HomeMy Public PortalAbout2011 1st Quarter ReportInvestment Performance AnalysisMay 2011Kristin Finney-Cooke, CAIA, Senior ConsultantMichael J. Valchine, CAIA, ConsultantMetropolitan St. Louis Sewer District
Table of ContentsMarket Commentary & Update 3Executive Summary 17Investment Performance Analysis 31Page2
Market Commentary & Update
" F i r s t q u a r t e r m a r k e t r e s u l t s w e r e p o s i t i v e d e s p i t e h i g h e r v o l a t i l i t y T u r m o i l i n M i d d l e E a s t , d i s a s t e r i n J a p a n , a n d d e e p e n i n g E u r o p e a n d e b t c r i s i s d i d n o t i m p e d e s t r o n g r e s u l t s f r o m e q u i t i e s C o m m o d i t y p r i c e s c l i m b e d d r i v e n b y e n e r g y , f o o d , a n d p r e c i o u s m e t a l s I n t e r e s t r a t e s r o s e s l i g h t l y a s c o m m o d i t y p r i c e i n c r e a s e s b a t t l e d w i t h h i g h u n e m p l o y m e n t a n d s l a c k c r e d i t m a r k e t s " E x p e c t e d r e t u r n s o f t r a d i t i o n a l a s s e t c l a s s e s r e m a i n m u t e d 3 0 y e a r r e t u r n s c a n s u p p o r t l o n g - t e r m e x p e c t a t i o n s b u t d o n o t c r e a t e m e d i u m - t e r m u p s i d e " O p p o r t u n i t i e s f o r h i g h e r r i s k - a d j u s t e d r e t u r n s e x i s t i n p o c k e t s o f t h e c a p i t a l m a r k e t s : B y i n c r e a s i n g e x p o s u r e t o e m e r g i n g m a r k e t s d e b t a n d e q u i t y B y t a k i n g o n r e a s o n a b l e e x p o s u r e t o i l l i q u i d i t y ( e s p e c i a l l y d i s t r e s s e d ) B y s e e k i n g a c t i v e r e t u r n s f r o m s t r a t e g i e s t h a t c a n t a k e a d v a n t a g e o f m a c r o - d r i v e n e v e n t s B y c o n s i d e r i n g l e s s d i r e c t i o n a l a p p r o a c h e s t o p o r t f o l i o s t r u c t u r i n g , i . e . e q u i t y l o n g s h o r t a s e q u i t y s u b s t i t u t e " G l o b a l e c o n o m i c u n c e r t a i n t y r e m a i n s e l e v a t e d H i g h v o l a t i l i t y c u r r e n c y r e g i m e e x p e c t e d t o c o n t i n u e A r i s k b a l a n c e d a p p r o a c h c a n l e a d t o i m p r o v e d o u t c o m e s a s p o r t f o l i o s r e d u c e c o n c e n t r a t e d e x p o s u r e t o e c o n o m i c g r o w t h F i r s t Q u a r t e r 2 0 1 1 N E P C O b s e r v a t i o n s a n d O p p o r t u n i t i e s 4
Market Environment - OverviewQtr. 1 Yr.3 Yr.5 Yr.10 Yr.World Equity BenchmarksMSCI World World 4.8% 13.4%-0.3%2.1% 4.2%Qtr. 1 Yr.3 Yr.5 Yr.10 Yr.Domestic Equity BenchmarksS&P 500 Large Core 5.9% 15.6% 2.4% 2.6% 3.3%Russell 1000 Large Core 6.2% 16.7% 3.0% 2.9% 3.8%Russell 1000 Growth Large Growth 6.0% 18.3% 5.2% 4.3% 3.0%Russell 1000 Value Large Value 6.5% 15.2% 0.6% 1.4% 4.5%S&P Mid Cap 400 Mid Core 9.4% 27.0% 10.0% 6.1% 9.4%Russell 2000 Small Core 7.9% 25.8% 8.6% 3.3% 7.9%Russell 2000 Growth Small Growth 9.2% 31.0% 10.2% 4.3% 6.4%Russell 2000 Value Small Value 6.6% 20.6% 6.8% 2.2% 9.0%NAREIT All Composite REIT 7.0% 24.7% 2.9% 0.9% 10.9%Qtr. 1 Yr.3 Yr.5 Yr.10 Yr.International Equity BenchmarksMSCI EAFE Int'l Developed 3.4% 10.4%-3.0%1.3% 5.4%MSCI EME Em. Mkt. Eqty. 2.0% 18.5% 4.3% 10.7% 16.8%MSCI ACWI ex US International 3.4% 13.1%-0.8%3.6% 7.4%S&P EPAC SmallCap Small Cap Int'l 4.3% 19.8% 0.3% 3.0% 10.5%Qtr. 1 Yr.3 Yr.5 Yr.10 Yr.Domestic