LIMITED/INTERNAL

MINUTES

Quarterly Meeting of the Administration Committee of the Board of Trustees of the

State Universities Retirement System Friday, June 5, 2020, 9:00 a.m.

State Universities Retirement System Via remote access only due to COVID-19 statewide restrictions

The meeting of the Administration Committee of the Board of Trustees of the State Universities Retirement System convened on June 5, 2020, at 9:00 a.m. via zoom (video conference) based on the Executive Order that temporarily amended the Open Meetings Act to allow public meetings to be conducted via phone or video conference. The following trustees were present via video conference (zoom): Mr. Collin Van Meter, chair, Mr. Aaron Ammons, Mr. John Atkinson, Mr. Richard Figueroa, Ms. Jamie-Clare Flaherty, Dr. Fred Giertz, Mr. John Lyons, Mr. Scott Hendrie, Dr. Steven Rock, Mr. Antonio Vasquez and Mr. Mitch Vogel. Others present via video conference (zoom): Mr. Martin Noven, Executive Director; Mr. Doug Wesley, Chief Investment Officer (CIO); Ms. Brenda Dunn, Chief Human Resource Officer; Ms. Tara Myers, Chief Financial Officer; Ms. Ellen Hung, Deputy CIO; Ms. Kelly Valle, Investment Analyst; Ms. Bianca Green, General Counsel; Mr. Albert Lee, Associate General Counsel; Ms. Kristen Houch, Head of Legislative Affairs; Ms. Suzanne Mayer, Chief Benefits Officer; Ms. Jackie Hohn, Chief Internal Auditor; Ms. Kelly Carson, Ms. Chelsea McCarty, and Ms. Annette Ackerman, Executive Assistants; Mr. Mike Calabrese of Foley and Lardner and Caren Lock of TIAA. Administration Committee roll call attendance was taken. Trustee Rock, present; Trustee Van Meter, present; and Trustee Vasquez, present.

PUBLIC COMMENT

There were no public comments presented to the Administration Committee.

APPROVAL OF MINUTES

Trustee Van Meter presented the minutes from the Administration Committee meeting of March 12, 2020. Trustee Vasquez made the following motion:

• That the minutes from the March 12, 2020 Administration Committee meeting be approved as presented.

LIMITED/INTERNAL

Trustee Rock seconded and the motion carried with all trustees present voting in favor. Trustee Van Meter presented the closed minutes from the Administration Committee meeting of March 12, 2020. Trustee Vasquez made the following motion:

• That the closed minutes from the March 12, 2020 Administration Committee meeting be approved and remain closed.

Trustee Rock seconded and the motion carried with all trustees present voting in favor.

CHAIRPERSON’S REPORT Trustee Van Meter did not have a formal report.

OPERATIONAL IMPACT OF COVID-19

Mr. Noven provided an update regarding the operational impact of COVID-19 on SURS. Mr. Noven was happy to announce how well staff was able to adjust to working from home. He explained that SURS staff has done an excellent job staying focused and they are continuing business as usual. SURS never had to shut down the call center, counseling sessions continued remotely, claims processing times were not impacted and SURS investment returns have been positive. Mr. Noven discussed the plan regarding the phase 1 return to work process that includes staggering schedules for up to 25 percent of employees and he also noted that the personnel policy is currently being finalized to address COVID-19 concerns and it will comply with CDC recommendations and guidelines. Mr. Noven stated that due to the COVID-19 pandemic, staff is not as able to use much vacation time. As it states in the human resource policy, the few staff members who have excessive accrued vacation time have a specific amount of time to spend down their excess vacation balance. He recommends the board consider allowing staff one or two additional years to spend down their excess balances. Trustee Vasquez made the following motion:

• That the vacation policy for using excess vacation time shall be extended by two years. Trustee Rock seconded and the motion passed with all trustees present voting in favor. Mr. Noven also reviewed the results from a recent staff survey about the COVID-19 pandemic. A copy of the presentations titled “Pandemic Engagement Pulse Check” and “SURS PEP Check Survey Trends” are incorporated as part of these minutes as Exhibit 1 and Exhibit 2.

CLOSED SESSION

Trustee Rock moved that the Administration Committee go into closed session pursuant to §2(c)(1) of the Open Meetings Act. Trustee Ammons seconded and the motion carried in a roll call vote:

LIMITED/INTERNAL

Trustee Rock - aye Trustee Van Meter - aye Trustee Vasquez - aye

RETURN TO OPEN SESSION

Upon a motion by Trustee Vasquez, second by Trustee Giertz, the motion carried, and the Administration Committee resumed its meeting in open session. FISCAL YEAR 2021 ADMINISTRATIVE EXPENSE & CAPITAL EXPENDITURE BUDGET

FISCAL YEAR 2021 INVESTMENT DEPARTMENT BUDGET Ms. Myers presented the proposed Administrative Expense and Capital Budget for Fiscal Year 2021. The administrative expense budget covers all operational costs of the SURS defined benefit plan, the SURS Self-Managed Plan (SMP) and costs of internal investment personnel services. Ms. Myers noted that the capital budget included major initiatives, services and purchases. Ms. Myers presented the Investment Department Administrative Expense Budget for Fiscal Year 2021. Trustee Rock made the following motion.

• That the Fiscal Year 2021 Administrative Expense and Capital Expenditure Budgets be approved as presented with the following amendments: remove additional IT personnel and table the cost of living increase and remove from the budget.

Trustee Giertz seconded and the motion carried with all trustees present voting in favor. Trustee Vasquez made the following motion.

• That the projected Investment Department Investment Management Fees for fiscal year 2021 be

accepted as presented. Copies of SURS presentations titled “SURS FY 2021 Budget Presentation” and “SURS FY 2021 Investment Operations Budget” are incorporated as part of these minutes as Exhibit 3 and Exhibit 4. A copy of the SURS memoranda titled “Administrative Expense and Capital Budget” is also incorporated as part of these minutes as Exhibit 5.

CHIEF DIVERSITY OFFICER UPDATE Ms. Brenda Dunn provided an update regarding the Chief Diversity Officer search stating that she and Mr. Noven conducted five phone interviews before narrowing it down to three candidates. The executive leadership team and Trustee Atkinson interviewed those three candidates via zoom. After the interviews, it was determined that the search firm should identify additional qualified candidates. It was recommended by Trustee Atkinson that the Diversity Committee be more involved in the process. The committee will meet over the next few weeks to better define the scope of the position and goals for the chief diversity officer position.

LIMITED/INTERNAL

There was no further business brought before the committee and Trustee Vasquez moved that the meeting be adjourned. The motion was seconded by Trustee Rock and carried with all trustees present voting in favor.

Respectfully submitted,

Mr. Martin Noven

Secretary, Board of Trustees MMN/kc

SURS

May 22, 2020

Exhitbit 1

See the appendix in this report for more information on our engagement

calculation and benchmark.

Current Year

80.8%

13.6%

4.0%1.6%

50.5:1

ENGAGEDEngaged employees consistently exceed expectations. They are energized and passionate about their work, leading them to exert discretionary effort to drive organizational performance.

ALMOST ENGAGEDAlmost engaged employees sometimes exceed expectations and are generally passionate about their work. At times they exert discretionary effort to help achieve organizational goals.

INDIFFERENTIndifferent employees are satisfied, comfortable, and generally able to meet minimum expectations. They see their work as “just a job”, prioritizing their needs before organizational goals.

