HomeMy Public PortalAboutDeferred Comp 2006 4th Quarter ReportOne Main Street, Cambridge, Massachusetts 02142-1524(617) 374-1300; F: (617) 374-1313www.nepc.comFebruary 2007February 2007Fourth Quarter 2006Fourth Quarter 2006457 Deferred Compensation Plan457 Deferred Compensation PlanExecutive SummaryExecutive SummaryMetropolitan St. Louis Sewer DistrictMr. Brian DonoghueMr. Brian DonoghueConsultantConsultantMs. Doris Ewing Ms. Doris Ewing PartnerPartner
1L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter 2006 Summary & DiscussionFourth Quarter 2006 Summary & DiscussionAsset Commentary• As of quarter end, total Plan assets were $24.8 million, up from$23 million at the prior quarter end.– For the quarter, the Plan experienced net contributions of $471 thousand and investment returns of $1.3 million.– During the quarter, the Vanguard International Growth Fund received the largest inflows equaling $116 thousand.– Investments experiencing the largest withdrawals during the quarter included the Vanguard US Growth (-$80 thousand) and the Vanguard Midcap Index (-$21 thousand).– Year-to-date, the Vanguard Balanced Fund has received the largest inflows totaling $258 thousand.Market Performance• The U.S. stock market returned 6.7% for the fourth quarter, finishing the year with a 15.8% return– Small caps led large caps again, as they have for 7 of the past 8 years– Value stocks outperformed growth stocks by an almost a 2-to-1 margin in 2006• The U.S. bond market sold off modestly in December and ended the year with virtually its coupon, 4.3%• The international equity markets outperformed the U.S. for the quarter and year, with returns of 9.6% and 25.2% respectively
2L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter 2006 Summary & DiscussionFourth Quarter 2006 Summary & DiscussionPlan Commentary• At quarter-end, the Plan’s equity commitment, including international stock, was 75.6%. In comparison, the median total fund’s equity commitment was 61.8%.– The Plan’s higher-than-median equity commitment signifies that plan participants are taking on more equity risk than the median.• The top four Plan options account for 61.9% of total Plan assets.– The most prevalent Plan options include Vanguard Windsor II (27.8%), Vanguard S&P 500 Index (12.9%), Vanguard Balanced (13%), and Vanguard US Growth (8.2%).• As a side note, on January 8, 2007 Lazard Asset Management (Lazard) replaced Equinox Capital Management (Equinox) and Tukman Capital Management (Tukman) as sub-advisor on Windsor II. Lazard will run a fundamentally driven, bottom-up 50 stock portfolio that replaces the two concentrated portfolios run by Equinox and Tukman.Plan Investment Performance• All of the Plan’s funds posted positive returns for the quarter and the year.• Quarterly returns ranged between 1.1% and 10.3%; year to date returns ranged between 1.8% and 25.7%, both on a net of fee basis.– Vanguard International Growth was the top performer for both the 4thquarter and the year returning 10.3% and 25.7% respectfully (net of fee).– The Retirement Savings Trust was the bottom performer for the quarter returning 1.1%, while the Vanguard US Growth was the bottom performer on the year returning 1.8%. – From a benchmarking perspective, it was a tough year for active management. Many funds underperformed their index benchmark.
