NRRIT 

National Railroad Retirement 

Investment Trust 

Annual Management Report for Fiscal Year 2019 

Required by Public Law 107-90, 

The Railroad Retirement and Survivors’ 

Improvement Act of 2001 
2 FISCAL YEAR 2019 

 

National Railroad Retirement Investment Trust 

Mission Statement 

The mission of the National Railroad Retirement Investment Trust is to help secure the 

retirement benefits of all participants of the railroad retirement system. Through the 

diligent oversight and prudent investment of railroad retirement assets, and an 

adherence to the highest ethical and professional standards within the industry, 

NRRIT’s trustees and investment professionals contribute to the financial security of rail 

workers, retirees, and their families, and the strength of the American rail industry. 
FISCAL YEAR 2019 TABLE OF CONTENTS - 3 

ANNUAL MANAGEMENT REPORT OF THE

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2019 

1) INTRODUCTORY STATEMENT 5 

 

A) OVERVIEW 5 

B) PORTFOLIO DIVERSIFICATION 7 

C) BOARD AND COMMITTEE MATTERS 7 

 

2) OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS 9 

 

A) TRUSTEE UPDATE 9 

B) COORDINATION WITH FEDERAL GOVERNMENT AGENCIES 9 

C) TRANSFERS TO AND FROM THE TREASURY 12 

D) ACCOUNT BENEFITS RATIO 14 

E) TRUST STAFF 14 

 

3) OPERATIONS OF THE TRUST: INVESTMENT MATTERS 16 

 

A) OVERVIEW 16 

B) INVESTMENT PLAN: STRUCTURE 16 

C) INVESTMENT PLAN: IMPLEMENTATION 17 

D) PROXY VOTING POLICY 19 

E) RAILROAD RETIREMENT SYSTEM ASSETS 20 

F) EXPENSES 20 

 

4) AUDIT COMMITTEE 21 

 

5) INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS 22 

 

A) CUSTODIAL ARRANGEMENTS 22 

B) ACCOUNTING 22 

 

6) FINANCIAL STATUS OF THE TRUST 23 

 

A) FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REPORT 23 

 
4 – APPENDICES FISCAL YEAR 2019 

_______________________________________________________________________ 

APPENDICES 

A) BY-LAWS 

B) INVESTMENT GUIDELINES 

C) 2002 MEMORANDUM OF UNDERSTANDING 

D) 2014 MEMORANDUM OF UNDERSTANDING

E) 2018 MEMORANDUM OF UNDERSTANDING

F) CONFLICTS OF INTEREST POLICY STATEMENT

G) CONFIDENTIALITY POLICY STATEMENT

H) PROXY VOTING POLICY

I) AUDIT COMMITTEE CHARTER

J) ADMINISTRATIVE COMMITTEE CHARTER

K) CHIEF INVESTMENT OFFICER AND CHIEF FINANCIAL AND OPERATING OFFICER 

CERTIFICATION LETTERS 

L) RAILROAD RETIREMENT BOARD CERTIFICATION LETTER TO TREASURY AND 

TREASURY FEDERAL REGISTER NOTICE ON 2020 TAX RATE 

M) NOTICE TO THE RAILROAD RETIREMENT BOARD AND ACCEPTANCE OF NEW TRUSTEES 

N) BIOGRAPHICAL INFORMATION ON TRUSTEES AND STAFF 
FISCAL YEAR 2019 INTRODUCTORY STATEMENT - 5 

1) Introductory Statement

A) Overview 

During the Trust’s 2019 fiscal year (October 1, 2018 - September 30, 2019), the global 

economy moved into its tenth year of expansion following the global financial crisis. 

However, growth moderated during the year, particularly in the manufacturing sector, as 

concerns over increasing US/China trade tensions, Brexit uncertainty, and rising 

geopolitical issues adversely impacted the global economy. Despite these macroeconomic headwinds, labor markets remained strong, with the US unemployment rate 

falling to 3.5% in September, and inflation continued to be muted. In response to 

concerns over slowing growth, most global central banks, including the US Federal 

Reserve, indicated a more dovish approach to monetary policy in the latter part of the 

year, with the US Fed cutting rates three times in FY 2019. Because of this pivot by the 

Fed, US interest rates declined during the year, with the 10Y Treasury yield dropping 138 

basis points. Elsewhere in many international developed markets, interest rates moved 

further into negative territory. Indeed, there were approximately $16 trillion in negativeyielding global sovereign bonds, mostly in Europe and Japan, by the end of September. 

This dramatic decline in interest rates globally had a significant impact on asset class 

returns, and returns within asset classes (sectors, etc.), during the year. 

 In this environment, the National Railroad Retirement Investment Trust (“Trust”) 

achieved an investment return of 2.8% (net of fees). This investment return compares 

with the return on the Trust’s benchmark of 3.9% over the same period. 

 Overall, during fiscal year 2019, the net asset value of Trust-managed assets 

decreased from $26.6 billion on October 1, 2018, to $25.4 billion on September 30, 2019. 

This decrease in asset value includes $1.8 billion that the Trust transferred to the US 

Treasury (the “Treasury”) for railroad retirement (tier 2) benefit payments during the 

fiscal year. 

 
6 - INTRODUCTORY STATEMENT FISCAL YEAR 2019 

Market Value of Trust-Managed Assets 

($ in billions)

October 1, 2018 $26.6 

Transfers from Trust to Treasury $(1.8) 

Net Change in value 0.6 

Net Increase/(Decrease) -1.2 

September 30, 2019 $25.4 

 

 In addition to Trust-managed assets, other assets of the railroad retirement system 

are retained by the Railroad Retirement Board (“RRB”) as reserves in accounts at the 

Treasury. These reserves are made up of recent payroll tax contributions from rail 

employers and employees, as well as assets that the Trust has transferred to the Treasury 

to pay future benefits. In order to understand the overall financial position of the railroad 

retirement system, it is important to consider both the Trust-managed assets and the 

system reserves held at the Treasury. 

During its seventeen years of investment operations, the Trust has transferred 

$24.7 billion to the Treasury to pay railroad retirement benefits. Even with these benefit 

payments, total railroad retirement system assets (Trust-managed assets plus reserves 

maintained at the Treasury) grew from $20.7 billion in 2002 to $27.3 billion as of the end 

of fiscal year 2019. As such, despite investment challenges encountered over the years, 

the Trust has made a significant contribution to the increase in total assets available to 

the railroad retirement system. 

Trust-Managed Assets and RRB Assets Held in Reserve 

($ in billions) 

February 1, 2002 (total system assets at Trust inception) 

 

$20.7 

Net transfers from the Trust to the Treasury for payment 

of RR Benefits $ (24.7) 

Net Change in value* 31.3 

Net increase/(decrease) 6.6 

September 30, 2019 $27.3 

* This includes investment return, payroll tax revenues, additional benefit payments and administrative expenses. 

 
FISCAL YEAR 2019 INTRODUCTORY STATEMENT - 7 

B) Portfolio Diversification 

Over the past seventeen years, the Trust has deployed assets received from the Treasury 

into a diversified portfolio of US and non-US equity, and US and non-US fixed income 

securities. Over time, the Trust has furthered that diversification by allocating a 

percentage of the portfolio to private equity, private debt, real assets, commodities, and 

absolute return investments. As mandated by its statute, the Trust has avoided undue 

concentration of investment in any asset class, type of security, or market sector. 

This policy of broad diversification is intended to serve the Trust well in strong 

markets and to protect its assets from disproportionate market shocks in volatile periods. 

The assumption underlying this diversification of Trust assets is that not all asset classes 

will perform the same in any given market environment. As part of this diversification 

process, the Trust holds tens of thousands of different securities selected by its numerous 

investment managers, pursuing many different strategies, for the Trust portfolio. The 

Trust’s Board and its investment staff carefully monitored the activities of the Trust's 

investment managers throughout the fiscal year, examining portfolio weights in each 

asset class, holdings within each asset class, and the work of active managers, in order 

to evaluate strategy and performance. 

C) Board and Committee Matters

During this fiscal year, the Board and its investment staff reviewed and updated the 

Trust’s investment, accounting, and operations procedures manuals. The Board and the 

investment staff also continued to monitor the Trust’s asset allocation structure, though 

this review did not result in any changes to the Trust’s Investment Guidelines that reflect 

the evolution of the Trust’s portfolio in the current market environment. 

 The Board of Trustees met six times during the course of the year to consider the 

various investment and management issues that are discussed in this seventeenth Annual 

Management Report. In addition, the Board’s Audit and Administrative Committees met 

periodically to consider matters within their areas of responsibility. A copy of the Audit 

Committee Charter, as revised and approved by the Board on February 24, 2017, is 
8 - INTRODUCTORY STATEMENT FISCAL YEAR 2019 

contained at Appendix I. A copy of the Administrative Committee Charter setting forth 

the duties of the Committee, as approved by the Board on May 22, 2013, is contained at 

Appendix J. 