Fixed Income BenchmarksBarclays Aggregate Core Bonds 0.4% 5.1% 5.3% 6.0% 5.6%Barclays High Yield High Yield 3.9% 14.3% 12.9% 9.1% 8.6%Barclays 1-10 Muni. Municipal Bond 0.7% 2.9% 4.6% 4.7% 4.4%Barclays 1-10 TIPS Inflation 2.3% 6.8% 3.6% 6.2% 6.3%90 Day T-Bill Cash 0.0% 0.2% 0.5% 2.2% 2.2%Qtr. 1 Yr.3 Yr.5 Yr.10 Yr.Global Fixed Income BenchmarksCitigroup World Govt Bond Global Bonds 0.7% 7.3% 3.2% 7.3% 7.4%J.P. Morgan EMBI Plus Em. Mkt. Bonds-0.4%7.5% 8.0% 7.9% 10.3%Qtr. 1 Yr.3 Yr.5 Yr.10 Yr.Diversified BenchmarkBalanced Index * Diversified 4.1% 13.8% 3.9% 4.2% 6.0%Qtr. 1 Yr.3 Yr.5 Yr.10 Yr.Alternative BenchmarksDJ UBS Commodity Index Commodities 4.5% 28.5%-5.2%2.6% 7.1%NCREIF Property Index Real Estate n/a n/a n/a n/a n/aHFRI Fund of Funds Hedge Fund of Funds 3.4% 5.5%-2.6%2.4% 4.1%CS Tremont Composite All Hedge Funds 2.2% 10.0% 3.6% 5.8% 7.4%CS Tremont Event Driven Event Driven 3.0% 10.7% 5.9% 7.5% 9.2%CS Tremont Long-Short Long-Short 2.3% 8.7% 3.8% 5.4% 7.1%CS Tremont Market Neutral Market Neutral 3.5% 3.3%-14.5% -5.7%0.6%* 35% LC, 10% SC, 12% Int'l, 3% Emerging, 25% FI, 5% HY, 5% Global FI, 5% REITS5
Economic Environment6
Components of U.S. GDP7
Key Economic Indicators8
Economic Environment9
Market Summary10Source: ICC
Domestic Equity11Source: ICC
International Equity12Source: ICC
Emerging Equity13Source: ICC
Currency Markets & Yield Curve14Source: ICC
Bond Markets15Source: ICC
2011SectorIndex2004200520062007200820092010JanFebMarQTR 12011SC Growth R2000 Growth 14.3% 4.1% 13.4% 7.1%-38.5%34.5% 29.1%-0.6%5.9% 3.8% 9.2% 9.2%SMid Cap R2500 18.3% 8.1% 16.2% 1.4%-36.8%34.4% 26.7% 1.3% 4.9% 2.3% 8.7% 8.7%Small Cap Russell 2000 18.3% 4.6% 18.4%-1.6% -33.8%27.2% 26.9%-0.3%5.5% 2.6% 7.9% 7.9%REITS Wilshire REIT 33.2% 13.8% 36.0%-17.6% -39.2%28.6% 28.6% 3.5% 4.6%-1.4%6.7% 6.7%SC Value R2000 Value 22.3% 4.7% 23.5%-9.8% -28.9%20.6% 24.5% 0.1% 5.1% 1.4% 6.6% 6.6%LC Value R1000 Value 16.5% 7.1% 22.3%-0.2% -36.8%19.7% 15.5% 2.3% 3.7% 0.4% 6.5% 6.5%Large CapRussell 1000 11.4% 6.3% 15.5% 5.8%-37.6%28.4% 16.1% 2.4% 3.5% 0.3% 6.2% 6.2%LC Growth R1000 Growth 6.3% 5.3% 9.1% 11.8%-38.4%37.2% 16.7% 2.5% 3.3% 0.1% 6.0% 6.0%S&P 500 S&P 500 10.9% 4.9% 15.8% 5.5%-37.0%26.5% 15.1% 2.4% 3.4% 0.0% 5.9% 5.9%CommoditiesDJ UBS Commodity 9.2% 21.4% 2.1% 16.2%-35.7%18.9% 16.8% 1.0% 1.3% 2.1% 4.4% 4.4%High Yield BC HY 11.1% 2.7% 11.9% 1.9%-26.2%58.2% 15.1% 2.2% 1.3% 0.3% 3.9% 3.9%BalancedDiversified* 12.8% 6.4% 15.2% 5.9%-26.9%24.8% 14.4% 1.3% 2.5% 0.2% 3.9% 3.9%Intl. Dev. EAFE (net) 20.3% 13.5% 26.3% 11.2%-43.4%31.8% 7.8% 2.4% 3.3%-2.2%3.4% 3.4%Intl. Emerging EM (net) 25.6% 34.0% 32.2% 39.4%-53.3%78.5% 18.9%-2.7% -0.9%5.9% 2.1% 2.1%Emerging FI BC Emerging ($US) 11.9% 12.3% 10.0% 5.2%-14.8%34.2% 12.8%-0.3%0.5% 1.4% 1.6% 1.6%Global FI Citigroup WGBI 10.4%-6.9%6.1% 11.0% 10.9% 2.6% 5.2%-0.0%0.4% 0.3% 0.7% 0.7%Muni BondsBC Muni (unadj) 4.5% 3.5% 4.8% 3.4%-2.5%12.9% 2.4%-0.7%1.6%-0.3%0.5% 0.5%Core FI BC Aggregate 4.3% 2.4% 4.3% 7.0% 5.2% 5.9% 6.5% 0.1% 0.3% 0.1% 0.4% 0.4%* 35% LC, 10% SC, 12% Intl, 3% Emerging, 25% FI, 5% HY, 5% Global FI, 5% REITSPERFORMANCE THRU 3/31/2011Investment Market Update: Multiple SectorsMarch 31 Market Update Sources: Lehman Live, Bloomberg, Wilshire16
Executive Summary