3L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Overview Overview (As of 12/31/2006)(As of 12/31/2006)Qtr. 1 Yr.3 Yr.5 Yr.Domestic Equity BenchmarksS&P 500Large Core 6.7% 15.8% 10.4% 6.2%Russell 1000Large Core 7.0% 15.5% 11.0% 6.8%Russell 1000 GrowthLarge Growth 5.9% 9.1% 6.9% 2.7%Russell 1000 ValueLarge Value 8.0% 22.2% 15.1% 10.9%S&P Mid Cap 400Mid Core7.0% 10.3% 13.1% 10.9%Russell 2000Small Core 8.9% 18.3% 13.6% 11.4%Russell 2000 GrowthSmall Growth 8.8% 13.4% 10.5% 6.9%Russell 2000 ValueSmall Value 9.0% 23.5% 16.5% 15.4%Qtr. 1 Yr.3 Yr.5 Yr.Citigroup PMI EPACInt'l Dev. 9.6% 25.2% 20.2% 15.2%Citigroup PMI EPAC Gr. Int'l Dev. Growth 8.9% 22.4% 17.9% 12.6%Citigroup PMI EPAC Va. Int'l Dev. Value 10.3% 28.0% 22.3% 17.7%Citigroup EMI EPACSmall Cap Int'l 13.1% 30.3% 27.0% 23.7%Citigroup PMI EM MKT Em. Mkt. Eqty. 19.7% 37.8% 31.0% 25.6%Qtr. 1 Yr.3 Yr.5 Yr.Lehman Bros. Aggregate Core Bonds 1.2% 4.3% 3.7% 5.1%Lehman Bros. High Yield High Yield 4.2% 11.9% 8.5% 10.2%Lehman Bros. 1-10 Muni. Municipal Bond 0.7% 3.7% 2.8% 4.2%90 Day T-BillCash1.3% 4.8% 3.1% 2.4%Qtr. 1 Yr.3 Yr.5 Yr.Citigroup World Govt Bond Global Bonds 1.8% 6.1% 2.9% 8.4%J.P. Morgan EMBI Plus Em. Mkt. Bonds 4.1% 10.5% 11.4% 15.2%Qtr. 1 Yr.3 Yr.5 Yr.NCREIF Property Index Real Estate 3.5% 15.5% 16.6% 13.1%All Private Equity1 Private Equity 3.9% 22.5% 25.1% 14.8%HFRI Fund of Funds Fund of Funds 4.9% 9.2% 7.8% 7.7%HFRI Equity HedgeLong / Short 5.8% 13.1% 11.0% 10.0%HFRI Equity Mkt. Neutral Mkt. Neutral 2.2% 7.6% 6.0% 4.3%HFRI Event DrivenRelative Value 5.3% 14.7% 12.5% 11.2%1 Pooled IRR. Source: US Private Equity Performance Index, Thomson Ventures EconomicsAlternative BenchmarksInternational Equity BenchmarksDomestic Fixed Income BenchmarksGlobal Fixed Income Benchmarks6.7%7.0%5.9%8.0%7.0%8.9%8.8%9.0%9.6%8.9%10.3%13.1%19.7%4.2%0.7%1.3%4.1%15.8%15.5%9.1%22.2%10.3%18.3%13.4%23.5%25.2%22.4%28.0%30.3%37.8%11.9%3.7%4.8%10.5%5.3%2.2%5.8%1.2%3.5%3.9%1.8%4.9%14.7%7.6%13.1%4.3%15.5%22.5%6.1%9.2%0% 5% 10% 15% 20% 25% 30% 35% 40%S&P 500Russell 1000Russell 1000 GrowthRussell 1000 ValueS&P Mid Cap 400Russell 2000Russell 2000 GrowthRussell 2000 ValueCitigroup PMI EPACCitigroup PMI EPAC Gr.Citigroup PMI EPAC Va.Citigroup EMI EPACCitigroup PMI EM MKTLehman Bros. AggregateLehman Bros. High Yield Lehman Bros. 1-10 Muni.90 Day T-BillCitigroup World Govt BondJ.P. Morgan EMBI PlusNCREIF Property IndexAll Private Equity1 HFRI Fund of Funds HFRI Equity HedgeHFRI Equity Mkt. Neutral HFRI Event DrivenQtr. 1 Yr.
