The document summarizes best practices for retirement oversight committees. It discusses committee makeup, importance of investment policies, asset/liability management, manager selection, cost monitoring, and future trends like the growth of defined contribution plans and challenges providing guaranteed income. Sample investment policy guidelines and peer group investment returns are also presented.

1. Suite 1425 | 411 Seventh Avenue I Pittsburgh, PA 15219-1905
Phone: 412-803-9900 | Fax: 412-803-9994
Presented by:
Terry Bilkey
Presentation to:
WEB-NY
Best Practices Discussion
Retirement Oversight Committees
March 21, 2019

2. CONFIDENTIAL – NOT FOR DISTRIBUTION Page 2
1) 45 years ago, ERISA established minimum standards.
2) Assisted hundreds of Oversight Committees for the last
40 years.
3) Whether Committees represent endowments, foundations,
DB/DC plans, or for-profit/not-for-profit entities, the Best
Practices are largely identical.
Best Practices--Retirement Oversight Committees

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Best Practices--Retirement Oversight Committees (cont.)
Committee Makeup (often overlooked)
▪ Expertise in operations, investments, legal, and general business all very helpful.
▪ May need to augment home-grown talent with outside experts.
All Committees Have an Asset/Liability Problem to Understand
(also often overlooked outside of DB plans)
Investment Policies Extremely Important
▪ Mission/philosophy
▪ Goals
▪ Asset allocation guidelines
▪ Measurement standards
▪ Reporting
▪ Responsibilities
▪ Periodic updates

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Staying Out of Trouble
How to Avoid Problems
1) Make sure that the asset allocation/diversification strategy
has merit, flexibility, and allows for rebalancing.
Asset Class Target Range
Equity 59% 50%- 70%
Domestic Large Cap Core Index 16% 11% - 21%
Domestic Large Cap Value 10% 6% - 14%
Domestic Large Cap Growth 7% 3% - 11%
Domestic Mid Cap Core 6% 0% - 10%
Domestic Small Cap Value 4% 0% - 10%
Domestic Small Cap Growth 4% 0% - 10%
International 12% 5% - 20%
Fixed Income 38% 30%- 50%
Intermediate 25% 20% - 30%
Bond Alternatives 13% 8% - 18%
Cash & Equivalents 3% 0%- 10%
Sample Investment Policy Guidelines

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Staying Out of Trouble (cont.)
2) Investment manager selection and ongoing performance
evaluation may require expertise beyond that of the
Committee. Specialist firms are often retained for these
functions.
▪ Watch for Committee conflicts of interest.
▪ Recent performance of little or no value.
▪ Most investment strategies can be profiled according to
expectations and specific market tendencies.

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Staying Out of Trouble (cont.)
Peer Group Analysis
All Endowments & Foundations <$1B-Total Fund Universe
As of December 31, 2018
Source: IM PARis.
Parentheses contain percentile
rankings (1=highest, 100=lowest).
Policy Index comprised of:
28% Russell 1000
11% Russell 2000
14% MSCI EAFE
8% MSCI EM
22% BB Int G/C
12% HFRI Fund of Funds Comp.
5% FTSE 3 Month T-Bill

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Staying Out of Trouble (cont.)
Peer Group Analysis
All Endowments & Foundations <$1B-Total Fund Universe
As of December 31, 2018
Source: IM PARis.
Parentheses contain percentile
rankings (1=highest, 100=lowest).
Policy Index comprised of:
28% Russell 1000
11% Russell 2000
14% MSCI EAFE
8% MSCI EM
22% BB Int G/C
12% HFRI Fund of Funds Comp.
5% FTSE 3 Month T-Bill

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Staying Out of Trouble (cont.)
3) Committees should know and periodically review cost of the
overall program as well as the individual component costs.
▪ Compare to industry-wide benchmarks.
▪ Active vs. passive management of assets.
▪ Costs are generally a function of asset size.
▪ Costs have been going down for years.

9. Largest 1,000 U.S. Retirement Plans = $10.3 Trillion as of September 30, 2018
▪ $6.6 trillion DB plan
▪ $3.7 trillion DC plan
Only About 10% of Employees Have a DB Plan Nationwide; Again Public Funds Dominate
▪ DC plans continue to be the primary vehicle for retirement savings.
▪ Target retirement date funds will continue to grow as the easiest default option and
the easiest option for participants to understand.
▪ Recent BlackRock research suggests that retirees are spending down retirement
assets at a slower pace than expected, particularly those who also have DB assets.
▪ Replicating the DB strategy of predictable monthly benefits is an ongoing challenge
for DC plans.
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Future Trends--Pensions & Investments Annual Survey
Skewed by Public Funds
with 5 of the largest
totaling over $1 trillion

10. DC Plans Have Evolved and Will Continue to Make It Easier to Achieve
Participant Goals
▪ Costs are down.
▪ Best practices are more widely used.
▪ Personalized data which allows for total integration of all assets, liabilities,
goals, and progress updates will explode in usage over the next 5 to 7 years.
▪ In essence, the DB asset/liability management which was honed over the
past 50 years will become the model for DC plans.
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The Future (cont.)
Assets
+
Contributions
+
Rate of Return
=
Monthly Defined Benefit
+
Asset Growth (Inflation Adj.)

