HomeMy Public PortalAbout2011 3rd Quarter ReportInvestment Performance Analysis
November 8, 2011
Kristin Finney-Cooke, CAIA, Senior Consultant
Metropolitan St. Louis
Sewer District
Table of Contents
Market Commentary & Update 3
Executive Summary 17
Investment Performance Analysis 33
Page
2 9/30/2011
Market Commentary & Update
3
9/30/2011
Market Environment - Overview
4
Qtr. Ytd 1 Yr.3 Yr.5 Yr.10 Yr.
World Equity Benchmarks
MSCI World World -16.6%-12.2%-4.3%-0.1%-2.2%3.7%
Qtr. Ytd 1 Yr.3 Yr.5 Yr.10 Yr.
Domestic Equity Benchmarks
S&P 500 Large Core -13.9%-8.7%1.1%1.2%-1.2%2.8%
Russell 1000 Large Core -14.7%-9.2%0.9%1.6%-0.9%3.3%
Russell 1000 Growth Large Growth -13.1%-7.2%3.8%4.7%1.6%3.0%
Russell 1000 Value Large Value -16.2%-11.2%-1.9%-1.5%-3.5%3.4%
S&P Mid Cap 400 Mid Core -19.9%-13.0%-1.3%4.1%2.2%7.5%
Russell 2000 Small Core -21.9%-17.0%-3.5%-0.4%-1.0%6.1%
Russell 2000 Growth Small Growth -22.2%-15.6%-1.1%2.1%1.0%5.5%
Russell 2000 Value Small Value -21.5%-18.5%-6.0%-2.8%-3.1%6.5%
NAREIT All Composite REIT -14.6%-5.9%1.3%-1.1%-3.0%8.6%
Qtr. Ytd 1 Yr.3 Yr.5 Yr.10 Yr.
International Equity Benchmarks
MSCI EAFE Int'l Developed -19.0%-15.0%-9.4%-1.1%-3.5%5.0%
MSCI EME Em. Mkt. Eqty. -22.6%-21.9%-16.1%6.3%4.9%16.1%
MSCI ACWI ex US International -19.8%-16.8%-10.8%0.5%-1.6%6.8%
S&P EPAC SmallCap Small Cap Int'l -19.8%-14.6%-5.9%3.7%-1.6%9.8%
Qtr. Ytd 1 Yr.3 Yr.5 Yr.10 Yr.
Domestic Fixed Income Benchmarks
Barclays Aggregate Core Bonds 3.8%6.6%5.3%8.0%6.5%5.7%
Barclays High Yield High Yield -6.1%-1.4%1.8%13.8%7.1%8.8%
Barclays 1-10 Muni.Municipal Bond 3.8%8.4%3.9%8.1%5.0%5.1%
Barclays 1-10 TIPS Inflation 6.5%8.8%6.0%6.5%6.4%6.3%
90 Day T-Bill Cash 0.0%0.1%0.1%0.2%1.5%1.9%
Qtr. Ytd 1 Yr.3 Yr.5 Yr.10 Yr.
Global Fixed Income Benchmarks
Citigroup World Govt Bond Global Bonds 2.4%6.5%4.6%7.7%7.5%7.4%
J.P. Morgan EMBI Plus Em. Mkt. Bonds -1.2%3.8%1.4%11.6%7.9%11.0%
Qtr. Ytd 1 Yr.3 Yr.5 Yr.10 Yr.
Diversified Benchmark
Balanced Index *Diversified -10.0%-5.5%0.2%3.4%1.4%5.4%
Qtr. Ytd 1 Yr.3 Yr.5 Yr.10 Yr.
