HomeMy Public PortalAboutDeferred Comp 2005 4th Quarter ReportOne Main Street, Cambridge, Massachusetts 02142-1524(617) 374-1300; F: (617) 374-1313www.nepc.comFebruary 2006February 2006Fourth Quarter 2005Fourth Quarter 2005457 Deferred Compensation Plan457 Deferred Compensation PlanExecutive SummaryExecutive SummaryMetropolitan St. Louis Sewer DistrictMr. Ross Bremen, CFA Mr. Ross Bremen, CFA Senior ConsultantSenior ConsultantMs. Doris Ewing Ms. Doris Ewing PartnerPartner
1L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter 2005 Summary & DiscussionFourth Quarter 2005 Summary & Discussion• As of quarter end, total Plan assets were $20.9 million, up from $20.3 million at the prior quarter end.– The Plan experienced net contributions of $296 thousand for the quarter and return on investment of $361 thousand.– During the quarter, the Life Strategy Moderate Growth Fund received the largest inflows equaling $137 thousand.– For the year, the Vanguard Retirement Savings Trust received the largest inflows totaling $375 thousand.– Investments experiencing withdrawals during the quarter included the Vanguard Balanced Fund (-$121 thousand), S&P 500 Index Fund (-$75 thousand), Vanguard US Growth Fund (-$27 thousand), Money Market Fund (-$20 thousand), and Vanguard Small Cap Fund (-$8 thousand).• At quarter-end, the Plan’s equity commitment, including international stock, was 76.1%. In comparison, the median plan’s equity commitment was 61.7%.– The Plan’s higher-than-median equity commitment ranks in the 7thpercentile of the defined contribution plan universe which signifies that plan participants are taking on more equity risk than the median.• The top four Plan options account for 64.8% of total Plan assets.– The most prevalent Plan options include Vanguard Windsor II (28.6%), Vanguard S&P 500 Index (13.5%), Vanguard Balanced (12.7%), and Vanguard US Growth (10.0%).
2L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAFourth Quarter 2005 Summary & DiscussionFourth Quarter 2005 Summary & Discussion• Equity markets and bond markets rose slightly in the fourth quarter of 2005. – For the year, stocks experienced robust earnings growth, yet concerns over inflation, oil prices and the deficit were some of the causes for the modest returns.– The equity market, as represented by the S&P 500 Index, rose 2.1% during the quarter and 4.9% for the year.– For the quarter, large stocks outperformed their smaller stock counterparts as the Russell 1000 Index gained 2.1% versus 1.1% for the Russell 2000 Index.– Domestic “growth” stocks performed well versus “value” stocks during the quarter as measured by the Russell 3000 Growth and Russell 3000 Value Indexes which returned 2.9% and 1.2%, respectively.– International stocks did very well this quarter, outperforming domestic names with the MSCI EAFE Index returning 4.1% and the MSCI Emerging Markets Free Index returning 7.2%– The Fed increased interest rates twice this quarter, which also kept bond returns at bay.– The bond market, as measured by the Lehman Aggregate Bond Index, returned 0.6%.• All of the Plan’s funds posted positive returns for the quarter (gross and net-of-fees).– In a quarter in which growth stocks performed well, the Plan’s top performing fund in absolute terms was the Vanguard US Growth Fund which returned 5.8% (net-of-fees).
3L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Overview Overview (As of Fourth Quarter 2005)(As of Fourth Quarter 2005)
4L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Economy Economy (As of Fourth Quarter 2005)(As of Fourth Quarter 2005)
5L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Interest Rates Interest Rates (As of Fourth Quarter 2005)(As of Fourth Quarter 2005)
6L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Sector / Style RotationSector / Style Rotation(As of Fourth Quarter 2005)(As of Fourth Quarter 2005)
7L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Domestic Equity Domestic Equity (As of Fourth Quarter 2005)(As of Fourth Quarter 2005)
8L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––Fixed Income Fixed Income (As of Fourth Quarter 2005)(As of Fourth Quarter 2005)
9L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAMarket Environment Market Environment ––International Equity International Equity (As of Fourth Quarter 2005)(As of Fourth Quarter 2005)
10L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAAsset Allocation Asset Allocation ––Fourth Quarter 2005Fourth Quarter 2005Life Strategy Conservative Growth1.6%Vanguard US Growth10.0%Life Strategy Income0.7%Vanguard Small Cap3.6%Vanguard Retirement Savings6.1%Vanguard Bond Index6.3%Vanguard International Growth3.0%Vanguard Money Market3.8%Vanguard Mid Cap Index3.5%Vanguard S&P 500 Index13.5%Vanguard Balanced12.7%Life Strategy Growth2.8%Life Stragety Moderate Growth3.8%Vanguard Windsor II28.6%