" A s s e t G r o w t h a n d A l l o c a t i o n A t q u a r t e r e n d , t h e a s s e t s i n t h e F u n d t o t a l e d a p p r o x i m a t e l y $ 2 0 2 . 4 m i l l i o n , a n i n c r e a s e o f $ 3 . 7 m i l l i o n o v e r t h e q u a r t e r , r e f l e c t i n g i n v e s t m e n t g a i n s o f $ 6 . 7 m i l l i o n a n d n e t o u t f l o w s o f $ 3 . 0 m i l l i o n . T h e F u n d s a l l o c a t i o n t o e q u i t i e s w a s 5 5 . 0 % a t t h e e n d o f t h e q u a r t e r ( i n c l u d i n g e q u i t y a l l o c a t i o n s o f G M O a n d P I M C O A l l A s s e t ) , w e l l b e l o w t h e m e d i a n p u b l i c f u n d s a l l o c a t i o n t o e q u i t i e s o f 5 5 . 8 % . T h e F u n d s e q u i t y c o m m i t m e n t r a n k e d i n t h e 5 4 t h p e r c e n t i l e o f t h e p u b l i c f u n d s u n i v e r s e * . " P e r f o r m a n c e T h e F u n d p o s t e d a 3 . 5 % r e t u r n i n t h e q u a r t e r , r a n k i n g i n t h e 7 4 t h p e r c e n t i l e o f p u b l i c f u n d s , n a t i o n w i d e . " A c t i v e m a n a g e m e n t a d d e d 1 0 b p s F o r t h e o n e - y e a r p e r i o d e n d i n g M a r c h 2 0 1 1 , t h e F u n d p o s t e d a r e t u r n o f 1 2 . 4 % , r a n k i n g i n t h e 7 1 t h p e r c e n t i l e o f p u b l i c f u n d s . " A c t i v e m a n a g e m e n t a d d e d 6 0 b p s F o r t h e t h r e e - y e a r p e r i o d , p e r f o r m a n c e w a s 5 . 2 % , w h i c h r a n k e d i n t h e 1 9 t h p e r c e n t i l e o f p u b l i c f u n d s . T h e f i v e - y e a r r e t u r n o f 6 . 1 % r a n k e d i n t h e 6 t h p e r c e n t i l e . " O v e r t h e a b o v e t i m e p e r i o d s , t h e c o m p o s i t e , p o l i c y i n d e x a n d a l l o c a t i o n i n d e x h a v e o u t p e r f o r m e d t h e m e d i a n p u b l i c f u n d ; a d d i t i o n a l l y , a c t i v e m a n a g e m e n t h a s a d d e d v a l u e " H i g h e r r e l a t i v e r e t u r n s w e r e e a r n e d w i t h l o w e r l e v e l s o f r i s k t h a n t h e m e d i a n p u b l i c f u n d o v e r t h e t h r e e - a n d f i v e - y e a r p e r i o d s . E x e c u t i v e S u m m a r y T o t a l F u n d * A s o f M a r c h 3 1 , 2 0 1 1 t h e p u b l i c f u n d s u n i v e r s e i n c l u d e d 1 7 5 f u n d s w i t h a s s e t s o f a p p r o x i m a t e l y $ 1 . 1 t r i l l i o n . 1 8
Total Fund Asset Growth Summary19
Performance20
Performance – Public Funds Universe21
Performance Contd. – Public Funds Universe22*The above data is for trailing one-year periods
Three Year Risk vs. Return – Public Funds UniverseComposite23
Five Year Risk vs. Return – Public Funds UniverseComposite24
Manager Executive Summary25
Manager Executive Summary Contd.26
EME3.4%EME3.0%Int'l9.9%Int'l10.0%Small Growth3.3%Small Growth2.5%MidValue3.4%MidValue2.5%LargeValue7.4%LargeValue7.0%LargeCore3.9%LargeCore3.0%LargeGrowth9.4%LargeGrowth10.0%GAA10.0%GAA10.0%Core Bonds14.3%Core Bonds15.0%Credit Opps2.0%Credit Opps5.0%HY5.7%HY5.0%Global Bonds8.1%Global Bonds8.0%MarketNeutral4.8%MarketNeutral5.0%AbsReturn4.6%AbsReturn4.0%RE4.1%RE5.0%Real Assets5.0%Real Assets5.0%Cash0.8%Total Fund Asset AllocationTarget Asset Allocation*Totals may not add to 100% due to rounding. Note: Totals include manager cash.27Equities40.7%Equities38.0%Fixed Income30.1%Fixed Income33.0%Alts18.5%Alts19.0%Actual Asset Allocation
Asset Allocation History28
Commitment To Equity – Public Funds Universe29
Actual vs. Policy Weights30Note: Totals may not add to 100% due to rounding.