Alternative Benchmarks
DJ UBS Commodity Index Commodities -11.3%-13.6%0.0%-5.7%-1.1%5.9%
NCREIF Property Index Real Estate n/a n/a n/a n/a n/a n/a
HFRI Fund of Funds Hedge Fund of Funds -5.0%-5.3%0.5%-2.1%0.4%3.4%
DJCS HF Composite All Hedge Funds -4.8%-3.2%1.3%4.6%4.2%6.6%
DJCS Event Driven Event Driven -10.9%-9.7%-4.3%3.6%3.9%7.4%
DJCS Long-Short Long-Short -9.8%-9.1%-3.7%3.2%3.0%5.9%
DJCS Equity Market Neutral Market Neutral -3.3%2.1%2.2%-14.8%-6.8%0.1%
9/30/2011
Economic Environment
5
Source: Bloomberg As of 9/30 Source: Bloomberg As of 9/30
Source: Bloomberg As of 9/30 Source: Bloomberg As of 9/30
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%Unemployment RateUnemployment Rate vs. U-6
Unemployment Rate U-6
2.0%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%Real Gross Domestic Product Growth
GDP growth in Q2 was revised to 1.3%; Q3 GDP growth is
estimated at 2.0%.
Unemployment stayed flat at 9.1% while U-6, a measure of
broader unemployment, ended September at 16.5%.
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
180
200
Consumer SentimentS&P/Case Shiller Home Price IndexS&P/Case Shiller Home Price Index and Consumer
Confidence
S&P Case-Shiller Home Price Index
Consumer Confidence
60
65
70
75
80
85
90
95
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%Capacity Utilization12-Mo CPICapacity Utilization vs. Rolling 12 Month CPI
12-Mo CPI Capacity Utilization
Consumer confidence dropped in Q3; the Case-Shiller Home
price index remains low.
Capacity utilization rose modestly in September but still
remains at depressed levels while CPI rose to 3.9%.
9/30/2011
Components of U.S. GDP
6
Source: Bloomberg As of 9/30 Source: Bloomberg As of 8/31
Source: Bloomberg As of 6/30 Source: Bloomberg As of 8/31
-10%
-5%
0%
5%
10%
15%Yearly % ChangeRetail Sales
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Inventory to Sales Ratio
6%
7%
8%
9%
10%
11%
12%
13%
14%
Corporate Profits as % of GDP
Profits/GDP
Average
-80
-70
-60
-50
-40
-30
-20
-10
0
$ BillionsU.S. Trade Surplus (Deficit)
This year has seen modest growth in Retail Sales, only
recently seeing a small dip to 7.8% in September.
The inventory liquidation process that was a boost to 2009
growth results has worn off, meaning demand must
contribute to further growth.
Corporate Profits as a % of GDP increased in Q2 to 12.9%.The U.S. trade deficit stayed flat in August.
9/30/2011
Key Economic Indicators
7
Source: Bloomberg As of 9/30 Source: Bloomberg As of 9/30
Source: St. Louis Fed As of 6/30 Source: Bloomberg As of 8/31
-20
-15
-10
-5
0
5
10
15
20
12 month rolling % changeEconomic Conference Board Leading
Economic Indicators
80
85
90
95
100
105
110
Index Value (1986=100)Small Business Optimism Index
-5
-4
-3
-2
-1
0
1
2
3 month moving averageChicago Fed National Activity 3-Mo Mvg. Avg.
Rolling percentage change in the Leading Economic
Indicators index decreased slightly in September.
The small business optimism index rose slightly in
September while remaining at depressed levels.
US GDP relative to Potential GDP has remained low in
recent months.Chicago Fed National Activity 3 Month moving average
decreased modestly in August.
