CITY COUNCIL REGULAR MEETING AGENDA PACKET

Page 2 of 4 including $20.2 million in the PARS conservative portfolio and $33.7 million in the PARS capital growth custom portfolio. The City’s net pension liability is currently over $200 million. The City needs to continue to implement measures to reduce its pension obligation. The asset allocation ranges for both portfolios under HighMark’s management are presented below. For the conservative portfolio, investments weigh more heavily in fixed income and have a lower allocation to equity, as presented in the table below. With a more conservative investment strategy, the investment return is also lower while the overall risk is low. At the end of June 30, 2024, the inception-to-date return for the conservative portfolio was 3.73% (annualized return), gross of investment advisory fees. The September 2024 quarterly report was not available when this report was prepared. For the capital growth custom portfolio, investments weigh more heavily in equity and have a lower fixed-income allocation, as presented in the table below. A more aggressive investment strategy also yields higher investment returns, while the overall risk is higher than a conservative strategy. At the end of June 30, 2024, the inception-to-date return for the capital growth portfolio was 7.27% (annualized return), gross of investment advisory fees. DISCUSSION The key changes to the investment policy documents are highlighted below. For the capital growth portfolio, the policy/target equity allocation has been changed from 70% to 75%, which is in line with PFMAM’s target allocation for the capital appreciation investment objective. The target equity allocation for the conservative portfolio has not changed, remaining at 15%. The asset allocation ranges for both portfolios under PFMAM’s management are presented below. Conservative Portfolio Asset Allocation Ranges and Target Page 120 of 658