4L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Economy Economy (As of 12/31/2006)(As of 12/31/2006)1 Source: U.S. Department of Labor: Bureau of Labor Statistics2 Source: U.S. Department of Commerce: Bureau of Economic AnalysisHedge Fund BenchmarksReal Gross Domestic Product22.0%-2%-1%0%1%2%3%4%5%6%7%8%Q2-91Q2-92Q2-93Q2-94Q2-95Q2-96Q2-97Q2-98Q2-99Q2-00Q2-01Q2-02Q2-03Q2-04Q2-05Q2-06Seasonally Adjusted Annual Rate - As of Q3 2006.Spot Oil Price301020304050607080Q4-93Q3-94Q2-95Q1-96Q4-96Q3-97Q2-98Q1-99Q4-99Q3-00Q2-01Q1-02Q4-02Q3-03Q2-04Q1-05Q4-05Q3-06Q2-07Q1-08Q4-08Year-over-Year Change in Consumer Price Index10%1%2%3%4%5%Q4-91Q1-93Q2-94Q3-95Q4-96Q1-98Q2-99Q3-00Q4-01Q1-03Q2-04Q3-05Q4-06Year over Year Change in CPIModerate growth in Q3 ...Oil prices slightly retreat in Q4 and future prices fall...Trade Weighted Dollar decreases over Q4...Inflation increases moderately in Q4...US Current Account Deficit vs. Real Trade-Weighted Dollar4-10%-8%-6%-4%-2%0%2%4%6%8%Q1-73Q1-75Q1-77Q1-79Q1-81Q1-83Q1-85Q1-87Q1-89Q1-91Q1-93Q1-95Q1-97Q1-99Q1-01Q1-03Q1-05CA Deficit as % of GDP020406080100120140Real TWD (Index Level)Current account in historic deficitDollar BearMarketDollar BullMarketDollar Bear MarketDollar Bull MarketSpot Oil PricesFutures Prices
5L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Interest Rates Interest Rates (As of 12/31/2006)(As of 12/31/2006)20 Year Treasury Yields4.8%4.7%4.8%4.74%4.76%5.24%5.1%4.0%4.2%4.4%4.6%4.8%5.0%5.2%5.4%5.6%Oct/05Nov/05Dec/05Jan/06Feb/06Mar/06Apr/06May/06Jun/06Jul/06Aug/06Sep/06Oct/06Nov/06Dec/0620 Yr. TreasuryFed Rate ChangesNo rate hikes over quarter...Pension Fund Discount Rates5.4%7.2%4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%Jun-96Aug-97Oct-98Dec-99Feb-01Apr-02Jun-03Aug-04Oct-05Dec-06Moody's® Long-Term Corporate Bond YieldCitigroup Pension Liability Index*Bond yield and discount rate rose slightly at end of Q4...20 Year Treasury Yields0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%Jan/90Jan/91Jan/92Jan/93Jan/94Jan/95Jan/96Jan/97Jan/98Jan/99Jan/00Jan/01Jan/02Jan/03Jan/04Jan/05Jan/0620 Yr. TreasuryTarget Fed RateLong rates remain relatively flat over the past year...Real Rates: Fed Funds vs. CPI-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%Q4-54Q4-57Q4-60Q4-63Q4-66Q4-69Q4-72Q4-75Q4-78Q4-81Q4-84Q4-87Q4-90Q4-93Q4-96Q4-99Q4-02Q4-05Fed Funds Rate - CPIReal interest rates are steady above 2%...
6L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Sector / Style RotationSector / Style Rotation(As of 12/31/2006)(As of 12/31/2006)Annual Calendar 1 Yr. Returns: Large Value vs. Large Growth-3%-15%13%0%12%11%-1%5%-5%12%-11%-8%-17%9%15%-5%1%-1%5%-23%-26%15%12%0%10%2%13%29%-40.0%-30.0%-20.0%-10.0%0.0%10.0%20.0%30.0%40.0%50.0%Dec-79Dec-81Dec-83Dec-85Dec-87Dec-89Dec-91Dec-93Dec-95Dec-97Dec-99Dec-01Dec-03Dec-05R 1000 V - R 1000 Gr.Small cap modestly outperforms...Value continues to outperform growth...Stock and bond yields are comparable...International equity continues to outperform...Stocks vs. Bonds4.0%14.3%2.2%5.2%7.5%4.7%8.4%10.9%7.2%15.2%6.7%7.8%13.4%9.5%4.6%7.3%2.9%0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%Q1-53Q1-57Q1-61Q1-65Q1-69Q1-73Q1-77Q1-81Q1-85Q1-89Q1-93Q1-97Q1-01Q1-05Earnings