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CITY OF SAN LEANDRO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />For The Year Ended June 30, 2019 <br />NOTE 13 — PENSION PLAN (Continued) <br />In determining the long-term expected rate of return, Ca1PERS took into account both short-term and <br />long-term market return expectations as well as the expected pension fund cash flows. Using historical <br />returns of all the funds' asset classes, expected compound geometric returns were calculated over the <br />short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the <br />expected nominal returns for both short-term and long-term, the present value of benefits was calculated <br />for each fund. The expected rate of return was set by calculating the single equivalent expected return that <br />arrived at the same present value of benefits for cash flows as the one calculated using both short-term <br />and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate <br />calculated above and adjusted to account for assumed administrative expenses. <br />The table below reflects the long-term expected real rate of return by asset class. The rate of return was <br />calculated using the capital market assumptions applied to determine the discount rate and asset <br />allocation. These rates of return are net of administrative expenses. <br />(a) In the Ca1PERS CAFR, Fixed Income is included in Global Debt Securities; <br />Liquidity is included in Short-term hivestments; Inflation Assets are <br />included in both Global Equity Securities and Global Debt Securities. <br />(b) An expected inflation of 2.0% used for this period <br />(c) An expected inflation of 2.92% used for this period <br />%L•9 <br />New Strategic <br />Real Return <br />Real Return <br />Asset Class (a) <br />Allocation <br />Years 1-10 (b) <br />Years 11+ (c) <br />Global Equity <br />50.0% <br />4.80% <br />5.98% <br />Fixed Income <br />28.0% <br />1.00% <br />2.62% <br />Inflation Assets <br />0.0% <br />0.77% <br />1.81% <br />Private Equity <br />8.0% <br />6.30% <br />7.23% <br />Real Assets <br />13.0% <br />3.75% <br />4.93% <br />Liquidity <br />1.0% <br />0.00% <br />-0.92% <br />Total <br />100.0% <br />(a) In the Ca1PERS CAFR, Fixed Income is included in Global Debt Securities; <br />Liquidity is included in Short-term hivestments; Inflation Assets are <br />included in both Global Equity Securities and Global Debt Securities. <br />(b) An expected inflation of 2.0% used for this period <br />(c) An expected inflation of 2.92% used for this period <br />%L•9 <br />