Investment Objectives The investment objective of the Long-Term Investment Pool is to equal or exceed the rate of return of a benchmark consisting of 50% of the S&P 500 Stock Index, 7.5% of the Morgan Stanley Capital International Europe, Australasia and Far East (EAFE) Stock Index, 7.5% of the Morgan Stanley Capital International All Country World ex-U.S. Index and 35% of the Barclays Aggregate Bond Index and to achieve an abovemedian ranking in a universe of balanced funds with similar investment policies over reasonable measurement periods. The investment objective of the domestic equity investments will be to exceed the rate of return of the S&P 500 Stock Index and to achieve an above-median ranking in a universe of equity funds over reasonable measurement periods. The investment objective of the foreign stock investments will be to exceed the rate of return of a blended foreign stock benchmark consisting of 50% of the Morgan Stanley EAFE Stock Index and 50% of the Morgan Stanley Capital International All Country World ex-U.S. Index and to achieve an above-median ranking in a universe of foreign stock funds over reasonable measurement periods. The investment objective of the fixed income investments will be to exceed the rate of return of the Barclays Aggregate Bond Index and to achieve an above-median ranking in a universe of fixed income funds over reasonable measurement periods. Each manager’s performance will be evaluated after the impact of investment management fees. When evaluating investment results, consideration shall be given to the possible effect of investment restrictions.
Use of Derivatives Derivative instruments may be used for any of the purposes listed below. Derivative instruments shall be defined as any contract or investment vehicle whose performance, risk characteristics, or value is based on a specific asset, interest rate, or index value.
To gain broad stock or bond market exposure in a manner that does not create the effect of leverage in the overall portfolio.
To convert financial exposure in a given currency to that of another currency (e.g., to hedge Japanese yen exposure back to the U.S. dollar).
To adjust the duration of a bond portfolio in a manner that is consistent with the accepted approach of the manager and other policies and guidelines provided to the manager.
To make other portfolio adjustments that are consistent with other elements of the Long-Term Pool’s investment policies and guidelines and that, when viewed from a total portfolio standpoint, do not increase risk or expected volatility of rate-of-return in the portfolio.