Yield (%)Interest Yield (%)Annual Calendar 1 Yr. Returns: Domestic Equity vs. International Equity114%10%-3%23%-1%-1%-24%-51%-19%-11%21%19%18%20%-21%-7%24%15%28%9%-9%4%9%-7%-10%-10%-10%-9%-60.0%-40.0%-20.0%0.0%20.0%40.0%60.0%Dec-79Dec-81Dec-83Dec-85Dec-87Dec-89Dec-91Dec-93Dec-95Dec-97Dec-99Dec-01Dec-03Dec-05S&P 500 - Citi PMI EPACAnnual Calendar 1 Yr. Returns: Large Cap Equity vs. Small Cap Equity-21%-7%-7%-5%-7%12%1%12%12%-8%14%15%-13%-9%-9%2%9%6%10%0%-5%-15%-1%-17%-7%2%-3%30%-40.0%-30.0%-20.0%-10.0%0.0%10.0%20.0%30.0%40.0%50.0%Dec-79Dec-81Dec-83Dec-85Dec-87Dec-89Dec-91Dec-93Dec-95Dec-97Dec-99Dec-01Dec-03Dec-05R 1000 - R 2000 Value OutperformsGrowth OutperformsDomestic OutperformsInt'l OutperformsLarge Cap OutperformsSmall Cap Outperforms
7L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Domestic Equity Domestic Equity (As of 12/31/2006)(As of 12/31/2006)1 Source: Standard & PoorsLarge Cap and Small Cap P/E Ratios20.05.010.015.020.025.030.035.040.045.0Q4-78Q1-80Q2-81Q3-82Q4-83Q1-85Q2-86Q3-87Q4-88Q1-90Q2-91Q3-92Q4-93Q1-95Q2-96Q3-97Q4-98Q1-00Q2-01Q3-02Q4-03Q1-05Q2-06PE Ratio (R 1000 & R 2000)Small Cap P/E (R 2000)Large Cap P/E (R 1000)Small Cap remains relatively high compared tohistorical averageCorporate profit growth moderates but remains strong...Small cap expensive?S&P 500 Sector Returns (Wgts.)10.4%3.5%11.3%7.1%1.3%5.8%6.1%10.9%7.6%9.2%18.6%14.4%24.6%19.4%7.3%12.8%8.5%17.3%33.7%21.2%-15% -5% 5% 15% 25% 35% 45%Con.Discretionary (10.05%)Con.Staples (9.6%)Energy (9.31%)Financials (22.13%)Health Care (12.7%)Industrials (11.06%)Info Tech. (15.29%)Materials (2.93%)Telecom (3.51%)Utilities (3.42%)Qtr. 1 Yr. All sectors positive. Materials and Energy led Q4...If history were a guide...Historical P/E Ratio vs. 5 Yr. Forward Return1-25%-15%-5%5%15%25%35%0 5 10 15 20 25 30 35 40 45 50P/E Ratio of the S&P 5005-Yr. Forward Return on S&P 500Year over Year Change in Operating EPS (S&P 500)1-8%-14%-8%21%28%23%11%3%2%20%-5%-24%20%25%12%9%13%21%-30%-20%-10%0%10%20%30%40%198919901991199219931994199519961997199819992000200120022003200420052006Year over Year Change in Operating EPS (%)Current P/E Ratio on the S&P 500 is 16.9Small Cap Average20.9Large Cap Average,17.4History suggests annual returns around 6-9% given current valuationsS&P 500 Average P/E Ratio = 15.7All Data Since 12/31/1978All Data Since 1/31/1926
8L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Fixed Income Fixed Income (As of 12/31/2006)(As of 12/31/2006)U.S. Treasury Yield Curve0%1%2%3%4%5%6%051015202530Years to Maturity Yield (%)CurrentLast Qtr. Last Yr. 3 Yrs. AgoCorporate Credit Performance (%)1.0%1.3%1.3%1.5%3.6%4.0%3.1%4.3%4.2%4.5%11.2%6.1%17.7%10.1%-4.0%1.0%6.0%11.0%16.0%21.0%AAAAAABBBBBBCCCQtr. 1 Yr. Investment Grade Sector Performance (%)_0.7%1.1%1.6%1.1%1.4%1.3%1.6%3.1%4.4%5.2%4.7%4.3%4.6%3.5%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%Treasuries Agencies MBSABS Inv.Gr. Corp. Inter. Corp. Long Corp.Qtr. 1 Yr. Performance (%)0.9%0.5%0.4%0.4%1.2%4.2%1.8%4.1%3.7%2.5%1.3%4.3%11.9%6.1%10.5%-1.1%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%2-Yr. Trs. 5-Yr. Trs. 10-Yr. Trs. 30-Yr. Trs. Core High Yield Global Bond EMDQtr. 