Investment Performance Analysis
Manager Allocation32
Performance Summary33
Performance Summary Continued34
Performance Summary Continued35
Performance Summary Continued36
Vanguard S&P 500Number of Issues 506 500P/E Ratio 15.9 15.9P/B Ratio 2.3 2.3Earnings Growth Rate 5.4 5.4Beta 1.0 1.0CharacteristicsWeightEXXON MOBIL CORP 3.4APPLE INC 2.7CHEVRON 1.8GENERAL ELECTRIC CO 1.8INTL BUSINESS MACHINES CORP 1.6MICROSOFT 1.6JPMORGAN CHASE + CO 1.5AT+T INC 1.5PROCTOR &GAMBLE 1.4WELLS FARGO 1.4Top 10 Holdings3Yr. Risk vs. Return (Large Core)-2.00.02.04.06.08.010.012.014.016.018.020.0Over / UnderVanguardS&P 500Sector Over / Under vs. ReturnDomestic Equity - Vanguard Institutional Fund-10.0-8.0-6.0-4.0-2.00.02.04.06.08.010.00.00 10.00 20.00 30.00 40.00 50.00ReturnStd Dev.VANGUARD INSTITUTIONAL INDEXS&P 50037
Vanguard Russell 1000 ValueNumber of Issues 241 668Market Cap ($Mil) 66,840 66,860P/E Ratio 13.7 15.1P/B Ratio 1.9 1.5Dividend Yield(%) 2.46 2.34Earnings Per Share (Trailing 12 Months)($) 3.8 3.1Return on Equity(%) 20.1 15.1Beta 1.0 1.0CharacteristicsMV Weight (%)INTL BUSINESS MACHINES CORP $496,718 3.5CONOCOPHILLIPS $476,738 3.4PFIZER INC $404,089 2.9JPMORGAN CHASE + CO $394,207 2.8WELLS FARGO + CO $387,590 2.7MICROSOFTCORP $377,939 2.7BRISTOL MYERS SQUIBB CO $355,327 2.5PHILIP MORRIS INTERNATIONAL $329,744 2.3RAYTHEON COMPANY $315,949 2.2INTEL CORP $305,002 2.2Top 10 Holdings-15-10-505100 1020304050ReturnStd Dev.VANGUARD WINDSOR IIRUSSELL 1000 VALUE3Yr. Risk vs. Return-15.0-10.0-5.00.05.010.015.020.0Over / UnderVanguardRussell 1000 ValueSector Over / Under vs. ReturnDomestic Equity - Vanguard Windsor II38
BDH & S Russell 1000 GrowthNumber of Issues 20 627Market Cap ($Mil) 42,600 85,300P/E Ratio 18.8 11.5P/B Ratio 3.7 3.3Dividend Yield(%) 1.6 1.3CharacteristicsWeight (%)MCDONALD SCORP 8.6%AGILENT TECHNOLOGIES INC 6.6UNUM GROUP 5.7VIVO PARTICIPACOES SA ADR 5.3APPLIED MATERIALS INC 5.1VARIAN MEDICAL SYSTEMS INC 4.9PRAXAIR INC 4.8STRYKER CORP 4.7FIDELITY NATL INFORMATION SVC 4.6BED BATH & BEYOND 4.5Top 10 Holdings-8-6-4-20246810120 1020304050ReturnStd Dev.BDH&SRUSSELL 1000 GROWTH3Yr. Risk vs. Return (Large Growth)-20.0-10.00.010.020.030.040.050.0Over / UnderBDH & SRussell 1000 GrowthSector Over / Under vs. Return Domestic Equity – BDH & S39
Waddell Russell 1000 GrowthNumber of Issues 50 627Market Cap ($Mil) 71,337 85,300P/E Ratio 27.6 11.5P/B Ratio 5.1 3.3Dividend Yield(%) 0.81 1.3CharacteristicsWeight (%)APPLE INC 6.4SCHLUMBERGER LTD 4.7ORACLE CORP 4.9GOOGLE INCCL A 4.3COGNIZANT TECH SOLUTIONS 3.9ALLERGAN INC 3.8WYNN RESORTS LDT 3.6NATIONAL OIL WELL VARCO 3.3T ROWE PRICE GROUP INC 3.1EMERSON ELECTRIC CO 3.1Top 10 Holdings-8-6-4-20246810120 1020304050ReturnStd Dev.WADDELL & REEDRUSSELL 1000 GROWTH3Yr. Risk vs. Return (Large Growth)-10.0-5.00.05.010.015.020.0Over / UnderWaddell & ReedRussell 1000 GrowthSector Over / Under vs. Return Domestic Equity - Waddell & Reed40
