HomeMy Public PortalAboutPension Plan 2007 4th Quarter ReportFourth Quarter 2007 Fourth Quarter 2007 Investment Performance Analysis ReportInvestment Performance Analysis ReportDecember 2007December 2007One Main Street, Cambridge, Massachusetts 02142-1524(617) 374-1300; F: (617) 374-1313www.nepc.comMetropolitan St. Louis Sewer DistrictMetropolitan St. Louis Sewer DistrictDoris V. EwingPartner
1L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptContentsContentsTabInvestment Performance Analysis 1Asset Allocation Analysis 2
2L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptInvestment Performance AnalysisInvestment Performance Analysis
3L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptMarket Summary Market Summary ––Fourth Quarter 2007Fourth Quarter 2007Equity Markets• The S&P 500 returned -3.3% in the quarter. The Fed was reactive, providing support by easing monetary policy and ending the year by cutting rates for the third time to 4.25%.– Large cap stocks continued to outpace small cap stocks and growth stocks beat value stocks in the quarter.– Four of the ten S&P 500 sectors posted positive returns during the quarter with Utilities (+7.3%), Energy (+3.9%), and Consumer Staples (+3.8%) posting the largest gains. Financials (-14.3%), Consumer Discretionary (-10.2%) and Telecom Services posted the weakest returns.• The developed foreign markets posted a -1.8% return in US dollar terms, as measured by the MSCI EAFE Index, while emerging markets returned 3.6%.Bond Markets• The Citigroup WGBI posted a 3.9% return while the Lehman Aggregate index rose 3.0% in the quarter. • Quality reigned king as Treasuries returned 4.0% in the quarter, outperforming all other investment grade bond segments. Concerns over an economic slowdown and investor risk aversion led to a flight to quality in the quarter.
4L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptMarket Environment Market Environment ––Overview Overview (As of 12/31/2007)(As of 12/31/2007)Qtr. 1 Yr.3 Yr.5 Yr.Domestic Equity BenchmarksS&P 500Large Core-3.3%5.5% 8.6% 12.8%Russell 1000Large Core-3.2%5.8% 9.1% 13.4%Russell 1000 GrowthLarge Growth-0.8%11.8% 8.7% 12.1%Russell 1000 ValueLarge Value-5.8% -0.2%9.3% 14.6%S&P Mid Cap 400Mid Core-2.7%8.0% 10.3% 16.2%Russell 2000Small Core-4.6% -1.5%6.8% 16.2%Russell 2000 GrowthSmall Growth-2.1%7.0% 8.1% 16.5%Russell 2000 ValueSmall Value-7.3% -9.8%5.3% 15.8%Qtr. 1 Yr.3 Yr.5 Yr.Citigroup PMI EPACInt'l Dev. -1.4%12.9% 17.7% 22.1%Citigroup PMI EPAC Gr. Int'l Dev. Growth-0.9%13.4% 16.7% 20.2%Citigroup PMI EPAC Va. Int'l Dev. Value-1.8%12.5% 18.6% 24.0%Citigroup EMI EPACSmall Cap Int'l -4.8%6.2% 19.1% 27.2%Citigroup PMI EM MKT Em. Mkt. Eqty. 6.1% 41.2% 36.8% 37.9%International Equity BenchmarksS&P 500 Sector Returns (Wgts.)-10.2%3.8%3.9%-14.3%0.0%-4.4%0.1%2.2%-5.1%7.3%-15.0%14 .1%33.8%-18.6%7.2%11.9 %16 .6 %24.7%11.2 %19 .2 %-25% -15% -5% 5% 15% 25% 35%Con.Discretionary (8.4%)Con.Staples (10.2%)Energy (12.6%)Financials (17.6%)Health Care (12%)Industrials (11.6%)Info Tech. (16.7%)Materials (3.6%)Telecom (3.6%)Utilities (3.6%)Qtr. 1 Y r .
5L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptMarket Environment Market Environment ––Overview Overview (As of 12/31/2007)(As of 12/31/2007)Qtr. 1 Yr.3 Yr.5 Yr.Lehman Bros. Aggregate Core Bonds 3.0% 7.0% 4.6% 4.4%Lehman Bros. High Yield High Yield -1.3%1.9% 5.4% 10.9%Lehman Bros. 1-10 Muni. Municipal Bond 1.8% 4.8% 3.4% 3.5%90 Day T-BillCash1.1% 5.0% 4.3% 3.1%Qtr. 1 Yr.3 Yr.5 Yr.Citigroup World Govt Bond Global Bonds 3.9% 10.9% 3.1% 6.8%J.P. Morgan EMBI Plus Em. Mkt. Bonds 2.7% 6.5% 9.6% 13.6%Qtr. 1 Yr.3 Yr.5 Yr.NCREIF Property Index* Real EstateAll Private Equity1 Private Equity HFRI Fund of Funds Fund of Funds 0.6% 14.3% 10.5% 9.1%CS Tremont Composite All Hedge Funds 1.1% 16.3% 12.5% 11.7%CS TremontEvent Driven 0.7% 18.2% 14.6% 14.8%CS Tremont Long-Short 1.2% 18.8% 14.4% 13.1%CS TremontMarket Neutral 1.3% 8.9% 8.3% 7.8%1 Pooled IRR. Source: US Private Equity Performance Index, Thomson Ventures EconomicsNCREIF Property Index not availableAlternative BenchmarksDomestic Fixed Income BenchmarksGlobal Fixed Income BenchmarksInvestment Grade Sector Performance (%)_4.0%3.2%3.1%-0.8%2.2%2.2%2.2%9.0%7.9%6.9%2.2%5.1%5.6%3.6%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%Treasuries Agencies MBSABS Inv.Gr. Corp. Inter. Corp. Long Corp.Qtr. 1 Yr.
