Finance and Management Committee
June 24, 2025
AGENDA REPORT
TO: Jestin D. Johnson FROM: Erin Roseman
City Administrator Finance Director
SUBJECT: Oakland PFRS’s Investment Portfolio
as of March 31, 2025
DATE: May 27, 2025
City Administrator Approval Date:
RECOMMENDATION
Staff Recommends That The City Council Receive An Informational Report On The Oakland Police And Fire Retirement System’s (“PFRS”, Or “System”) Investment Portfolio As Of March 31, 2025.
EXECUTIVE SUMMARY
The attached Quarterly Investment Performance report (Attachment A), provided by the Oakland Police and Fire Retirement System (PFRS) Investment Consultant, Meketa Investment Group (MIG), summarizes the performance of the PFRS investment portfolio for the quarter ended March 31, 2025.
During the most recent quarter, the PFRS Total Portfolio generated an absolute return of
0.0 percent, gross of fees, underperforming its policy benchmark by -0.4 percent. The portfolio also underperformed its benchmark over the latest one-year and three-year periods and outperformed its benchmark over the five-year period. This is discussed in more detail in the “Investment Performance” section of this report.
Quarter 1 Year 3 Year 5 Year
Total Portfolio (a) 0.0 4.5 4.1 9.6
Policy Benchmark 0.4 5.8 5.0 9.5
Excess Return -0.4 -1.3 -0.9 0.1
(a) Investment returns are gross of fees.
BACKGROUND / LEGISLATIVE HISTORY
The Oakland Police and Fire Retirement System is a closed, defined benefit plan established by the City of Oakland’s (the "City”) Charter. PFRS is governed by a board of seven trustees (the “PFRS Board”). PFRS covers the City’s sworn police and fire employees hired prior to July 1, 1976. PFRS was closed to new members on June 30,1976. As of March 31, 2025, PFRS had 602 retired members and no active members.
Jestin Johnson (Jun 12, 2025 23:09 PDT)
Jun 12, 2025
Jestin D. Johnson, City Administrator
Subject: Oakland PFRS’s Investment Portfolio as of March 31, 2025 Date: May 27, 2025 Page 2
Finance and Management Committee
June 24, 2025
The System’s investment portfolio is governed by the investment policy set by the PFRS Board.
The PFRS Board sets an investment policy that authorizes investments in a variety of domestic and international equity and fixed income securities. Eleven external investment managers currently manage the System’s portfolio. Most of the portfolio is held in custody at Northern Trust. In accordance with the City Charter, the PFRS Board makes investment decisions according to the prudent person standard as defined by applicable court decisions and as required by the California Constitution.
In March 1997, the City issued Taxable Pension Obligation Bonds, Series 1997 (“1997 POBs”) and, as a result, deposited $417 million into the System to pay the City’s contributions through June 2011. As a result of the funding agreement entered at the time the 1997 POBs were issued, City payments to PFRS were suspended from February 25, 1997, to June 30, 2011. The City of Oakland resumed contributing to PFRS effective July 1, 2011, and contributed $45.5 million for the fiscal year (FY) ended June 30, 2012.
In July 2012, the City issued $212.5 million of Taxable Pension Obligation Bonds, Series 2012 (“2012 POBs”). The City subsequently deposited $210 million into the System and entered a funding agreement with the PFRS Board. Thus, no additional contributions were required until July 1, 2017.
As of the most recent actuary study dated July 1, 2024, the System’s Unfunded Actuarial Liability is approximately $58.4 million, and the System had a Funded Ratio of 88.3 percent on an Actuarial Value of Assets (AVA) basis. The City of Oakland is currently making monthly payments to the Plan for the FY 2024/2025 required contribution of $34.85 million.
ANALYSIS AND POLICY ALTERNATIVES
The attached report, provided by the PFRS Investment Consultant and Actuary, summarizes the performance of the PFRS’ investment portfolio. This report is being provided in accordance with the City of Oakland Charter, to provide an update to the City Council on the status of the Oakland Police and Fire Retirement System.