 This report and its various appendices provide information on the operations and 

financial status of the Trust for the fiscal year, including the report of the audit of the 

financial statements as required by the Trust’s enabling statute. 
FISCAL YEAR 2019 OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS - 9 

2) Operations of the Trust: Administrative Matters 

A) Trustee Update 

In February 2019, the Trust announced the appointment of two Trustees and a new Chair 

for the period beginning February 1, 2019. Railroad management appointed Ms. Beth 

Miller, AVP Treasury & Risk Management, BNSF Railway Company , to a three-year term 

that expires on January 31, 2022. Railway labor unions appointed Mr. William C. Walpert, 

National Secretary-Treasurer Emeritus of the Brotherhood of Locomotive Engineers and 

Trainmen (BLET) to a three-year term that expires on January 31, 2022. In addition, 

the Trustees appointed Mr. William F. Quinn, former chairman and founder of American 

Beacon Advisors as the Chair of the Board of Trustees for the period February 1, 2019 - 

January 31, 2020. 

 Ms. Miller and Mr. Walpert joined the following five members on the Board: for 

terms expiring on January 31, 2020, Mr. Joel Parker, former Special Assistant to the 

President and International Vice President of the Transportation Communications 

International Union (TCU)/IAM, Mr. Richard G. Patsy, Assistant Vice President Pensions 

and Investments, CSX Corporation, and Mr. Quinn; and for terms expiring on January 31, 

2021, Mr. George J. Francisco, Jr., President Emeritus, National Conference of Firemen 

and Oilers – SEIU, and Mr. Christopher R. Neikirk, Assistant Vice President Finance, 

Norfolk Southern Corporation. 

 Biographical information on the Trustees can be found in Appendix N. 

B) Coordination with Federal Government Agencies 

Throughout the fiscal year, the Trust maintained regular communications with the RRB 

and the Treasury on all matters relating to the transfer of monies between the various 

RRB accounts at the Treasury and the Trust. In addition, the Trust transmitted all 

monthly data required pursuant to a Memorandum of Understanding (“MOU”) entered 

into in 2002 with these entities and the Office of Management and Budget (“OMB”). This 

2002 MOU outlines the budgetary, transfer, accounting, and financial reporting 

responsibilities for assets held by the Trust and railroad retirement system assets held 
10 - OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS FISCAL YEAR 2019 

within the Treasury. This MOU requires the Trust to report on a monthly basis: receipts 

and disbursements of funds, purchases and sales of assets, earnings and losses on 

investments, value of investments held, and administrative expenses incurred. A copy of 

the 2002 MOU is included in Appendix C. 

 The Trust and the RRB entered into a subsequent MOU in 2014 that delineates 

responsibilities and procedures for financial audits and performance reviews with respect 

to assets held by the Trust. This MOU formalizes the requirement that the Trust retain 

an independent qualified public accounting firm to annually audit the Trust’s financial 

statements, and the deadline for transmittal of the audited financial statements to the 

RRB. In addition, this MOU contains provisions related to the timing, structuring, scope, 

and cost of periodic performance reviews, as well as the assessment of the results of the 

reviews. A copy of the 2014 MOU is included in Appendix D. Pursuant to this 2014 MOU, 

during the fiscal year the Trust engaged Cortex Applied Research, Inc. (“Cortex”) to 

conduct an independent performance review of its investment guidelines, asset 

allocation, performance benchmarks, and investment plan. The report detailing Cortex’s 

findings was provided to the RRB. 

 Pursuant to its established practice of periodic meetings with the RRB, during fiscal 

year 2019, the Trustees, the Chief Executive Officer/Chief Investment Officer, and Trust 

legal counsel held periodic meetings and telephone conferences with the Members of the 

RRB and its General Counsel and Chief Financial Officer to review the investment and 

administrative activities of the Trust. Senior staff of the two organizations and Trust legal 

counsel conferred after each quarterly meeting of the Trust’s Board. Trustees and 

Members of the RRB met three times during the year. In addition, the Trust prepared 

Quarterly Updates that were transmitted to the RRB for posting on the RRB website to 

be available to all interested parties. 

 During 2019, the Trust also consulted with the RRB on its fiscal year-end audit and 

reporting processes to facilitate the transmittal of fiscal year audited net asset data of the 

Trust to the RRB by November 15 for use in its financial statements. In addition, the 

Trust worked with the U.S. Government Accountability Office (“GAO”) during 2018 to 
FISCAL YEAR 2019 OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS - 11 

create an MOU related to GAO access to information supporting the Trust’s audited 

financial statements. The MOU was finalized and implemented in fiscal year 2019, and 

provides for coordination between the GAO and the Trust’s auditors to facilitate the 

inclusion of audited Trust net asset balances in the Financial Report of the United States 

Government. A copy of this MOU is included in Appendix E. 

 
12 - OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS FISCAL YEAR 2019 

C) Transfers to and from the Treasury 

The Railroad Retirement and Survivors’ Improvement Act of 2001 (the "Act") provided 

for the transfer of railroad retirement system funds to the Trust for investment in a 

diversified portfolio similar to those of other large US pension plans. From inception 

through fiscal year 2004, the Trust received $21.3 billion of railroad retirement system 

funds. The Trust has received no transfers from the Treasury since the end of fiscal year 

2004. The funds transferred to the Trust consisted primarily of assets transferred from 

the Railroad Retirement Account ("RRA"), and a smaller amount from the Social Security 

Equivalent Benefit (“SSEB”) Account. The RRA assets were invested in a diversified 

portfolio in accordance with the Trust’s Investment Guidelines, while the funds received 

from the SSEB Account were invested in federal securities as required in the Act. 

 The Act also provides for the transfer from the Trust to the Treasury of amounts 

necessary to pay RRA benefits under the Act. During fiscal year 2019, the Trust 

transferred a total of $1.8 billion to the Treasury for payment of RRA benefit obligations. 

The following chart displays the individual transfers from the Trust to the Treasury in 

fiscal year 2019. 
FISCAL YEAR 2019 OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS - 13 

Summary of transfers: From its inception in February 2002 to September 30, 2019, the 

Trust has received $21.3 billion from the Treasury. The Trust has since returned the 

entire $21.3 billion, as well as an additional $3.4 billion, to the Treasury; therefore 

cumulative transfers to the Treasury since inception are $24.7 billion. 

 The assets received by the Trust have been invested in a diversified multi-assetclass portfolio in accordance with the Trust’s Investment Guidelines. This diversification 

of assets away from the prior all-Treasury-securities portfolio has allowed the Trust’s 

assets to grow beyond their original value. The cumulative increase in value in Trustmanaged assets since inception is $28.8 billion, representing total Trust-managed assets 

of $25.4 billion as of September 30, 2019, plus $3.4 billion in excess funds returned to 

Treasury. The following chart reflects the growth of the Trust’s assets over time, as well 

as cumulative transfers between the Trust and the Treasury. 

} 
14 - OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS FISCAL YEAR 2019 

D) Account Benefits Ratio 

The funds available to pay railroad retirement benefits and administrative costs include 

assets held in the RRA, the SSEB Account, and assets held by the Trust. Section 204 of 

the Act requires that amounts in the RRA and assets held by the Trust be included in the 

annual calculation of the account benefits ratio (“ABR”). The ABR is the ratio of the 

combined fair market value of RRA and Trust assets as of the close of the fiscal year to 

the total benefits and RRB and Trust expenses paid in that fiscal year. The average 

account benefits ratio ("AABR"), the ten-year average of the ABR, is used to determine 

the tier 2 tax rates for railroad employers and employees. 

 As provided in the Act, the RRB computed the account benefits ratio for fiscal year 

2019 and certified the ratio to the Secretary of the Treasury on October 29, 2019. The 

Secretary determined the AABR for fiscal year 2019 and on November 25, 2019 published 

a notice in the Federal Register of the tier 2 employer and employee tax rates for calendar 

year 2019. Copies of the RRB certification letter and the Treasury notice are contained 

in Appendix L. The ABR decreased from 4.86 for fiscal year 2018 to 4.60 for fiscal year 

2019. The ten-year AABR declined from 5.1 at September 30, 2018 to 5.0 at September 

30, 2019. 

E) Trust Staff 

The Trust’s staff is comprised of professionals in three major areas of responsibility: 

investments, operations, and accounting. The investment staff reports to a Chief 

Executive Officer/Chief Investment Officer (“CEO/CIO”). The operations and accounting 

staff report to the Chief Financial and Operating Officer (“CFO/COO”). The CFO/COO and 

all investment directors report to the CEO/CIO. The CEO/CIO and staff are accountable 

to the Board of Trustees. The Trust also employs a Chief Compliance Officer (“CCO”) to 

oversee compliance activities of the Trust. The CCO reports directly to the Trustees on 

all compliance-related matters. 

Investment management personnel include Directors who are responsible for each 

major asset class. Working with the Directors are investment analysts assigned to specific 
FISCAL YEAR 2019 OPERATIONS OF THE TRUST: ADMINISTRATIVE MATTERS - 15 

asset classes. The operations staff is responsible for tracking and monitoring Trust 

assets, as well as other operational functions such as treasury and cash management, 

information technology, office management, and human resources. The accounting staff 

interacts with the Trust’s independent auditor, and is responsible for financial reporting 

in accordance with Generally Accepted Accounting Principles. 