1 Yr. High Yield Spread38802004006008001,0001,200Q1-90Q4-91Q3-93Q2-95Q1-97Q4-98Q3-00Q2-02Q1-04Q4-05OAS Spread (CSFB HY - 10 Yr. Treasury)Long Term Avg. 577Slight inversion of the short end of the curveRising Yields = Falling PricesLehman TSY Bellwether ReturnsLehman US Aggregate Sector ReturnsLehman US Corporate and HY IndicesFed did not raise rates this quarter
9L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––International Equity International Equity (As of 12/31/2006)(As of 12/31/2006)Developed Market Equity Returns (U.S. Dollars)Citigroup PMI EPACBaseBaseWeight (%)Qtr. (%)1 Yr. (%)Australia4.6% 16.2% 32.9%Austria0.8% 18.8% 42.2%Belgium 1.5% 9.5% 53.5%Denmark1.1% 15.0% 33.7%Finland1.2% 7.9% 25.8%France10.2% 9.5% 33.3%Germany6.1% 15.1% 35.7%Greece0.8% 14.9% 34.6%Hong Kong2.9% 14.2% 31.8%Iceland0.1% 2.4% 7.1%Ireland0.7% 15.6% 40.6%Italy4.7% 11.9% 33.2%Japan24.9% 4.8% 5.9%Luxembourg0.2% 24.2% 23.0%The Netherlands3.2% 7.1% 32.4%New Zealand0.2% 21.4% 21.7%Norway1.3% 25.0% 45.9%Portugal0.4% 13.4% 46.3%Singapore1.2% 20.6% 43.6%Slovenia0.0% 15.9% 84.5%South Korea3.7% 3.9% 13.8%Spain3.7% 13.9% 48.8%Sweden2.5% 20.1% 44.7%Switzerland5.9% 5.8% 24.3%United Kingdom18.0%9.5%29.3%Index Total100.0% 9.6% 25.2%US Dollar Return vs. Major Foreign Currencies(Negative = Dollar Depreciates, Positive = Dollar Appreciates)Qtr. 1 Yr. 5 Yr. Euro-3.9% -10.6% -7.6%Japanese Yen0.9% 1.0%-1.9%British Pound-4.6%-12.3%-5.8%Currency Impact on Developed Mkt. Returns(Negative = Currency Hurt, Positive = Currency Helped)Qtr. 1 Yr. 5 Yr. MSCI EAFE (Local) 7.0% 16.4% 8.7%MSCI EAFE (USD)10.4%26.3%15.0%Currency Impact3.3% 9.9% 6.3%Sector Returns (Wgts. %)10.1%8.5%8.7%8.8%1.4%12.0%4.5%14.7%17.4%14.6%21.9%30.2%17.7%26.6%17.4%19.3%9.8%34.1%31.6%50.3%0% 10% 20% 30% 40% 50% 60%Con.Discretionary (10.13%)Con.Staples (7.93%)Energy (7.59%)Financials (32.59%)Health Care (6.92%)Industrials (9.35%)Info Tech. (6.09%)Materials (7.43%)Telecom (5.86%)Utilities (6.1%)Qtr. 1 Yr. Int'l Developed12%-12%33%8%11%6%2%20%-14%-21%-16%20%15%25%27%39%-100.0%-80.0%-60.0%-40.0%-20.0%0.0%20.0%40.0%60.0%80.0%100.0%Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06Annual Return (%) - Citi PMI EPACEmerging Markets60%11%75%-7%-5%6%-12%-25%-31%-2%-6%56%26%34%32%66%-100.0%-80.0%-60.0%-40.0%-20.0%0.0%20.0%40.0%60.0%80.0%100.0%Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06Annual Return (%) - MSCI Emg. Mkt. Free5Source: CitigroupSource: Citigroup
10L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAAsset Allocation Asset Allocation ––Fourth Quarter 2006Fourth Quarter 2006Life Strategy Conservative Growth1.7%Vanguard US Growth8.2%Life Strategy Income0.9%Vanguard Small Cap3.8% Vanguard Retirement Savings6.4%Vanguard Bond Index5.9%Vanguard International Growth4.4%Vanguard Money Market3.7%Vanguard Mid Cap Index3.5%Vanguard S&P 500 Index12.9%Vanguard Balanced13.0%Life Strategy Growth3.4%Life Stragety Moderate Growth4.6%Vanguard Windsor II27.8%* Allocation percentages may not total 100% exactly due to rounding to the tenth decimal.