DISENGAGEDDisengaged employees usually fail to meet minimum expectations, putting in time rather than effort. They have little interest in their job and the organization and often display negative attitudes.

Organization's Ratio of Engaged to Disengaged

ENGAGED ALMOST ENGAGED INDIFFERENT DISENGAGED

Current Year 80.8% 13.6% 4.0% 1.6%

Overall Engagement ResultsSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

3

Exhitbit 1

Previous

Year

My contributions are important to the success ofmy department. --

I am very proud of the work I do. --

I am very proud of the products and services theorganization provides. --

I am very committed to this organization. --

Taking everything into account, I like working atthis organization. --

Taking everything into account, I like my job. --

< 40% Low Performing 40%-60% Average Performing > 60% High Performing

97%

95%

93%

93%

87%

85%

Engagement Question ScoresSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

4

Exhitbit 1

AdminEmployees: 5

100

LegalEmployees: 4

100

InvestmentsEmployees: 8

100

CounselorsEmployees: 8

100

ProjectEmployees: 4

100

Call CenterEmployees: 14

14 86

3DEmployees: 7

14 86

ServicesEmployees: 6

17 83

0% 100%

Highest 8 Departments

PREPEmployees: 7

14 14 14 57

RetirementEmployees: 10

20 20 60

AccountingEmployees: 6

33 67

ITEmployees: 12

33 67

Pay Benefits + InsuranceEmployees: 7

29 71

OutreachEmployees: 13

23 77

Application DevelopmentEmployees: 10

10 10 80

0% 100%

Lowest 7 Departments

Disengaged Indifferent Almost Engaged Engaged

Engagement Results by DepartmentSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

5

Exhitbit 1

0% 100%

Previous Year

COVID-19 Questions --

Manager Relationships --

Employee Empowerment --

Senior Management Relationships --

< 40% Low Performing 40%-60% Average Performing > 60% High Performing

91%

87%

84%

78%

Driver ResultsSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

6

Exhitbit 1

DRIVER: EMPLOYEE EMPOWERMENT

0% 100%

Previous Year

I clearly understand what is expected of meon the job.

--

I have all the tools I need to do a great job. --

< 40% Low Performing 40%-60% Average Performing > 60% High Performing

92%

75%

Action Plan - ImproveSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

8

Exhitbit 1

DRIVER: MANAGER RELATIONSHIPS

0% 100%

Previous Year

My supervisor cares about me as a person. --

My supervisor keeps me well informedabout decisions that affect me.

--

< 40% Low Performing 40%-60% Average Performing > 60% High Performing

89%

84%

Action Plan - ImproveSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

9

Exhitbit 1

DRIVER: SENIOR MANAGEMENT RELATIONSHIPS

0% 100%

Previous Year

I understand the rationale behind most ofthe business decisions made by the

members of the executive leadership team.--

< 40% Low Performing 40%-60% Average Performing > 60% High Performing

78%

Action Plan - EvaluateSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

10

Exhitbit 1

DRIVER: COVID-19 QUESTIONS

0% 100%

Previous Year

This organization’s actions support thehealth and wellbeing of its employees.

--

I support this organization’s overallresponse to COVID-19.

--

I receive regular, meaningfulcommunication about how COVID-19

impacts my work.--

< 40% Low Performing 40%-60% Average Performing > 60% High Performing

95%

94%

85%

Action Plan - LeverageSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

11

Exhitbit 1

Interpreting the Results

Engagement CalculationThe survey questions were developed by subject matter experts. The reliability of the overall engagement score was calculated using Cronbach’s alpha. The reliability for engagement wasfound to be α = 0.92. Engagement is calculated by averaging the responses to the engagement measure questions, for each employee. Average scores correlate to our four levels ofengagement.

Average scores between 5.01 – 6.00 = Engaged Average scores between 4.01 – 4.50 = IndifferentAverage scores between 4.51 – 5.00 = Almost engaged Average scores less than 4.00 = Disengaged

Driver CalculationMcLean & Company uses a standardized 6-point scale for data collection. Respondents are asked to indicate the extent to which they agree with each statement by choosing a numberbetween 1 and 6 on the scale. We display the results as a top box score, or the percentage of respondents who chose 5 or 6 (agree or strongly agree).

BenchmarksMcLean & Company offers clients a general benchmark to ensure the data has enough breadth and depth to maintain its integrity. The following industries are included in McLean &Company’s engagement survey benchmark: Business Services, Financial Services, Not-for-profit, Manufacturing, Construction, Retail/Wholesale, Consumer Products, Energy, Health Care,Government, Education.

Ultimately the state of engagement at every organization is shaped by its people, culture, history, and other factors. Consequently, all decisions related to engagement initiatives must bebased on your organization’s results and unique needs. External comparisons – including benchmarks – should be used to provide context around your results rather than to make decisions.

Priority MatrixThe prioritization grid is created by plotting the top box scores for each driver on the horizontal axis and the impact of each driver on engagement on the vertical axis. The top box scores foreach driver are calculated by taking the average top box score (% of respondents selecting 5 or 6) for each of the question that relates to the corresponding driver. The impact each driver hason engagement is determined by calculating the correlation between each driver and engagement and then multiplying this correlation score by the slope between each driver andengagement.

AppendixSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

13

Exhitbit 1

Demographics # of Employees # of Responses Response Rate

Overall Organization 155 125 81%

3D 7 7 100%

Accounting 7 6 86%

Admin 7 5 71%

Application Development 14 10 71%

Audit 3 3 100%

Call Center 17 14 82%

Counselors 15 8 53%

IT 14 12 86%

IT and Applicaton Development 1 1 100%

Investments 10 8 80%

Legal 4 4 100%

Outreach 16 13 81%

Respondent BreakdownSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

14

Exhitbit 1

Demographics # of Employees # of Responses Response Rate

Overall Organization 155 125 81%

PREP 8 7 88%

Pay Benefits + Insurance 10 7 70%

Project 5 4 80%

Retirement 11 10 91%

Services 6 6 100%

Respondent BreakdownSURS

Open Date: May 15, 2020

Close Date: May 22, 2020

155# of Employees

125# of Responses

81%Response Rate

15

Exhitbit 1

1 McLean & Company

State Universities Retirement System of Illinois Pandemic Engagement Pulse Check Survey Trends and Insights

For survey open from May 15th to 22nd, 2020

Overall Engagement Results • Participation is strong at 81%. Only one department had a participation rate below 70%

(Counselors, 53%).• Overall, there is a high level of engagement (80.8%), and a very low level of disengagement

(1.6%, or 2 people).

Engagement Results by Demographic • Disengaged are in two departments: Applications Development and PREP.• The percentage of engaged employees varies by Division Leader from 67% (Claims and Finance)

to 100% (Admin).

Overall Driver Results

Employee Empowerment • Overall positive scores for the question, “I clearly understand what is expected of me on the job.”• For the question, “I have all the tools I need to do a great job,”

o Department: Accounting scored 50% and PREP scored 43%. All other departmentsscored between 67% (Services) and 100% (Project, Legal, Admin).

COVID – 19 Questions • Overall positive scores for the questions, “This organization supports the health and wellbeing of

its employees,” and, “I support this organization’s overall response to COVID-19.”• For the question, “I receive regular, meaningful communication about how COVID-19 impacts my

work,”o Department: PREP and 3D both scored 57%. Accounting scored 67%. All other

departments scored 75% or above.