The presentation of this report supports the Citywide priority of responsive, trustworthy government. This report communicates the PFRS's financial positions and obligations to the public, policymakers, retirees, and stakeholders. At the same time, the annual audits of the PFRS finances assure the accuracy of the information contained therein.
PFRS’ Membership
The City Charter establishes plan membership, contribution, and benefit provisions. The System serves the City’s sworn employees hired prior to July 1, 1976, who have not transferred to the California Public Employees’ Retirement System (“CalPERS”). As of March 31, 2025, the System’s membership was 602, as shown in Table 1 below.
Jestin D. Johnson, City Administrator
Subject: Oakland PFRS’s Investment Portfolio as of March 31, 2025 Date: May 27, 2025 Page 3
Finance and Management Committee
June 24, 2025
Table 1
PFRS Membership
as of March 31, 2025
Membership POLICE FIRE TOTAL
Retiree 254 134 388
Beneficiary 121 93 214
Total Membership 375 227 602
PFRS Investment Portfolio
As of March 31, 2025, the PFRS’ portfolio had an aggregate value of $458.6 million, as shown in Table 2.
Table 2
PFRS Investment Portfolio
as of March 31, 2025
Investment Fair Value
Domestic Equities $ 200,126,910
Fixed Income 113,106,700
Covered Calls 19,552,021
International Equities 64,519,979
Crisis Risk Offset 38,427,918
Credit 5,962,886
Cash 16,909,205
Total Portfolio $ 458,605,619
As of March 31, 2025, the PFRS portfolio had an aggregate value of $458.6 million. This represents a $4.4 million decrease in investment value after $4.5 million in outflows for the benefit payments over the quarter. During the previous one-year period, the PFRS Total Portfolio increased in value by $4.1 million after drawdowns of $20.2 million for benefit payments, as shown in Table 3 below. The investment drawdowns for benefit payments are less than the City of Oakland’s Contributions to the PFRS Plan of $8.7 million for the Quarter and $34.8 million for the fiscal year.
Jestin D. Johnson, City Administrator
Subject: Oakland PFRS’s Investment Portfolio as of March 31, 2025 Date: May 27, 2025 Page 4
Finance and Management Committee
June 24, 2025
Table 3
Change in PFRS Portfolio Valuation
as of March 31, 2025
Total Plan Value Quarter 1 Year
Beginning Market Value $ 462,969,798 $ 454,455,689
Investment Drawdowns for Benefit Payments -4,482,669 -16,019,551 Gain/(Loss) on Investment 118,490 20,169,481
Ending Market Value $ 458,605,619 $ 458,605,619
PFRS Investment Performance
During the most recent quarter ending March 31, 2025, the PFRS Total Portfolio generated an absolute return of 0.0 percent, gross of fees, underperforming its policy benchmark by -0.4 percent. The portfolio underperformed its benchmark over the latest one-year period and three- year period, and outperformed its benchmark over the five-year period.
Over the most recent quarter ending March 31, 2025, the Plan’s Domestic Equity allocation outperformed its benchmark by 1.0 percent. The Plan’s International Equity allocation outperformed its benchmark by 1.8 percent. The Plan’s Fixed Income outperformed its benchmark by 0.1 percent. The Plan’s Credit allocation underperformed its benchmark by 0.4 percent. The Plan’s Crisis Risk Offset allocation outperformed its benchmark by 1.4 percent, while the Covered Calls allocation underperformed its benchmark by -0.1 percent. Table 4 below shows PFRS’s recent investment performance in comparison to its corresponding benchmarks.