6L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptExecutive Summary Executive Summary ––Total FundTotal Fund*As of December 31, 2007, the public funds universe included 191 funds with assets of $835 billion. Asset Growth and Allocation• At quarter end, the assets in the Fund totaled approximately $191.5 million, an increase of $2.5 million over the quarter, reflecting investment earnings of $1.7 million and net inflows of $900,000.• The Fund’s allocation to equities was 47.4% at the end of the quarter (including equity allocations of GMO and PIMCO All Asset), well below the median Public Fund’s allocation to equities of 59.2%.• The Fund’s equity commitment ranked in the 82ndpercentile of the public funds universe.*Performance• The Fund’s conservative posture helped return in the quarter. The Fund posted a 0.9% return in the quarter, ranking in the 3rdpercentile of public funds, nationwide.−Active management contributed 60 basis points in the quarter, while policy contributed 20 basis points.• For the year 2007, the Fund earned a 11.2% return, ranking in the 4thpercentile of public funds. • For the three- and five-year periods, the Fund returned 9.8% and 11.9% respectively, ranking in the 38thand 61stpercentiles of Public Funds. −Returns were earned with lower levels of risk than the median public fund.
7L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptExecutive Summary Executive Summary ––CommentaryCommentaryWhat Helped Performance in the Quarter•Investment policy helped in the quarter, as the Policy Index outperformed the median public fund by 80 basis points, ranking in the 25thpercentile. •Active management, in the aggregate, contributed 60 basis points to return owing to strong performance from some of the managers. Most notably,– Waddell & Reed outperformed their benchmark by 270 basis points, ranking in the 6thpercentile of large cap growth managers.– Pyramis outperformed its benchmark by 830 basis points and ranked in the 5thpercentile of its peer group. – Morgan Stanley Emerging Market Equity beating its benchmark by 200 basis points, ranking in the 17thpercentile of emerging markets equity managers.What Hurt Performance in the Quarter•Below average performance in the small cap composite due to poor returns from Ark•Weak performance from Vanguard Windsor II and BDH&S.– Ark underperformed its benchmark by 20 basis points with a return of -7.5% (terminated 12/17/07).– Vanguard Windsor II earned a return of -6.0% underperforming its benchmark by 20 basis points.– BDH&S performance was 370 basis points below that of the median manager in the peer group.•Brandywine’s performance matched that of the median global bond manager. However, they lagged the Citigroup WGBI return by 130 basis points. •PIMCO lagged its benchmark return by 80 basis points.•UBS Reality underperformed its benchmark by 170 basis points. Note – BPS =basis points. 100 basis points is equivalent to 1%. Returns are gross of fees.
8L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Executive SummaryManager Executive SummaryManager OrganizationInvestment Process & ProductPerformance GMODeparture of Jack Gray, Co-Director of Asset Allocation team; and arrival of Edward Chancellor as a senior member of Asset Allocation team. No changes in process or strategy.Top quartile for the year.Vanguard Windsor IINo organizational changes. No changes to investment process or strategy.Above average performance over the five-year period. Below median over the three-year period.Buford, Dickson, Harper & SparrowNo organizational changes. No changes to investment process or strategy.Improved over the last year. Longer-term performance bottom quartile.Waddell & ReedNo organizational changes. No changes to investment process or strategy.Top decile over the one and three-year periods. Median over the five-year period.Vanguard Institutional IndexNo organizational changes.No changes to investment process or strategy.Index Fund. Performance consistent with index.ArkNo organizational changes.No changes to investment process or strategy.Terminated in December of 2007 due to poor performance. Replaced by Kennedy Capital. Times SquareIn November 2007 one of the four founding partners, Yvette Bockstein, retired. A transition plan has been successfully implemented our transition plan. Ms. Bockstein was a Portfolio Manager on both the Small and Small/Mid Cap Growth strategies.No changes to investment process or strategy.Outperformed the Russell 2000 Value index over all periods measured. Top quartile over the three-year period. Top third over the five-year period.
