Investments

On behalf of the PSRS and PEERS Board of Trustees and the internal investment staff, I am pleased to present the following reports on the Systems’ investments for the fiscal year ending June 30, 2007.

Fiscal year 2007 was the fourth consecutive year of strong investment returns for the combined Retirement Systems as both PSRS and PEERS achieved a 16.6% return. The four-year cumulative return for each System of just over 56% drove the market value of the total assets to $31.8 billion as of June 30, 2007. The combined Systems ended the year as one of the 50 largest defined benefit plans in the United States.

The primary purpose of this annual letter is typically to review the investment activity of the prior fiscal year and to provide the members with an update on significant investment changes within the Systems’ portfolios. However, as the PSRS and PEERS fiscal year came to a close (June 30, 2007), the general ‘optimism’ in the financial markets was swiftly replaced with ‘pessimism’. Thus, I felt it important to broaden the reach of this year’s letter to discuss three primary topics:

Fiscal Year 2007 Review
The solid investment performance in fiscal year 2007 was the result of a well-diversified asset mix for the Systems. All asset categories enjoyed positive returns last year, with global stocks providing the largest increase at a return of 31.8%. The PSRS/PEERS U.S. stock portfolio returned 18.8%, the bond portfolio increased 6.3% and the Systems’ newer allocations to alternative investments provided strong returns and beneficial diversification. Private equity (investments in private companies) increased almost 22% the past year while the PSRS/PEERS real estate investments returned just over 16%. Finally, PSRS/PEERS initiated a small allocation to hedge funds in the last half of the fiscal year and those investments (as a group) outperformed their benchmark. In total, the Systems’ investment return of 16.6% exceeded the policy benchmark of 16.1%. The investment expenses for fiscal year 2007 were 0.21% or 21 cents for every $100 managed.

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	Investments December 28, 2007 To the Members of the Systems: On behalf of the PSRS and PEERS Board of Trustees and the internal investment staff, I am pleased to present the following reports on the Systems’ investments for the fiscal year ending June 30, 2007. Fiscal year 2007 was the fourth consecutive year of strong investment returns for the combined Retirement Systems as both PSRS and PEERS achieved a 16.6% return. The four-year cumulative return for each System of just over 56% drove the market value of the total assets to $31.8 billion as of June 30, 2007. The combined Systems ended the year as one of the 50 largest defined benefit plans in the United States. The primary purpose of this annual letter is typically to review the investment activity of the prior fiscal year and to provide the members with an update on significant investment changes within the Systems’ portfolios. However, as the PSRS and PEERS fiscal year came to a close (June 30, 2007), the general ‘optimism’ in the financial markets was swiftly replaced with ‘pessimism’. Thus, I felt it important to broaden the reach of this year’s letter to discuss three primary topics: Fiscal year 2007 performance, Implementation of the long-term strategic asset allocation, and Events in the financial markets in the first half of fiscal year 2008. *Fiscal Year 2007 Review* The solid investment performance in fiscal year 2007 was the result of a well-diversified asset mix for the Systems. All asset categories enjoyed positive returns last year, with global stocks providing the largest increase at a return of 31.8%. The PSRS/PEERS U.S. stock portfolio returned 18.8%, the bond portfolio increased 6.3% and the Systems’ newer allocations to alternative investments provided strong returns and beneficial diversification. Private equity (investments in private companies) increased almost 22% the past year while the PSRS/PEERS real estate investments returned just over 16%. Finally, PSRS/PEERS initiated a small allocation to hedge funds in the last half of the fiscal year and those investments (as a group) outperformed their benchmark. In total, the Systems’ investment return of 16.6% exceeded the policy benchmark of 16.1%. The investment expenses for fiscal year 2007 were 0.21% or 21 cents for every $100 managed. - more -