Senior Management Relationships • Department: While Retirement felt they received regular, meaningful communication on how

COVID-19 impacts their work (90%), they were less likely to agree that they “understand therationale behind most of the business decisions made by the members of the executiveleadership team,” (50%). PREP also scored lower to this question (43%).

Manager Relationships • Overall, scores for this driver were high, except for PREP:

o “My supervisor cares about me as a person,” 57%o “My supervisor keeps me well informed about decisions that affect me,” 43%

Exhitbit 2

2 McLean & Company

Open-Ended Comments

Question 1: What has this organization done well in response to COVID-19? • Quickly enabled employees to work from home

o Made the decision quickly o Good IT support, getting equipment and tools out to employees o Little disruption to work, able to maintain productivity and continue business as usual

• SURS cares about the wellbeing of its employees o Implemented working from home before it was mandated o Compassionate and sensitive to staff’s personal needs

• Communication o Increased staff meetings o Increased overall communication – updates, what is going on with the company, what is

expected of employees • Keeping people employed, job security

Question 2: What can this organization do to support you right now? • Keep doing what you are doing • Don’t return to the office too soon

o Keep employees safe o No available childcare (daycares, camps, etc.)

• Workload can be stressful o Production expectations too high, difficult to work from home o Reprioritize, give some time off o Training for working from home

• Communication and transparency; more frequent updates • Continue to provide support to employees

o Family considerations, time away from work, mental health, flexible schedules • Some specific technology requests like monitors, computers with microphones, printers/scanners

Exhitbit 2

State Universities Retirement System Fiscal Year 2021

Administrative Expense and Capital Budget

June 5, 2020 Administration Committee

Exhitbit 3

2

State Universities Retirement System Fiscal Year 2021 Administrative Expense Budget

TABLE OF CONTENTS

Budget Message .................................................................................................................................................................... 3 Fiscal Year 2021 Consolidated Administrative Budget..................................................................................................... 4 FY 2020 Budget vs FY 2020 Actual Projected ................................................................................................................... 5 FY 2020 Budget vs FY 2021 Budget ................................................................................................................................... 6 FY 2020 Actual Projected vs FY 2021 Budget ................................................................................................................... 7 Self-Managed Plan Budget .................................................................................................................................................. 8 Supplemental Plan Budget .................................................................................................................................................. 9 Investment Administrative Expense Budget .................................................................................................................... 10 Capital Expenditure Budget .............................................................................................................................................. 11

Exhitbit 3

3

June 5, 2020 To: Administration Committee From: Tara R. Myers, Chief Financial Officer Re: Fiscal Year 2021 SURS Administrative and Capital Budget I am pleased to submit for your review and approval the Administrative Operating Expense and Capital Budget for the State Universities Retirement System (SURS) for the Fiscal Year 2021, which begins July 1, 2020, and ends June 30, 2021. The budget reflects the staff’s commitment to provide services and programs in alignment with the SURS Strategic Plan. Our staff has been resilient through the challenges of changes in administration, state funding and pension reform. The staff continues to service our members and employers with skill, professionalism, and passion. The proposed Fiscal Year 2021 administrative budget of $27,983,601 is a 1.6% increase over prior year’s budget and a 18.1% increase over the prior year’s projected actual. Personnel Services & Benefits costs are up 11.6% over the prior year’s budget and 21.9% over the projected actual. Non-personnel costs are down 13.3% over the prior year’s budget and down 1.2% over the projected actual. The capital budget is 2.8% higher than the prior year’s budget. Thank you to the management team for their assistance as we completed the Fiscal Year 2021 budget. Sincerely,

Tara R. Myers Chief Financial Officer

Exhitbit 3

4

SURS FISCAL YEAR 2021 CONSOLIDATED ADMINISTRATIVE BUDGET

$ Increase % Increase $ Increase % IncreaseFY 2020 Full Year FY 2021 from Proj from Proj from Prior from PriorBudget Actual Projected Budget Actual Actual Yr Budget Yr Budget

Personnel Services 10,078,175 9,429,514 10,680,621 1,251,107 13.3% 602,446 6.0%Insurance 2,817,758 2,387,308 3,834,749 1,447,441 60.6% 1,016,991 36.1%Pension 1,264,310 1,139,177 1,299,094 159,917 14.0% 34,784 2.8%Payroll Tax 144,901 143,119 154,869 11,750 8.2% 9,968 6.9% Total Personnel & Benefits 14,305,144 13,099,117 15,969,333 2,870,216 21.9% 1,664,189 11.6%

Statistical & Tabulation Administration 18,866 18,866 18,866 - 0.0% - 0.0% Operations & Applications 2,337,611 2,501,882 1,654,347 (847,535) -33.9% (683,264) -29.2%Recruitment and Relocation 165,500 80,637 20,000 (60,637) -75.2% (145,500) -87.9%Medical/Disability Program 9,360 5,586 6,000 414 7.4% (3,360) -35.9%Auditing and Management Services 55,490 44,328 314,664 270,336 609.9% 259,174 467.1%Professional & Technical 666,354 412,713 451,395 38,682 9.4% (214,959) -32.3%Actuarial Services 337,210 256,131 399,000 142,869 55.8% 61,790 18.3%Legal Fees 340,000 228,006 390,000 161,994 71.0% 50,000 14.7%Postage 200,320 198,216 207,000 8,784 4.4% 6,680 3.3%Copying, Photographic & Printing 37,950 39,399 45,450 6,051 15.4% 7,500 19.8%Surety Bond & Insurance 411,959 470,152 478,540 8,388 1.8% 66,581 16.2%Freight & Express Mail 4,800 4,550 4,800 250 5.5% - 0.0%EDP Equipment Repairs & Maintenance 84,479 92,110 98,435 6,325 6.9% 13,956 16.5%Office Rental 20,144 20,141 25,000 4,859 24.1% 4,856 24.1%Office Equipment Repairs & Maintenance 11,200 9,788 11,400 1,612 16.5% 200 1.8%Equipment Rental-Telephone 136,196 153,217 169,800 16,583 10.8% 33,604 24.7%Subscriptions & Information Services 61,020 57,676 62,002 4,326 7.5% 982 1.6%Office & Library Supplies 52,800 53,841 56,700 2,859 5.3% 3,900 7.4%Meeting Expenses 18,130 11,197 18,130 6,933 61.9% - 0.0%Printing Supplies 22,500 21,596 31,200 9,604 44.5% 8,700 38.7%EDP Supplies 50,000 50,000 75,000 25,000 50.0% 25,000 50.0%EDP Operating Equipment 91,000 55,000 33,988 (21,012) -38.2% (57,012) -62.7%Registration & Conference Expenses 57,570 22,127 63,020 40,893 184.8% 5,450 9.5%Employee Training Programs 60,633 37,529 56,687 19,158 51.0% (3,946) -6.5%Employer Training Programs 450 450 300 (150) -33.3% (150) -33.3%Board Travel 30,000 18,942 45,000 26,058 137.6% 15,000 50.0%Board Meeting 15,000 11,431 15,000 3,569 31.2% - 0.0%Association Fees 43,035 41,587 28,472 (13,115) -31.5% (14,563) -33.8%Employee Tuition 32,003 19,816 18,064 (1,752) -8.8% (13,939) -43.6%Travel 133,995 73,124 138,770 65,646 89.8% 4,776 3.6%Building & Grounds Maintenance 467,716 286,990 215,800 (71,190) -24.8% (251,916) -53.9%Utilities 184,581 105,955 185,781 79,826 75.3% 1,200 0.7%