9L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Executive SummaryManager Executive SummaryManager OrganizationInvestment Process & ProductPerformance Morgan Stanley International EquityHas bolstered its strong capital position with a long-term investment of approximately $5 Billion From China Investment Corporation. In November of 2007, Morgan Stanley Investment Management formed a strategic partnership with Traxis Partners wherein MSIM acquired a minority interest in Traxis Partners. Traxis will remain an independent firm led by its current management team. Leadership changes, effective December 1, 2007 included appointing - 1) Walid A. Chammah and James P. Gorman as Co-Presidents; 2) Robert Scully to join a newly created Office of the Chairman, where he will focus on the Firm’s key clients – with a particular emphasis on global sovereign investors; 3) Michael Petrick to oversee the Firm’s trading business and serve as Co-Head of Institutional Securities Sales and Trading; 4)Neal Shear as Chairman of the Firm’s industry-leading Commodities business. After 25 years of distinguished service to Morgan Stanley, Zoe Cruz, Co-President, has retired from the Firm.No changes to investment process or strategy.Recent performance has improved. Lagged the benchmark for the year. Morgan Stanley Emerging Mkt. EquityGaite Ali, Executive Director, and Timothy Drinkall, Executive Director, have joined the Global Emerging Markets team. Adeline Koh, a Portfolio Manager and Executive Director based in Singapore has resigned. Until a suitable replacement is hired, the Taiwan portfolio will continue to be run by the team based in Singapore, under the guidance of James Cheng, Managing Director and lead Portfolio Manager for Asia ex-Japan. Adeline will remain with the team until April. No changes to investment process or strategy.Top quartile performer.Income Management and ResearchHave added Michael Sheldon to the investment team as a PM/Analyst. No changes to investment process or strategy.Top third over the three-year period. Median performer over the full year.
10L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Executive SummaryManager Executive SummaryManager OrganizationInvestment Process & ProductPerformanceBrandywine Global Bond FundNo organizational changes.No changes to investment process or strategy.Top decile over the three-year period. Median performer over the full year.Penn CapitalNo organizational changes.No changes to investment process or strategy.Improved over the quarter. Bottom quartile over the full year. Too short a period to judge the effectiveness of the manager’s strategy.PyramisNo organizational changes.No changes to process or strategy.Top decile over the year.PIMCO All AssetNo organizational changes.No changes to process or strategy.Top quartile for the year.UBS RealtyReceived during December 2007 the required consents to move forward with the conversion of RESA and PMSAto a REIT-based fund as part of its long-planned transition of the management of RESA and PMSA assets from Aetna to UBS Realty. The conversion will bring to an end Aetna's original sponsorship of and fiduciary responsibility related to oversight of UBS Realty's management of RESA and PMSA.The new Fund names will be the UBS Trumbull Property Fund (formerly RESA)and the UBS Trumbull PropertyIncome Fund (formerly PMSA).No changes to process or strategy.Weak performance over the quarter pulled down the one year return below median. Manager has been in place for less than three years.
11L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptAsset Growth as of 12/31/07Asset Growth as of 12/31/07
12L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.ppt3.5%3%9.7%10%9.2%10%6.5%20%2.9% 10.2% 9.7%10.0%20%19.3%4.5%5.0%8.1%8% 5.0%5.1%4.0%3.9%5.0%5.6%1.9%Equities 49.0%Fixed Income 37.0%Equities 47.4%**Fixed Income 37.7%***Int’l EquityDomestic EquityARK: 3.9%# TS: 5.3%BDH&S:3.0% W&R:7.2%Windsor II VGDomestic FICore FixedIncome ResearchCashInt’l EquityDomestic EquitySmall CapLarge Cap EquityDomestic FICore FixedCurrent Asset Allocation*Current Asset Allocation*Policy Target Asset AllocationPolicy Target Asset AllocationGMOEqty:3.9%FI:5.3%HF:0.5%Asset Allocation as of 12/31/07Asset Allocation as of 12/31/07EM Int’l DevHY GB RE Mk NeutGBBrandywineMorgan StanleyMk NeutEMInt’l DevSmall CapLC ValueLCCoreLC GrowthGAAPyramisPennHYARPIMCOEqty:1.5%FI:0.5%Others:1.9%REUBSARTAA*Totals may not add to 100% due to rounding. Totals include manager cash.** Equities include a 1.5% allocation included in the PIMCO All Asset product and a 3.9% included in the GAA product. *** Fixed Income includes a 0.5% allocation included in the PIMCO All Asset product and a 5.3% included in the GAA product.# ARK was terminated 12/17/07. All funds went to cash account.Eqty: 6%FI: 4%
13L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptEquity Weighting vs. Median Public FundEquity Weighting vs. Median Public FundAs of December 31, 2007Composite Percentage Excludes Manager Cash.