Biographical information on the Trust’s staff can be found in Appendix N. 
16 – AUDIT COMMITTEE FISCAL YEAR 2019 

3) Operations of the Trust: Investment Matters 

A) Overview 

For fiscal year 2019, the investment return, net of fees, on Trust-managed assets was 

2.8%, while the Trust’s strategic benchmark returned 3.9%. The relative 

underperformance for the Trust during the current fiscal year was driven by the 

investment performance of the Trust’s investment managers as well as the tactical 

investment positions taken by the Trust. 

 The top three performing asset classes for the Trust were public real estate, private 

equity, and private real assets, which returned 13.6%, 10.9% and 9.2% respectively for 

the year. The Trust maintains a long-term focus and a well-diversified portfolio to take 

advantage of market movements regardless of which asset classes are in favor in any 

single year. 

B) Investment Plan: Structure 

Since its inception in September 2002, the Trust’s asset class structure has evolved from 

a portfolio consisting entirely of government securities, to a simple three-asset-class 

approach, and finally to a structure which is more fully diversified across geography, 

capitalization size, investment style, credit quality, and other characteristics. The Trust’s 

Investment Guidelines specify the neutral target allocation and approved ranges for each 

asset class, as well as rules for rebalancing back towards these neutral targets as market 

valuations change. The Investment Guidelines also provide a policy benchmark for each 

asset class and a composite benchmark for the total portfolio to measure actual Trust 

performance against an objective standard. The Trust’s most recent full asset allocation 

study was conducted during fiscal year 2017 and resulted in minor revisions to the 

previous target allocations and ranges reflecting changes in capital market expectations 

since the previous asset allocation study. The new target allocations and ranges became 

effective beginning October 1, 2017. The Trust’s Investment Guidelines are included in 

Appendix B. 
FISCAL YEAR 2019 INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS - 17 

Current Long-Term Target Asset Allocation 

(Approved August 16, 2017) 

Asset Class Target Range 

 US Equity 24% 19-29% 

 Non-US Equity 24% 19-29% 

 Private Equity 10% 5-15% 

 US Fixed Income 14% 10-18% 

 Non-US Fixed Income 4% 2-6% 

 Private Debt 2% 0-4% 

 Real Estate 10% 5-15% 

 Commodities 4% 2-6% 

 Absolute Return 7% 3-11% 

 Cash 1% 0-3% 

 100% 

C) Investment Plan: Implementation 

 US Equity: There were no additions or terminations to the US equity manager 

accounts during the fiscal year. At the end of the fiscal year, this asset class had 15 

active US equity managers, two of which manage two separate accounts, and one US 

equity index manager managing three products. 72% of the Trust’s US equity portfolio 

was actively managed at the end of the fiscal year. 

 Non-US Equity: During fiscal year 2019, the Trust added three active manager 

accounts with new managers, and terminated one active and two passive manager 

accounts. The Trust ended fiscal year 2019 with 14 active non-US equity managers, two 

of which manage two separate accounts each and one of which manages three separate 

accounts, and one index manager, which manages three products in non-US equity. 

Approximately 95% of the Trust’s non-US equity allocation was actively managed. 

Additionally, for the currency overlay program, there were no additions or terminations, 
18 – AUDIT COMMITTEE FISCAL YEAR 2019 

and the Trust continued to employ three active managers at the end of the fiscal year. 

 US Fixed Income: There were no additions or terminations to the US fixed 

income manager accounts during the fiscal year. At the end of the fiscal year, this asset 

class had 13 active/specialist managers, and 100% of the Trust’s US fixed income 

allocation was actively managed. 

 Non-US Fixed Income: There were no additions or terminations to the Non-US 

fixed income manager accounts during the fiscal year. At the end of the fiscal year, this 

asset class had five active managers, and 100% of the Trust’s non-US fixed income 

allocation was actively managed. 

 Commodities: During fiscal year 2019, there were no additions or terminations 

in this asset class. At the end of the fiscal year, this asset class had three active 

managers, and 100% of the Trust’s allocation to commodities was actively managed. 

 Absolute Return: There were no additions or terminations to the absolute return 

asset class during the fiscal year. At the end of the fiscal year, this asset class had 11 

active/specialist managers, one of which manages four separate portfolios for the Trust, 

and two of which each manage two separate portfolios for the Trust. This allocation is 

100% actively managed. Additionally, one commitment was made to an existing manager 

for a new mandate scheduled to begin during fiscal year 2020. 

 Private Equity: During fiscal year 2019, the Trust continued its private equity 

program implementation with eight new private equity funds with existing managers, 

bringing the total number of active partnerships in the private equity portfolio to 100 at 

the end of the fiscal year. These 100 partnerships are actively managed by 39 managers. 

Additionally, commitments were made to one new partnership with a new manager and 

five new partnerships with existing managers scheduled to begin their investment period 

during fiscal year 2020. One partnership wound up operations upon reaching the end of 

its fund life during the fiscal year. 

 Private Debt: Two new private debt funds with new managers began their 

investment period during fiscal year 2019, bringing the total number of active 

partnerships in private debt to 13 at the end of the fiscal year. These 13 partnerships 
FISCAL YEAR 2019 INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS - 19 

are actively managed by 9 managers. Additionally, commitments were made to two new 

partnerships with new managers, which were scheduled to begin their investment period 

during fiscal year 2019. One partnership wound up operations upon reaching the end of 

its fund life during the fiscal year. 

 Real Assets: One new real estate partnership with a new manager and eight 

new partnerships with existing managers began their investment period during fiscal year 

2019, bringing the total number of active partnerships in real assets to 90. These 90 

partnerships are actively managed by 36 managers. Additionally, commitments were 

made to five new partnerships, all with existing managers, which were scheduled to begin 

their investment period during fiscal year 2020. The Trust also had investments in three 

actively-managed REIT funds at the end of the fiscal year. 

Cash: During fiscal year 2019, the Trust added one active manager account. At 

the end of the fiscal year, this asset class had one account with an active manager and 

one passive account with the Trust’s custodian bank. 

D) Proxy Voting Policy

The Trust maintains a proxy voting policy which delegates the voting of Trust proxies to 

its investment managers as fiduciaries of the Trust. It also details specific responsibilities 

of those managers in the voting of proxies, makes clear the responsibility of investment 

managers to coordinate proxy voting with the Trust’s custodian, and retains for the Trust 

itself responsibility for monitoring, reviewing, and reporting on the implementation of the 

proxy voting policy. A copy of the proxy voting policy can be found in Appendix H. 

 Each year, managers with proxy voting responsibilities are required to certify that 

they have voted all proxies in accordance with the policy and solely in the interest of the 

participants and beneficiaries of the Trust. After the end of the fiscal year, staff reviews 

and reports to the Board of Trustees regarding each manager’s proxy voting record with 

respect to Trust securities. 

 
20 – AUDIT COMMITTEE FISCAL YEAR 2019 

E) Railroad Retirement System Assets 

While most railroad retirement system assets are managed by the Trust, some assets 

remain in Treasury accounts managed by the RRB. Approximately 7.0% of the total, or 

$1.9 billion out of $27.3 billion as of September 30, 2019, is held in the form of reserves 

that are invested in Treasury securities by the RRB. These reserves are replenished as 

needed through transfers from the Trust to the Treasury. In determining its asset 

allocation, the Trust takes into account these reserves and sets its investment policies 

accordingly. 

F) Expenses

The largest component of the Trust's expenses is investment management fees which 

now constitute approximately 83% of all expenses. Total expenses as a percentage of 

assets under management have stabilized as the investment portfolio has been 

transitioned from an all-indexed portfolio to one that is primarily actively managed. The 

expense ratio compares favorably to investment industry standards. The Trust’s expense 

ratios for the past ten years are shown below. 

 

Trust Expense Ratio 

FY 2010 – FY 2019 

Fiscal Year Expense Ratio (%) 

2019 0.27 

2018 0.29 

2017 0.31 

2016 0.28 

2015 0.27 

2014 0.29 

2013 0.29 

2012 0.30 

2011 0.36 

2010 0.33 
FISCAL YEAR 2019 INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS - 21 

4) Audit Committee 

The Audit Committee (the “Committee”) held four meetings during fiscal year 2019. 

During the year, the Committee engaged KPMG LLP to perform the annual audit of the 

Trust’s financial statements for the fiscal year-ended September 30, 2019. The Audit 

Committee provided oversight of the financial statement audit process in accordance with 

its fiduciary duty to the Trust. The Trust issued its financial statements which contained 

an unqualified audit opinion, within 45 days of its fiscal year-end. This allowed the RRB 

to include the Trust’s audited net assets in its financial statements and meet its financial 

reporting deadline. 

 Also during fiscal year 2019, the Committee provided oversight of the Trust’s 

ongoing program of periodic performance reviews. This included the retention of a 

qualified, independent, non-governmental organization to conduct a performance review 

during fiscal year 2019. The scope of the performance review included an assessment 

of the Trust’s investment guidelines, asset allocation, performance benchmarks, and 

investment plan. The review was completed during the fiscal year, in accordance with 

the terms of the 2014 MOU included in Appendix D. 