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%US GDP Relative to PotentialUS GDP Relative to Potential
9/30/2011
Economic Environment
8
Source: United States Federal Reserve As of 9/30 Source: IMF, CBOE As of 12/31
Source: St. Louis Fed As of 9/1 Source: Bloomberg As of 9/30
0
20
40
60
80
100
120
140
160
180
200 Developed Markets: Debt as Percent of GDP
-
500
1,000
1,500
2,000
2,500
3,000 Federal Reserve Assets
Loans, Liquidity, Rescue and Other
Assets
Securities Held Outright Less
Overnight and Term
0
200
400
600
800
1000
1200
1400
1600
1800
0
2
4
6
8
10
12
1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011Excess Reserves ($billions)M2 Money MultiplierM2 Money Multiplier vs. Excess Reserves
M2 Money Multiplier (RHS)
Excess Reserves (LHS)
0
1000
2000
3000
4000
5000
6000
7000
Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Greece
Spain
Portugal
Italy
Peripheral Europe CDS Spreads
The Fed Balance Sheet has leveled off (for now) as QE2
came to a close on June 30, 2011.
Many developed nations are at or approaching
unsustainable debt levels.
The Money Multiplier remains low as a result of QE2, and
banks have increased reserves in recent months.
Peripheral Europe Credit Default Swap spreads have widened
dramatically over the last 18 months, indicating increased
investor concern about default possibility.
Market Summary
9
Source: ICC
9/30/2011
Domestic Equity
10
Source: ICC
9/30/2011
International Equity
11
Source: ICC
9/30/2011
Emerging Equity
12
Source: ICC
9/30/2011
Currency Markets & Yield Curve
13
Source: ICC
9/30/2011
Bond Markets
14
Source: ICC
9/30/2011
10/31/2011
Investment Market Update As of October 31, 2011
Sources: Lehman Live, Bloomberg, Wilshire
15
Index 2008 2009 2010 QTR 1 Apr May Jun QTR 2 July Aug Sep QTR 3 Oct 2011
BC Muni (unadj)-2.5%12.9%2.4%0.5%1.8%1.7%0.4%3.9%1.0%1.7%1.0%3.8%-0.4%8.0%
Citigroup WGBI 10.9%2.6%5.2%0.7%3.2%-0.1%0.2%3.3%2.3%2.1%-2.0%2.4%0.5%7.1%
BC Aggregate 5.2%5.9%6.5%0.4%1.3%1.3%-0.3%2.3%1.6%1.5%0.7%3.8%0.1%6.8%
BC Emerging ($US)-14.8%34.2%12.8%1.6%1.4%1.3%0.7%3.4%2.0%-0.3%-4.5%-2.9%4.8%6.8%
BC HY -26.2%58.2%15.1%3.9%1.6%0.5%-1.0%1.1%1.2%-4.0%-3.3%-6.1%6.0%4.5%
Diversified*-26.9%24.8%14.4%3.9%2.9%-0.6%-1.3%1.0%-0.6%-4.2%-6.9%-11.3%8.0%1.6%
S&P 500 -37.0%26.5%15.1%5.9%3.0%-1.1%-1.7%0.1%-2.0%-5.4%-7.0%-13.8%10.9%1.3%
DJ UBS Commodity -35.7%18.9%16.8%4.4%3.5%-5.1%-5.0%-6.7%3.0%1.0%-14.7%-11.3%6.6%-7.9%
EAFE (net)-43.4%31.8%7.8%3.4%6.0%-3.0%-1.3%1.6%-1.6%-9.0%-9.5%-19.0%9.6%-6.8%
Russell 2000 -33.8%27.2%26.9%7.9%2.6%-1.9%-2.3%-1.6%-3.6%-8.7%-11.2%-21.9%15.1%-4.5%
EM (net)-53.3%78.5%18.9%2.1%3.1%-2.6%-1.5%-1.1%-0.4%-8.9%-14.6%-22.5%13.2%-11.5%
R1000 Value -36.8%19.7%15.5%6.5%2.7%-1.1%-2.1%-0.5%-3.3%-6.2%-7.6%-16.2%11.4%-1.1%
R1000 Growth -38.4%37.2%16.7%6.0%3.4%-1.1%-1.4%0.8%-1.0%-5.3%-7.4%-13.2%11.0%3.0%
Russell 1000 -37.6%28.4%16.1%6.2%3.0%-1.1%-1.8%0.1%-2.2%-5.8%-7.5%-14.8%11.2%0.9%
R2500 -36.8%34.4%26.7%8.7%2.9%-1.2%-2.2%-0.6%-3.8%-8.2%-10.8%-21.2%14.6%-3.4%
R2000 Growth -38.5%34.5%29.1%9.2%3.6%-2.0%-2.1%-0.6%-3.9%-8.6%-11.5%-22.3%15.9%-2.2%
R2000 Value -28.9%20.6%24.5%6.6%1.6%-1.8%-2.5%-2.7%-3.3%-8.8%-10.9%-21.4%14.4%-6.8%
PERFORMANCE THROUGH 10/31/2011
Supplemental Performance
Executive Summary
16
" 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 $ 1 8 8 . 1 m i l l i o n , a
d e c r e a s e o f $ 1 9 . 6 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 l o s s e s o f $ 1 6 . 5
m i l l i o n a n d n e t o u t f l o w s o f $ 3 . 1 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 4 . 7 % 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 ) , a b o v e 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 0 . 6 % .