14L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptAsset Allocation (as of 12/31/07)Asset Allocation (as of 12/31/07)Target Allocation Actual AllocationVariance from TargetEquity43.0% 42.0% -1.0%Large Cap Equity20.0% 19.6% -0.4%Small Cap Equity10.0% 9.2% -0.8%International Equity10.0% 9.7% -0.3%Emerging Markets Equity 3.0% 3.5% 0.5%Fixed Income33.0% 31.9% -1.1%Core Fixed Income20.0% 19.3% -0.7%High Yield5.0% 4.5% -0.5%Global Bonds8.0% 8.1%0.1%GTAA10.0% 9.7% -0.3%Real Estate5.0% 5.1% 0.1%Absolute Return4.0% 3.9% -0.1%Market Neutral5.0% 5.6% 0.6%Cash0.0% 1.9% 1.9%Total100% 100%Asset Class
15L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptPolicy Index: Calculated by taking the target asset class weights times the return of the respective passive benchmark (re-balanced monthly). Measures the effectiveness of Plan Structure.Allocation Index: Calculated by taking the actual asset class weights times the return of the respective passive benchmark. Measures the effectiveness of deviating from Target Weights.Composite: Actual Plan results. When compared to the Allocation Index, it measures the effectiveness of the Managers.Total Fund PerformanceTotal Fund Performance**vs. Public Fund Universe vs. Public Fund Universe * Returns are gross of fees.As of December 31, 2007
16L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptTotal Fund Performance vs. Public Fund UniverseTotal Fund Performance vs. Public Fund UniverseAs of December 31, 2007Policy Index: Calculated by taking the target asset class weights times the return of the respective passive benchmark (re-balanced monthly). Measures the effectiveness of Plan Structure.Allocation Index: Calculated by taking the actual asset class weights times the return of the respective passive benchmark. Measures the effectiveness of deviating from Target Weights.Composite: Actual Plan results. When compared to the Allocation Index, it measures the effectiveness of the Managers.
17L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptTotal Fund Performance vs. Public Fund UniverseTotal Fund Performance vs. Public Fund UniverseAs of December 31, 2007Policy Index: Calculated by taking the target asset class weights times the return of the respective passive benchmark (re-balanced monthly). Measures the effectiveness of Plan Structure.Allocation Index: Calculated by taking the actual asset class weights times the return of the respective passive benchmark. Measures the effectiveness of deviating from Target Weights.Composite: Actual Plan results. When compared to the Allocation Index, it measures the effectiveness of the Managers.
18L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptTotal Public Funds Total Public Funds ––Total Return vs. Risk Total Return vs. Risk --3 Years Ending 12/31/07 3 Years Ending 12/31/07 Total Fund Risk/ReturnTotal Fund Risk/ReturnAllocation IndexS&P 500CompositePolicy IndexLB AggregateHigher absolute and risk adjusted return then the median Public Fund.
19L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptTotal Public Funds Total Public Funds ––Total Return vs. Risk Total Return vs. Risk --5 Years Ending 12/31/07 5 Years Ending 12/31/07 Total Fund Risk/ReturnTotal Fund Risk/ReturnPolicy IndexCompositeAllocation IndexS&P 500Policy IndexCompositeLB AggregateStronger risk-adjusted return than the median Public Fund.
20L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptDomestic Stocks Style and Size MapDomestic Stocks Style and Size MapAs of December 31, 2007S&P 500Vang. Inst. IndexLarge Cap EquityLarge Cap GrowthWaddell & ReedB D H & SVang. Windsor IILarge Cap ValueTimes SquareSmall Cap EquityR 2000(R)Composite
21L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptPerformance Summary (12/31/07)Performance Summary (12/31/07)Managers ranked in respective style universe.