The Wisconsin Health Education Loan Repayment and University Trust-Principal Fund shortfalls were not in excess of the $400 million ceiling and did not exceed the balances of the Funds available for interfund borrowing.
The distribution of interest earnings to investment pool participants is based on the average daily balance in the pool and each fund's share. Therefore, the monthly calculation by the State Controller's Office will automatically reflect the use of these temporary reallocations of balance authority.
Sincerely,
MARK D. BUGHER
Secretary, DOA
__________________
State of Wisconsin
Investment Board
Madison
May 22, 1997
To the Honorable, the Legislature:
Section
25.17(14r) of the Statutes requires that the State of Wisconsin Investment Board (SWIB) submit a report to the Joint Committee on Audit, Joint Committee on Finance, and Chief Clerks of each House summarizing any change in the Board's investment policies, upon adoption of the change.
On May 8, 1997, the Board approved the attached modifications to the Investment Policy Guidelines for the Market Evaluation Portfolio (MEP) and the Core Fixed Income Portfolio (CORE) currently managed by SWIB's Public Fixed Income Group. Investment guidelines were also slightly changed for the Real Estate Division. They are also attached. Additions to the previous guidelines are shaded and deletions are the stricken material.
A196
SWIB's public bonds are presently managed in three portfolios: (1) The CORE portfolio is invested primarily in U.S. government bonds and corporate bonds purchased in public markets. (2) The MEP portfolio, prior to the following guideline changes, has been weighted primarily toward corporate securities. (3) The Intermediate Duration portfolio invests in U.S. Treasury and agency securities, primarily in the three-to-seven year maturity range.
MEP GUIDELINE CHANGES
The MEP was originally established in 1988 as a subset of the CORE portfolio. Since then, it has grown in size from $400 million to over $1.2 billion and is now a stand-alone portfolio. Substantive changes to its investment guidelines have not been made since its origination. Given its present size and the complexity of the public fixed income market, broader guidelines are warranted.
The attached guideline changes to the MEP were enacted in order to take better advantage of the available investment opportunities across public fixed income sectors, provide greater liquidity, and enhance risk management within SWIB's MEP portfolio. The changes are summarized below:
* The new guidelines broaden the MEP portfolio mandate by removing the explicit focus on the corporate market. This change will enhance overall risk management of the portfolio as it will provide for greater diversification and increased liquidity of MEP investments. By and large, this will position the portfolio to react more quickly to market fluctuations as they occur.
* The guideline changes widen the duration range of the MEP portfolio to +20% of the portfolio's benchmark, up from +10% of the target. Duration is defined as a general measure of interest rate and market sensitivity. In essence, the widening of the duration range will allow a greater response to anticipated market changes. The revised benchmark has a fixed duration of 6.5 which is consistent with the average duration of the previous benchmark. With the implementation of the new guidelines, the overall duration structure of the fixed income portfolios remains unchanged.
* The new guidelines set forth an overall portfolio credit quality restriction while removing such restriction from the individual issuer and security levels. An addition to the guidelines also allows opportunistic investment of up to 15% of the portfolio in issues rated BB+ and below. The primary purpose of this change is to allow investment in issues which are on the cusp of becoming investment grade securities and expected returns are commensurate with risk. As the overall quality restriction at the broader portfolio level is unchanged, the portfolio will have greater flexibility in issue selection without subjecting the portfolio to any additional aggregate risk.
* With an increased spectrum of allowable investments, the percent allowed in any one investment grade issuer was decreased from 10% to 5% of the portfolio, investment in issuers with ratings below BB+ is limited to 3% of the portfolio.
* Changes were also made to the portfolio's benchmark accordingly.
CORE GUIDELINE CHANGES
The attached changes to the CORE portfolio guidelines are relatively minor and have no material impact on the present portfolio. The first change substitutes the term duration" for maturity. This change updates the guidelines to reflect the industry standard of measurement. Duration is widely accepted as a better measure of interest rate sensitivity and relative risk. The second minor change was initiated in order to set forth CORE guidelines which are consistent with some of the language in the new MEP guidelines. This change specifies limits on the investment which can be made in any one issuing company. Again, this change is anticipated to have little effect on current practices.
REAL ESTATE GUIDELINE CHANGES
Minor technical changes were made to the investment guidelines for the National Industrial Discretionary Account Program (NISDAP) with SWIB's Real Estate Division. NISDAP's purpose is to establish a program which allows SWIB to build portfolios of industrial properties within selected markets. The revisions are non-material and come as a result of Trustee requests for clarification of NISDAP wording.
The revisions better define qualifying investments and remove some ambiguity within the former investment guidelines. The overall effect of these changes has been a slightly greater restriction in investment policy without having any material effect on current investment practices.
Please contact me if you have any questions.
Sincerely,
PATRICIA LIPTON
Executive Director
__________________
Southeast Wisconsin
Professional Baseball
Park District
TO: Charles R. Sanders
Assembly Chief Clerk
FROM: Michael Duckett,
Executive Director
DATE: May 22, 1997
RE: Monthly Progress Report
Enclosed is your copy of the Miller Park Monthly Progress Report for April 1997. Please feel free to contact me if you have any questions or comments.
Thank you for your continued assistance and cooperation.
__________________
REFERENCE BUREAU CORRECTIONS
Senate Substitute Amendment 1 to Senate Bill 105
1. Page 3, line 5: in both places, delete "capital" and substitute "operating".
2. Page 3, line 7: delete "capital" and substitute "operating".