11L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPAAsset Growth Asset Growth --Fourth Quarter 2005Fourth Quarter 2005Beginning Net Income Gain EndingVanguard Fund NameValue Contributions Received (Loss) ValueComposite$20,287 $296 $354 $7 $20,944Balanced Fund2,732 (121) 22 26 $2,659Windsor II Fund5,893 82 228 (212) $5,991US Growth Fund1,997 (27) 4 114 $2,088S&P 500 Index Fund2,852 (75) 848 $2,833Mid Cap Index Fund658 53815 $735Small Cap Fund761 (8) 82 $762International Growth Fund531 72 209 $632Money Market Fund806 (20) 71 $794Bond Index Fund1,287 17 15 (6) $1,313Retirement Savings Fund1,139 120 121 $1,272Life Strategy Growth519 5375 $584Life Strategy Moderate Growth643 137 123 $796Life Strategy Conservative Growth 329 842 $342Life Strategy Income140 521 $147(Dollars in 000’s)The 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 2005Fourth Quarter 2005Domestic Int'l Domestic Cash & Stable BalancedEquity Equity Fixed Equiv. Value Funds CompositeComposite$12,409 $631 $1,313 $793 $1,272 $4,526 $20,944Balanced Fund2,658 $2,658Windsor II Fund5,991$5,991US Growth Fund2,088$2,088S&P 500 Index Fund2,833$2,833Mid Cap Index Fund734$734Small Cap Fund763$763International Growth Fund631$631Money Market Fund793$793Bond Index Fund1,313$1,313Retirement Savings Fund1,272$1,272Life Strategy Growth583 $583Life Strategy Moderate Growth795 $795Life Strategy Conservative Growth343 $343Life Strategy Income147 $147
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)1.0% 21 3.3% 18 1.9% 30 2.4% 36 90-day T-Bills0.9% 56 3.1% 47 1.8% 42 2.3%50Retirement Savings Trust (vs. Stable Value Funds)1.1% 47 4.3% 54 4.5% 40 3.4% 94 BT 3-Year GIC Rate0.8% 87 3.2% 86 4.0% 79 4.9% 65Total Bond Market Index (vs. Core Bond Funds)0.7% 22 2.6% 62 3.6% 76 5.5% 88 LB Aggregate Bond Index0.6% 54 2.4% 68 3.6% 66 5.9% 63 Median bond manager0.6%2.6%4.2%6.3%Balanced Index Fund (vs. Balanced Funds)1.6% 65 4.9% 70 12.7% 45 4.7% 31 60% S&P 500/ 40% LB Aggregate Index1.5% 68 4.0% 82 10.1% 67 3.0% 79 Median balanced fund2.0%6.2%11.8%4.0%Life Strategy Income (vs. Balanced Funds)1.2% 78 3.5% 86 7.0% 85 5.1% 25Life Strategy Conservative Growth (vs. Balanced Funds1.6% 62 4.8% 71 10.1% 66 4.9% 27Life Strategy Moderate Growth (vs. Balanced Funds)2.0% 50 6.0% 52 13.1% 43 4.5% 33Life Strategy Growth (vs. Balanced Funds)2.4% 34 7.2% 33 16.0% 17 3.8% 58The 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)2.1% 42 5.0% 65 14.4% 79 0.6% 69 S&P 500 Index2.1% 42 4.9% 65 14.4% 79 0.6%69Windsor II Fund (vs. Large Cap Value)0.2% 93 7.5% 61 18.6% 35 6.2% 47 Russell 1000 Value Index1.3% 71 7.1% 65 17.5% 53 5.3% 58U.S. Growth (vs. Large Cap Growth)5.9% 21 11.6% 28 14.9% 57 -7.7% 99 Russell 1000 Growth Index3.0% 77 5.3% 75 13.2% 71 -3.6% 87Mid Cap Index (vs. Mid Cap Core)3.1% 33 14.2% 15 22.6% 47 9.5% 65 Russell Mid Cap Index2.4% 52 12.7% 25 23.8% 33 8.5% 84Small Cap Index (vs. Small Cap Core)1.2% 57 7.6% 44 23.2% 37 9.2% 88 Russell 2000 Index1.1% 58 4.6% 71 22.1% 52 8.2% 93 Median domestic equity manager2.1%7.5%18.3%4.6%International Growth (vs. Intl Developed Mkt)4.9% 41 15.7% 47 23.4% 70 4.9% 82 Citigroup PMI EPAC Index4.5% 79 15.2% 83 24.3% 49 5.0% 62 MSCI EAFE Index4.1% 82 13.5% 92 23.7% 54 4.6% 65 Median international equity manager4.3%15.3%25.0%8.7%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% *0.9%3.0%1.6%2.2%Retirement Savings Trust 0.30% **1.0%4.0%4.2%3.1% 90-day T-Bills0.9%3.1%1.8%2.3% BT 3-Year GIC Rate0.8%3.2%4.0%4.9%Total Bond Market Index0.20%0.6%2.4%3.3%5.3% LB Aggregate Bond Index0.6%2.4%3.6%5.9% Median bond manager-0.5%3.2%4.9%7.2%Balanced Index Fund 0.20%1.5%4.6%12.4%4.5% 60% S&P 500/ 40% LB Aggregate Index1.5%4.0%10.1%3.0% Median balanced fund3.5%12.3%13.9%2.6%Life Strategy Income0.25%1.1%3.2%6.6%4.8%Life Strategy Conservative Growth 0.25%1.5%4.4%9.8%4.6%Life Strategy Moderate Growth 0.26%1.9%5.7%12.7%4.2%Life Strategy Growth0.26%2.3%6.8%15.6%3.5%The performance shown above is net of fees, as reported by the managers. * As of 8/31/2005** As of 9/30/2005
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%2.0%4.8%14.2%0.4% S&P 500 Index2.1%4.9%14.4%0.6%Windsor II Fund 0.37%0.1%7.0%18.1%5.7% Russell 1000 Value Index1.3%7.1%17.5%5.3%U.S. Growth0.53%5.8%11.1%14.4%-8.1% Russell 1000 Growth Index3.0%5.3%13.2%-3.6%Mid Cap Index 0.22%3.1%13.9%22.3%9.2% Russell Mid Cap Index2.4%12.7%23.8%8.5%Small Cap Index 0.23%1.2%7.3%22.9%8.9% Russell 2000 Index1.1%4.6%22.1%8.2% Median domestic equity manager2.1%7.5%18.3%4.6%International Growth 0.63%4.7%14.9%22.6%4.2% Citigroup PMI EPAC Index4.5%15.2%24.3%5.0% MSCI EAFE Index4.1%13.5%23.7%4.6% Median international equity growth manager6.5%18.8%24.1%6.4%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. 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.