-5-3-1135791113150 102030405060ReturnStd Dev.KENNEDYRUSSELL MIDCAP VALUEKennedyRussell Mid Cap ValueNumber of Issues 54 541Market Cap ($Mil) 7,032 7,665P/E Ratio 15.3 15.5P/B Ratio 2.1 1.7Dividend Yield(%) 1.4 2.0Earnings Per Share (Trailing 12 Months)($) 2.6 2.0Return on Equity(%) 8.7 7.8Beta 1.0 1.1CharacteristicsMV Weight (%)OIL STATES INTERNATIONAL INC 1,619,802 2.8AMERIPRISE FINANCIAL INC 1,497,987 2.6ATWOOD OCEANICS INC 1,483,624 2.6HARMAN INTERNATIONAL INDUSTRIES 1,411,107 2.4PIONEER NATURAL RESOURCES 1,396,962 2.4TRIMBLE NAVIGATION LTD 1,376,962 2.4SM ENERGY CO 1,342,468 2.3FLIR SYSTEMS INC 1,339,649 2.3ALLIED WORLD ASSURANCE CO 1,330,281 2.3Top 10 Holdings3Yr. Risk vs. Return (Mid Value)-10.0-5.00.05.010.015.020.025.0Over / UnderKennedyRussell Mid Cap ValueSector Over / Under vs. Return Domestic Equity - Kennedy41As of 12/31/10
Times SquareRussell 2000 GrowthNumber of Issues 109 1,269Market Cap ($Mil) 1,534 1,618P/E Ratio 22.1 22.5P/B Ratio 4.6 4.9Dividend Yield(%) 0.42 .45Earnings Per Share (Trailing 12 Months)($) 1.6 1.3Return on Equity(%) 11.3 11.7Beta 1.0 1.0CharacteristicsMV Weight (%)GLOBAL PAYMENTS INC14,186,800 2.07SOLERA HOLDINGS INC14,210,910 2.07ULTIMATE SOFTWARE GROUP INC12,925,000 1.88VARIAN SEMICONDUCTOR EQUIP12,410,850 1.81WRIGHT EXPRESS CORP11,923,200 1.74BOTTOMLINETECHNOLOGIES INC11,500,380 1.68GENESEE +WYOMING INC CL A11,232,600 1.64STANDCORP FINANCIAL CORP INC10,893,544 1.59UNITED NATURAL FOODS INC9,860,400 1.44TRANSDIGM GROUP9,347,045 1.36Top 10 Holdings024681012141618200 1020304050ReturnStd Dev.TIMES SQUARERUSSELL 2000 GROWTH3Yr. Risk vs. Return (Small Growth)-15.0-10.0-5.00.05.010.015.020.025.0Over / UnderTimes SquareRussell 2000 GrowthSector Over / Under vs. Return Domestic Equity - Times Square42
0510152025Weight %Morgan Stanley MSCI EAFEPrice / Sales 0.98 0.89Price / Earnings 12.16 11.52Price / Cash Flow 5.29 4.32Price / Book 1.89 1.42Dividend Yield 3.65 3.33CharacteristicsSector Weights3Yr. Risk vs. Return (Developed Int’l)Country AllocationInternational Equity - Morgan Stanley-13-11-9-7-5-3-113570 102030405060ReturnStd Dev.Morgan Stanley Int'lMSCI EAFE (NET)43Morgan StanleyAmericas 2.29United Kingdom 34.97Europe Developed 33.29Japan 25.56Asia ex. Japan 3.88
CharacteristicsTop 10 Holdings3Yr. Risk vs. Return (Emerging Markets)Country AllocationInternational Equity - Morgan Stanley Emerging Equity-8-6-4-202468101215 25 35 45 55ReturnStd Dev.Morgan Stanley EMMSCI EMERGING MARKETS (NET)44Morgan StanleyMSCI EM FreeAverage Market Cap 13.96 11.52Price / Earnings 14.41 11.88Dividend Yield 1.74 3.33Price / Cash Flow 3.63 4.32Price / Book 2.37 1.42Morgan StanleyMSCI EM FreeSAMSUNG ELECTRONICS CO 2.8 2.7LUKOIL HOLDING 2.6 0.9AMERICA MOVIL SAB DE CV 2.5 1.5PETROLEO BRASILEIRO SA 1.9 3.4VALE SA 1.7 2.8SBERBANK OF RUSSIA 1.7 0.9NASPERS LTD 1.6 0.6ITAU UNIBANCO MULTIPL 1.6 1.4CHINA CONTSRUCTION BANK 1.5 1.1TAIWAN SEMICONDUCTOR MFG 1.4 1.5SAMSUNG ELECTRONICS CO 2.8 2.7LUKOIL HOLDING 2.6 0.9Morgan StanleyMSCI EM FreeASIA53.6 57.6EMERGING EURO. M. EAST, AFRICA23.5 19.0LATIN AMERICA19.0 23.3CASH2.9 0.0OTHER 1.0 0.0
Penn CapitalMerrill Lynch HY Cash PayAverage Coupon(%) 8.7 8.2Average Maturity(Yrs) 7.4 7.4Duration(Yrs) 3.9 4.3Number of Issues 162Quality B+ B+Characteristics0.51.87.711.011.216.720.413.92.12.95.95.80.0005.00010.00015.00020.00025.000Average Maturity % Held4681012141618200 5 10 15 20 25 30ReturnStd Dev.PENN CAPITALBofAML US HIGH YIELD CASH PAY3Yr. Risk vs. Return (High Yield Bonds)1.0 1.01.83.27.216.220.439.03.70.55.50.05.010.015.020.025.030.035.040.045.0Credit DistributionDomestic Fixed Income (High Yield) – Penn Capital45
