The URL can be used to link to this page

Home My Public Portal About2003 4th Quarter ReportFourth Quarter 2003 Fourth Quarter 2003 Investment Performance AnalysisInvestment Performance AnalysisExecutive SummaryExecutive SummaryFebruary 12, 2004February 12, 2004Douglas Moseley, Senior ConsultantOne Main Street, Cambridge, Massachusetts 02142-1524(617) 374-1300; F: (617) 374-1313www.nepc.com 1L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptAsset Allocation•The assets in the Fund totaled $137.1 million as of December 31, 2003, reflecting a increase of $11.2 million from September 30, 2003 from investment gains of $10.8 million and a net contribution of $400 thousand.•The Fund’s allocation to equities was 64%, slightly higher than the target equity weighting of 60% (page 6), due to a 1.1% overweight in int’l equity, a 1.3% overweight to small cap and a 1.8% overweight to large cap.•Relative to the Public Fund peer group, the 62% equity commitment (excluding cash) ranked at the 43rdpercentile (page 7).Performance•The Total Fund gained 8.6% in the 4th quarter, which ranked in the 46thpercentile of Public Fund peer group (page 8).•For the trailing year, the Fund was up 21.5%, which ranked in the 53rd percentile of the Public Fund universe. Asset allocation decisions had a positive impact on performance as the allocation index beat the policy index by 220 basis points. Active management detracted 110 basis points from the trailing one-year return (page 8).•For the longer-term three- and five-year periods, the Fund ranked in the 34thand 37thpercentiles of the Public Fund universe, respectively. Over the three-year period active management detracted 110 basis points, but deviations from policy added 290 basis points. Over the five-year period active management contributed 40 basis points and deviations from policy contributed 110 basis points.•Returns over the three- and five-year periods were earned with slightly lower levels of volatility than the median Public Fund (pages 12-13).Executive Summary Executive Summary ––Total FundTotal Fund 2L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEQUITY MARKETSFIXED INCOME MARKETSMarket Environment Market Environment ––Fourth Quarter 2003Fourth Quarter 2003•The Domestic Equity Marketsfinished 2003 with an outstanding quarter. The S&P 500 index returned 12.2% during the quarter. Small cap stocks, as measured by the Russell 2000 index, continued to outpace the return of their large cap peers, returning 14.5% during the quarter. • After a slow start, the equity markets posted three consecutive strong quarters resulting in an impressive 2003. The S&P 500 advanced nearly 29%, while the Russell 2000 soared over 47%. The tech heavy NASDAQ gained 50%.• Underneath the equity returns, there was quite a divergence among the sectors and types of stocks generating the returns. Economically sensitive (cyclicals) and highly volatile (technology) sectors far outpaced the more defensive consumer staple and health care sectors. •The Developed International Equity Markets outperformed the S&P 500 index for the third consecutive quarter. The MSCI EAFE index surged 17.1% higher in U.S. dollar terms during the fourth quarter, and closed the year up 38.6%, its strongest annual return in 17 years. •The Emerging Equity Markets were the best performing asset class during the fourth quarter and trailing year, returning 17.8% and 55.8%, respectively. 2003 was the third year in a row the emerging equity markets outperformed the S&P 500. • The returns to U.S. based investors in the Developed and Emerging markets were supported by the weakening U.S. dollar.