 The Trust maintains a whistleblower telephone hotline as a means for all Trust 

employees, investment managers, service providers and other interested parties to 

report, on a confidential basis, any suspected acts of fraud or actions involving the 

inaccurate or incomplete recording of financial information. The Committee monitors this 

hotline throughout the year. The hotline number is (877) 888-0002. 
22 – FINANCIAL STATUS OF THE TRUST FISCAL YEAR 2019 

5) Internal Accounting and Administrative Controls 

During fiscal year 2019, the Trust’s staff continued to improve the system of internal 

accounting and administrative controls designed to ensure the safekeeping and proper 

accounting of investments, and the efficient operation of the Trust’s activities. 

Enhancements were made to the Trust’s accounting and operations procedures manuals, 

and these updates were presented to the Trustees. 

A) Custodial Arrangements 

The Trust’s assets are primarily held by its custodian, The Northern Trust Company 

(“Custodian”). Assets invested in commingled funds are held with the custodian of each 

respective fund. Likewise, investments in private partnerships and absolute return 

strategies are maintained by the custodian or administrator of each respective fund. 

Periodic statements are presented to and recorded by the Custodian on the Trust’s books. 

The Custodian maintains records of, and custodial accounts for, all of the Trust’s assets. 

As the Trust’s investments have grown in complexity over the years, the Trust has 

worked closely with the Custodian to enhance internal processes, procedures, and 

systems supporting all investment and operational activity. 

B) Accounting

The Custodian provides the Trust with investment performance of Trust assets, as well 

as a record of all transactions involving Trust assets. Reconciliations of the primary 

custodial records to the investment managers’ records are performed monthly. The Trust 

has established a process to review the monthly reconciliations to ensure that all 

transactions are recorded properly on the respective books. Financial data from the 

custodial bank form an integral part of the Trust’s required reports and financial 

statements. 

 
FISCAL YEAR 2019 INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS - 23 

6) Financial Status of the Trust 

A) Financial Statements and Independent Auditors’ Report 
National Railroad 

Retirement Investment 

Trust 

Financial Statements as of and for the 

Fiscal Year Ended September 30, 2019, and 

Independent Auditors’ Report 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Table of Contents 

Page(s) 

Independent Auditors’ Report 1 

Financial Statements as of and for the Fiscal Year Ended 

September 30, 2019:

Statement of Assets and Liabilities 2 

Condensed Schedule of Investments 3–8 

Statement of Operations 9 

Statement of Cash Flows 10 

Statement of Changes in Net Assets 11 

 Notes to Financial Statements 12–28 
Independent Auditors’ Report 

The Board of Trustees 

National Railroad Retirement Investment Trust 

We have audited the accompanying financial statements of the National Railroad Retirement Investment Trust, 

which comprise the statement of assets and liabilities, including the condensed schedule of investments, as of 

September 30, 2019, and the related statements of operations, changes in net assets, and cash flows for the 

year then ended, and the related notes to the financial statements. 

Management’s Responsibility for the Financial Statements 

Management is responsible for the preparation and fair presentation of these financial statements in 

accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and 

maintenance of internal control relevant to the preparation and fair presentation of financial statements that are 

free from material misstatement, whether due to fraud or error. 

Auditors’ Responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our 

audit in accordance with auditing standards generally accepted in the United States of America. Those 

standards require that we plan and perform the audit to obtain reasonable assurance about whether the 

financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of 

the risks of material misstatement of the financial statements, whether due to fraud or error. In making those 

risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation 

of the financial statements in order to design audit procedures that are appropriate in the circumstances, but 

not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we 

express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and 

the reasonableness of significant accounting estimates made by management, as well as evaluating the overall 

presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion. 

Opinion 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial 

position of the National Railroad Retirement Investment Trust as of September 30, 2019, and the results of its 

operations, changes in net assets, and cash flows for the year then ended in accordance with U.S. generally 

accepted accounting principles. 

November 15, 2019 

KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 

KPMG LLP

Suite 900

8350 Broad Street

McLean, VA 22102
2 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Statement of Assets and Liabilities

As of September 30, 2019

($ in thousands)

Assets

 Investments — at fair value (cost $20,135,631) 25,109,691 $ 

 Cash and cash equivalents (including restricted cash of $40,257) 666,322 

 Receivable for investments sold 433,361 

 Interest receivable 33,899 

 Cash denominated in foreign currency — at fair value (cost $24,809) 24,485 

 Dividends receivable 24,054 

 Unrealized gain on forward contracts 21,777 

 Securities sold under agreements to repurchase 16,500 

 Swap contracts, at fair value 8,490 

 Other assets 27,299 

 Total assets 26,365,878 

Liabilities

 Payable for investments purchased 887,231 

 Swap contracts, at fair value 36,054 

 Accrued management fees 20,400 

 Unrealized loss on forward contracts 18,511 

 Obligation to return cash collateral held 4,197 

 Other liabilities 11,588 

 Total liabilities 977,981 

Net Assets $ 25,387,897

The accompanying footnotes are an integral part of these financial statements.
3 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Condensed Schedule of Investments

As of September 30, 2019

($ in thousands)

% of 

Net Assets

Number of 

Units, Shares or 

Par Value (000) Fair Value

Global Equity

 US Equity

 US Common Stocks

Microsoft Corp. 1,015 141,137 $ 

Amazon.com Inc. 54 93,526 

Facebook Inc. 524 93,246 

Visa Inc. 483 83,087 

Apple Inc. 363 81,288 

Alphabet Inc. Class A 61 74,482 

Citigroup Inc. 924 63,822 

Other US Common Stocks 3,828,974 

17.56% 4,459,562 

 Other US Equity Securities (a) 0.05% 12,959 

 US Equity Commingled Funds

BlackRock Russell 1000 Index Fund 28,736 1,302,478 

BlackRock Russell Growth Index Fund 11,719 501,468 

Other US Equity Commingled Funds 8,017 

7.14% 1,811,963 

 Total US Equity 24.75% $ 6,284,484

The accompanying footnotes are an integral part of these financial statements.
4 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Condensed Schedule of Investments (continued)

As of September 30, 2019

($ in thousands)

% of 

Net Assets

Number of 

Units, Shares or 

Par Value (000) Fair Value

Global Equity (continued)

 Non-US Equity

 Non-US Common Stocks

Samsung Electronics Co. Ltd. 2,342 96,057 $ 

Alibaba Group Holding Ltd. 536 89,692 

Nestlé S.A. 698 75,840 

Roche Holdings AG 246 71,688 

Tencent Holdings Ltd. 1,574 66,287 

Other Non-US Common Stock 5,458,381 

23.07% 5,857,945 

 Non-US Preferred Stocks 0.23% 57,169 

 Non-US Equity Commingled Funds

BlackRock MSCI EAFE Equity Index Fund 6,631 164,921 

BlackRock World ex-US Small Cap Equity 

 Index Fund 4,118 93,881 

BlackRock MSCI Equity Index Fund (Canada) 680 61,883 

1.26% 320,685 

 Total Non-US Equity 24.56% $ 6,235,799

The accompanying footnotes are an integral part of these financial statements.
5 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Condensed Schedule of Investments (continued)

As of September 30, 2019

($ in thousands)

% of 

Net Assets

Number of 

Units, Shares or 

Par Value (000) Fair Value

Global Equity (continued)

 Private Equity

Emergence Capital Partners III 13,518 87,831 $ 

AlpInvest North Rush, LP 28,693 81,527 

Silver Lake Partners IV, LP 23,726 78,748 

Blackstone Capital Partners VI, LP 11,999 78,071 

McCoy Investments LP 1 75,566 

TCV VIII, LP 46,430 71,549 

AlpInvest North Rush II, LP 71,735 71,373 

TCV VII, LP 1 67,466 

Apollo Investment Fund VIII, LP 42,419 64,539 

NGP Natural Resources XI, LP 47,785 61,966 

TA XII-A LP 37,002 61,074 

Other Private Equity 1,532,752 

 Total Private Equity 9.19% 2,332,462

Total Global Equity (cost $11,180,595) 58.50% $ 14,852,745

Global Fixed Income

 Corporate Bonds 6.49% 1,648,542 $ 

 Government Notes and Bonds 

US Treasury Notes, 2.625%, 02/15/29 130,231 140,950 

US Treasury Bonds, 2.125% 05/15/25 85,070 87,476 

Other Government Notes and Bonds 1,241,437 

5.79% 1,469,863 

 Government-Sponsored Entity Mortgage -

 Backed Securities ("MBS") 3.67% 932,428 

The accompanying footnotes are an integral part of these financial statements.
6 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Condensed Schedule of Investments (continued)

As of September 30, 2019

($ in thousands)

% of 

Net Assets

Number of 

Units, Shares or 

Par Value (000) Fair Value

Global Fixed Income (continued)

 Asset Backed Securities 0.99% 250,697 $ 

 Commercial MBS 0.48% 121,652 

 Private Debt 0.45% 113,045 

 Government Agencies 0.40% 101,665 

 Index-Linked Government Bonds 0.31% 79,273 

 Municipal Bonds 0.19% 49,280 

 Other Fixed Income Securities (b) 0.18% 44,676 

 Non-Government Collateralized Mortgage

 Obligations 0.17% 42,386 

 Short-Term Bills and Notes 0.04% 11,298 

 Fixed Income Commingled Funds

Wellington Emerging Market Debt 13,441 134,274 

AG Mortgage Value Partners 73,638 123,762 

Other Fixed Income Commingled Funds 77,546 

1.32% 335,582 

Total Global Fixed Income (cost $5,050,829) 20.48% $ 5,200,387

The accompanying footnotes are an integral part of these financial statements.
7 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Condensed Schedule of Investments (continued)