Table 4
PFRS Asset Class Performance
as of March 31, 2025
Investment Type Quarter 1 Year 3 Year 5 Year
PFRS Total Fund
0.0 4.5
4.1 9.6
PFRS Policy Benchmark 0.4 5.8 5.0 9.5
Excess Returns -0.4 -1.3 -0.9 0.2
PFRS Domestic Equity -3.8 4.5 6.3 16.6
Benchmark: Russell 3000 -4.7 7.2 8.2 18.2
Excess Returns 1.0 -2.7 -1.9 -1.6
Jestin D. Johnson, City Administrator
Subject: Oakland PFRS’s Investment Portfolio as of March 31, 2025 Date: May 27, 2025 Page 5
Finance and Management Committee
June 24, 2025
Table 4
PFRS Asset Class Performance
As of March 31, 2025, cont’d
Investment Type Quarter 1 Year 3 Year 5 Year
PFRS International Equity
7.0 8.5
7.1 12.6
Benchmark: MSCI ACWI Ex US (Net) 5.2 6.1 4.5 10.9
Excess Returns 1.8 2.5 2.7 1.6
PFRS Fixed Income
2.9 5.2 1.1 1.1
Benchmark: Bloomberg US Universal 2.8 5.4 1.1 0.3
Excess Returns 0.1 -0.2 0.0 0.8
PFRS Credit
0.7 5.9 5.0 9.9
Benchmark: Bloomberg US Corp High
Yield
1.0 7.7 5.0 7.3
Excess Returns -0.4 -1.8 0.0 2.6
PFRS Crisis Risk Offset
2.7 -4.1 -2.1 -5.3
Benchmark: Crisis Risk Offset
Benchmark
1.2 -2.0 3.6 2.1
Excess Returns 1.4 -2.1 -5.8 -7.4
PFRS Covered Calls
-3.2 8.1 7.5 15.6
Benchmark: CBOE S&P 500 Buy Write -3.1 9.8 4.6 11.7
Excess Returns -0.1 -1.7 2.9 3.9
Note: Investment returns are gross of fees.
Crisis Risk Offset Benchmark is composed of 100% SG Multi Alternative Risk Premia Index through 12/31/2022; 33.34% SG Trend Index, 33.33% SG Multi Alternative Risk Premia Index, and 33.33% Bloomberg US Government Long Term Bond Index thereafter.
Jestin D. Johnson, City Administrator
Subject: Oakland PFRS’s Investment Portfolio as of March 31, 2025 Date: May 27, 2025 Page 6
Finance and Management Committee
June 24, 2025
FISCAL IMPACT
This is an informational report. There are no budget implications associated with this report.
PUBLIC OUTREACH / INTEREST
This item did not require public outreach other than the required posting on the City’s website.
COORDINATION
This report was prepared in coordination with the PFRS’ Investment Consultant (Meketa).
SUSTAINABLE OPPORTUNITIES
Economic: Whenever possible, the PFRS Board seeks to benefit the local Oakland-based economy. In 2006, the PFRS Board and staff, created the PFRS Local Broker provision. This provision mandates that the PFRS Investment Managers consider using Oakland-based brokers for all trades conducted on behalf of the fund based on best execution. This program aims to regenerate some of the commissions generated by the System into the Oakland economy.
Environmental: The PFRS Board supports a sustainable environment. On June 29, 2016, the PFRS Board passed Resolution No. 6927 prohibiting PFRS investment managers from investing PFRS funds in any publicly traded company which derives at least 50 percent of its revenue from the mining and extracting of thermal coal.
Race & Equity: There are no race and equity opportunities associated with this report.
Jestin D. Johnson, City Administrator
Subject: Oakland PFRS’s Investment Portfolio as of March 31, 2025 Date: May 27, 2025 Page 7
Finance and Management Committee
June 24, 2025
Erin Roseman (Jun 11, 2025 11:21 PDT)
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That the City Council Receive an Informational Report on the Oakland Police and Fire Retirement System’s (“PFRS”, or “System”) Investment Portfolio as of March 31, 2025.
For questions regarding this report, please contact Erin Roseman, Director of Finance, at (510) 238-2026.
Respectfully submitted,
ERIN ROSEMAN
Director of Finance, Finance Department
Reviewed by:
Dawn Hort, Assistant Treasury Administrator
Prepared by:
Téir Jenkins, Investment & Operations Manager
Retirement Unit
Attachments (1):
Attachment A: Oakland Police and Fire System Quarterly Investment Performance Report as of March 31, 2025