Total Non-Personnel Expense 6,157,871 5,402,983 5,338,611 (64,373) -1.2% (819,261) -13.3%

Subtotal-Defined Benefit Expense 20,463,015 18,502,100 21,307,943 2,805,843 15.2% 844,928 4.1% Depreciation 1,135,000 562,500 885,000 322,500 57.3% (250,000) -22.0%Total Defined Benefit Expenses 21,598,015 19,064,600 22,192,943 3,128,343 16.4% 594,928 2.8%

Investment Administrative 5,361,498 3,973,834 4,924,335 950,501 23.9% (437,163) -8.2%Self-Managed Plan Administrative 596,786 659,739 735,803 76,064 11.5% 139,016 23.3%Supplemental Plan Administrative - - 130,520 130,520 130,520

Total Administrative Expense 27,556,299 23,698,173 27,983,601 4,285,428 18.1% 427,301 1.6%

Capital Budget 1,574,445 742,372 1,619,278 876,906 118.1% 44,833 2.8%

Exhitbit 3

5

$ Increase % IncreaseFY 2020 Full Year from Prior from PriorBudget Act Projected Yr Budget Yr Budget

Personnel Services 10,078,175 9,429,514 (648,661) -6.4%Insurance 2,817,758 2,387,308 (430,451) -15.3%Pension 1,264,310 1,139,177 (125,132) -9.9%Payroll Tax 144,901 143,119 (1,783) -1.2%

Total Personnel & Benefits 14,305,144 13,099,117 (1,206,027) -8.4%Not all positions were filled in the current year. Budget is based on full staffing

Statistical & Tabulation Administration 18,866 18,866 - 0.0% Operations & Applications 2,337,611 2,501,882 164,271 7.0%

Recruitment and Relocation 165,500 80,637 (84,863) -51.3%Recruiting firms were not utilized as much as expected in FY20

Medical/Disability Program 9,360 5,586 (3,774) -40.3%Auditing and Management Services 55,490 44,328 (11,162) -20.1%

Professional & Technical 666,354 412,713 (253,641) -38.1%

FY20 Budget included $200k for a consultant that was not hired. The work will be done by Voya

Actuarial Services 337,210 256,131 (81,079) -24.0%The actuaries were not utilized as much as expected for special projects

Legal Fees 340,000 228,006 (111,994) -32.9%Actual expenses were down due to delays in finalizing external counsel contracts

Postage 200,320 198,216 (2,104) -1.1%Copying, Photographic & Printing 37,950 39,399 1,449 3.8%

Surety Bond & Insurance 411,959 470,152 58,193 14.1%The Board voted to increase the limits for Cyber and Fudiciary insurance coverage

Freight & Express Mail 4,800 4,550 (250) -5.2%EDP Equipment Repairs & Maintenance 84,479 92,110 7,631 9.0%Office Rental 20,144 20,141 (3) 0.0%Office Equipment Repairs & Maintenance 11,200 9,788 (1,412) -12.6%Equipment Rental-Telephone 136,196 153,217 17,021 12.5%Subscriptions & Information Services 61,020 57,676 (3,344) -5.5%Office & Library Supplies 52,800 53,841 1,041 2.0%Meeting Expenses 18,130 11,197 (6,933) -38.2%Printing Supplies 22,500 21,596 (904) -4.0%EDP Supplies 50,000 50,000 - 0.0%

EDP Operating Equipment 91,000 55,000 (36,000) -39.6%

FY20 Budget was high as we anticipated additional equipment request related to the move to 1801

Registration & Conference Expenses 57,570 22,127 (35,443) -61.6%Actual expenses were down partly due to COVID related restrictions

Employee Training Programs 60,633 37,529 (23,104) -38.1%Employer Training Programs 450 450 - 0.0%Board Travel 30,000 18,942 (11,058) -36.9%Board Meeting 15,000 11,431 (3,569) -23.8%Association Fees 43,035 41,587 (1,448) -3.4%Employee Tuition 32,003 19,816 (12,187) -38.1%

Travel 133,995 73,124 (60,871) -45.4%Actual expenses were down partly due to COVID related restrictions

Building & Grounds Maintenance 467,716 286,990 (180,726) -38.6%FY20 Budget was high due an over estimate of the cost related to 1801

Utilities 184,581 105,955 (78,626) -42.6%FY20 Budget was high and the COVID shut down reduced utilization

Total Non-Personnel Expense 6,157,871 5,402,983 (754,888) -12.3%

Subtotal-Defined Benefit Expense 20,463,015 18,502,100 (1,960,915) -9.6%

Depreciation 1,135,000 562,500 (572,500) -50.4%FY20 Budget was high due to capital spending that will not occur until FY21

Total Defined Benefit Expenses 21,598,015 19,064,600 (2,533,415) -11.7%

FY 2020 Budget vs FY 2020 Actual Projected

Exhitbit 3

6

$ Increase % IncreaseFY 2020 FY 2021 from Prior from PriorBudget Budget Yr Budget Yr Budget

Personnel Services 10,078,175 10,680,621 602,446 6.0% Includes COLA increase of 2.3% Insurance 2,817,758 3,834,749 1,016,991 36.1% Increase of employer cost charged by CMSPension 1,264,310 1,299,094 34,784 2.8%Payroll Tax 144,901 154,869 9,968 6.9% Total Personnel & Benefits 14,305,144 15,969,333 1,664,189 11.6%Statistical & Tabulation Administration 18,866 18,866 - 0.0% Operations & Applications 2,337,611 1,654,347 (683,264) -29.2% Fewer projects budgeted for FY20

Recruitment and Relocation 165,500 20,000 (145,500) -87.9%FY20 included recruitment firms that will not be needed in FY21

Medical/Disability Program 9,360 6,000 (3,360) -35.9%

Auditing and Management Services 55,490 314,664 259,174 467.1%Increase includes $175K for an IT audit and $90k for an Actuarial Services audit

Professional & Technical 666,354 451,395 (214,959) -32.3%

FY20 Budget included $200k for a consultant that was not hired. The work will be done by Voya

Actuarial Services 337,210 399,000 61,790 18.3%Experience study added as required every 3 years

Legal Fees 340,000 390,000 50,000 14.7%Fudiciary Counsel is expected to be utilized more in FY21

Postage 200,320 207,000 6,680 3.3%Copying, Photographic & Printing 37,950 45,450 7,500 19.8%

Surety Bond & Insurance 411,959 478,540 66,581 16.2%Increase due to increases in coverage limits for Cyber and Fudiciary insurance

Freight & Express Mail 4,800 4,800 - 0.0%EDP Equipment Repairs & Maintenance 84,479 98,435 13,956 16.5%Office Rental 20,144 25,000 4,856 24.1%Office Equipment Repairs & Maintenance 11,200 11,400 200 1.8%Equipment Rental-Telephone 136,196 169,800 33,604 24.7%Subscriptions & Information Services 61,020 62,002 982 1.6%Office & Library Supplies 52,800 56,700 3,900 7.4%Meeting Expenses 18,130 18,130 - 0.0%Printing Supplies 22,500 31,200 8,700 38.7%

EDP Supplies 50,000 75,000 25,000 50.0%Increase due to an increase in staff and their supply needs

EDP Operating Equipment 91,000 33,988 (57,012) -62.7%

FY20 Budget was high as we anticipated additional equipment request related to the move to 1801