BrandywineCiti World Gov’tIndexAverage Coupon(%) 5.3Average Maturity(Yrs) 20.3Duration(Yrs) 5.46.3Number of Issues 73Quality AYield to Maturity(%) 6.32.33CharacteristicsSector Allocation0.02.04.06.08.010.012.00.00 5.00 10.00 15.00 20.00ReturnStd Dev.BRANDYWINE GLOBAL BOND FUNDCitigroup WGBI (All Maturities)3Yr. Risk vs. Return (Global Bonds)Credit Distribution Global Fixed Income - Brandywine46.04.622.26.51.31.23.614.5051015202530354045502.859.02.39.01.511.412.02.3-0.3-1001020304050607046
Income ResearchBarclays Capital Gov’t/CorpYield 2.9 2.2Option Adj Spread 104 43Effective Duration(Yrs) 3.8 3.9Convexity 0.2 0.2Average Quality Ax3/AA- Aa1/AACharacteristics13.09.04.17.015.93.523.97.815.8051015202530Sector Allocation024681012140246810ReturnStd Dev.INCOME RESEARCHBC GOV/CREDIT INTERMEDIATE3Yr. Risk vs. Return (Core Bonds)22.921.88.929.216.90.0 0.00.30.005.0010.0015.0020.0025.0030.0035.00Credit DistributionDomestic Fixed Income – Income Research47
Loomis Sayles Blended Index*Average Maturity(Yrs)10.27.5Duration(Yrs)6.15.4Average QualityBaa3n/aNumber of Issues647 5432CharacteristicsSector Allocation3Yr. Risk vs. Return (High Yield)Credit Distribution3.60.720.822.71.023.210.79.12.45.9100.00204060801001200.94.06.111.025.620.017.65.24.05.7051015202530N/A* Index consists of 50% BC Corporate / 25% BC High Yield / 25% S&P/LSTA Leveraged Loan.Loomis, Sayles & Company – Credit Asset Trust48
Absolute Return – PIMCO All Asset FundSource: PIMCO49Fund Number 736Fund NameAll Asset FundTotal Fund Net Assets ($US MM) 21,112.59/30/2009 12/31/2009 3/31/2010 6/30/2010 9/30/2010 12/31/2010 1/31/2011 2/28/2011 3/31/2011Short-Term Strategies: 10.0% 6.0% 4.9% 4.4% 10.4% 6.9% 6.3% 6.4% 6.7%Floating Income Fund 1.4% 0.9% 1.0% 1.2% 5.3% 6.1%Low Duration Fund 3.7% 2.3% 2.5% 1.3% 2.6% 0.7%Short Term Fund 4.9% 2.7% 1.4% 1.9% 2.5% 0.1%US Bond Strategies: 28.6% 27.4% 28.1% 13.9% 12.4% 9.8% 8.9% 8.6% 8.0%GNMA Fund ------Investment Grade Corporate Bond Fund 13.0% 12.1% 8.4% 5.9% 5.7% 5.3%Long Duration Total Return Fund 3.5% 3.3% 3.2% 0.3% 0.0% 0.0%Long Term Credit Fund 5.6% 6.0% 6.8% 6.2% 6.1% 4.2%Long-Term US Government Fund 4.0% 3.6% 3.5% 0.2% 0.1% 0.1%Mortgage-Backed Securities Fund ------Total Return Fund 2.5% 2.3% 6.2% 1.3% 0.6% 0.2%Alternative Bond Strategies: 12.5% 13.7% 14.9% 30.1% 33.2% 36.7% 36.4% 36.0% 34.2%Developing Local Markets 0.8% 2.5% 3.1% 5.6% 3.4% 3.0%Diversified Income Fund 3.5% 3.5% 3.4% 3.4% 3.5% 3.6%Emerging Local Bond Fund 1.5% 1.8% 2.0% 4.1% 2.0% 1.5%Emerging Markets Bond Fund 1.8% 1.4% 1.5% 1.2% 0.6% 0.6%Foreign Bond Fund (Unhedged) 0.1% 0.1% 0.1% 0.1% 0.1% 0.8%Global Advantage Strategy Bond Fund 2.0% 2.0% 2.4% 2.3% 2.2% 2.6%Global Bond Fund (Unhedged) ------High Yield Fund 1.0% 0.7% 0.7% 1.7% 2.3% 3.9%High Yield Spectrum Fund - - - - 0.4% 0.8%Income Fund 1.8% 1.8% 1.8% 4.0% 7.4% 8.9%Unconstrained Bond Fund - - - 7.8% 11.4% 11.0%Inflation Related Strategies: 35.8% 36.8% 29.2% 22.3% 12.0% 18.7% 20.0% 20.9% 22.9%CommoditiesPLUS™ Strategy Fund - - - 2.2% 1.8% 3.1%CommodityRealReturn Strategy Fund® 4.0% 4.5% 2.8% 3.8% 1.9% 4.2%Real Return Asset Fund 25.9% 26.0% 20.5% 12.9% 6.0% 8.2%Real Return Fund 5.6% 5.9% 