*Includes Ark’s performance until their termination on December 17th.Last QtrRank1 YearRank3 YearRank5 YearRankMarket ValueAllocationCOMPOSITE0.9% 13 11.2% 8 9.8% 37 11.9% 52 $191,532,017 100.0%ALLOCATION INDEX0.3%8.7%8.9%11.6%POLICY INDEX0.1%8.3%9.0%11.6%TAA Composite(0.2)%47 9.7% 19 9.4% 31 n/a$18,532,207 9.7%GMO(0.2)%47 9.7% 19 n/an/a$18,532,207 9.7%65% MSCI World / 35% Lehman Agg(0.7)%8.0%9.1%11.7%Median Balanced Manager(0.3)%7.9%8.0%10.3%LARGE CAPLarge Cap Equity Composite(1.4)%27 12.9% 19 10.8% 28 n/a$37,599,151 19.6% S&P 500(3.3)%5.5%8.6%12.8%Vanguard Windsor II(6.0)%56 2.8% 30 9.5% 59 15.3% 48 $12,491,093 6.5% Russell 1000 Value(5.8)%(0.2)%9.3%14.6%Median Large Cap Value Manager(5.6)%0.6%9.7%15.2%BDH&S(0.7)%66 14.9% 39 7.3% 83 10.3% 96 $5,806,839 3.0%Waddell & Reed3.5% 6 25.6% 2 14.6% 5 14.1% 50 $13,831,787 7.2% Russell 1000 Growth(0.8)%11.8%8.7%12.1%Median Large Cap Growth Manager3.0%13.3%9.8%14.1%Vanguard Institutional Index(3.3)%51 5.6% 49 8.7% 67 12.9% 75 $5,469,432 2.9% S&P 500(3.3)%5.5%8.6%12.8%Median Large Cap Core Manager(3.3%)5.6%9.3%14.2%SMALL CAPSmall Cap Equity Composite*(3.9)%61 3.4% 64 10.2% 36 n/a$17,541,606 9.2% Russell 2000(4.6)%(1.5)%6.8%16.2%Ark**n/an/an/an/a$7,471,539 3.9% Russell 2000 Value(7.3)%(9.8)%5.3%15.8%Median Small Cap Value Manager(6.5)%(7.9)%5.8%16.2%Times Square(1.1)%22 11.1% 40 14.4% 14 18.5% 35 $10,070,067 5.3% Russell 2000 Growth(2.1)%7.0%8.1%16.5%Median Small Cap Growth Manager(2.9%)8.7%10.2%17.4%International Equity Composite(0.6)%50 11.0% 62 13.3% 97 18.4% 98 $18,547,348 9.7% Citigroup PMI EPAC(1.4)%12.9%17.7%22.1%Morgan Stanley International(0.6)%50 11.0% 62 n/an/a$18,547,348 9.7% MSCI EAFE(1.8)%11.2%16.8%21.6%Median International Developed Manager(0.6)%12.5%18.0%23.3%Morgan Stanley Emerging5.6% 17 44.1% 18 n/an/a$6,684,846 3.5% MSCI Emerging Mkts Free3.6%39.4%35.2%37.0%Median Emerging Markets Manager3.0%36.7%34.5%37.7%PERIODS ENDING December 31, 2007TAA MANAGERSEQUITY MANAGERS
22L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptPerformance Summary (12/31/07)Performance Summary (12/31/07)Managers ranked in respective style universe.Last QtrRank1 YearRank3 YearRank5 YearRankMarket ValueAllocationFIXED INCOME Domestic Fixed Income Composite2.2% 58 6.5% 53 5.0% 34 n/a$45,500,864 23.8%Income Research2.7% 49 7.4% 27 4.9% 30 4.8% 41 $36,914,564 19.3% Lehman Agg Intermediate Gov't/Corp2.9%7.4%4.3%4.1%Median Core Fixed Income Manager2.7%6.8%4.7%4.7%Penn Capital(0.2)%43 2.8% 81 n/an/a$8,586,300 4.5% Merrill Lynch High Yield Cash Pay(1.1)%2.2%5.5%10.6%Median High Yield Manager(0.3)%3.7%5.9%9.9%Brandywine Global Bond Fund2.6% 49 10.6% 32 5.9% 16 n/a$15,474,135 8.1% Citi World Gov't Index3.9%10.9%3.1%6.8%Median Global Bond Manager2.6%9.6%4.2%7.2%MARKET NEUTRALPyramis10.1% 5 25.4% 7 n/an/a$10,715,369 5.6% 90 Day T-Bill + 300bps1.8%8.1%7.4%6.1%ABSOLUTE RETURNPimco All Asset1.8% 8 9.6% 25 n/an/a$7,390,349 3.9% CPI + 500bps2.6%9.3%8.5%8.2%REAL ESTATEUBS Realty1.9% 31 13.5% 55 n/an/a$9,826,289 5.1% NCREIF Property3.6%16.2%17.6%15.2%Cash1.2% 35 5.4% 26 4.3% 56 n/a$3,719,853 1.9% 90 Day T-Bill1.1%5.0%4.3%3.1%Notes: Results for periods longer than one year are annualized. Total percentages may add to more than 100% due to rounding. All returns are gross of fees.**Ark was terminated 12/17/07. All funds went to the Cash accountALTERNATIVE ASSETSPERIODS ENDING December 31, 2007FIXED INCOME MANAGERS
23L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptDomestic Equity Total Rates of ReturnDomestic Equity Total Rates of ReturnManagers ranked in the Total Equity Universe.
24L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptDomestic Equity Total Rates of ReturnDomestic Equity Total Rates of ReturnManagers ranked in the Total Equity Universe.
25L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptDomestic Equity Total Rates of ReturnDomestic Equity Total Rates of ReturnManagers ranked in the Total Equity Universe.
26L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptDomestic Equity Total Rates of ReturnDomestic Equity Total Rates of ReturnManagers ranked in the Total Equity Universe.
27L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptDomestic Equity Total Rates of ReturnDomestic Equity Total Rates of ReturnManagers ranked in the Total Equity Universe.
28L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptBond Funds Total Rates of ReturnBond Funds Total Rates of ReturnManagers ranked in the Total Bond Universe.
29L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptBond Funds Total Rates of ReturnBond Funds Total Rates of ReturnManagers ranked in the Total Bond Universe.
30L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptBond Funds Total Rates of ReturnBond Funds Total Rates of ReturnManagers ranked in the Total Bond Universe.
31L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptBond Funds Total Rates of ReturnBond Funds Total Rates of ReturnManagers ranked in the Total Bond Universe.
32L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptGlobal Bond Funds Total Rates of ReturnGlobal Bond Funds Total Rates of ReturnManagers ranked in the Total Bond Universe.