Registration & Conference Expenses 57,570 63,020 5,450 9.5%Employee Training Programs 60,633 56,687 (3,946) -6.5%Employer Training Programs 450 300 (150) -33.3%

Board Travel 30,000 45,000 15,000 50.0%The 2 trips per year limit was increased to 4 trips

Board Meeting 15,000 15,000 - 0.0%Association Fees 43,035 28,472 (14,563) -33.8%Employee Tuition 32,003 18,064 (13,939) -43.6%Travel 133,995 138,770 4,776 3.6%

Building & Grounds Maintenance 467,716 215,800 (251,916) -53.9%FY20 Budget was high due an over estimate of the cost related to 1801

Utilities 184,581 185,781 1,200 0.7%

Total Non-Personnel Expense 6,157,871 5,338,611 (819,261) -13.3% Subtotal-Defined Benefit Expense 20,463,015 21,307,943 844,928 4.1%

Depreciation 1,135,000 885,000 (250,000) -22.0%FY20 Budget was high based due to capital spending that will not occur until FY21

Total Defined Benefit Expenses 21,598,015 22,192,943 594,928 2.8%

FY 2020 Budget vs FY 2021 Budget

Exhitbit 3

7

$ Increase % IncreaseFull Year FY 2021 from Proj from Proj

Act Projected Budget Actual ActualPersonnel Services 9,429,514 10,680,621 1,251,107 13.3%Insurance 2,387,308 3,834,749 1,447,441 60.6% Increase of employer cost charged by CMSPension 1,139,177 1,299,094 159,917 14.0%Payroll Tax 143,119 154,869 11,750 8.2%

Total Personnel & Benefits 13,099,117 15,969,333 2,870,216 21.9%Budget is based on all positions being filled throughout the year

Statistical & Tabulation Administration 18,866 18,866 - 0.0%

Operations & Applications 2,501,882 1,654,347 (847,535) -33.9%Decrease is due to fewer projects currently on the schedule

Recruitment and Relocation 80,637 20,000 (60,637) -75.2%Recruitment firms will not be utilized as heavily in FY21

Medical/Disability Program 5,586 6,000 414 7.4%

Auditing and Management Services 44,328 314,664 270,336 609.9%Increase includes $175K for an IT audit and $90k for an Actuarial Services audit

Professional & Technical 412,713 451,395 38,682 9.4%

Actuarial Services 256,131 399,000 142,869 55.8%

Experience study added (required every 3 years) and we expect to utilize special projects more in FY21

Legal Fees 228,006 390,000 161,994 71.0%

Now that external counsel contracts are in place and fudiciary counsel is secured, these cost are expected to increase

Postage 198,216 207,000 8,784 4.4%Copying, Photographic & Printing 39,399 45,450 6,051 15.4%Surety Bond & Insurance 470,152 478,540 8,388 1.8%Freight & Express Mail 4,550 4,800 250 5.5%EDP Equipment Repairs & Maintenance 92,110 98,435 6,325 6.9%Office Rental 20,141 25,000 4,859 24.1%Office Equipment Repairs & Maintenance 9,788 11,400 1,612 16.5%Equipment Rental-Telephone 153,217 169,800 16,583 10.8%Subscriptions & Information Services 57,676 62,002 4,326 7.5%Office & Library Supplies 53,841 56,700 2,859 5.3%Meeting Expenses 11,197 18,130 6,933 61.9%Printing Supplies 21,596 31,200 9,604 44.5%

EDP Supplies 50,000 75,000 25,000 50.0%Increase due to an increase in staff and their supply needs

EDP Operating Equipment 55,000 33,988 (21,012) -38.2%More equipment was purchased in FY20 than anticipated, FY21 cost will go down

Registration & Conference Expenses 22,127 63,020 40,893 184.8%Actual expenses were down partly due to COVID related restrictions

Employee Training Programs 37,529 56,687 19,158 51.0%FY20 is low but is expected to return to a normal level in FY21

Employer Training Programs 450 300 (150) -33.3%

Board Travel 18,942 45,000 26,058 137.6%The 2 trips per year limit was increased to 4 trips for FY21

Board Meeting 11,431 15,000 3,569 31.2%Association Fees 41,587 28,472 (13,115) -31.5%Employee Tuition 19,816 18,064 (1,752) -8.8%

Travel 73,124 138,770 65,646 89.8%Actual expenses were down partly due to COVID related restrictions

Building & Grounds Maintenance 286,990 215,800 (71,190) -24.8%Building Maintenance that was completed in FY20 will not need done in FY21

Utilities 105,955 185,781 79,826 75.3%Utilization was low in FY20 due to COVID but expected to increase next year

Total Non-Personnel Expense 5,402,983 5,338,611 (64,373) -1.2%

Subtotal-Defined Benefit Expense 18,502,100 21,307,943 2,805,843 15.2% Depreciation 562,500 885,000 322,500 57.3%Total Defined Benefit Expenses 19,064,600 22,192,943 3,128,343 16.4%

FY 2020 Actual Projected vs FY 2021 Budget

Exhitbit 3

8

SELF-MANAGED PLAN (SMP) BUDGET

FY 2020

FY 2020 Projected FY 2021Budget Actual Budget $ % $ %

Salaries and Wages 295,100$ 267,087$ 370,157$ 103,070$ 38.6% 75,057$ 25.4%Insurance 81,681 72,123 124,068 51,946 72.0% 42,388 51.9%Pension 35,377 34,274 40,690 6,417 18.7% 5,314 15.0%Payroll Tax 4,279 3,873 5,367 1,494 38.6% 1,088 25.4%

Investment Consulting & Other 160,000 205,113 122,500 (82,613) -40.3% (37,500) -23.4%

Postage 15,630 6,800 5,000 (1,800) -26.5% (10,630) -68.0%

Legal Consulting Services - 65,000 65,000 - 0.0% 65,000

Printing Supplies 1,400 1,600 300 (1,300) -81.3% (1,100) -78.6%

Member Programs/Association Dues 1,220 1,070 920 (150) -14.0% (300) -24.6%

Travel 2,100 2,800 1,800 (1,000) -35.7% (300) -14.3%

Total Expenses 596,786$ 659,739$ 735,803$ 76,064$ 11.5% 139,016$ 23.3%

FY 2020 Proj Actual FY 2020 Budget FY 2021 BUDGET INC/(DEC) FROM:

Salaries, Wages and Payroll Related A portion of the salary of the Investment team member that has SMP oversight responsibilities is being allocated to the SMP budget. A portion of the salaries for Accounting and IT resources is also being allocated to SMP. Since significant IT resources are being utilized in the transition to the new record keeper, the cost allocated to this department increased compared to previous years. Investment Consulting & Other The fees are mainly related to Cammack consulting services and are expected to be reduced for FY21 budget compared to FY20. A portion of the fees incurred by the actuaries are also charged to the SMP when applicable. Legal Consulting Services In prior years, the Legal Fees associated with the Self-Managed Plan were not directly charged to the SMP as they properly should be. The accounting treatment of these fees changed in FY20 and are budgeted accordingly.