5.6% 1.8% 1.3% 1.7%RealEstateRealReturn Strategy Fund 0.3% 0.3% 0.3% 1.5% 1.0% 1.5%Long Equity-Related Strategies: 5.1% 5.0% 5.1% 9.0% 8.8% 8.5% 8.4% 8.3% 10.6%EqS Pathfinder Fund - - - 1.2% 1.1% 1.1%EM Fundamental IndexPLUSTM TR Strategy Fund 1.8% 1.9% 1.8% 4.7% 6.0% 5.9%Fundamental IndexPLUSTM0.1% 0.1% 0.1% 0.1% 0.1% 0.1%Fundamental IndexPLUSTM TR 0.8% 0.7% 0.8% 0.7% 0.4% 0.4%Int'l StocksPLUS® TR Strategy Fund (U.S Dollar Hedged) 1.0% 0.8% 0.8% 0.8% 0.4% 0.3%Int'l StocksPLUS® TR Strategy Fund (Unhedged) 0.3% 0.3% 0.3% 0.5% 0.3% 0.3%Small Cap StocksPLUS® Total Return Fund 0.7% 0.7% 0.7% 0.6% 0.1% 0.1%StocksPLUS® Fund 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%StocksPLUS® Total Return Fund 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%Alternative Equity-Related Strategies: 8.1% 11.2% 17.9% 20.2% 23.2% 19.5% 20.0% 19.8% 17.7%Convertible Fund 2.6% 2.7% 2.6% 3.2% 3.6% 3.7%Fundamental Advantage Total Return Strategy Fund 5.5% 8.5% 15.2% 16.9% 19.7% 15.7%100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Asset AllocationHistorical AllocationRisk ProfileTactical Asset Allocation - GMO Global BalancedSource: GMO50
Portfolio CharacteristicsSector Allocation Market Neutral - PyramisSource: Pyramis51
Strategy / Fund DetailsGeographic DiversificationProperty Type DiversificationTotal Return by Property TypeReal Estate – UBS Trumbull Property FundSource: UBS52
Portfolio ReturnsActive Portfolio WeightsAttribution ChartAsset Allocation SummaryWellington Diversified Inflation Hedges53
Kristin R. Finney-Cooke, CAIASenior ConsultantMs. Finney-Cooke joined NEPC in 2010 with over twelve years of investment experience. Prior to NEPC, Kristin was a Principal at Mercer Investment Consulting with broad responsibility in all facets of client management, which included providing clients (both public and corporate) with advice on asset allocation, investment policy development, investment manager selection, performance measurement and risk management. While at Mercer, Kristin was their National Public Fund Segment Leader for three years where she was responsible for ensuring relevant intellectual capital was leveraged throughout the firm, client solutions were proactive, cutting edge and used as a national resource for public fund clients. Additionally, Kristin led the Emerging Managers Task Force where she identified high conviction Emerging/MWDBE (Minority, Women and Disabled Persons Business Enterprise) managers, performed rigorous due diligence and helped develop and implement Emerging/MWDBE programs.Prior to Mercer, Kristin was a Financial Advisor in the Private Client Services Group of Credit Suisse First Boston. At Credit Suisse First Boston, Kristin developed and implemented customized investment strategies for her high net worth and institutional client base. Kristin also conducted research in the private equity and hedge fund asset classes in order to identify opportunities for smaller institutional clients. Kristin holds an MBA in Finance and Accounting from the University of Chicago and a BS from Howard University. Kristin is a frequent speaker at conferences including, Annual NASP, Plan Sponsor and Emerging Minority Manager Consortium, IMN Public FundsSummit and IL PERS Conferences and the Stars and Stripes Conference. Team Bios54
