State of Wisconsin Investment Board - Wisconsin Coalition of Annuitants

Nov 14, 2010 - Global Investors (BGI), which was acquired by BlackRock, Inc., in late 2009—limited its clients' withdrawals from their accounts primarily because of liquidity needs of its securities-lending cash collateral pools. Most of the Investment Board's BGI investments involved index funds, but BGI loaned many of the ...
1MB Sizes 0 Downloads 99 Views
Report 10-14 November 2010

An Evaluation

State of Wisconsin Investment Board

2009-2010 Joint Legislative Audit Committee Members Senate Members:

Assembly Members:

Kathleen Vinehout, Co-chairperson Robert Jauch Mark Miller Robert Cowles Mary Lazich

Peter Barca, Co-chairperson Andy Jorgensen Mark Pocan Bill Kramer Samantha Kerkman

LEGISLATIVE AUDIT BUREAU The Bureau is a nonpartisan legislative service agency responsible for conducting financial and program evaluation audits of state agencies. The Bureau’s purpose is to provide assurance to the Legislature that financial transactions and management decisions are made effectively, efficiently, and in compliance with state law and that state agencies carry out the policies of the Legislature and the Governor. Audit Bureau reports typically contain reviews of financial transactions, analyses of agency performance or public policy issues, conclusions regarding the causes of problems found, and recommendations for improvement. Reports are submitted to the Joint Legislative Audit Committee and made available to other committees of the Legislature and to the public. The Audit Committee may arrange public hearings on the issues identified in a report and may introduce legislation in response to the audit recommendations. However, the findings, conclusions, and recommendations in the report are those of the Legislative Audit Bureau. For more information, write the Bureau at 22 East Mifflin Street, Suite 500, Madison, WI 53703, call (608) 266-2818, or send e-mail to [email protected] Electronic copies of current reports are available at www.legis.wisconsin.gov/lab.

State Auditor – Janice Mueller

Audit Prepared by

Diann Allsen, Director and Contact Person Brandon Brickner Gretchen Wegner

Director of Publications – Jeanne Thieme Report Design and Production – Susan Skowronski

CONTENTS Letter of Transmittal

1

Report Highlights

3

Introduction

9

Operating and Investment Expenses The Wisconsin Retirement System Investment Management and Performance Benchmarks Fund Composition Performance Relative to Benchmarks Public Equities Performance Real Estate Performance Other Performance Factors Withdrawal Restrictions by External Managers Comparison to Other Public Pension Funds Recent Performance and Actuarial Expectations Changes in Investment Strategy Risk Management and Oversight The State Investment Fund Participation and Investment Objectives Performance Relative to Benchmarks Interfund Borrowing Risk Insurance Wisconsin CD Program Appendices Appendix 1—Investment Board Organization Chart Appendix 2—Three-Year Comparison of Core Fund and Variable Fund Asset Allocations Appendix 3—Performance of the Investment Board’s Individual Asset Classes Appendix 4—Wisconsin Retirement System Effective Rates and Annuity Adjustments Appendix 5—Wisconsin Retirement System Contribution Rate History Appendix 6—Wisconsin Retirement System Performance Response From the Executive Director of the State of Wisconsin Investment Board

11 15 18 19 22 24 25 26 28 29 30 33 36 39 40 41 43 44 45

November 19, 2010 Senator Kathleen Vinehout and Representative Peter Barca, Co-chairpersons Joint Legislative Audit Committee State Capitol Madison, Wisconsin 53702 Dear Senator Vinehout and Representative Barca: We have completed an evaluation of the State of Wisconsin Investment Board, as directed by s. 25.17(51m), Wis. Stats. As of December 31, 2009, the Investment Board managed a total of $78.1 billion in investments that include assets of the Wisconsin Retirement System, the State Investment Fund, and five smaller insurance and trust funds. We assessed the performance of the Investment Board by comparing returns to benchmarks established by the Board of Trustees. As of December 31, 2009, the Wisconsin Retirement System’s two funds—the Core and the Va