• The first half of the year was marked by strong performance in the broad investment grade fixed incomemarket. However, the second half finished flat as the Lehman Aggregate index returned 0.2% for the last 6 months of 2003, and 0.3% for the fourth quarter. The Aggregate returned 4.0% for the year. • The Treasury market posted a modest 2.4% return for the year, which included a -0.4% return during the last quarter. Performance was negatively impacted by rising interest rates.•Investment Grade Corporate Bondswere the best performing component of the Lehman Aggregate. The narrowing of corporate spreads to Treasuries helped generate significant capital gains. Corporate bonds posted a return of 7.7% for the year and 0.5% for the quarter. •High Yield Bondswere the top performing sector of the market as they returned 5.9% for the quarter and 29.0% for the year, as measured by the Lehman Brothers High Yield index. •Global/International Bondscontinued their strong run during the quarter as the Citigroup World Government Bond index rose 5.2% for the quarter and 14.9% for the year. Returns were aided by the falling U.S. dollar. 3L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptMarket Environment Market Environment ––Fourth Quarter 2003Fourth Quarter 2003 4L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptMarket Environment Market Environment ––Fourth Quarter 2003Fourth Quarter 2003 5L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptMarket Environment Market Environment ––Fourth Quarter 2003Fourth Quarter 2003 6L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.ppt7.5%8.6%7.5%8.8%45.0%38.7%10.1%32.2%35.0%1.7%5.0%Equities 60.0% Fixed Income 40.0%Equities 64.2%* Fixed Income 34.1%Large Cap EquityInt’l EquitySmallDomestic EquityInvescoARK 4.6%TimesSq.4.2%Growth 11.1%BD&HWaddellValue 22.4%AllianceWindsor IICore 5.2%VanguardDomestic FICore FixedIncome Research GarnerCashInt’l EquityDomestic EquitySmallCapLarge Cap EquityDomestic FICore FixedCashCurrent Asset AllocationCurrent Asset AllocationPolicy Target Asset AllocationPolicy Target Asset AllocationAs of December 31, 2003As of December 31, 2003VanguardAsset Alloc.*Including Manager CashAsset Allocation as of 12/31/03Asset Allocation as of 12/31/03 7L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.ppt* Excludes Manager CashEquity Weighting vs. Median Public FundEquity Weighting vs. Median Public FundAs of December 31, 2003 8L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 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 Performance vs. Public Fund UniverseTotal Fund Performance vs. Public Fund UniverseAs of December 31, 2003 9L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptTotal Fund Performance vs. Public Fund UniverseTotal Fund Performance vs. Public Fund UniverseAs of December 31, 2003Policy 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. 10L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptTotal Fund Performance vs. Public Fund UniverseTotal Fund Performance vs. Public Fund UniverseYears Ending 11L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptTotal Fund Performance vs. Public Fund UniverseTotal Fund Performance vs. Public Fund UniverseYears Ending 12L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.ppt-18%-14%-10%-6%-2%2%6%10%14%18%2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24%Risk (% Standard Deviation)Annualized ReturnTotal Public Funds Total Public Funds ––Total Return vs. Risk