MARCH 21, 2023 AGENDA ITEM 3 INFORMATION ITEM

MARCH 21, 2023

AGENDA ITEM 3

INFORMATION ITEM

CALIFORNIA ABLE ACT BOARD

Review of CalABLE Investment Performance for the Fourth Quarter 2022

Background

The CalABLE Act Board and its program administrator, TIAA Tuition Financing, Inc. will

review the “Quarterly Investment Performance Report” for the CalABLE Plan for the

Fourth Quarter 2022.

Presenter

Jeremy Thiessen, Head of Investment Strategies, TIAA Tuition Financing Inc.

Attachments

• Attachment #1 – CalABLE Investment Performance Report 4Q22

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4th Quarter 2022

Quarterly Investment Performance Report

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QUARTERLY INVESTMENT PERFORMANCE REPORT

Market Overview: Q4 2022

Key Themes

• U.S. equities posted positive returns during the fourth quarter as the market

reacted favorably to decreasing levels of inflation and the prospect of the Fed

slowing interest rate hikes. The Russell 3000 Index gained 7.18% in the fourth

quarter.

Equities

• Ten out of eleven GIC sectors in the S&P 500 produced positive returns in the

fourth quarter. Consumer Discretionary (-9.09%) was the only sector that declined

during the quarter, while Energy (22.86%) was the strongest performer.

Fixed Income

• The U.S. Federal Reserve raised interest rates by 50 basis points in December,

continuing its effort to tame inflation. Short-term treasury yields moved higher

while long-term yields remained relatively flat across the curve, which increased

the inversion for the 2year-10year treasury yield spread. The Bloomberg U.S.

Aggregate Bond Index of intermediate-term investment grade U.S. bonds returned

1.87% during the fourth quarter.

Past performance is not indicative of future results. You can not invest directly in an

index. U.S. Equities – Russell 3000 Index; U.S. Growth Stocks – Russell 1000 Growth

Index; U.S. Value Stocks – Russell 1000 Value Index; U.S. Mid Cap Stocks – Russell

Midcap Index; U.S. Small-Cap Stocks – Russell 2000 Index; International Developed

Markets – MSCI EAFE Index; Emerging Markets – MSCI Emerging Markets Index;

Real Estate Stocks – FTSE NAREIT All Equity REITS Index; U.S. Investment Grade

Bonds – Bloomberg Barclays U.S. Aggregate Bond Index; Inflation-Linked Bonds –

Bloomberg Barclays TIPS 1-10 Years Index; High Yield Bonds – BofA Merrill Lynch

BB/B Cash Pay Index; Commodities - Bloomberg Commodity Index; Cash – Bloomberg

Barclays U.S. 3 month Treasury Bellweathers Index.

C34631

Asset Class

3 Month 1 Year 3 Year 5 Year

U.S. Equities

7.18 -19.21 7.07 8.79

U.S. Growth Stocks

2.20 -29.14 7.79 10.96

U.S. Value Stocks

12.42 -7.54 5.96 6.67

U.S. Mid-Cap Stocks

9.18 -17.32 5.88 7.10

U.S. Small-Cap Stocks

6.23 -20.44 3.10 4.13

Int’l Developed Stocks

17.34 -14.45 0.87 1.54

Emerging Markets Stocks

9.70 -20.09 -2.69 -1.40

Real Estate Stocks

4.14 -24.95 0.20 4.43

U.S. Investment Grade Bonds

1.87 -13.01 -2.71 0.02

Inflation-Linked Bonds

1.64 -7.34 2.01 2.50

High Yield Bonds

4.31 -10.59 -0.20 2.31

Commodities

2.22 16.09 12.65 6.44

Cash

0.90 1.51 0.74 1.28

Consumer Price Index, December 2022

6.45 4.92 3.78

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QUARTERLY INVESTMENT PERFORMANCE REPORT

Asset Overview by Options as of Q4 2022

Total Assets: $89.6 Million

FOR INSTITUTIONAL CLIENT USE ONLY, NOT FOR DISTRIBUTION

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QUARTERLY INVESTMENT PERFORMANCE REPORT

Asset Overview by Underlying Fund as of Q4 2022

FOR INSTITUTIONAL CLIENT USE ONLY, NOT FOR DISTRIBUTION

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QUARTERLY INVESTMENT PERFORMANCE REPORT

• The U.S. economy gained 223,000 jobs in December and the unemployment rate fell to 3.5 percent. Health care, leisure and

hospitality business services continued to add jobs. Despite the slowdown in housing market, construction jobs continue to increase.

• Real average hourly earnings of all employees on private nonfarm payrolls increased 4.6% year-over-year from last December,

seasonally adjusted.

• Sales of new single-family houses in the United States were at a seasonally adjusted annual rate of 640,000 in November.

• The three risk-based portfolios had positive absolute returns in Q4.

• All underlying mutual funds in the program experienced positive returns in Q4 during an accommodating environment. The TIAA-CREF

Life Funding Agreement, which is held in the Moderate Portfolio and Conservative Portfolio, continued to credit a positive rate of

return and benefited participants.

• The Program is primarily composed of index funds, which have an objective to replicate respective benchmark returns gross of fees.

• Portfolio returns lagged those of blended indexes. This was primarily due to the fixed income funds as the bond market displayed

short periods of notable volatility throughout the quarter.

FOR INSTITUTIONAL CLIENT USE ONLY, NOT FOR DISTRIBUTION

Investment Portfolios vs. Composite Indexes: Q4 2022 Return (%)

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QUARTERLY INVESTMENT PERFORMANCE REPORT

Investment Portfolios

vs. Composite Benchmarks: Return (%)

FOR INSTITUTIONAL CLIENT USE ONLY, NOT FOR DISTRIBUTION

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QUARTERLY INVESTMENT PERFORMANCE REPORT

Asset Allocation, Fees, and Performance

FOR INSTITUTIONAL CLIENT USE ONLY, NOT FOR DISTRIBUTION

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QUARTERLY INVESTMENT PERFORMANCE REPORT

FOR INSTITUTIONAL CLIENT USE ONLY, NOT FOR DISTRIBUTION

Underlying Funds vs. Benchmarks

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