33L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptTOP TEN EQUITY PORTFOLIO HOLDINGS*SECTOR OVER/UNDER WEIGHTS VS. RUSSELL 1000 VALUE-0.22.4-4.35.20.91.51.10.0-7.7-0.91.9-20 -15 -10 -5 0 5 10 15 20Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesMiscManager Performance Manager Performance ––Windsor II FundWindsor II FundSecurityWeightOccidental Petroleum Corp.3.10%Imperial Tobacco Group ADR3.00%Altria Group, Inc.2.90%AT&T Inc.2.70%ConocoPhillips Co.2.60%Bank of America Corp.2.40%Verizon Communications Inc.2.40%JPMorgan Chase & Co.2.20%Citigroup, Inc.2.10%Bristol-Myers Squibb Co.2.10%WINDSOR II SUB- ADVISORS*Barrow, Hanley, Mewhinney & Strauss, Inc. (1985)Lazard Asset Management (2007)**Vanguard Quantitative Equity Group (1991)Hotchkis & Wiley Capital Management, LLC(2003)Armstrong Shaw Associates Inc. (2006)* Top 10 equals 25.8% of net assets * Top 10 equals 25.8% of net assets * Inception year of sub-advisory relationship in parenthesis.
34L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTEN BEST AND WORST PERFORMERSSECTOR OVER/UNDER WEIGHTS VS. RUSSELL 1000 GROWTH-3.40.0-2.41.33.8-0.20.5-1.6-0.82.9-15 -10 -5 0 5 10 15Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesManager Performance Manager Performance ––Waddell & ReedWaddell & Reed
35L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTEN BEST AND WORST PERFORMERSSECTOR OVER/UNDER WEIGHTS VS. RUSSELL 1000 GROWTH-3.2-4.66.113.92.5-3.6-1.6-2.03.3-10.8-25 -15 -5 5 15 25Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesManager Performance Manager Performance ––BDH&SBDH&S
36L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICS*TOP TEN EQUITY PORTFOLIO HOLDINGS*Sector Over/Under Weights vs. Russell 2000 Growth*-6.31.52.8-1.02.8-3.90.60.00.92.00.7-20 -15 -10 -5 0 5 10 15 20Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesMiscellaneousTEN BEST AND WORST PERFORMERS*Manager Performance Manager Performance ––TimesSquareTimesSquare
37L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Performance Manager Performance --GMO GMO Benchmark Current AllocationASSET ALLOCATION*Benchmark: 65% MSCI All Country World Index, 35% Lehman Aggregate Bond. HISTORICAL ALLOCATIONPORTFOLIO CHARACTERISTICS*RISK vs. RETURN 3 YEARSeptember 1996 – December 2007LB AGGS&P 500GMO
38L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptStock% HoldingBritish American Tobacco3.8%Imperial Tobacco Group3.7%Nestle SA3.5%Cadbury Schweppes3.3%Unilever NV2.5%RWE AG2.1%Stomo Mitisui Financial Group2.1%Vodafone2.1%Holcim LTD2.1%Telefonica SA2.1%Manager Performance Manager Performance ––Morgan Stanley Intl. EquityMorgan Stanley Intl. EquityTOP TEN HOLDINGSCOUNTRY ALLOCATIONAustralia1.6% (6.6%)UK30.3% (22.3%)Cash4.4% (0.0%)Other Europe11.3% (20.8%)Netherlands5.4% (3.6%)Germany8.2% (8.5%)France5.9% (10.2%)Japan24.4% (20.6%)Switzerland9.1% (6.6%)**Numbers in Parenthesis ( ) reflect benchmark weights.SECTOR PERFORMANCE
39L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptTOP TEN HOLDINGS%Gazprom4.32CVRD3.36Petrobrás3.26China Mobile3América Móvil2.35Sberbank Russia2.12MTN Group1.97China Construction Bank1.67China Coal Energy1.67Au Optronics1.51Manager Performance Manager Performance ––Morgan Stanley Emerging Mkts.Morgan Stanley Emerging Mkts.TOP TEN HOLDINGSTaiwan5.8% (11.4%)Cash.9% (0.0%)Poland4.1% (1.6%)Russia10.4% (9.0Brazil12.5% (11.9%)South Korea13.0% (0.0%)India9.7% (6.9%) South Africa5.4% (6.8%)China14.6% (12.6%)Mexico6.1% (4.9%)Other13.9% (31.2%)**Numbers in Parenthesis ( ) reflect benchmark weights.COUNTRY ALLOCATION
40L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptCash.4%(0.0%)ABS1.1%(0.0%)MBS19.9%(0.0%)Corporates34.7%(32.0%)Govt.38.9%(44.2%)Agency1.1% (23.0%)Municipals3.8%(.8%)CREDIT DISTRIBUTIONSECTOR ALLOCATION15.0%3.0%14.8%41.8%25.2%0.9%0%20%40%60%CashBaaAAaAaaGov'tPORTFOLIO ANALYSISAVERAGE MATURITY % HELD2.4%18.5%24.0%24.2%7.7%0%20%40%10.0+8.0-10.06.0-8.04.0-6.02.0-4.0YearsManager Performance Manager Performance ––Income ResearchIncome Research**Numbers in Parenthesis ( ) reflect benchmark weights..
