caused credit spreads to widen marginally. •Nonetheless, investment grade, high yield and emerging markets debt all provided healthy positive returns in the first quarter. •Spreads remained above their 10-year averages, offering investors some compensation for the higher interest volatility of recent (and potentially future) quarters. 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 0 5 10 15 20 25 30Yield Maturity (Years) U.S. Yield Curve 3/31/2023 12/31/2022 3/31/2022 1.4% 4.6%4.8% 1.3% 4.7%4.5% 1.2% 3.3% 4.0% 1.2% 4.3% 3.7% 0% 1% 2% 3% 4% 5% 6% US Investment Grade US High Yield Emerging Market DebtOption-Adjusted SpreadOption-Adjusted Spreads 3/31/202312/31/20221-Year Ago10Y Average For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.12©2023 SEI Source: Bloomberg LLC, ICE-BofA, SEI. Data as of 3/17/2023. Getting a MOVE on •Bond-market volatility has reached new cycle highs in the current financial crisis. •The chart highlights the Merrill Option Volatility Estimate (MOVE) Index, which measures investors’ uncertainty about bond prices and the extent of their risk- aversion. The higher the uncertainty and risk-aversion, the higher the index. •In March, this measure hit its highest level since 2008. That degree of bond- market volatility exceeded the March 9, 2020 pandemic-related peak and the historical peak on October 8, 1998, which came on the heels of the collapse of Long Term Capital Management, a large and highly leveraged hedge fund. 0 50 100 150 200 250 300 Merrill Option Volatility Estimate (MOVE) IndexImplied fixed-income market volatility For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.13©2023 SEI Portfolio review For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.14©2023 SEI City of South Burlington Defined Benefit Plan Investment compliance verification —March 31, 2023 Market IMA Strategy Value Allocation Allocation U.S. Factor Allocation Fund $6,007,517 14.6%15.0% Large Cap Index Fund $5,297,535 12.9%13.0% Small Cap II Fund $1,139,597 2.8%3.0% World Equity Ex-US Fund $7,697,114 18.8%19.0% Emerging Markets Equity Fund $2,015,732 4.9%5.0% Equity $22,157,495 54.0%40.0% Core Fixed Income Fund $4,806,969 11.7%12.0% Limited Duration $2,771,489 6.8%7.0% Opportunistic Income Fund $1,981,095 4.8%5.0% High Yield Bond Fund $1,602,067 3.9%4.0% Emerging Markets Debt Fund $1,607,086 3.9%4.0% Fixed Income $12,768,706 31.1%32.0% Dynamic Asset Allocation Fund $2,026,067 4.9%5.0% Other $2,026,067 4.9%5.0% Core Property CIT $4,096,264 10.0%8.0% Real Estate $4,096,264 10.0%8.0% Government Fund $6 0.0%0.0% Cash & Equivalents $6 0.0%0.0% Total $41,048,538 100.0%100.0% For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.15©2023 SEI Important information: asset valuation and portfolio returns Inception date 8/31/2013. Historical Total Index can be provided upon request. The Portfolio Return and fund performance numbers are calculated using Gross Fund Performance, using a true time-weighted performance method (prior to 6/30/2012, the Modified Dietz method of calculation was used). Gross Fund Performance reflects the effective performance of the underlying mutual funds that are selected or recommended by SIMC to implement an institutional client’s investment strategy. Gross Fund Performance does not reflect the impact of fund level management fees,fund administration or shareholder servicing fees, all of which, if applicable, are used to offset the account level investment management fees the client pays to SIMC. Gross Fund Performance does reflect certain operational expenses charged by the funds and the reinvestment of dividends and other earnings. The inclusion of the fund level expenses that the client incurs but that are offset against the client’s account level investment management fees would reduce the Gross Fund Performance of the mutual funds. For additional information about how performance is calculated, please see your monthly performance report. If applicable, alternative, property and private assets performance and valuations may be reported on a monthly or quarterly lag. Alternative, property and private assets performance is calculated gross of investment management fees and net of administrative expenses and underlying fund expenses. However: Structured Credit Fund performance is calculated gross of investment management fees and net of administrative expenses; SEI Offshore Opportunity Fund II Ltd. Class A performance is calculated net of investment management and administrative expenses; and Energy Debt Fund performance is calculated net of management fees, performance fees, as applicable,and operating expenses. Net Portfolio Returns since 6/30/12 reflect the deduction of SIMC’s investment management fee and the impact that fee had on the client’s portfolio performance. Prior to 6/30/12, Net Portfolio Returns deduct a proxy annual fee for all periods to demonstrate the impact that SIMC’s investment management fee had on the portfolio performance. However, this is a hypothetical calculation, as it does not reflect the actual fees paid by the client during the period. Please see your client invoice for actual fees paid. For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.16©2023 SEI City of South Burlington Defined Benefit Plan Portfolio summary —March 31, 2023 For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.17©2023 SEI Return time periods less than 12 months are cumulative, over 12 months are annualized. City of South Burlington Defined Benefit Plan Annualized investment returns —March 31, 2023 For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.18©2023 SEI Return time periods less than 12 months are cumulative, over 12 months are annualized. City of South Burlington Defined Benefit Plan Annualized investment returns —March 31, 2023 For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.19©2023 SEI Return time periods less than 12 months are cumulative, over 12 months are annualized. City of South Burlington Defined Benefit Plan Calendar year investment returns —March 31, 2023 For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.20©2023 SEI Return time periods less than 12 months are cumulative, over 12 months are annualized. City of South Burlington Defined Benefit Plan Calendar year investment returns —March 31, 2023 For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.21©2023 SEI Manager changes Funds Manager Addition and Rationale Manager Termination and Rationale World Equity ex- US Fund Lazard Asset Management (February 2023) Lazard’s process is quantitative and incorporates two suites of factors in the portfolio: sentiment (momentum) and quality. The strategy seeks to capitalize primarily on momentum factors such as analyst estimate revisions, residual price momentum, and reversal affects. There is also a portion of the model that is weighted to quality factors. Lazard’s strategy provides consistent exposure to the momentum alpha source. McKinley Capital Management (February 2023) We removed the strategy in order to consolidate assets among higher conviction managers and also to increase the Fund’s exposure to momentum. The assets in McKinley’s strategy were transferred to Lazard Asset Management’s All Country Ex-US 130/30 Momentum strategy. We believe the removal of McKinley will improve the Fund’s manager lineup and enhance its exposure to the momentum alpha source. For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.22©2023 SEI Source: APX and SEI Data Warehouse. Manager and fund allocations are subject to change. City of South Burlington Defined Benefit Plan Institutional investment strategies —March 31, 2023 For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.23©2023 SEI Core Property Fund For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.24©2023 SEI U.S. property market landscape Data as of 12/31/2022 Sources: NCREIF ODCE Vacancy Rate is from the NCREIF ODCE Details spreadsheet and is calculated as 1 minus the Occupancy rate; NPI Net Operating Income Growth, Transaction Cap Rates, Current Value cap Rates, and NPI Price Index are from the NCREIF Trends Report and all but the Index figures are 4-quarter rolling averages. 4.83% 3.88% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%1Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q194Q191Q202Q203Q204Q201Q212Q213Q214Q211Q222Q223Q224Q22Current Pricing Environment Transaction Cap Rates Current Value Cap Rates 662 400 450 500 550 600 650 700 750 NPI Price Index 7.53% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%1Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q194Q191Q202Q203Q204Q201Q212Q213Q214Q211Q222Q223Q224Q22NPI Net Operating Income Growth 7.03% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50%1Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q194Q191Q202Q203Q204Q201Q212Q213Q214Q211Q222Q223Q224Q22NCREIF ODCE Vacancy Rate For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.25©2023 SEI Data as of 12/31/2022 Source: NCREIF. NPI is a quarterly time series composite total rate of return measure of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only on an unlevered basis. The ODCE (Open-End Diversified Core Equity) is a Fund-level capitalization weighted, time-weighted return index and includes property investments at ownership share, cash balances and leverage. Past performance does not guarantee future results. Performance for periods of less than one year is cumulative; greater than one year is annualized. U.S. property market returns Market Update •The U.S. property market had a moderate selloff in the fourth quarter. While income remained stable, asset valuations were written down in aggregate as private and public markets continue to react to rising rates and overall uncertainty of broader economic growth. Vacancy metrics inched higher while net operating income (NOI) growth continued to settle lower from extremely strong levels seen in 2021 and the first half of 2022. This moderation in income growth is from elevated levels and continues to be a strong fundamental tailwind within an inflationary environment. •Within the commercial real estate market, higher cap rates are working their way through the market and we have seen valuations come down. As a result, we would expect trend performance to move back more in line historical averages. However, the path that we take to get there is the key uncertainty entering 2023. •During Q4, the NCREIF Property Index (NPI) and the NCREIF Open End Diversified Core Equity (ODCE) saw write-downs of approximately 4.5% to 5.8% on average, resulting in an overall return of -3.5% to -5.0%, respectively. At a sector level, all four of the largest sectors saw negative return (Office, Multi-Family, Retail & Industrial). Hotels saw a positive return, but note that this sector represents less than 1% of the NCREIF Property Index. 