11L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAAsset Growth Asset Growth --Fourth Quarter 2006Fourth Quarter 2006The net contributions column includes NEPC’s calculation of implied fees in the Plan. Although the Plan invests in mutual funds where the fees are taken from the funds’ net asset values, the fees exist and are subtracted from the beginning values each period.
12L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAAccount Market Values Account Market Values ––Fourth Quarter 2006Fourth Quarter 2006Domestic Int'l Domestic Cash & StableEquity Equity Fixed Equiv. Value Composite %Composite$17,400 $1,347 $3,404 $1,053 $1,582 $24,786 100.0%Balanced Fund1,944 3 1,281 6$3,234 13.0%Windsor II Fund6,884$6,884 27.8%US Growth Fund2,026$2,026 8.2%S&P 500 Index Fund3,197$3,197 12.9%Mid Cap Index Fund857$857 3.5%Small Cap Fund930$930 3.8%International Growth Fund1,084$1,084 4.4%Money Market Fund920$920 3.7%Bond Index Fund1,466$1,466 5.9%Retirement Savings Fund1,582 $1,582 6.4%Life Strategy Growth628 126 84$838 3.4%Life Strategy Moderate Growth680 113 339$1,132 4.6%Life Strategy Conservative Growth 190 21 127 85$423 1.7%Life Strategy Income64107 42$213 0.9%
13L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPADomestic Equity Style AnalysisDomestic Equity Style AnalysisWindsor II500 Index FundS&P 500 Index Mid Cap Index FundSmall Cap Index FundRussell 2000 IndexUS GrowthCompositeBalancedLS IncomeLS Mod GrowthLS Conservative GrowthLS Growth
14L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter Performance Fourth Quarter Performance ––Category SpecificCategory SpecificGrossGross--ofof--Fee Returns for Comparative PurposesFee Returns for Comparative PurposesQuarter Rank 1 Year Rank 3 Years Rank 5 Years RankFederal Money Market (vs. Cash Equivalents)1.4% 18 5.2% 20 3.3% 26 2.5% 38 90-day T-Bills1.3%4.8%3.1%2.4%Retirement Savings Trust (vs. Stable Value Funds)1.2% 62 4.7% 45 4.4% 69 3.9% 84 BT 3-Year GIC Rate1.0%3.8%3.6%4.4%Total Bond Market Index (vs. Core Bond Funds)1.4% 27 4.5% 55 3.9% 66 4.8% 87 LB Aggregate Bond Index1.2%4.3%3.7%5.1% Median bond manager1.3%4.6%4.0%5.5%Balanced Index Fund (vs. Balanced Funds)4.8% 50 11.3% 50 8.5% 53 6.8% 60 60% S&P 500/ 40% LB Aggregate Index4.5%11.1%7.8%6.0% Median balanced fund4.8%11.3%9.0%7.1%Life Strategy Income (vs. Balanced Funds)3.0% 72 8.3% 70 6.1% 84 5.8% 74Life Strategy Conservative Growth (vs. Balanced Funds)4.3% 56 11.0% 52 8.0% 62 6.9% 57Life Strategy Moderate Growth (vs. Balanced Funds)5.7% 35 13.7% 29 10.2% 36 8.1% 28Life Strategy Growth (vs. Balanced Funds)7.1% 16 16.5% 11 12.2% 12 9.0% 10The gross of fee investment performance of each of the Plan’s investments is calculated by NEPC by grossing up the net of fee mutual fund returns by the respective expense ratios. NEPC “grosses up” fund performance in order to measure each fund’s performance within the ICC universe. The ICC provides the largest performance universe in the industry and is a gross of fee universe.