Exhitbit 3

9

SUPPLEMENTAL PLAN BUDGET

FY 2020

FY 2020 Projected FY 2021Budget Actual Budget $ % $ %

Investment Consulting & Other - - 122,500 122,500 122,500

Postage - - 5,000 5,000 5,000

Printing Supplies - - 300 300 300

Member Programs/Association Dues - - 920 920 920

Travel - - 1,800 1,800 1,800

Total Expenses -$ -$ 130,520$ 130,520$ 130,520$

FY 2021 BUDGET INC/(DEC) FROM:FY 2020 Proj Actual FY 2020 Budget

Investment Consulting and Other The fees are mainly related to Cammack consulting service. A portion of the fees incurred by the actuaries will also be charged to the Supplemental Plan when applicable.

Exhitbit 3

10

INVESTMENT ADMINISTRATIVE BUDGET

FY 2020

FY 2020 Projected FY 2021Budget Actual Budget $ % $ %

Salaries and Wages 1,179,511$ 1,174,356$ 1,276,880$ 102,524$ 8.7% 97,369$ 8.3%Insurance 173,208 137,537 227,367 89,831 65.3% 54,159 31.3%Pension 138,314 137,241 147,103 9,862 7.2% 8,789 6.4%Payroll Tax 17,103 17,028 18,515 1,487 8.7% 1,412 8.3%

Investment Consultant 1,891,583 801,583 1,040,333 238,750 29.8% (851,250) -45.0%

Custody and Performance 1,075,000 1,075,000 1,075,000 - 0.0% - 0.0%

Databases 186,450 66,955 197,964 131,010 195.7% 11,514 6.2%

Travel 83,154 28,341 50,000 21,659 76.4% (33,154) -39.9%

Resources 87,175 33,375 246,173 212,798 637.6% 158,998 182.4%

Investment Legal Counsel 530,000 502,418 645,000 142,582 28.4% 115,000 21.7%

Total Expenses 5,361,498$ 3,973,834$ 4,924,335$ 950,501$ 23.9% (437,163)$ -8.2%

FY 2020 Proj Actual FY 2020 BudgetFY 2021 BUDGET INC/(DEC) FROM:

Note: The Investment administrative expenses presented in this table include only the personnel and operational expenses and do not include investment management fees approved separately. Salaries, Wages and Payroll Related Salaries and wages are based on the approved compensation increase for current staff and the addition of the compliance position added late in FY20. The insurance, pension and payroll tax expense increased as a result of these factors. Investment Consultant In FY20, $1M for TorreyCove was budgeted here as a consultant. It was later determined that the cost should be classified as a manager fee, so for FY21 it has been budgeted accordingly. Databases The budget includes the addition of private equity software ($100k) to assist with the continued growth of that part of the investment portfolio and the addition of a trade/cost analysis service ($30k) that will help analyze if managers are paying reasonable trading costs. Resources In FY21 there were cost moved into Investments that had previously been accounted for in other departments. The Glass Lewis proxy service provider ($113k) and cost related to Council of Institutional Investments ($40k) were moved here and therefore increased this budget. Investment Legal Counsel The activity in this account correlates to the level of search activity to be completed in each fiscal year. In FY21 there will be expense related Private Real Asset, Private Credit and Public Market deals.

Exhitbit 3

11

Fiscal Year 2021 Capital Expenditure Budget

Building ServicesBuilding Maintenance (Counselor Area) 418,700Building Maintenance (Call Center) 387,000 #Meeting Room Upgrades 150,000Building Maintenance (HVAC, Noise Remediation) 101,000Parking Lot Enhancements 55,000Furniture (miscellaneous replacements) 5,000Subtotal - Building Services 1,116,700

TechnologyPure Storage (netapp replacement) 200,000Website Enhancements 100,000 #Laptops 51,200Backup Server/Repository with SSD array 25,000New sealer for mailroom 25,000Ricoh PRO8300S with IPDS 24,878Bulk email solution 20,000Visitor Management & Employee ID Badge Systems 18,000Cisco Router replacement 15,000Zone paging for 1901 Fox 10,000Plan Choice Microsite Live Data Feed - Phase II 8,500Doorbell kiosk for NIU 5,000Subtotal - Technology 502,578

Total Capital Budget 1,619,278$

# - Project approved in FY 2020 Capital Budget

Exhitbit 3

To: Administration Committee From: Douglas C. Wesley, CFA

Tara R. Myers, CPA Date: June 5, 2020 Re: Investment Operations Budget – Fiscal Year 2021

Overview SURS staff annually submits a budget for the Department’s administrative expenses. The Department also presents a projection of investment management fees to be paid in accordance with fee agreements negotiated between SURS and each of its external managers. Staff routinely evaluates and monitors fees and expenses in an attempt to identify cost savings in the investment program.

Investment Department Budget: Administrative Expenses The administrative expenses budget encompasses essential services for the management and fiduciary oversight of SURS’ investments. The proposed fiscal year 2021 administrative expenses budget totals $3.3 million. This proposed amount is around $600,000 less than the $3.9 million budget approved for fiscal year 2020. Of the $3.3 million budget proposed for fiscal year 2021, $3.0 million (or 91%) is allocated to three areas: investment consultants, external legal counsel, and the master custodian. Each of the major line items is discussed in greater detail below.

Investment Consulting Investment consulting services are expected to decrease by $851,250 from the fiscal year 2020 budget. This decrease is almost entirely attributable to the specialty private equity consultant fees being reclassified as asset management fees for fiscal year 2021. This reclassification was done to reflect the discretionary nature of the consultant’s role in managing the private equity portfolio.

Investment Counsel The investment counsel line increases by $115,000 from the fiscal year 2020 budget. The amount of legal expenses correlates to the amount of search activity to be completed and the resulting number of agreements to be drafted. Additional legal expenses may be incurred if revisions are made to existing agreement guidelines or if fees are renegotiated.

Custody, Performance & Databases The custody, performance and database line increased by $11,514 from the fiscal year 2020 budget. The proposed increase is primarily the result of the increased cost of the manager research and monitoring software that is currently utilized by the Department.

Exhitbit 4

Resources The resources category includes costs related to corporate governance, education, training, conferences, reference materials, subscriptions, participation in research projects and studies, RFP search advertisements, and professional dues and memberships. This line item increases by $158,998 from fiscal year 2020. This increase is entirely due to moving corporate governance costs from the legal department budget into the investment department budget. Investment Travel The travel line includes transportation, meals and lodging to attend due diligence meetings, conferences and Investment Committee and Board meetings for the Department’s staff. The travel budget decreases by $33,154 from the fiscal year 2020 budgeted amount. This decrease is due to the impact of COVID-19 on meetings and conferences.