0.9%0.8%3.9%3.4%4.1%3.8% -4.5%-5.8% 1.6%3.9%3.8%6.0% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% NPI -3.5% ODCE -5.0% NPI 5.5% ODCE 7.5% NPI 8.1% ODCE 9.9% 4Q22 1 Year 3 Year Property Market Returns Income Return Capital Growth -4.8%-3.4% 1.4% -3.2% 7.1% 9.3% -1.6% 2.7% -0.3% -3.6% 14.6% 22.4% 3.4% 10.0% -4.8% -10% -5% 0% 5% 10% 15% 20% 25% 30% 4Q22 1 Year 3 Year U.S. Core Property Sector Returns Office Multi-Family Retail Industrial Hotel For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.26©2023 SEI 1.1%0.9%0.8%3.9%3.9%3.4%4.2%4.1%3.8% -4.4%-4.5%-5.8% 6.7% 1.6%3.9% 8.1% 3.8%6.0% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% CPF -3.3% NPI -3.5% ODCE -5.0% CPF 10.8% NPI 5.5% ODCE 7.5% CPF 12.5% NPI 8.1% ODCE 9.9% 4Q22 1 Year 3 Year SEI Core Property Fund (CPF) Returns Income Return Capital Growth Data as of 12/31/2022 Sources: SEI and NCREIF. Fund Allocation excludes cash. Performance for periods of less than one year is cumulative; greater than one year is annualized. Performance is gross of investment management fees and net of administrative expenses and underlying fund expenses.Clients implemented via collective investment trusts incur product-level fees, including trustee and administrative fees, which will affect performance. Performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call 1-800-DIAL-SEI. Core Property Fund: Performance review Contributors •The SEI Core Property Fund (“CPF”, “the Fund”) lost 3.3% during the fourth quarter of 2022. This outperformed both the NPI and the ODCE during the period. Both income and capital losses were better than the broader market, driving relative returns. •This outperformance continues when looking over the past 1yr and 3yr periods. Income is commensurate with the market during these periods, however the capital growth of properties held in the Fund stands stronger. •As evidenced by outperformance in both positive and negative markets, the Fund’s relative strength was not driven by leverage or overall market risk but by manager, sector and security selection during a variety of market environments. •The Fund’s allocation to specialist managers along with the Fund’s overweight to industrial assets contributed on a comparative basis while overall quality helped mitigate losses in the forth quarter. Detractors •There were no material detractors during the period. 15% 17% 10% 15% 13% 6% 16%8% CPF Underlying Manager Allocations MS Prime Property Fund (PPF) Heitman AmericasRealty Trust (HART) DWS RREEF America REIT II (RREEF) Clarion Lion Properties Fund (LPF) Invesco Core Real Estate Fund (ICRE) Sentinel Real EstateFund (SREF) Clarion LionIndustrial Trust (LIT) Harrison Street Core Property Fund (HSCPF) For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.27©2023 SEI Data as of 12/31/2022. Sources: SEI, NPI. Based on actual invested position of money drawn by Underlying Funds and excluding cash; “Other” includes predominantly self-storage, hotel and land. Diversification may not protect against market risk. Past performance does not guarantee future results. Core Property Fund: Positioning and actions Positioning •The Fund currently maintains an overweight to the industrial and other non-core sectors at the expense of office and retail. •Fund-level leverage stands at 22.8% and occupancy was 93.6% for the quarter; both of these right in line with corresponding ODCE figures, at 22.7% and 93%, respectively. •We continue to focus on maintaining allocations to specialty sectors, which include Self-Storage, Senior Housing, Student Housing and Life Sciences. •The Fund remains well diversified through its eight underlying funds, which in total provide exposure to more than 1,500 individual property assets. Actions •There were no manager changes during the period and allocations across managers within the Fund remained relatively stable as we provide liquidity to investors in a balanced manner. •Transaction volume continues to remain depressed, which continues to decrease the liquidity of the asset classes as investors look to rebalance as a result of strong returns relative to traditional stocks and bonds in 2022. 28.0% 42.1% 22.1% 7.8% 29.3% 41.5% 22.0% 7.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% East West South Midwest CPF Geographic Allocation SEI CPF 0.3% 13.8% 32.1% 25.7% 28.1% 15.3% 7.1% 37.2% 15.8% 24.6% 0%10%20%30%40% Other Specialty Sectors Retail Industrial Office Multi- Family Sector Allocations SEI CPF NPI For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.28©2023 SEI Appendix For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.29©2023 SEI City of South Burlington Defined Benefit Plan Fee summary Investment Management Fees Assets Prior Fee Schedule Current Fee Schedule First $25 million (Public Funds)0.65%0.62% Next $25 million (Public Funds)0.60%0.57% Over $50 million (Public Funds)0.50%0.47% Core Property (Real Estate)1.25%1.25% Other Services Assets Prior Fee Schedule Current Fee Schedule Trust and Custody Fee Included Included For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.30©2023 SEI Important information: SIMC This presentation is provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company. The material included herein is based on the views of SIMC. Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results. This presentation should not be relied upon by the reader as research or investment advice (unless SIMC has otherwise separately entered into a written agreement for the provision of investment advice). There are risks involved with investing including loss of principal. There is no assurance that the objectives of any strategy or fund will be achieved or will be successful. No investment strategy, including diversification, can protect against market risk or loss. Current and future portfolio holdings are subject to risk. Past performance does not guarantee future results. For those SEI products which employ a multi-manager structure, SIMC is responsible for overseeing the sub-advisers and recommending their hiring, termination, and replacement. References to specific securities, if any, are provided solely to illustrate SIMC’s investment advisory services and do not constitute an offer or recommendation to buy, sell or hold such securities. Any presentation of gross mutual fund performance of underlying mutual fund investments or gross account level performance is only intended for one-on-one presentations with clients and may not be duplicated in any form by any means or redistributed without SIMC’s prior written consent. Through September 30, 2012, annual performance is calculated based on monthly return streams, geometrically linked. From September 30, 2012 onward, annual performance is based upon daily return streams, geometrically linked as of the specific month end. Performance results do not reflect the effect of certain account level advisory fees. The inclusion of such fees would reduce account level performance, particularly when compounded over a period of years. The following hypothetical illustration shows the compound effect fees have on investment return: For an account charged 1% with a stated annual return of 10%, the net total return before taxes would be reduced from 10% to 9%. A ten year investment of $100,000 at 10% would grow to $259,374, and at 9%, to $236,736 before taxes. For a complete description of all fees and expenses, please refer to SIMC’s Form ADV Part 2A, the investment management agreement between SIMC and each client, and quarterly client invoices. Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such sources are believed to be reliable, neither SEI nor its affiliates assumes any responsibility for the accuracy or completeness of such information and such information has not been independently verified by SEI. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs, or expenses, which would reduce returns. Indexes are unmanaged and one cannot invest directly in an index. For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.31©2023 SEI Important information: collective trust funds As identified in the presentation, certain funds are collective trust funds, not mutual funds. A collective trust fund is an investment fund that is maintained by a bank or trust company for the collective investment of qualified retirement plans and governmental plans, and that is exempt from SEC registration as an investment company under Section 3(c)(11) of the Investment Company Act of 1940. Collective trust funds eliminate many of the administrative costs associated with institutional and retail mutual funds. For more information on the collective trust funds, including fees and expenses, please read the disclosure document for the trust. There is no guarantee that the investment objective will be fulfilled. If the fund is a target date fund, the principal balance of the portfolio may be depleted prior to a portfolio’s target end-date and, therefore, distributions may end earlier than expected. This risk increases if the distribution amount chosen is a significant portion of the starting principal. The target date represents the respective date when an investor intends to retire. Principal of any target date fund is not guaranteed at any time, including the target date. The projected time periods do not take into account the payment of fees to the advisor out of the portfolio or any other additional distribution from the account. For those SEI collective trust funds that may be held in the account, the SEI collective trust fund is part of a Collective Investment Trust (the "Trust") operated by SEI Trust Company (“STC”). STC manages the Trust based on the advice of one or more third party managers, which may include SIMC. Additionally,STC serves as the trustee of the collective trust funds and maintains ultimate fiduciary authority over the management of, and the investments made, in the funds. STC is also a wholly owned subsidiary of SEI Investments Company. For existing institutional investor client use only. Not for public distribution. The information contained herein is confidential and proprietary to SEI and is not to be reproduced or made available in any form to any persons without the express prior written consent of SEI.32©2023 SEI Thank you.