2023 Performance

The international equities portfolio returned 9.12%, compared to its benchmark return of 12.53%.

This lower than benchmark return was mainly because we invested more in emerging markets, which did not perform as well as expected and managers did not meet their respective benchmarks.

All international managers underperformed their benchmarks except for Jennison Associates. Jennison beat its benchmark of 15.07% with a return of 17.85%. William Blair returned 10.10% vs 15.07%; Mackenzie Investments returned 4.33% vs 6.45%; Marathon returned 13.61% vs 15.07%; and Somerset returned -1.75% vs 6.88%

The Fund terminated Somerset Capital Management who had been managing the emerging markets allocation since 2007. Performance had been challenging and the firm was experiencing asset outflows. The funds have been placed in an emerging market exchange traded fund until we onboard a new manager, which we expect to happen by the end of the second quarter in 2024.

Investment Approach

Our international equities portfolio is managed by a variety of expert teams, each focusing on different global regions and investment styles. The benchmark is roughly 74% developed markets (established economies) and 26% emerging markets (developing economies).

We have three managers focused on developed markets, one manager for Asia Pacific, and one manager for emerging markets. We tend to invest in stocks in larger companies and with a fairly even split across value, core, and growth.

Capital Allocation

At the end of 2023, total investments in international equities increased to $1.843 billion, up from $1.641 billion in 2022. Total Fund allocation to international equities was 22.8% at the end of 2023 compared to 21.5% at the end of 2022. This is slightly under our target of 23%.

Investments in emerging markets represent 32.4% of international holdings compared to 26.5% for the benchmark.