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 3 9 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 - 8 . 0 % 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 2 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 , 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 d e t r a c t e d 2 0 b p s f r o m p e r f o r m a n c e
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 S e p t e m b e r 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 . 5 % ,
r a n k i n g i n t h e 5 7 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 3 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 . 4 % , w h i c h r a n k e d i n t h e 2 2 n d 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 4 . 1 % r a n k e d i n t h e 8 t h p e r c e n t i l 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 S e p t e m b e r 3 0 , 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 7 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 . 3 t r i l l i o n .
1 7 9 / 3 0 / 2 0 1 1
Total Fund Asset Growth Summary
18 9/30/2011
Performance
19 9/30/2011
Performance – Public Funds Universe
20 9/30/2011
Performance Contd. – Public Funds Universe
21
*The above data is for trailing one-year periods
9/30/2011
Three Year Risk vs. Return – Public Funds Universe
Composite
22 9/30/2011
Five Year Risk vs. Return – Public Funds Universe
Composite
23 9/30/2011
Manager Executive Summary
24 9/30/2011
Asset Class / Manager Benchmark Organization Product &
Process
Last 3
Months 1 Year 3 Years 5 Years
DOMESTIC EQUITY
Vanguard Windsor II Russell 1000
Value No changes to note Stable 1.5% 2.4% 2.4% 1.7%
BDH&S Russell 1000
Growth No changes to note (3.2)%(4.3)%(9.0)%(3.5)%
Waddell & Reed Russell 1000
Growth No changes to note
Matt Hekman, Ass't Portfolio Manager
has moved from the LC Growth team
to the firm’s LC Value strategy.
Replacing Matt Hekman as Ass't
Portfolio Manager is Brad Klapmeyer,
CFA, who has been with the firm for 4
years covering the Health Care
industries.
(0.1)%(0.4)%(2.3)%1.2%
Vanguard Institutional
Index S&P 500 No changes to note Stable 0.0% 0.1% 0.3% 0.2%
Kennedy Russell MidCap
Value No changes to note Two analysts left the firm during July.(0.7)%0.9% 4.8% n/a
TimesSquare Russell 2000
Growth No changes to note
In July, an Analyst, Matthew D'Alto
was added to the team and will
cover the Energy sector
2.7% 6.6% 5.0% 3.8%
INTERNATIONAL EQUITY
Morgan Stanley
International MSCI EAFE No changes to note Stable 2.2% 4.4% 1.1% 2.4%
Morgan Stanley
Emerging
MSCI Emerging
Mkts Free No changes to note
Jason Kang joined the team as an
analyst focusing on Korea and
Taiwan and will be based in
Singapore. Rama Rao who
conducted stock selection will be
resigning.
2.8% 1.2% (1.2)%(0.1)%
Excess Return Vs. Benchmark
Manager Executive Summary Contd.