15L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter Performance Fourth Quarter Performance ––Category SpecificCategory SpecificGrossGross--ofof--Fee Returns for Comparative PurposesFee Returns for Comparative PurposesQuarter Rank 1 Year Rank 3 Years Rank 5 Years RankS&P 500 Index Fund (vs. Large Cap Core)6.7% 53 15.9% 40 10.5% 65 6.2% 65 S&P 500 Index6.7%15.8%10.4%6.2%Windsor II Fund (vs. Large Cap Value)6.7% 69 18.8% 63 14.9% 52 10.6% 45 Russell 1000 Value Index8.0%22.3%15.1%10.9%U.S. Growth (vs. Large Cap Growth)4.2% 70 2.3% 85 7.1% 70 -0.1% 99 Russell 1000 Growth Index5.9%9.1%6.9%2.7%Mid Cap Index (vs. Mid Cap Core)7.5% 52 13.9% 59 16.2% 30 12.5% 60 Russell Mid Cap Index7.7%15.3%16.0%12.9%Small Cap Index (vs. Small Cap Core)8.5% 42 15.9% 59 14.5% 63 11.9% 92 Russell 2000 Index8.9%18.4%13.6%11.4% Median domestic equity manager7.0%15.5%12.4%8.7%International Growth (vs. Intl Developed Mkt)10.4% 43 26.5% 47 20.7% 59 14.5% 82 Citigroup PMI EPAC Index9.6%25.2%20.2%15.2% MSCI EAFE Index10.4%26.3%19.9%15.0% Median international equity manager10.3%26.2%21.2%16.3%The gross of fee investment performance of each of the Plan’s investments is calculated by NEPC by grossing up the net of fee mutual fund returns by the respective expense ratios. NEPC “grosses up” fund performance in order to measure each fund’s performance within the ICC universe. The ICC provides the largest performance universe in the industry and is a gross of fee universe.
16L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter Performance Fourth Quarter Performance ––Category SpecificCategory SpecificNetNet--ofof--Fee ReturnsFee ReturnsExpenseRatioQuarter1 Year3 Years5 YearsFederal Money Market 0.30%*1.3%4.8%2.9%2.3%Retirement Savings Trust 0.30%*1.1%4.4%4.1%3.6% 90-day T-Bills1.3%4.8%3.1%2.4% BT 3-Year GIC Rate1.0%3.8%3.6%4.4%Total Bond Market Index0.20%1.4%4.3%3.6%4.6% LB Aggregate Bond Index1.2%4.3%3.7%5.1% Median bond manager1.3%4.6%4.1%5.5%Balanced Index Fund 0.20%4.8%11.0%8.3%6.6% 60% S&P 500/ 40% LB Aggregate Index4.5%11.1%7.8%6.0% Median balanced fund4.8%11.3%9.0%7.1%Life Strategy Income0.25%3.0%7.9%5.7%5.5%Life Strategy Conservative Growth 0.25%4.2%10.6%7.7%6.6%Life Strategy Moderate Growth 0.25%5.6%13.3%9.8%7.8%Life Strategy Growth0.26%7.0%16.1%11.8%8.6%The performance shown above is net of fees, as reported by the managers. * As of most recent fiscal year end as provided by Vanguard
17L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter Performance Fourth Quarter Performance ––Category SpecificCategory SpecificNetNet--ofof--Fee ReturnsFee ReturnsExpenseRatioQuarter1 Year3 Years5 YearsS&P 500 Index Fund0.18%6.7%15.7%10.3%6.1% S&P 500 Index6.7%15.8%10.4%6.2%Windsor II Fund 0.36%6.6%18.3%14.4%10.1% Russell 1000 Value Index8.0%22.3%15.1%10.9%U.S. Growth0.53%4.1%1.8%6.6%-0.4% Russell 1000 Growth Index5.9%9.1%6.9%2.7%Mid Cap Index 0.22%7.4%13.6%15.9%12.3% Russell Mid Cap Index7.7%15.3%16.0%12.9%Small Cap Index 0.23%8.5%15.7%14.2%11.6% Russell 2000 Index8.9%18.4%13.6%11.4% Median domestic equity manager7.0%15.5%12.4%8.7%International Growth 0.63%10.3%25.7%19.9%13.7% Citigroup PMI EPAC Index9.6%25.2%20.2%15.2% MSCI EAFE Index10.4%26.3%19.9%15.0% Median international equity manager10.3%26.2%21.1%16.3%The performance shown above is net of fees, as reported by the managers.
18L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAInformation Disclosure• New England Pension Consultants, Inc. (NEPC) uses, as its data source, the plan’s custodian bank or fund service company, and NEPC relies on those sources for security pricing, calculation of accruals, and all transactions, including income payments, splits, and distributions. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within.• The Investment Performance Analysis (IPA) is provided as a management aid for the client’s internal use only. Portfolio performance reported in the IPA does not constitute a recommendation by NEPC.• Information in this report on market indices and security characteristics is received from sources external to NEPC. While efforts are made to ensure that this external data is accurate, NEPC cannot accept responsibility for errors that may occur.