11. Single Biggest Short-Term Hurdle for DC Plans
How to create a “guaranteed” monthly income stream
similar to that of a DB plan while growing a portion
of the asset base to maintain purchasing power.
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The Future (cont.)

12. Solutions to Date and Limitations
▪ 4% solution.
▪ Annuities.
– Immediate
– Deferred
▪ Treasury Inflation Protected Securities.
▪ Current academic work by Bill Sharpe, 1990 Nobel Prize Winner in
Economics.
According to Bill, no obvious solutions,
but all is work accessible
on his “RISMAT” website at Stanford University.
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The Future (cont.)

13. ▪ BilkeyKatz Investment Consultants, Inc. is a Registered Investment Adviser under the Investment Advisers Act of 1940.
▪ The information set forth herein and any opinions contained herein do not constitute an endorsement, implied or otherwise, of any security, nor does it constitute an
endorsement with respect to any investment area or vehicle. This material is being provided for client use only and is not intended to provide, and should not be relied upon
for, accounting, legal, or tax advice. This material is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use
would be contrary to local law or regulation.
▪ BilkeyKatz receives no compensation in any form from any other source except client consulting fees.
▪ BilkeyKatz subscribes to Investment Metrics, LLC’s (IM) PARis (Performance Analysis Reporting Information System) for performance measurement and reporting purposes.
▪ Manager performance, risk measures, market benchmarks, and peer comparisons are taken from IM PARis and are net of fees unless otherwise noted.
▪ BilkeyKatz uses or customizes databases supplied by IM for statistical measures and peer comparisons unless otherwise noted. Peer group percentile rankings (1=highest;
100=lowest) are usually shown in parentheses directly to the right of the respective returns. The peer groups are segmented by product type: SA+CF comprised of separately
managed accounts and composites of accounts, commingled funds, collective funds and unit trusts; MF comprised of mutual funds (open-end funds and exchange-traded funds
(ETFs)); and Plan Sponsor comprised of peer groups provided to IM by Russell Mellon as well as all PARis clients opting to include their own clients’ plans into respective plan
sponsor peer groups. For all statistical calculations and rankings, the SA+CF Universe data are gross of fees; MF Universe data are net of fees; SA+CF+MF Universe data are gross
of fees for SA+CF products and net of fees for MF products; and Plan Sponsor Universe data may be gross of fees or net of fees, depending on how performance was reported by
each individual plan.
▪ All returns shown are net of fees, are expressed as percentages, based in U.S. dollars, and annualized for periods longer than one year. Cumulative returns are not annualized.
Past performance is no guarantee of future results.
▪ Data from IM PARis and Pensions & Investments were used in this document.
▪ Definitions of the indices used in this document follow:
– BB Int G/C: The Bloomberg Barclays Intermediate U.S. Government/Credit Bond Index includes U.S. Treasuries, government-related issues, and investment-grade U.S.
corporate securities with remaining maturities of one to ten years.
– FTSE 3 Month T-Bill: The FTSE 3 Month Treasury Bill Index represents the monthly return equivalents of yield averages which are not marked to market; this Index is an
average of the last three-month Treasury Bill issues.
– HFR (Hedge Fund Research, Inc.) Monthly Indices: Series of benchmarks designed to reflect hedge fund industry performance by constructing equally weighted
composites of funds, as reported by the hedge fund managers in the HFR Database, net of fees, reported in U.S. dollars. Both domestic and offshore funds are included
in the HFRI Indices. HFRI Indices are updated three times per month: 5th and 15th of the month and the 1st business day of the following month. (The HFRX Indices are
engineered to achieve representative performance of a larger universe of hedge fund strategies, utilizing a proprietary and highly quantitative process; some HFRX
indices are available in foreign currencies.)
• HFRI Fund of Funds Comp.: The Hedge Fund Research, Inc. Fund of Funds Composite Index encompasses a universe of more than 650 fund of funds. The Index
calculates the average performance of the funds each month, net of fees and expenses.
– MSCI EAFE: The Morgan Stanley Capital International Europe, Australasia, and Far East Index is a free float-adjusted market capitalization index that is designed to
measure the equity market performance of developed markets, excluding the US & Canada.
– MSCI EM: The Morgan Stanley Capital International Emerging Markets Index is a free float-adjusted market capitalization index designed to measure equity market
performance of global emerging markets.
– Russell 1000: The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index.
– Russell 2000: The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index.
Disclosures and Index Definitions
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