FY 2020 FY 2021 $ Increase (Decrease)

% Increase (Decrease) Approved Proposed

Budget Budget

Investment Consultant - Retainer $ 1,801,583 $ 1,040,333 $ (761,250) (42.3)%

Investment Consultant - Projects 90,000 - (90,000) (100.0)%

Investment Counsel 530,000 645,000 115,000 21.7%

Custody, Performance & Databases 1,261,450 1,272,964 11,514 0.9%

Resources 87,175 246,173 158,998 182.4%

Travel 83,154 50,000 (33,154) (39.9)%

Total Administrative Expenses $ 3,853,362 $ 3,254,470 $ (598,892) (15.5)% Investment Management Fees The investment management fees proposed for fiscal year 2021 are based upon April 30, 2020 asset values adjusted for any known or anticipated cash flows occurring after that date, including the expectation of receiving 100% of appropriated state contributions. In total, overall assets are projected to increase 2.39% from April 30, 2020 to April 30, 2021. This projection considers both the asset return assumptions and the expected outflows needed to cover member benefits in excess of the state appropriation. The projected investment assets were then applied to the manager’s current fee schedule to determine the investment management fee for the fiscal year. Performance-based fees were estimated in total by weighting the actual annual performance fees incurred over the past seven years. No attempt is made, when constructing the projection, to attribute performance-based fees to specific managers. While some factors affecting portfolio assets are reasonably predictable (e.g. state appropriations and projected benefit payments), other factors like market performance are inherently uncertain. A projected rate of growth was applied to each asset class as follows, based on information provided by SURS’ investment consultant:

Exhitbit 4

Asset Class Growth Rates

Strategy Asset Class Projected Annual

Growth Rate Crisis Risk Alternative Risk Premia 4.40%

Crisis Risk Long Duration 3.20%

Crisis Risk Trend Following 4.40%

Inflation Sensitive TIPS 2.90%

Non-Traditional Growth Non-Core Infrastructure 9.10%

Non-Traditional Growth Private Equity 9.40%

Non-Traditional Growth Real Assets (Non-Core) 8.40%

Principal Protection Fixed Income (Core) 2.60%

Stabilized Growth Emerging Market Debt - Hard 4.50%

Stabilized Growth Emerging Market Debt - Local 4.80%

Stabilized Growth Fixed Income (Credit) 3.60%

Stabilized Growth Hedged Strategies 6.00%

Stabilized Growth Options Strategies 6.00%

Stabilized Growth Real Assets (Core) 6.30%

Traditional Growth Global Equity 7.80%

Fiscal year 2020 was the first year in a period of transition as SURS gradually implements a new allocation approach based on strategic asset classes. This transition resulted in noticeable changes in both asset mix and manager mix, further complicating the task of projecting management fees. The Fiscal Year 2020 Investment Management Fee Budget, accepted by the Investment Committee in June 2019, was $68.7 million with actual expenditures currently anticipated to be approximately $62.5 million. Investment returns have trailed projected growth rates thus far in fiscal year 2020, leading to moderate decreases in asset-based fees and sharp decreases in performance-based fees compared to last year’s budget. Assuming returns are in line with long-term asset class forecasts, fees are projected to be approximately $75.1 million in fiscal year 2021. Total investment management fees are projected to increase by $6.4 million from fiscal year 2020 budgeted fees and include fees paid directly from alternative asset funds. This increase is due to the continued growth of the real estate portfolio and continued reallocation of assets from public equities into diversifying strategies. FY 2020 FY 2021

$ Increase (Decrease)

% Increase (Decrease) Accepted Proposed

Fees Fees

Asset-Based Fees $ 63,406,000 $ 69,766,400 $ 6,360,400 10.0%

Performance-Based Fees 4,480,500 4,412,100 (68,400) (1.5)%

Securities Lending Fees 438,200 455,000 16,800 3.8%

STIF Fees 371,000 481,000 110,000 29.6%

Total Investment Management Expenses $ 68,695,700 $ 75,114,500 $ 6,418,800 9.3% Total fees as a % of assets (basis points) 34.8 bps 39.5 bps

Exhitbit 4

Recommended Action Consistent with past years, staff is recommending the approval of the Investments Administrative Expense Budget for the fees and expenses relating to the operations and oversight of the SURS Investment Program. Staff is recommending acceptance of the Investment Management Fees Budget. As a result of the challenge of accurately projecting the asset value of accounts and continual developments that affect performance-based fees, the SURS Board of Trustees has previously chosen to accept rather than approve the recommendation from staff. Staff is recommending the practice of accepting the budget be continued for fiscal year 2021. Recommendations SURS staff recommends that:

The Investment Department Administrative Expense Budget for fiscal year 2021 be approved as presented.

The projected Investment Department Investment Management Fees for fiscal year 2021 be accepted as presented.

Exhitbit 4

FY 2020 FY 2020 FY 2021Approved Projected Proposed

Budget Actual BudgetInvestment Consultant - Retainer 1,801,583$ 801,583$ 1,040,333$ Investment Consultant - Projects 90,000 - - Investment Counsel 530,000 427,307 645,000 Custody, Performance & Databases 1,261,450 1,141,955 1,272,964 Resources 87,175 33,375 246,173 Travel 83,154 28,341 50,000

Total Administrative Expenses 3,853,362$ 2,432,561$ 3,254,470$

Investment Operations Budget: Administrative Expenses

Exhitbit 4

ACCEPTED FY 2020 FY 2020 PROPOSED FY 2021 FY 2021

Acct Size Fee Fee Acct Size Fee Fee($ millions) % $ ($ millions) % $

TRADITIONAL GROWTH 11,173.5$ 0.195% 21,783,000$ 7,268.6$ 0.199% 14,487,000$

STABILIZED GROWTH 4,048.2 0.395% 16,010,000 4,784.4 0.439% 21,008,000 CORE REAL ASSETS 713.2 0.853% 6,082,000 989.3 0.869% 8,596,000 CREDIT 2,428.3 0.293% 7,118,000 2,681.1 0.343% 9,200,000 OPTION/HEDGE STRATEGIES 906.7 0.310% 2,810,000 1,114.0 0.288% 3,212,000

PRINCIPAL PROTECTION 1,386.0 0.093% 1,283,000 1,424.6 0.125% 1,786,000

NON-TRADITIONAL GROWTH 2,002.0 1.056% 21,142,000 2,562.6 0.942% 24,149,400 PRIVATE EQUITY 1,422.3 0.769% 10,940,000 1,828.2 0.595% 10,879,000 NON-CORE REAL ASSETS 579.7 1.760% 10,202,000 734.4 1.807% 13,270,400

INFLATION 985.3 0.161% 1,583,000 1,087.9 0.008% 88,000

CRISIS RISK 118.9 1.350% 1,605,000 1,882.1 0.438% 8,248,000

Investment Management Asset-Based Fees 19,713.9$ 0.322% 63,406,000$ 19,010.2$ 0.354% 69,766,400$

Investment Management Performance Fees 0.023% 4,480,500$ 0.023% 4,412,100$ based on seven-year average

Securities Lending Expense 0.002% 438,200$ 0.002% 455,000$ Short Term Invested Funds (STIF) Fee 0.002% 371,000$ 0.003% 481,000$

Total Investment Management Fees 0.348% 68,695,700$ 0.395% 75,114,500$

1

Investment Operations Budget: Investment Management Fees

FY 2020 ACCEPTED FY 2021 PROPOSED1

Management fees are only projected for investment mandates that have been approved as of March 31, 2020. FY 2020 and FY 2021 will be years of transition as SURS gradually implements a new asset allocation approach based on strategic asset class (as opposed to traditional asset class). This transition will likely result in large changes in both asset mix and manager mix, the timing and magnitude of which are uncertain at this time. It is probable that there will be multiple new managers paid in fiscal year 2021.