Total Return vs. Risk --3 Years Ending 12/31/03 3 Years Ending 12/31/03 ValueRankValueRankComposite3.5 34 11.6 69Allocation Index4.6 13 10.7 78Policy Index1.7 77 12.9 33S&P 500 -4.0 22.0LB Aggregate 7.6 3.4Median Public Fund 2.8 12.3Annualized Return Standard DeviationS&P 500LB AggregateMSD CompositeAllocation IndexMedian Public FundPolicy IndexTotal Fund Risk/Return (12/31/03)Total Fund Risk/Return (12/31/03) 13L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.ppt-8%-6%-4%-2%0%2%4%6%8%10%12%2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%Risk (% Standard Deviation)Annualized ReturnTotal Public Funds Total Public Funds ––Total Return vs. Risk Total Return vs. Risk --5 Years Ending 12/31/03 5 Years Ending 12/31/03 ValueRankValueRankComposite4.8 37 10.3 58Allocation Index4.4 51 8.7 88Policy Index3.3 83 11.1 39S&P 500 -0.6 100 19.3 1LB Aggregate 6.6 8 3.4 100Median Public Fund 4.5 10.7Annualized Return Standard DeviationS&P 500LB AggregateMSD CompositeAllocation IndexMedian Public FundPolicy IndexTotal Fund Risk/Return (12/31/03)Total Fund Risk/Return (12/31/03) 14L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptPublicLastPublicLastPublicLastPublic% of 4Q03Rank1 YearRank3 YearsRank5 YearsRankMarket Value PortfolioMSD Composite (GROSS) 8.6%4621.5%533.5%344.8%37$137,137,194 100.0%Median Public Fund8.4% 22.1% 2.8% 4.5% Allocation Index 8.8% 22.6% 4.6% 4.4% Policy Index 7.8% 20.4% 1.7% 3.3%Balanced Manager / Tactical Asset AllocationVanguard Asset Allocation Fund 10.2% 19 N/A N/A N/A $13,793,318 10.1% Custom Benchmark 7.5% 19.2% 0.3% 2.2%Large Cap EquityTotal Large Cap Equity$52,911,375 38.6%AllianceBernstein 12.6% 84 29.4% 65 3.2% 51 N/A $25,714,669 18.8%Windsor II 14.0% 57 30.6% 52 N/A N/A $4,889,878 3.6% S&P Barra Value14.5% 31.8%(2.7%)2.0% Russell 1000 Value 14.2% 30.0% 1.2% 3.6%Waddell & Reed 10.7% 36 25.0% 74 N/A N/A $10,819,025 7.9%BDH&S 9.8% 52 26.6% 57(5.6%)27 N/A $4,326,216 3.2% Russell 1000 Growth 10.4% 29.7%(9.4%) (5.1%)Vanguard S&P 500 Index Fund12.2%5528.7% 58(4.0%)59N/A $7,161,587 5.2% Standard & Poors 500 12.2% 28.7%(4.0%) (0.6%)Small Cap EquityTotal Small Cap Equity$12,175,538 8.9%Ark 14.8% 66 39.9% 75 N/A N/A $6,353,078 4.6% Russell 2000 Value 16.4% 46.0% 13.8% 12.3%TimesSquare 11.6% 72 38.9% 73 N/A N/A $5,822,460 4.2% Russell 2000 Growth 12.7% 48.5%(2.0%)0.9%Performance Summary (12/31/03)Performance Summary (12/31/03) 15L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptPublicLastPublicLastPublicLastPublic% of 4Q03Rank1 YearRank3 YearsRank5 YearsRankMarket Value PortfolioInt'l EquityINVESCO 16.1% 35 31.6% 770.4%48 N/A $11,741,798 8.6% EAFE (After Taxes) 17.1% 38.6%(2.9%) (0.0%) CITI EPAC 16.9% 38.4%(2.7%)0.7%Core FixedTotal Core Fixed Income$44,202,161 32.2%Income Research & Management 0.4% 53 5.6% 29 8.0% 38 6.9% 38 $37,431,922 30.1%Garner Asset Management 0.4% 51 4.2% 64 7.3% 75 6.4% 77 $6,770,239 5.4% Lehman Int. Govt./Credit 0.1% 4.3% 7.7% 6.6% Lehman Aggregate Bond 0.3% 4.1% 7.6% 6.6%CashCash Account 0.3% N/A N/A N/A $2,313,004 1.7% 90 Day U.S. T-Bills 0.3% 1.1% 2.4% 3.7%Performance Summary (12/31/03)Performance Summary (12/31/03) 16L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTen Best and Worst PerformersSector Over/Under Weights vs. Russell 1000 Value-1.70.9-3.2-9.46.70.8-2.5-0.91.4-2.010.1-15 -10 -5 0 5 10 15Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesMisc.Manager Performance Manager Performance ––Alliance BernsteinAlliance Bernstein 17L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTen Best and Worst PerformersSector