41L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Performance Manager Performance ––Penn CapitalPenn CapitalAverage Maturity6.3Average Duration4.5Average Coupon8.5%Average Yield to Maturity8.6%Average Credit QualityB2Number of Issues12133.1%16.5%36.4%1.6%10.0%2.4%0%20% 40%10.0+8.0 - 10.06.0 - 8.04.0 - 6.02.0 - 4.00.0 - 2.0PORTFOLIO ANALYSISAVERAGE MATURITY % HELDCREDIT DISTRIBUTION28.8%5.8%25.1%10.0%5.1%4.1%1.4%19.4%0.3%0%20%40%OtherCaa1B3B2B1Ba3Ba2Ba1Baa3
42L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Performance Manager Performance ––BrandywineBrandywinePORTFOLIO CHARACTERISTICU.S.Australia12%Canada5%Germany0%Singapore7%Poland8%Sweden9%Mexico4%U.K.7%Other25%CREDIT DISTRIBUTIONCOUNTRY ALLOCATION20.0%9.1%3.4%60.7%4.8%0% 20% 40% 60% 80% 100%BaBaaAAaAaaAVERAGE MATURITY % HELD21.7%2.3%6.7%19.5%21.4%12.3%16.1%0%20%40%20.0+10.0 -7.0 - 10.05.0 - 7.03.0 - 5.01.0 - 3.00.0 - 1.0
43L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Performance Manager Performance ––PIMCO All AssetPIMCO All AssetPORTFOLIO CHARACTERISTICS
44L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Performance Manager Performance ––Fidelity Market Neutral (Pyramis)Fidelity Market Neutral (Pyramis)PORTFOLIO CHARACTERISTICS*SECTOR ALLOCATION*-2.1-0.11.10.1-3.71.13.03.3-0.5-2.3-4 -3 -2 -1 0 1 2 3 4Consumer Disc.Info TechnologyFinancialsHealth CareIndustrialsConsumerEnergyMaterialsTelecom ServicesUtilities
45L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptManager Overview Manager Overview ––UBS RESAUBS RESAUBS RESA is an actively managed core style, diversified, open end commingled vehicle. The goal is to optimize the portfolio’s asset mix through acquisitions and timely sales in order to maximize total return while maintaining an acceptable level of risk. GEOGRAPHIC DIVERSIFICATIONPROPERTY TYPE DIVERSIFICATIONSTRATEGY / FUND DETAILSQUARTER-END OCCUPANCY LEVELSFunded in June 2006.
46L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptEquity Funds 3 Year Risk AnalysisEquity Funds 3 Year Risk AnalysisWaddell & ReedSmall Cap EqtyR 2000(R)B D H & SVG Windsor IILarge Cap EqtyVG Inst IndexS&P 500
47L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptEquity Funds 3 Year Risk AnalysisEquity Funds 3 Year Risk AnalysisR 2000(R)Large Cap ValueTimes SquareLarge Cap GrowthS&P 500
48L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptEquity Funds 5 Year Risk AnalysisEquity Funds 5 Year Risk AnalysisTimes SquareR 2000(R)VG Windsor IIWaddell & ReedVG Inst IndexS&P 500B D H & S
49L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptBond Funds 3 Year Risk AnalysisBond Funds 3 Year Risk AnalysisFixed Income Comp.Income ResearchLB AggregateLB GOVT/CR INT
50L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptBond Funds 5 Year Risk AnalysisBond Funds 5 Year Risk AnalysisIncome ResearchLB AggregateLB GOVT/CR INT
51L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptAsset Allocation AnalysisAsset Allocation Analysis
52L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptNEPC 2008 Return and Risk ProjectionsNEPC 2008 Return and Risk ProjectionsReturn (Geometric Basis) RiskReturn (Geometric Basis) RiskAsset ClassCash4.00% 1.25%4.00% 1.50% 0.00%0.25%Core Bonds5.00% 6.75%5.00% 6.75% 0.00%0.00%TIPs4.75% 6.00%4.75% 6.00% 0.00%0.00%Long G/C Bonds5.00% 11.00% 5.25% 11.00% 0.25% 0.00%High-Yield Bonds6.25% 10.75% 6.75% 10.75% 0.50% 0.00%Global Bonds4.00% 9.25%4.00% 9.25% 0.00%0.00%Emerg Market Debt6.50% 15.00% 6.50% 15.00% 0.00% 0.00%Real Estate6.75% 11.50% 6.75% 11.50% 0.00% 0.00%Large Cap Equities8.50% 16.00% 8.50% 16.00% 0.00% 0.00%Small/Mid Cap Equities8.75% 21.00% 8.75% 21.00% 0.00% 0.00%Int'l Equities8.75% 