Investment Board
April 28, 2005
The Honorable, The Legislature:
As provided in section
25.17(14m) of the Statutes, attached is our annual report to the Legislature regarding investment goals, long-term strategies and performance. As a follow-up to our discussions with the Joint Legislative Audit Committee, this report also addresses a number of findings and recommendations in the Legislative Audit Bureau's November 2004 management review of SWIB.
Major observations about 2004:
• Assets under management grew from $69.1 billion at the end of 2003 to $74.7 billion as of December 31, 2004, an increase of $5.6 billion.
• The 12.8% return for the Fixed Retirement Trust Fund surpassed the 11.7% return for its performance benchmark in 2004. The Fund also exceeded its benchmark on a five-year and ten-year basis. The Fixed Fund is invested in a diversified mix of stocks, bonds, real estate and other assets. A fourth quarter surge in US stocks combined with strong returns from international markets, private equity and real estate contributed to the Fund's favorable return.
• The 12.7% return for the Variable Retirement Trust Fund trailed the 13.4% return for its performance benchmark in 2004. The Variable Fund invests in domestic and international stocks. An overweighting in small cap technology stocks, adverse developments for several pharmaceutical stocks, and earnings disappointments for several other mid cap and large cap stocks contributed to the Fund's under-performance in 2004. However, at year-end, the Variable Fund remained ahead of its five-year and
ten-year benchmarks.
• The 1.3% return for the State Investment Fund (SIF) slightly lagged the 1.4% return for its performance benchmark in 2004. The SIF was ahead of its five-year and ten-year
benchmarks at year-end. The SIF is a cash management fund for state agencies, local governments and the Wisconsin Retirement System.
• During fiscal year 2004, SWIB made over $684.3 million in new investments in Wisconsin companies. Wisconsin investments are subject to the same due diligence and fiduciary responsibility standards that apply to all other investments.
• Our total cost of management in 2004 was $156.7 million, the same as in 2003. Relative to assets, our total cost fell from 25 cents for each $100 managed in 2003 to 22 cents in 2004.
To take advantage of changing opportunities in the marketplace, SWIB must be more flexible than ever and able to leverage the strengths of our staff as well as those of our outside managers. We recently completed an extensive review to ensure that we are using internal and external resources cost effectively to achieve optimal net investment returns.
Our review: (1) compared SWIB's mix of portfolio management styles and net returns to those our peers; (2) modeled the potential effects on net returns and risk from alternative mixes of internal and external management and active and passive management; and (3) compared SWIB's budget and management authority to to that of our peers. Findings were presented to the Board earlier this month.
Overall, our review suggests that SWIB is generally well positioned in the use of internal and external resources and mix of active and passive management styles. However, we have identified a number of potential ways in which we could enhance our position. We are pursuing improvements in these areas. Several relate to topics raised in the LAB audit, and they are discussed in more detail in the attached report. I would welcome the opportunity to discuss them with you.
Please let me know if you have any questions or comments about the report.
Sincerely,
DAVID C. MILLS
Executive Director
State of Wisconsin
Office of the Governor
May
3
, 2005
To the Honorable, the Senate:
The following bill(s), originating in the Senate, have been approved, signed and deposited in the office of the Secretary of State:
Bill Number Act Number
Date Approved
Senate Bill 3 Act
4
April 29
, 2005
Senate Bill 83 Act
6
May
2
, 2005
Senate Bill 79 Act
7
May
2
, 2005
Senate Bill 27 Act
9
May
2
, 2005
Sincerely,
JIM DOYLE
Governor
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State of Wisconsin
Office of the Governor
April 21, 2005
The Honorable, The Senate:
I am pleased to nominate and with the advice and consent of the Senate, do appoint Flynn
, James,
of Madison, as a member of the Labor and Industry Review Commission, to serve for the term ending March 1, 2011.
Sincerely,
JIM DOYLE
Governor
Read and referred to committee on Labor and Election Process Reform.
State of Wisconsin
Office of the Governor
April 27, 2005
The Honorable, The Senate:
I am pleased to nominate and with the advice and consent of the Senate, do appoint Hunt
, Courtney,
of Milwaukee, as a member of the Ethics Board, to serve for the term ending May 1, 2009.
Sincerely,
JIM DOYLE
Governor
Read and referred to committee on Campaign Finance Reform and Ethics.
State of Wisconsin
Office of the Governor
April 28, 2005
The Honorable, The Senate:
I am pleased to nominate and with the advice and consent of the Senate, do appoint Mirkin
, Leslie,
of Madison, as a member of the Marriage and Family Therapy Professional Counseling and Social Work Examining Board, to serve for the term ending July 1, 2009.
Sincerely,
JIM DOYLE
Governor
Read and referred to committee on Health, Children, Families, Aging and Long Term Care.
__________________
Senator Schultz, with unanimous consent, asked that the reading be dispensed with, and the appointments be taken up en masse.
Brennan, James M.,
of Milwaukee, as a member of the Public Defender Board, to serve for the term ending May 1, 2007.
Renwick, Suzette,
of La Crosse, as a member of the Artistic Endowment Foundation, to serve for the term ending May 1, 2010.
Thorn
, Ellen M.,
of Sparta, as a member of the Public Defender Board, to serve for the term ending May 1, 2007.
Wettersten, Nancy,
of Madison, as a member of the Public Defender Board, to serve for the term ending May 1, 2008.
Read.
The question was: Confirmation?
The ayes and noes were required and the vote was: ayes, 31; noes, 0; absent or not voting, 2; as follows:
Ayes - Senators Breske, Brown, Carpenter, Coggs, Cowles, Decker, Erpenbach, S. Fitzgerald, Grothman, Hansen, Harsdorf, Jauch, Kanavas, Kapanke, Kedzie, A. Lasee, Lassa, Lazich, Leibham, Miller, Olsen, Plale, Reynolds, Risser, Robson, Roessler, Schultz, Stepp, Taylor, Wirch and Zien - 31.
Noes - None.
Absent or not voting - Senators Darling and Ellis - 2.
Confirmed.
__________________
The committee on Health, Children, Families, Aging and Long Term Care reports and recommends:
Relating to group foster homes for children.
No action taken.
Relating to medicare supplement, replacement, cost-sharing, select, advantage and medicare D prescription drug plans.
No action taken.
Carol Roessler
Chairperson
The committee on Natural Resources and Transportation reports and recommends:
Relating to asbestos permit exemption fees and inspection fees and a program for recovering the exact costs of laboratory fees for sample analysis for the asbestos program.
No action taken.
Neal Kedzie
Chairperson
__________________
S193
State of Wisconsin
Revisor of Statutes Bureau