Michael J. Valchine, CAIAConsultantMichael’s investment career began in 1998, and he joined NEPC in 2007. As a Consultant, Michael is exposed to a variety of client types, including public funds, Taft-Hartley funds, corporate plans, endowments, foundations and defined contribution plans. In support of his client relationships, Michael is responsible for overall plan design and asset allocation, manager selection and performance monitoring as well as asset and liability studies in conjunction with risk budgeting. He is also a member of the Small Cap Equity Advisory Group.Prior to joining NEPC, Michael was a Registered Client Associate within the Merrill Lynch Institutional Consulting Group. While there he supported two consultants in the four main areas of the institutional consulting relationship; investment policy statements, asset allocation studies, manager searches and performance monitoring. Prior to Merrill Lynch, Michael worked as an analyst on the pension and 401(k) investment staff of ThyssenKrupp Budd Company. While at ThyssenKrupp Budd Company he assisted the Manager of Trust Investments in the day to day management of the pension trust and 401(k) including monitoring market values and transactions, investment manager performance, and acting as a liaison between the investment committee and current and prospective service providers. Michael earned an M.S. degree in Finance from Walsh College in 2006 and a B.A. in Finance from Oakland University 2001. Michael became a CAIA designee in 2010.Team Bios55
" N E P C u s e s , a s i t s d a t a s o u r c e , t h e p l a n s c u s t o d i a n b a n k o r f u n d s e r v i c e c o m p a n y , a n d N E P C r e l i e s o n t h o s e s o u r c e s f o r s e c u r i t y p r i c i n g , c a l c u l a t i o n o f a c c r u a l s , a n d a l l t r a n s a c t i o n s , i n c l u d i n g i n c o m e p a y m e n t s , s p l i t s , a n d d i s t r i b u t i o n s . W h i l e N E P C h a s e x e r c i s e d r e a s o n a b l e p r o f e s s i o n a l c a r e i n p r e p a r i n g t h i s r e p o r t , w e c a n n o t g u a r a n t e e t h e a c c u r a c y o f a l l s o u r c e i n f o r m a t i o n c o n t a i n e d w i t h i n . " T h e I n v e s t m e n t P e r f o r m a n c e A n a l y s i s ( I P A ) i s p r o v i d e d a s a m a n a g e m e n t a i d f o r t h e c l i e n t s i n t e r n a l u s e o n l y . P o r t f o l i o p e r f o r m a n c e r e p o r t e d i n t h e I P A d o e s n o t c o n s t i t u t e a r e c o m m e n d a t i o n b y N E P C . " I n f o r m a t i o n i n t h i s r e p o r t o n m a r k e t i n d i c e s a n d s e c u r i t y c h a r a c t e r i s t i c s i s r e c e i v e d f r o m s o u r c e s e x t e r n a l t o N E P C . W h i l e e f f o r t s a r e m a d e t o e n s u r e t h a t t h i s e x t e r n a l d a t a i s a c c u r a t e , N E P C c a n n o t a c c e p t r e s p o n s i b i l i t y f o r e r r o r s t h a t m a y o c c u r . " S & P I n d e x d a t a i s p r o v i d e d c o u r t e s y o f S t a n d a r d & P o o r s F i n a n c i a l S e r v i c e s L L C . I n f o r m a t i o n D i s c l o s u r e 5 6