As of September 30, 2019

($ in thousands)

% of 

Net Assets

Number of 

Units, Shares or 

Par Value (000) Fair Value

Global Real Assets

 Private Real Estate

Northwood Real Estate Partners, LP 37,822 86,413 $ 

Blackstone Real Estate Partners VII, LP 1 82,614 

Prudential PRISA II 2 73,844 

Other Private Real Estate 1,592,008 

7.23% 1,834,879 

 Commodities

Wellington Commodity Fund 34,641 293,411 

Gresham ETAP Fund 355,000 292,747 

PIMCO Short-Term Floating NAV Portfolio II 17,182 172,006 

2.99% 758,164 

 Real Estate Investment Trusts (c) 2.03% 516,385 

Total Global Real Assets (cost $2,456,145) 12.25% $ 3,109,428

Absolute Return

Elliott International Class B 224 325,845 $ 

Bridgewater Pure Alpha II Ltd Class B 135 322,899 

Element Capital US Feeder Fund LLC 140,000 198,301 

Farallon Capital Institutional Partners 125,000 168,084 

Davidson Kempner International Ltd Class C 975 156,585 

Tilden Park Investment Fund LP 100,000 115,700 

CQS Directional Opportunities Feeder Fund Ltd Class A 17 112,736 

The accompanying footnotes are an integral part of these financial statements.
8 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Condensed Schedule of Investments (continued)

As of September 30, 2019

($ in thousands)

% of 

Net 

Assets

Number of 

Units, Shares or 

Par Value (000) Fair Value

Absolute Return (continued)

Carlson Double Black Diamond Ltd Series Z 869 112,660 $ 

Blue Mountain Credit Alternatives 1,074 98,544 

Two Sigma Absolute Return Fund 47 84,100 

PDT Fusion Fund, LLC Class A 569 80,095 

PDT Mosaic Fund, LLC Class A 541 70,439 

Other Absolute Return Funds 101,143 

Total Absolute Return (cost $1,448,062) 7.67% $ 1,947,131

Total Investments (cost $20,135,631) 98.90% 25,109,691

Other Assets less Liabilities 1.10% 278,206

Net Assets 100% $ 25,387,897

(a) Includes Purchased Options, Preferred Stock, Exchange-Traded Funds, and Rights/Warrants.

(b) Primarily consists of Government-Issued Commercial MBS.

(c) Primarily consists of exchange-traded equity instruments in both US and Non-US real estate 

 investment trusts. 

The accompanying footnotes are an integral part of these financial statements.

Note: The Condensed Schedule of Investments presents the investments of the National Railroad 

Retirement Investment Trust within each asset class while identifying the largest 50 holdings in the 

portfolio, including all holdings exceeding 5% of net assets.
9 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Statement of Operations

For the Fiscal Year Ended September 30, 2019

($ in thousands)

Income

 Dividends 303,701 $ 

 Interest 187,755 

 Total income 491,456 

Expenses

 Investment management fees 56,354 

 Compensation and benefits 4,370 

 Professional fees 2,131 

 Investment related fees and expenses 2,058 

 Network, software and systems 990 

 Occupancy expense 730 

 Custodial fees 157 

 Trustee fees and expenses 132 

 Other expenses 886 

 Total expenses 67,808 

Net investment income 423,648 

Realized and unrealized gain/loss from investments and foreign currency

 Net realized gain from investments and foreign currency 864,388 

 Net change in unrealized gain/loss from investments and foreign currency (669,594) 

Net realized and unrealized gain/loss from investments and foreign currency 194,794 

Change in net assets resulting from operations 618,442 $ 

The accompanying footnotes are an integral part of these financial statements.
10 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Statement of Cash Flows

For the Fiscal Year Ended September 30, 2019

($ in thousands)

Cash flows from operating activities:

Change in net assets resulting from operations 618,442 $ 

Adjustments to reconcile change in net assets from operations

 to net cash provided by operating activities:

Proceeds from sales and maturities of long-term investments 25,208,768 

Purchase of long-term investments (24,093,619) 

Net realized gain from investments and foreign currency (864,388) 

Net change in unrealized gain/loss on investments and foreign currency 669,594 

Net proceeds from purchases/sales of short-term investments (a) (178,130) 

Change in receivable for investments sold 162,154 

Proceeds from principal paydowns of asset-backed securities 154,976 

Change in payable for investments purchased (60,318) 

Net decrease in cash from swap contract transactions 46,025 

Change in obligation to return cash collateral held (30,659) 

Change in other assets (8,642) 

Change in interest receivable 5,469 

Change in other accrued expenses and liabilities (4,595) 

Change in accrued investment management fees 3,700 

Change in dividends receivable (3,472) 

 1,625,305

Cash flows from financing activities:

Assets transferred to the Treasury (1,794,000) 

 (1,794,000)

Effect of foreign currency on cash 16,745 

Net change in cash, cash equivalents and foreign currency (151,950) 

Beginning balance 842,757 

Ending balance 690,807 $ 

(a) Short-term investments consist of debt instruments and repurchase agreements with original 

 maturities of less than 60 days.

The accompanying footnotes are an integral part of these financial statements.
11 

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

Statement of Changes in Net Assets

For the Fiscal Year Ended September 30, 2019

($ in thousands)

Change in net assets from operations:

 Net investment income 423,648 $ 

 Net realized gain from investments and foreign currency 864,388 

 Net change in unrealized gain/loss from investments and foreign currency (669,594) 

 Net change in net assets resulting from operations 618,442 

Assets transferred to the Treasury (1,794,000) 

Net Assets:

 Beginning of year 26,563,455 

 

 End of year 25,387,897 $ 

The accompanying footnotes are an integral part of these financial statements.
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

12 

1. ORGANIZATION 

Formation — The National Railroad Retirement Investment Trust (the “Trust”) was created as a 

result of Federal legislation. The Railroad Retirement and Survivors’ Improvement Act of 2001 (the 

“Act”) established the Trust, the sole purpose of which is to manage and invest industry-funded 

Railroad Retirement assets as set forth in the Act. Domiciled in, and subject to the laws of the 

District of Columbia (to the extent not inconsistent with the Act), the Trust is a tax-exempt entity 

under section 501(c)(28) of the Internal Revenue Code of 1986, and is neither an agency nor 

instrumentality of the Federal Government. The Trust became effective on February 1, 2002. 

The Railroad Retirement system was created as a Federal pension program during the 1930s to fund 

retirement benefits of railroad workers and their dependents. For more than 80 years, the Railroad 

Retirement Account (“RRA”), a Federal trust fund, has collected payroll taxes from railroad 

employers and employees and paid out benefits to beneficiaries. Railroad Retirement is funded as a 

pay-as-you-go system that is not subject to the Employee Retirement Income Security Act of 1974 

(“ERISA”) funding rules. 

The Act authorizes the Trust to manage and invest the assets of the Railroad Retirement system in 

the same array of investment alternatives available to private sector pension plans, and to pay 

administrative expenses of the Trust from the assets in the Trust. Prior to the Act, Railroad 

Retirement assets were limited to investment in US Government securities issued directly by the 

United States Treasury (the “Treasury”). Responsibility for administering the Railroad Retirement 

system, including eligibility determinations and the calculation of beneficiary payments, remains 

with the Railroad Retirement Board (the “Board”), a Federal agency. 

Investment Management — The Trust’s principal investment objective for its portfolio of 

investments (“portfolio”) is to achieve a long term rate-of-return on assets for the portfolio sufficient 

to enhance the financial strength of the railroad retirement system and to provide timely funding to 

the Treasury for payment of benefit obligations and administrative expenses. 

Except for limited partnership interests in Private Real Assets funds, Private Debt funds, Private 

Equity funds, Absolute Return funds and derivative instruments owned by the Trust, generally all 

assets in the Trust’s portfolio are held by custodians appointed by the Trust, or transfer agents in the 

case of commingled funds. 

 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

13 

2. SIGNIFICANT ACCOUNTING POLICIES 

Basis of Preparation — The Trust qualifies as an investment company and follows the accounting 

and reporting requirements of the Financial Accounting Standards Board (“FASB”) Accounting 

Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies. The 

accompanying financial statements were prepared in accordance with accounting principles 

generally accepted in the United States of America (“GAAP”), including but not limited to ASC 

946. 

Valuation of Investments — The Trust follows FASB ASC Topic 820, Fair Value Measurement.

The Topic establishes a single definition of fair value, creates a three-tier hierarchy as a framework 

for measuring fair value based on inputs used to value the Trust’s investments, and requires certain 

disclosures about fair value. The Topic defines fair value as the price that would be received to sell 

an asset, or paid to transfer a liability, in an orderly transaction between market participants at the 

measurement date. See Note 3 for further information on fair value. 

Securities (US and foreign) for which quotations are not readily available are valued under 

procedures contained in the Investment Manager Guidelines of the Trust’s custodian contract with 

Northern Trust, approved by the Trustees. The pricing procedures for a security traded within the 

US, which includes, among other factors, researching most recent bid and ask prices, documenting 

the reason(s) for unavailability of data from a pricing service, and requesting current bids for similar 

securities from independent securities broker-dealers, may also be used to estimate the fair value of 

a foreign security should something occur that renders quotations not readily available for a foreign 

security. 