Over/Under Weights vs. Russell 1000 Value-4.44.41.2-6.34.87.2-2.02.10.1-3.8-3.1-10 -5 0 5 10Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesMisc.Manager Performance Manager Performance ––Windsor II FundWindsor II Fund 18L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTen Best and Worst PerformersSector Over/Under Weights vs. Russell 1000 Growth2.9-8.42.7-6.8-2.5-7.90.3-0.1-0.79.6-15 -10 -5 0 5 10 15Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesManager Performance Manager Performance ––Waddell & ReedWaddell & Reed 19L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTen Best and Worst PerformersSector Over/Under Weights vs. Russell 1000 Growth2.6-7.24.1-10.0-2.5-0.95.516.34.1-12.0-15 -10 -5 0 5 10 15Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesManager Performance Manager Performance ––BDH&SBDH&S 20L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTen Best and Worst PerformersSector Over/Under Weights vs. Russell 2000 Value5.31.8-0.89.72.6-3.9-3.5-14.7-1.14.7-15 -10 -5 0 5 10 15Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesManager Performance Manager Performance ––Ark Asset ManagementArk Asset Management 21L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEQUITY PORTFOLIO CHARACTERISTICSTOP TEN EQUITY PORTFOLIO HOLDINGSTen Best and Worst PerformersSector Over/Under Weights vs. Russell 2000 Growth-2.81.02.5-2.1-0.44.3-2.1-0.52.3-1.1-1.2-7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7Cons DiscretionaryConsumer StaplesEne rgyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesMisc.Manager Performance Manager Performance ––TimesSquareTimesSquare 22L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptCREDIT DISTRIBUTIONSECTOR ALLOCATIONGovt/Agency43.5%Corporates44.8%ABS1.2%Mortgage7.1%Muni's1.1%Utilities2.3%24.7%7.2%11.7%37.8%15.4%0.0%0% 20% 40% 60% 80% 100%Below BaaBaaAAaAaaGov'tPORTFOLIO ANALYSISAVERAGE MATURITY % HELD15.5%5.5%18.9%14.2%27.6%15.2%0% 20% 40% 60% 80% 100%20.0 +10.0 -5.0 - 10.03.0 - 5.01.0 - 3.00.0 - 1.0YearsManager Performance Manager Performance ––Income ResearchIncome Research 23L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptCREDIT DISTRIBUTIONSECTOR ALLOCATIONGovt11.1%Corporates88.9%87.2%6.0%5.7%1.1%0.0%0.0%0.0%0% 20% 40% 60% 80% 100%Below BaaBaaAAaAaaGov'tOtherPORTFOLIO ANALYSISAVERAGE MATURITY % HELD41.7%0.0%14.3%1.1%42.8%0.0%0% 20% 40% 60% 80% 100%20.0 +10.0 - 20.05.0 - 10.03.0 - 5.01.0 - 3.00.0 - 1.0YearsManager Performance Manager Performance ––Garner Asset Mgmt.Garner Asset Mgmt. 24L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptSECTOR ALLOCATIONTOP TEN HOLDINGSPORTFOLIO COUNTRY WEIGHTS0%5%10%15%20%25%Consumer DiscretionaryConsumer StaplesEnergyFinancialsHealth CareIndustrialsInfo TechnologyMaterialsTelecom ServicesUtilitiesMiscellaneousSTOCK % HOLDINGNestle SA 3.1%Novartis AG 2.8%Total SA 2.6%Fuji Photo Film 2.5%BP Plc. 2.5%Endesa 2.4%BASF Ag 2.3%Cadbury Schweppes Plc 2.3%Societe Generale 2.3%Danske Bank 2.2%France8.2%Total North America/Cash3.9%Japan18.9%U.K.21.9%Germany3.6%Australia/New Zealand2.4%Other Pacific Basin4.4%Other Europe36.7%Manager Performance Manager Performance ––INVESCOINVESCO 25L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptEquity Funds 3 Year Risk AnalysisEquity Funds 3 Year Risk Analysis 26L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptBond Funds 3 Year Risk AnalysisBond Funds 3 Year Risk Analysis 27L:\Clients/St Louis MSD/IPA/Executive Reports /2003/MSD 3Q 2003 Executive Report.pptBond Funds 5 Year Risk AnalysisBond Funds 5 Year Risk Analysis