Exhitbit 4

n

STATE UNIVERSITIES RETIREMENT SYSTEM

STATEMENT OF INVESTMENT EXPENSES

1st QTR 2nd QTR 3rd QTR TOTALS BUDGET BALANCEInvestment Managers:

Adams Street Partners 1,391,162$ 1,392,634$ 1,367,893$ 4,151,689$ 5,598,000$ 1,446,311$

Alinda Capital Partners 34,171 33,273 26,441 93,885 700,000 606,115

AQR Capital Management 133,239 195,765 204,163 533,167 747,000 213,833

Aspect Capital Limited - 102,686 134,467 237,153 - (237,153)

Ativo Capital Management 198,212 206,040 191,531 595,782 831,000 235,218

Basis Investment 112,192 113,425 113,425 339,042 450,000 110,958

BlackRock Institutional Trust Company 390,314 397,736 330,469 1,118,518 2,084,000 965,482

Blackstone Property Partners LP 42,424 510,925 525,641 1,078,990 1,644,000 565,010

Blue Vista Real Estate Partners 117,154 120,334 120,334 357,822 525,000 167,178

Brookfield Strategic Real Estate Partners 229,000 238,000 237,821 704,821 1,050,000 345,179

Campbell & Company 157,736 157,736 (157,736)

Carlyle Property Partners 232,386 239,433 245,027 716,846 1,059,000 342,154

CastleArk Management 193,668 169,503 - 363,171 811,000 447,829

Channing Capital Management 124,011 128,101 109,366 361,478 518,000 156,522

Colchester Global Investors 186,709 190,345 182,280 559,334 747,000 187,666

Credit Suisse Asset Management 53,416 53,416 (53,416)

Crow Holdings Realty Partners 140,905 153,896 151,628 446,429 825,000 378,571

Denali Advisors 60,815 64,574 55,611 181,001 258,000 76,999

Dune Real Estate 357,243 965,910 415,756 1,738,909 2,090,000 351,091

EARNEST Partners 306,163 390,966 385,999 1,083,128 397,000 (686,128)

Fairview Capital Partners 93,750 93,750 93,750 281,250 370,000 88,750

Fidelity Institutional Asset Management 216,203 264,825 (111,517) 369,511 858,000 488,489

Franklin Templeton 110,321 106,557 113,077 329,955 1,035,000 705,045

Garcia Hamilton & Associates 119,772 129,925 126,856 376,553 458,000 81,447

Gladius 553,440 314,680 233,287 1,101,407 2,370,000 1,268,593

GlobeFlex Capital 225,871 241,794 348,379 816,044 984,000 167,956

Heitman HART 407,574 418,063 414,137 1,239,774 1,732,000 492,226

Invesco Balanced Risk Commodity Trust 356,719 121,163 - 477,882 1,528,000 1,050,118

JP Morgan Strategic Property Fund 492,063 496,465 497,562 1,486,090 2,096,000 609,910

KKR Prisma 28,822 26,373 19,602 74,797 41,000 (33,797)

LM Capital Group 80,543 112,217 119,078 311,838 301,000 (10,838)

Long Wharf RE Partners - 292,027 149,824 441,851 - (441,851)

Macquarie Infrastructure Partners 346,669 389,735 368,952 1,105,356 2,027,000 921,644

Matarin Capital Management 160,138 169,023 143,156 472,317 679,000 206,683

Mesirow Financial Investment Management 192,500 192,500 192,500 577,500 866,000 288,500

Mondrian Investment Partners 362,653 384,210 306,439 1,053,302 1,954,000 900,698

Muller and Monroe 287,500 208,696 162,500 658,696 1,000,000 341,304

Neuberger Berman 540,080 945,344 937,768 2,423,192 1,987,000 (436,192) Northern Trust Asset Management 29,970 29,909 25,441 85,319 122,000 36,681

Oaktree Real Estate 53,423 50,572 52,561 156,556 300,000 143,444

PAAMCO 174,518 56,557 31,796 262,871 171,000 (91,871)

Pantheon Ventures 1,065,261 840,354 739,727 2,645,342 3,106,000 460,658

Parametric Clifton 101,552 159,752 46,839 308,143 334,000 25,857

Piedmont Investment Advisors 275,320 298,468 237,368 811,156 1,085,000 273,844

PIMCO 1,219,699 1,319,917 1,195,983 3,735,600 4,935,000 1,199,400

Progress Investment Management 602,567 635,787 738,904 1,977,259 2,549,000 571,741

Prudential Fixed Income 322,037 340,135 344,255 1,006,427 1,352,000 345,573

Pugh Capital Management 77,709 112,515 115,773 305,997 261,000 (44,997)

Ramirez Asset Management - 97,471 74,992 172,463 - (172,463) RhumbLine Advisers 40,775 48,695 49,173 138,643 162,000 23,357

Smith Graham & Company 26,314 (315) - 25,999 185,000 159,001

State Street Global Advisors 10,391 2,019 - 12,410 78,000 65,590

StepStone Real Estate 72,345 57,750 57,750 187,845 330,000 142,155

Strategic Global Advisors 276,130 292,971 233,964 803,065 1,176,000 372,935

T. Rowe Price 839,783 903,616 760,504 2,503,903 3,520,000 1,016,097

TCW MetWest 135,719 - - 135,719 992,000 856,282

Fiscal Year 2020 to DateJuly 1, 2019 through March 31, 2020

Exhitbit 4

n

STATE UNIVERSITIES RETIREMENT SYSTEM

STATEMENT OF INVESTMENT EXPENSES

1st QTR 2nd QTR 3rd QTR TOTALS BUDGET BALANCEInvestment Managers:

Fiscal Year 2020 to DateJuly 1, 2019 through March 31, 2020

TorreyCove Capital Partners 57,292 171,875 171,875 401,042 1,000,000 598,958

UBS 231,700 - 195,556 427,255 421,000 (6,255)

Wellington Management Company 758,589 830,423 792,971 2,381,983 1,707,000 (674,983)

Short Term Invested Funds (STIF) 125,876 132,911 101,933 360,720 371,000 10,280

Performance Fees - - 4,480,500 4,480,500 Securities Lending Expense 119,383 113,550 121,498 354,431 438,200 83,769

Total Investment Management Fees 15,440,738$ 17,015,823$ 15,213,216$ 47,669,777$ 69,695,700$ 22,025,923$

Investment Administrative Expenditures:

Investment Consultant (includes Legal Counsel) 212,599$ 318,392$ 409,938$ 940,929$ 1,421,583$ 480,654$ Custody, Performance & Databases 316,445 275,170 275,170 866,785 1,261,450 394,666 Resources, Travel 20,281 30,045 9,848 60,174 170,329 110,155

Total Investment Administrative Expenditures 549,324$ 623,607$ 694,956$ 1,867,887$ 2,853,362$ 985,475$

Total Investment Expenditures 15,990,062$ 17,639,431$ 15,908,172$ 49,537,664$ 72,549,062$ 23,011,398$

Exhitbit 4

To: Administration Committee From: Tara R. Myers Date: June 5, 2020 Re: Administrative Expense and Capital Budget – Fiscal Year 2021

Overview Annually, the administrative expense and capital budget is submitted for approval. The administrative expense budget covers all operational costs of the Defined Benefit Plan, the Self-Managed Plan (SMP), the Supplemental Plan (added in Fiscal Year 2021) and the Investment Department administrative expenses. The total proposed Fiscal Year 2021 administrative budget is $27,983,601 or 1.6% more than the Fiscal Year 2020 budget of $27,556,299.

The capital budget includes major initiatives, services, and purchases. The total proposed Fiscal Year 2021 capital budget is $1,619,278 or a 2.8% increase compared to the Fiscal Year 2020 budget of $1,574,445.

Recommendation SURS staff recommends:

• That the Fiscal Year 2021 Administrative Expense Budget be approved aspresented.

• That the Fiscal Year 2021 Capital Expenditure Budget be approved as presented.

Exhitbit 5