Security Transactions, Accrued Income, and Expense — The Trust records purchases and sales 

of investment securities on a trade-date basis. Interest income is determined on the basis of coupon 

interest accrued using the effective interest method. Dividend income (less foreign tax withheld, if 

any) is recorded on the ex-dividend date. Gains or losses realized on sales of investment securities 

are based on average cost. 

Cash and Cash Equivalents — Cash and cash equivalents includes cash held at banks and cash 

balances held in short-term investment funds, which can be drawn down with same day notice. As of 

September 30, 2019, the Trust held approximately $40.3 million of restricted cash, representing 

initial margin on futures contracts and pledged collateral received from counterparties for option, 

swap or forward contracts. 

Foreign Currency – Foreign currency includes deposits held at banks that are denominated in 

foreign currencies, which bear a potential risk of loss arising from changes in currency exchange 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

14 

rates. These deposits are translated into US dollars at the prevailing foreign exchange spot rates on 

the date of valuation. 

Options Contracts — The Trust may purchase or sell (write) exchange-traded or over-the-counter 

(“OTC”) options contracts to hedge against risks associated with price fluctuations for certain 

securities, or as a cost-effective means to gain exposure to a particular security, commodity, or other 

economic factor. 

When either a put or call option is purchased, the contract is recorded as an investment and the 

premium is marked-to-market daily to reflect the current fair market value of the option contract. 

When a purchased option contract expires (unexercised), a loss is realized in the amount of the cost 

of (premium paid for) the option. If a closing sale contract is entered into, however, a gain or loss is 

realized, to the extent that the proceeds from the sale are greater or less than the cost of the option. If 

a put option is exercised, a gain or loss is realized from the sale of the underlying security by 

adjusting the proceeds from such sale by the amount of the premium paid for the put option. If a call 

option is exercised, the cost of the security purchased upon exercise is increased by the premium 

paid for the call option. 

When either a put or call option is sold (written), an amount equal to the premium received is 

recorded as a liability. The liability is marked-to-market daily to reflect the current market value of 

the written option. When a written option contract expires (unexercised), a gain is realized in the 

amount of the premium received for this option. If a closing purchase contract is entered into, 

however, a gain or loss is realized in the amount of the premium less the cost of the option. If a 

written put option is exercised, the amount of the premium originally received reduces the cost of 

the security, which is purchased upon exercise of the put option. If a sold (written) call is exercised, 

a gain or loss is realized from the sale of the underlying security, and the proceeds (if any) from such 

sale are increased by the premium received for the written call. 

The Trust could be exposed to risk if the counterparties in options transactions were unable to meet 

the terms of the contracts. To mitigate this risk, the Trust requires its counterparties to these 

contracts to pledge either cash or securities as collateral against any default in these transactions. 

Futures Contracts — The Trust may invest in financial futures contracts for the purpose of hedging 

its portfolio to counter fluctuations in value, to gain access to securities the Trust intends to 

purchase, and to manage overall portfolio risk as part of a broad risk management program. 

The Trust is required to pledge an amount of cash, US government securities, or other assets, equal 

to a certain percentage of the futures contract amount (initial margin deposit) upon entering a 

financial futures contract. Subsequent payments, known as “variation margin,” are made (or 

received) by the Trust each day, depending on the daily fluctuations in the value of the underlying 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

15 

financial instrument. The Trust records a receivable or payable (and corresponding realized gain or 

loss) equal to the daily variation margin. Futures contracts are valued at the last sales price quoted 

on the exchange on which they primarily trade. 

The Trust’s use of financial futures transactions entails the risk of imperfect correlation in 

movements in the price of futures contracts and the value of the underlying hedged assets, and the 

risk associated with the possibility of an illiquid market. Should futures’ market conditions change 

unexpectedly, and the Trust takes no action to respond to such changes, the Trust may not achieve 

the anticipated benefits of the financial futures contracts and may realize a loss. Potential losses 

associated with counterparty risk are mitigated by initial margin deposits either in the form of cash 

or securities and variation margins deposited daily. 

Foreign Currency Translation — The Trust maintains accounting records in US dollars. All 

investments quoted in foreign currency are translated into US dollars at the prevailing foreign 

exchange spot rates on the date of valuation. Purchases and sales of securities, income receipts and 

trading expenses are translated into US dollars at the exchange rate on the date of the transactions. 

Foreign securities are valued as of the close of each foreign security’s market wherein each security 

trades. Investments in foreign securities may involve risks not present in domestic investments. 

Since foreign securities may be denominated in foreign currency and involve settlement and pay 

interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to 

the US dollar can significantly affect the value of investments and earnings of the portfolio. Foreign 

investments may also subject the Trust to foreign government exchange restrictions, expropriations, 

taxation or other political, social or economic risks, all of which could affect the value of the foreign 

securities investments. 

Forward Contracts — The Trust may use forward contracts to gain exposure to or hedge against 

foreign currency exchange rate fluctuations, commodity price movements, and other economic 

factors. 

The Trust may also use spot currency contracts to hedge against foreign currency exchange rate 

fluctuations related to a specific portfolio transaction, such as the delay between a security 

transaction’s trade date and settlement date. Differences in currency exchange rates can adversely 

impact the value associated with the purchasing or selling of investment securities denominated in a 

foreign currency. 

Forward contracts are adjusted daily by the prevailing spot or forward rate of the underlying asset, 

and any appreciation or depreciation is recorded for financial statement purposes as unrealized until 

the contract settlement date, at which time the Trust records realized gains or losses equal to the 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

16 

difference between the value of the contract at the time the contract opened and the value at the time 

it closed. 

The Trust could be exposed to risk if the counterparty is unable to meet the terms of a forward 

contract or if the value of the underlying changes unfavorably and the Trust does not alter its 

position in the transaction. To mitigate this risk, the Trust requires its counterparties to pledge either 

cash or corporate securities as collateral against default in these transactions. 

Swap Contracts — The Trust may enter swap transactions for hedging purposes and/or to 

efficiently gain exposure to a particular asset class index. 

Swaps are marked-to-market daily based upon values from third party vendors or quotations from 

other sources. Unrealized appreciation is recorded as an asset and unrealized depreciation is 

recorded as a liability on the Statement of Assets and Liabilities. The change in value of swaps, 

including accruals of periodic amounts of interest to be paid or received on swaps, is recorded as 

unrealized gain/loss from investments and foreign currency in the Statement of Operations. 

Payments received or made at the beginning of the measurement period represent payments made or 

received upon entering into the swap agreement to compensate for differences between the stated 

terms of the swap contracts and prevailing market conditions (credit spreads, currency exchange 

rates, interest rates, and other relevant factors). A liquidation payment received or made at the 

termination of the swap is recorded as realized gain or loss in the Statement of Operations. Net 

periodic payments received by the Trust are included as part of the realized gain or loss in the 

Statement of Operations. 

Entering into these contracts involves, to varying degrees, elements of credit, market and 

counterparty risk in excess of the amounts recognized in the Statement of Assets and Liabilities. 

Such risks involve the possibility that there will be no liquid market for these contracts, that the 

counterparty to the contracts may default on its obligations to perform or disagree as to the meaning 

of contractual terms in the contracts, and that there may be unfavorable changes in interest rates. At 

the time a swap contract reaches its scheduled termination (or contract expiration) date, there is risk 

that the Trust would not be able to obtain a replacement transaction or that the terms of the 

replacement would not be as favorable as the expiring transaction. The Trust’s swap contracts 

consist of interest rate swaps, credit default swaps and total return swaps. 

Repurchase Agreements — The Trust may engage in repurchase agreement transactions, whereby 

a security is simultaneously purchased and sold under a master forward agreement. 

Income Taxes — The Trust is exempt from federal income taxes under Section 501(c)(28) of the 

Internal Revenue Code of 1986 and from state and local taxes pursuant to Section 231(n)(j)(6) of the 

Railroad Retirement Act of 1974. As such, no provision for income taxes is included in the financial 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

17 

statements. The Trust is subject to unrelated business income tax, in connection with certain of its 

limited partnership and commingled fund interests. For the fiscal year ended September 30, 2019, 

the Trust had no unrelated business income tax expense. 

Uncertain tax positions are evaluated in accordance with the Income Taxes Topic (“Topic 740”) of 

the FASB ASC. The Trust has no material uncertain tax positions. 

Investment Management Fees — The Trust has entered into investment management agreements 

with third party investment managers. These agreements provide for the payment of investment 

management fees, which are generally paid on a quarterly basis. The fees are calculated as a 

percentage of the weighted-average value of assets under management, with an additional 

performance fee in some instances. 

Counterparty Risk and Collateral — The Trust invests in derivatives that are transacted and settle 

directly with a counterparty and thereby expose the Trust to counterparty risk. To mitigate this risk, 

the Trust’s third party investment managers have entered into master netting arrangements with 

certain counterparties that permit net settlement under specified conditions and, for certain 

counterparties, also provide collateral agreements. The Trust accounts for derivatives on a gross 

basis. It does not offset the fair value of derivative liabilities against the fair value of derivative 

assets in its financial statements. 