19.00% 9.00% 19.00% 0.25% 0.00%Int'l Small Cap Equity9.25% 24.00% 9.25% 24.00% 0.00% 0.00%Emerg Market Equity9.75% 27.00% 9.50% 27.00%(0.25%)0.00%Private Equity10.25% 27.00% 10.25% 27.00% 0.00%0.00%Hedge Funds - Cons6.50% 7.00%6.50% 7.00% 0.00%0.00%Hedge Funds - Mod8.00% 10.00% 8.00% 10.00% 0.00% 0.00%Commodities5.00% 15.00% 5.00% 15.00% 0.00% 0.00%Changes in Return from 2007Changes in Risk from 20072007 Assumptions 2008 Assumptions• The returns shown here are market based returns; no value added assumed for: –Active management –Under or overweighting an asset class relative to the policy target–Manager implementation (e.g., the use of portable alpha)
53L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.ppt15.00%5.00%10.00%8.00%7.00%6.50%27.00%10.50%27.00%9.50%24.00%9.25%19.00%9.00%21.00%8.75%16.00%8.50%11.50%6.75%15.00%6.50%9.25%4.00%10.75%6.75%11.00%5.25%6.00%4.75%6.75%5.00%1.50%4.00%1.50%3.00%0% 5% 10% 15% 20% 25% 30% 35% 40%InflationCashCore BondsTIPSLong G/C BondsHigh Yield BondsGlobal BondsEmerging DebtReal EstateLarge CapSmall/M id CapInt'l EquityInt'l Small CapEmerging MarketsPrivate EquityHedge Funds ConsHedge Funds M odCommoditiesForecast Risk (volatility of returns)Expected Return (net of fees)2008 Asset Class Risk/Return Assumptions2008 Asset Class Risk/Return Assumptions
54L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.ppt2008 Asset Class Correlation Assumptions2008 Asset Class Correlation AssumptionsAsset ClassCash Core TIPs Long Global EMD RE HY Large Smid Intl Intl Sm Emg PE HF-C HF-M CommCash1.00Core Bonds0.25 1.00TIPs0.10 0.75 1.00Long Bonds0.20 0.95 0.75 1.00Global Bonds0.15 0.70 0.50 0.60 1.00Emerg Mkt Bonds0.00 0.10 0.10 0.00 -0.10 1.00Real Estate0.40 -0.10 -0.10 -0.20 0.00 0.00 1.00High-Yield Bonds-0.10 0.50 0.30 0.55 0.30 0.60 -0.10 1.00Large Cap Equities0.00 0.20 0.00 0.20 -0.10 0.50 0.00 0.50 1.00Small/Mid Cap Equities-0.10 0.00 0.00 0.10 -0.20 0.50 -0.05 0.60 0.90 1.00Int'l Equities-0.20 0.00 0.00 0.05 0.30 0.50 0.10 0.40 0.70 0.60 1.00Int'l Small Cap Eq-0.10 0.00 -0.10 0.00 0.10 0.50 0.00 0.35 0.60 0.50 0.90 1.00Emerg Int'l Equities-0.10 -0.20 -0.10 -0.30 0.00 0.60 -0.10 0.45 0.50 0.50 0.60 0.55 1.00Private Equity-0.10 0.15 0.00 0.10 0.00 0.25 0.00 0.60 0.75 0.85 0.50 0.60 0.25 1.00Hedge Funds - Con0.50 0.35 0.40 0.35 0.00 0.00 -0.10 0.30 0.20 0.20 0.05 0.00 0.00 0.10 1.00Hedge Funds - Mod0.10 0.00 0.10 0.00 0.10 0.10 -0.20 0.40 0.50 0.50 0.15 0.10 0.10 0.30 0.90 1.00Commodities0.00 -0.10 0.20 -0.10 -0.10 0.15 0.05 -0.20 -0.20 -0.20 -0.10 -0.10 -0.10 0.00 0.00 0.00 1.00
55L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptMSD Asset Allocation History & ProposalMSD Asset Allocation History & ProposalTarget w/2007AssumptionsCurrent w/2008AssumptionsTarget w/2008AssumptionsAlternative I w/2008AssumptionsAlternative II w/2008Assumptions RangesEquity43.0% 42.0% 43.0%41.0%41.0%Large Cap20.0% 19.6% 20.0%20.0%20.0% 16 - 24%Small Cap10.0%9.2%10.0%8.0%8.0% 8 - 12%International10.0% 9.7%10.0%10.0%10.0% 8 - 12%Emerging3.0%3.5%3.0%3.0%3.0% 2 - 5%Fixed Income33.0% 31.9% 33.0%33.0%33.0%Domestic Bonds 20.0% 19.3% 20.0%20.0%20.0% 16 - 24%High Yield Bonds 5.0%4.5%5.0%5.0%5.0% 3 - 7%Global Bonds8.0%8.1%8.0%8.0%8.0% 6 - 10%GAA10.0% 9.7%10.0%12.0%10.0% 8 - 12%Real Estate5.0%5.1%5.0%5.0%5.0% 3 - 7%Absolute Return 4.0%3.9%4.0%4.0%4.0% 3 - 7%Market Neutral 5.0%5.6%5.0%5.0%7.0% 3 - 7%Cash0.0%1.9%0.0%0.0%0.0% 3 - 7%Expected Return7.74% 7.55% 7.60%7.56%7.55%Expected Risk8.40% 8.72% 8.96%8.82%8.66%Sharpe Ratio0.960.910.890.900.91
56L:\Clients/St Louis MSD/IPA/Executive Reports /2007/MSD 4Q 2007 Executive Report.pptInformation 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.