Subject: Oakland PFRS’s Investment Portfolio and Actuarial Valuation Report From: Finance Department Recommendation: Receive An Informational Report On The Oakland Police And Fire Retirement System’s (“PFRS”, Or “System”) Investment Portfolio As Of December 31, 2025, And Actuarial Valuation Report As Of July 01, 2025

This informational report details the financial status and investment performance of the Oakland Police and Fire Retirement System (PFRS), a closed defined benefit plan for employees hired before July 1, 1976. As of July 1, 2025, the PFRS's funded ratio (Actuarial Value of Assets basis) increased to 95.3%, with an Unfunded Actuarial Liability (UAL) of $22.2 million. On a Market Value of Assets (MVA) basis, the plan is 100.9% funded.

Key Financial Highlights:

• The employer contribution for Fiscal Year 2026-2027 is projected to be $0, consistent with prior estimates. This is due to the UAL being fully amortized by the City Charter's deadline of July 1, 2026.
• For the fiscal year ending June 30, 2025, the plan's market value assets returned 9.72% (net of fees), significantly outperforming the 5.00% actuarial assumption, resulting in a $20.8 million market value gain.
• The City maintains a separate property tax override fund, which, if added to the MVA (net of the now-paid $54.9 million Pension Obligation Bond debt as of December 15, 2025), would result in a 172.3% funded ratio.

Investment Performance (as of December 31, 2025):

• The total portfolio value reached $500.6 million.
• The plan returned 1.8% (gross of fees) for the quarter, matching its policy benchmark. For the calendar year 2025, it returned 12.4% (net of fees), outperforming the 12.2% policy benchmark.
• Outperformance was driven by International Equity and Fixed Income, while Domestic Equity underperformed.
• EARNEST Partners (Mid Cap) partially breached medium and long-term monitoring criteria, and Versor Trend Following remains on watch status since September 2023 due to performance concerns.

Actuarial Projections & Risks:

• The plan is expected to reach over 100% funding next year, with a projected surplus emerging due to deferred gains. This surplus is expected to grow as contributions cannot drop below zero and will cover administrative expenses.
• As a closed plan with no active members (membership decreased to 577 as of December 31, 2025), PFRS faces increasingly negative net cash flows, requiring asset liquidation to pay benefits. The Board has de-risked the portfolio by increasing bond holdings to minimize volatility.
• Liabilities are sensitive to investment returns, Cost-of-Living Adjustments (assumed 3.25% annually after June 30, 2026), and mortality experience.

Sustainable Practices: PFRS continues its Local Broker provision to support Oakland's economy and maintains a coal divestment policy (Resolution No. 6927, June 29, 2016) prohibiting investments in companies deriving 50% or more revenue from thermal coal.