MEKETA.COM
San Jose Federated City Employees’ Retirement System
San Jose Police & Fire Department Retirement Plan
October 16, 2025
Public Safety, Finance, and
Strategic Support Committee
(PSFSS) Meeting
1 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
Asset Allocation–The Most Important Determinant of Return 2 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
→ The San Jose Federated City Employees’ Retirement System investment return ranked in the top quartile of the peer group for the calendar year-to-date time period and third quartile of the peer group for the past year. For the longer-term periods of three and five years ending June 30, 2025, the Retirement System’s annualized returns ranked near median and top quartile of the peer group, respectively. The peer group included 110 public defined benefit pension plans with market values over $1 billion. 3 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
→ The City of San Jose Police and Fire Department Retirement Plan investment returns ranked in the top half of the peer group for the calendar year-to-date time period and near median for the past year. For the longer-term periods of three and five years ending June 30, 2025, the Retirement Plan’s annualized returns ranked near median and in the top third of the peer group, respectively. The peer group included 11 0 public defined benefit pension plans with market values over $1 billion. 4 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
Appendix
5 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
There Has Been a Decline in Available Investment Returns1 → The chart above illustrates that a portfolio comprised of 65% domestic stocks and 35% investment grade bonds has produced diminishing expected returns, as well as actual returns, over the past 30 years. 0%
20%
40%
60%
80%
100%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Equity Expected Return 16.7% 15.0% 8.8% 7.9% 3.4% 5.3% 6.9% 5.7% 5.1% 4.0% Bond Expected Return 11.3% 12.6% 8.9% 8.8% 7.5% 5.2% 4.9% 3.2% 2.9% 5.6% 60/40 Eq/Bond Exp. Ret. 14.8% 14.3% 9.1% 8.5% 5.3% 5.5% 6.4% 5.0% 4.5% 4.9% Actual 10-year Return 15.5% 12.6% 14.0% 10.3% 2.0% 6.5% 9.6% 8.4% Probability of Earning 7.0% 99% 99% 73% 67% 30% 33% 42% 27% 22% 26% …
Percent Return
1 Expected return assumptions for 1) Bonds equals the yield of the ten-year Treasury plus 100 basis points, and 2) Equities equals the dividend yield plus the earnings yield of the S&P 500 index (using the inflation-adjusted trailing 10-year earnings).
Probability calculation is for the subsequent ten years. 6 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
Federated Discount Rate History
10 Year US Treasury
Rate
Discount Rate Fiscal Year
Return1
Excess Performance to Discount
Rate
Years Fiscal Year (%) (%) (%) (%)
1997 6.51 8.25
1 2016 1.49 6.875 -0.7 -7.6
2 2017 2.31 6.875 7.5 0.6
3 2018 2.85 6.75 5.9 -0.9
4 2019 2.00 6.75 4.3 -2.5
5 2020 0.66 6.75 3.6 -3.2
6 2021 1.45 6.625 29.2 22.6
7 2022 2.98 6.625 -4.4 -11.0
8 2023 3.81 6.625 7.5 0.9
9 2024 4.39 6.625 9.7 3.1
10 2025 4.25 6.625 9.6 3.0
→ The Federated System has had an average annual return for the past 10 years of 7.2%. Financial optimizers typically project a 50% probability of meeting the expected returns each year, so we would expect that approximately half of the time investments will outperform the expected return, and approximately half of the time, investments will lag the projected return. 1 Fiscal Year Ends 6/30. Returns are net of fund management fees. 7 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
Police and Fire Discount Rate History
→ The Police & Fire Plan has had an average annual return for the past 10 years of 7. 2%. Financial optimizers typically project a 50% probability of meeting the expected returns each year, so we would expect that half of the time, investments will outperform the expected return, and half the time, investments will lag the projected return
1 Fiscal Year Ends 6/30. Returns are net of fund management fees 10 Year
US Treasury Rate Discount Rate Fiscal Year Return1
Excess Performance to
Discount Rate
Years Fiscal Year (%) (%) (%) (%)
1997 6.51 8.00
1 2016 1.49 6.875 -0.6 -7.5
2 2017 2.31 6.875 9.7 2.8
3 2018 2.85 6.75 6.9 0.2
4 2019 2.00 6.75 4.3 -2.5
5 2020 0.66 6.75 3.1 -3.7
6 2021 1.45 6.625 26.3 19.7
7 2022 2.98 6.625 -5.0 -11.6
8 2023 3.81 6.625 7.7 1.1
9 2024 4.39 6.625 9.7 3.1
10 2025 4.25 6.625 10.0 3.4
8 San Jose Federated City Employees’ Retirement System and San Jose Police & Fire Department Retirement Plan Public Safety, Finance, and Strategic Support Committee (PSFSS) Meeting MEKETA.COM
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