Use of Estimates — The preparation of financial statements requires management to make 

estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of 

contingent assets and liabilities at the date of the financial statements and the reported amounts of 

increases and decreases in net assets from operations during the reporting period. Actual results 

could differ from those estimates. 

3. FAIR VALUE MEASUREMENT 

The Trust’s assets and liabilities recorded at fair value have been categorized based upon a fair value 

hierarchy in accordance with FASB’s guidance on fair value measurement. 

The hierarchy of inputs is summarized below. 

Level 1 — Investments that reflect unadjusted quoted prices in active markets for identical assets or 

liabilities that the Trust has the ability to access at the measurement date. The types of investments 

generally included in this category are exchange traded common and preferred stock, futures 

contracts, foreign currency, and commingled funds in which the Trust’s ownership interest in such 

fund is traded in an active market. The fair value of these securities is generally based on quotations 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

18 

obtained from national securities exchanges or published to investors by the issuer of the 

commingled fund. 

Level 2 — Investments valued using observable inputs such as quoted prices for identical securities 

in inactive markets or quoted prices for similar securities in active markets. Where securities are not 

listed on an exchange, quotations may be obtained from brokerage firms. Other observable inputs 

may include such factors as interest rates, credit spreads, prepayment speeds, and credit risk, among 

other relevant factors. Level 2 investments generally included in this category are bonds, swap 

contracts, foreign currency exchange contracts, and options contracts. 

Level 3 — Investments valued using pricing inputs which are both unobservable and significant to 

the valuation. The Level 3 investments consist primarily of private placement corporate bonds and 

certain foreign government bonds. The significant unobservable inputs used in the fair value 

measurement of these securities are predominantly uncorroborated non-binding broker quotes, and 

extrapolated data points in security pricing models. These prices are provided by third-party pricing 

services, and the range of unobservable inputs applied by these sources is not readily available or 

cannot be reasonably estimated. Significant changes in any of those inputs could result in a 

significantly different fair value measurement. 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value 

hierarchy. In such cases, the level in the fair value hierarchy within which the fair value 

measurement in its entirety falls has been determined based on the lowest level input that is 

significant to the fair value measurement in its entirety. The Trust’s assessment of the significance 

of a particular input to the fair value measurement in its entirety requires judgment and considers 

factors specific to the asset or liability. Investments are transferred into or out of any level at their 

beginning period values. 

The availability of observable inputs can vary from security to security and is affected by a wide 

variety of factors, including, for example, the type of security, whether the security is new and not 

yet established in the marketplace, and other characteristics. To the extent that valuation is based on 

models or inputs that are less observable in the market, the determination of fair value requires more 

judgment. Accordingly, the degree of judgment exercised by the Trust in determining fair value is 

greatest for instruments categorized as Level 3. 

 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

19 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk 

associated with investing in those securities. The following table is a summary of the inputs used in 

valuing the Trust’s assets and liabilities carried at fair value ($ in thousands): 

Assets Level 1 Level 2 Level 3 Other* Total

US Equity 6,277,633 $ 3,278 $ 3,573 $ - $ 6,284,484 $ 

Non-US Equity 6,231,740 1,750 2,309 - 6,235,799 

Private Equity - - - 2,332,462 2,332,462 

Global Fixed Income 79,836 4,711,641 25,258 383,652 5,200,387 

Global Real Assets 981,741 - 61 2,127,626 3,109,428 

Absolute Return Mandates - - - 1,947,131 1,947,131 

Total investments 13,570,950 $ 4,716,669 $ 31,201 $ 6,790,871 $ 25,109,691 $ 

Swap contracts, at fair value - $ 8,490 $ - $ - $ 8,490 $ 

Futures contracts** 7,216 - - - 7,216 

Forward contracts - 21,777 - - 21,777 

Foreign currency 24,485 - - - 24,485 

Liabilities 

Swap contracts, at fair value - $ 36,054 $ - $ - $ 36,054 $ 

Futures contracts** 3,687 - - - 3,687 

Forward contracts - 18,511 - - 18,511 

Written options*** - 6,959 - - 6,959 

 * In accordance with FASB Accounting Standards Update (“ASU”) 2015-07, Disclosures for 

Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent), 

investments in certain commingled funds and partnerships which are valued using the Net Asset 

Value (“NAV”) practical expedient are not classified within the fair value hierarchy because of the 

redemption features inherent in the fund investment documents. 

**Amounts represent cumulative gross gains and losses on open futures contracts, translated into US 

dollars, as of September 30, 2019. Only the current day’s variation margin is included in Other 

Assets and Other Liabilities in the Statement of Assets and Liabilities. 

***Included in Other Liabilities in the Statement of Assets and Liabilities. 

For the year ended September 30, 2019, there were no significant changes to the Trust’s fair value 

methodologies. Purchases and sales of Level 3 securities during the year were $5.6 million and 

$16.2 million, respectively. Certain US Equity, Non-US Equity, Global Fixed Income and Global 

Real Assets securities were transferred between the Level 2 and 3 categories due to changes in the 

availability of significant observable inputs in the valuation of these securities. For the year ended 

September 30, 2019, transfers into and out of Level 3 were $14.8 million and $4.6 million, 

respectively. 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

20 

The Trust uses a third party pricing agent to value its securities. When determining the reliability of 

third party pricing information, the Trust reviews the valuation policies of the pricing agent and 

conducts due diligence on the execution of the agent’s pricing procedures. External investment 

managers reconcile valuations to the pricing agent on a monthly basis, and discrepancies are 

investigated and resolved. 

Equity securities that are traded on a national securities exchange or quoted on the NASDAQ 

National Market System (“NMS”) are valued on their last reported sale price on the principal 

exchange (US or foreign) or official closing price as reported by NASDAQ. Options and futures 

contracts are valued at the last sales price quoted on the exchange on which they primarily trade. 

Securities traded on OTC markets as well as listed securities for which no sales are reported are 

valued at the most recent bid quotation. 

Fixed income securities (US and foreign) for which price quotations are readily available are valued 

at the most recent reported sales price. If no reported sales price is available, fixed income securities 

are valued at prices furnished by an independent pricing service, which considers yield or price of 

bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who 

make markets in such securities. 

The ability of issuers of the fixed income securities held by the Trust to meet their obligations may 

be affected by economic developments in a specific industry or region. The values of the securities 

can be significantly affected by changes in interest rates or in the financial condition of the issuer or 

market conditions generally. The Trust invests a portion of its assets in mortgage-backed securities 

and debentures. The value and related income of these securities is sensitive to changes in economic 

conditions, including delinquencies and/or defaults. 

Commingled funds (“Funds”), which are not publicly traded, may include publicly-traded securities 

for which detailed holdings are reported to the Trust. Fair values of these Funds are determined 

after consideration of NAVs provided by the external investment managers. The valuation of these 

non-publicly traded securities held by Funds may involve estimates, appraisals, assumptions, and 

methods that are reviewed by management. 

Private Debt, Private Equity and Real Estate limited partnership assets (“Partnerships”) are valued 

by the Trust at fair value after consideration of NAVs provided by each Partnership’s general 

partner. The valuation of these Partnerships may involve estimates, appraisals, assumptions, and 

methods that are reviewed by management. 

As shown in the fair value hierarchy table in Note 3, the Trust relies on the NAV of certain Funds 

and Partnerships described above as a practical expedient to estimating their fair value. The NAVs 

that have been provided by investees are derived from the fair values of the underlying investments 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

21 

as of the reporting date. All investments for which NAV is used as fair value (a) do not have a 

readily determinable fair value pursuant to the guidance in ASU 2015-07 and (b) either prepare 

financial statements consistent with the measurement principles of an investment company or have 

the attributes of an investment company. 

The following table lists the Trust’s unfunded commitments to investments in Funds and Partnerships 

by major category ($ in thousands): 

Asset Class Strategy

Unfunded 

Commitments Note

US Equity Includes passively managed funds tracking major US 

Equity indices

$ (a) -

Non-US Equity Includes passively managed funds tracking major NonUS Equity indices (a) -

Private Equity Includes Venture Capital, Leveraged Buyout, and 

Corporate Finance investment funds

 (b) 1,100,619

Global Fixed Income Includes US Investment Grade, High Yield, Private Debt, 

and Global Government Bond and Currency investment 

funds

 (c) 333,711

Global Real Assets Includes Commodities, Natural Resources, Private Real 

Estate and Real Estate Investment Trust investment 

funds

 (d) 1,267,623

Absolute Return Includes multi-asset class strategies that offer an 

attractive risk-adjusted return and have a low correlation 

with other Trust investments

 (e) 105,114

$ 2,807,067

(a) Investments may have redemption restrictions that limit the days when redemption requests can 

be made to one or more days per month. Advance notice of up to 3 days may be required for 

redemption. 

(b) Private Equity investments are generally held for the life of the investment. 

(c) Private Debt investments are generally held for the life of the investment. All other investments 

can generally be redeemed on either a monthly or quarterly basis with the exception of one fund 

which may impose redemption fees, and one fund which may impose gate provisions. 

(d) Private Real Estate and Natural Resources investment funds are generally held for the life of the 

investment. Commodities fund investments can be redeemed on either a monthly or quarterly 

basis with up to 90 days advance notice. 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

22 

(e) Absolute Return investments can generally be redeemed on either a monthly, quarterly or annual 

basis after the expiration of an initial lock-up period of up to three years. 

4. DERIVATIVE INSTRUMENTS 

As of September 30, 2019, the Trust invested in derivative contracts: primarily futures, forwards, 

options and swaps. Derivative contracts serve as components of the Trust’s investment strategy as 

described in Note 2. The following tables summarize the value of asset and liability derivatives and 

related gains and losses as of and for the year ended September 30, 2019 ($ in thousands). 

Risk Exposure

Location within Statement of Assets and 

Liabilities

Derivative

Assets

Derivative

Liabilities

Commodity

Purchased Options Investments - at fair value 3,614 $ - $ 

Written Options Other liabilities - (2,506) 

Commodity 

 Forward Contracts Unrealized gain/loss on forward contracts (619) 872 

Commodity Swaps Swap contracts, at fair value 1,238 (15,932) 

Futures Contracts Other assets 1,838 (1,418) 

Credit

Credit Default Swaps Swap contracts, at fair value 216 - 

Currency

Purchased Options Investments - at fair value 409 - 

Foreign Currency 

 Exchange Contracts Unrealized gain/loss on forward contracts (17,892) 20,905 

Equity

Total Return Swaps Swap contracts, at fair value 1,139 (479) 

Interest Rate

Purchased Options Investments - at fair value 3,698 - 

Written Options Other liabilities - (4,453) 

Interest Rate Swaps Swap contracts, at fair value 5,897 (19,643) 

Futures Contracts Other assets/liabilities 2,222 (83) 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

23 

Commodity

Options Contracts 544 $ 6,089 $ 

Commodity Forward Contracts 377 (537) 

Commodity Swaps (27,700) (5,098) 

Futures Contracts - (5,341) 

Credit

Options Contracts 3 125 

Credit Default Swaps (70) 696 

Currency

Options Contracts (2,341) (19,955) 

Foreign Currency Exchange Contracts 189 8,732 

Equity

Total Return Swaps 408 (525) 

Interest Rate

Options Contracts 603 4,005 

Interest Rate Swaps (16,907) (22,980) 

Futures Contracts - 1,722 

Net change in unrealized 

gain (loss) from investments 

and foreign currency

Net realized gain (loss) from 

investments and foreign 

currency

Location within the Statement of Operations

Risk Exposure
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

24 

The following table summarizes the long and short notional exposure of derivative contracts as of 

September 30, 2019 ($ in thousands): 

Risk Exposure Long Exposure Short Exposure

Commodity

Purchased Options 1 $ - $ 

Written Options - 71 

Commodity Forward Contracts 2,142 2,063 

Commodity Swaps 1,290 2,609 

Futures Contracts 165,587 156,328 

Credit

Credit Default Swaps 52,421 50,566 

Currency

Purchased Options 227,617 - 

Foreign Currency Exchange Contracts 1,551,451 1,586,337 

Equity

Total Return Swaps 21,684 18,997 

Interest Rate

Purchased Options 229,804 - 

Written Options - 183,242 

Interest Rate Swaps 178,159 244,285 

Futures Contracts 775,578 913,616 

5. RELATED-PARTY TRANSACTIONS 

Railroad Retirement Board — Under the provisions of the Act, the Board directs the Treasury to 

contribute RRA and Social Security Equivalent Benefit Account (“SSEBA”) assets to the Trust, as 

defined in the Act. Since the Trust’s inception, the Board has contributed $21.3 billion to the Trust. 

The Board also periodically directs the Trust to transfer funds to the Treasury to fund benefit 

payments and administrative expenses of the RRA. Since the Trust’s inception, approximately 

$24.7 billion has been transferred to the Treasury by the Trust. During the fiscal year ended 

September 30, 2019, approximately $1.8 billion was transferred to the Treasury. As defined in the 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

25 

Act, the Trust reports to the Board and is required to perform its duties solely in the interest of the 

Board and through it, the participants and beneficiaries of the programs funded by the Act. 

Legal Counsel — The Trust incurred approximately $1.3 million in legal fees during the fiscal year 

ended September 30, 2019. Legal counsel was provided by firms that may also provide services to 

the major railroads and railway labor unions whose representatives are members of the Board of 

Trustees. 

Custodian — The Trust’s custodian was also engaged to provide investment management transition 

services for a portion of Trust assets during the fiscal year ended September 30, 2019. The 

custodian credited $45 thousand of commission charges related to these services. This amount is 

deducted from custodial fees in the Statement of Operations. 

6. EMPLOYEE BENEFIT PLAN 

The Trust provides a defined contribution plan (“Plan”) covering all employees. Employees 

participate in the Plan by making discretionary contributions from their eligible compensation, but 

not more than the maximum annual amount allowed by law. The Trust makes matching 

contributions equal to 100% on the first 6% of compensation deferred. The Trust may also, at its 

discretion, make an additional profit-sharing contribution to the Plan. During the fiscal year ended 

September 30, 2019, the Trust made contributions of approximately $252 thousand to the Plan on 

behalf of the employees. 

7. INDEMNIFICATIONS 

In the ordinary course of business, the Trust may enter into contracts or agreements that contain 

indemnifications. Future events could occur that lead to the execution of these provisions against 

the Trust. The Trust’s maximum exposure under these contracts or agreements is unknown. No 

such claims have occurred, nor are they expected to occur and the Trust expects the risk of loss to be 

remote. 

 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

26 

8. COMMITMENTS 

Office Space Lease — In October 2012, the Trust entered into an eleven year operating lease 

agreement with respect to its principal office space in Washington, DC. 

Remaining rental payment obligations relating to the lease for each of the next five years and 

thereafter are as follows: 

Fiscal Years Ending

September 30 Amount

2020 499,987 $ 

2021 510,001 

2022 520,226 

2023 530,655 

2024 313,138 

Thereafter - 

Total 2,374,007 $ 

Investments — The Trust has made contractual commitments to fund various investments. These 

investments typically have investment periods of five years and terms of ten years. The investment 

manager or general partner invests the committed dollars during the investment period and harvests 

the portfolio during the remainder of the term. The amounts of these commitments are disclosed in 

the table in Note 3. 

 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

27 

9. FINANCIAL HIGHLIGHTS 

The financial ratios noted below encompass the net of all funds received by the Trust for the fiscal 

year ended September 30, 2019. 

October 1, 2018 —

September 30, 2019

FINANCIAL RATIOS (1):

 Expense to average net assets 0.27%

 Net investment income to average net assets 1.66%

TOTAL RETURN (2)

 — Total return 2.82%

(1) The ratios of expense to average net assets and net investment income to average net assets 

represent the expenses and net investment income for the period, as reported on the Statement of 

Operations, to the Trust’s average net assets. 

(2) The total return reflected in the table includes net investment income and net realized and 

unrealized gains on investments. The return is time-weighted and measures the performance of a 

unit of assets held continuously for the time period covered. 

10. TRUST DIVERSIFICATION 

Since its inception in 2002, the Trust has deployed assets received from Treasury into a diversified 

and balanced portfolio of US and Non-US equity and US and Non-US fixed income securities. Over 

time, the Trust has furthered that diversification by allocating a percentage of the portfolio to private 

equity, private debt, real estate, and commodities. As mandated by the Act, the Trust manages its 

concentration of investment in any asset class, type of security or market sector. The Trust’s policy 

of broad diversification is intended to protect its assets from disproportionate market shocks in 

volatile periods. 

 
NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST 

Notes to Financial Statements 

As of and for the Fiscal Year Ended September 30, 2019 

28 

The following table is a summary of the Trust’s concentration of investments by geographic region 

($ in thousands): 

Geographic US Non-US Private Global Fixed Global Real Absolute

Region Equity Equity Equity Income Assets Return Total

North America 6,284,484 $ 554,731 $ 1,799,570 $ 3,959,863 $ 2,589,626 $ 1,144,971 $ 16,333,245 $ 

Europe - 2,700,858 123,245 460,760 210,315 - 3,495,178 

Asia - 2,451,804 - 257,437 200,496 - 2,909,737 

South America - 164,501 - 98,640 - - 263,141 

Australia - 189,627 - 26,596 10,722 - 226,945 

Central America - 38,554 - 121,815 - - 160,369 

Africa - 66,608 - 39,571 - - 106,179 

Multi-Region / 

Global 69,116 - 409,647 235,705 98,269 802,160 1,614,897 

$ 6,235,799 6,284,484 $ 2,332,462 $ 5,200,387 $ 3,109,428 $ 1,947,131 $ 25,109,691 $ 

11. RECENTLY ISSUED ACCOUNTING STANDARDS 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure 

Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The guidance 

in this ASU, which resulted from the FASB’s disclosure effectiveness project, removes or modifies 

certain fair value disclosures for non-public entities. Reporting entities may remove or amend the 

disclosures no longer required immediately, with retrospective application. The Trust has elected 

immediate adoption of this ASU. 

12. SUBSEQUENT EVENTS 

The Trust has evaluated subsequent events through November 15, 2019, the date these financial 

statements were issued, and determined that there were no subsequent events requiring adjustments 

to or disclosure in the financial statements. 

*****