25 9/30/2011
FIXED INCOME
Income Research Barclays Capital
Gov't/Corp
During the third quarter, Steve Kern, a Senior Portfolio Manager on the
securitized team and a shareholder of the firm, left the firm.Stable (0.7)%(0.1)%2.6% 1.0%
Penn Capital Merrill Lynch High
Yield Cash Pay No changes to note Stable 2.0% 2.3% (2.8)%(0.5)%
Pictet JPM GBI EM No changes to note Stable n/a n/a n/a n/a
Loomis Credit Asset
Fund
50/25/25 BC
Credit/HY/LLI No changes to note Stable (2.0)%(0.8)%n/a n/a
GLOBAL / INT'L FIXED INCOME
Brandywine Global
Bond Fund
Citi World Gov't
Index No changes to note Stable 0.1% 1.9% 4.4% 1.6%
TACTICAL ASSET ALLOCATION
GMO 65% MSCI World /
35% BC Agg No changes to note Stable 3.7% 4.2% 2.1% 2.4%
ALTERNATIVE ASSETS
Pyramis 90 Day T-Bill +
300bps
In August, Boyce Greer, who had served as Vice Chairman of Pyramis
Global Advisors, suddenly passed. Charlie Morrison became Vice
Chairman of Pyramis Global Advisors and President of Fixed Income
Division as a result. Also in August, Derek Young was named a Vice
Chairman of Pyramis and President of Fidelity Asset Management's Asset
Allocation division
Stable (1.5)%(3.1)%(3.1)%(2.4)%
PIMCO All Asset CPI + 500bps
There have been no material organizational changes. However, in
September, the establishment of Allianz Asset Management was
announced effective January 1, 2012, which will be the new holding
company structure for Allianz’s asset management businesses: PIMCO
and AGI. Each organization will operate independently of the other.
Stable (8.7)%(9.0)%2.6% (1.3)%
UBS Realty NCREIF Property No changes to note Stable (0.2)%(0.2)%(1.4)%(1.3)%
Wellington Diversified
Inflation Hedge
55% MSCI
World/25%
GSCI/20% BC US
Tips 1-10 Yr
No changes to note Stable (2.8)%(0.1)%n/a n/a
Asset Class / Manager Benchmark Organization Product &
Process
Last 3
Months 1 Year 3 Years 5 Years
Excess Return Vs. Benchmark
Total Fund Asset Allocation
Target Asset Allocation
Note: Totals include manager cash; totals may not add to 100% due to rounding
26
Equities
37.2%
Equities
38.0%
Fixed Income
35.2%
Fixed Income
33.0%
Alts
16.7%
Alts
19.0%
Actual Asset Allocation
9/30/2011
Asset Allocation History
27 9/30/2011
Commitment To Equity – Public Funds Universe
28 9/30/2011
Actual vs. Policy Weights
29
Note: Totals may not add to 100% due to rounding.
9/30/2011
Asset Class Target
Allocation
Actual
Allocation
Variance
from Target
Equity 38.0%37.2%-0.8%
Large Cap Equity 20.0%19.4%-0.6%
Small Cap Equity 5.0%5.8%0.8%
International Equity 10.0%9.0%-1.0%
Emerging Markets Equity 3.0%2.9%-0.1%
Fixed Income 33.0%35.3%2.3%
Core Fixed Income 13.0%14.1%1.1%
High Yield 5.0%4.6%-0.4%
Global Bonds 8.0%9.2%1.2%
Emg Mkts Debt (LC)5.0%5.3%0.3%
Credit Opportunity 2.0%2.0%0.0%
GTAA 10.0%10.2%0.2%
Real Assets 10.0%9.1%-0.9%
Absolute Return 4.0%2.5%-1.5%
Market Neutral 5.0%5.1%0.1%
Cash 0.0%0.6%0.6%
Total 100.0%100.0%
Investment Performance Analysis
30
Manager Allocation
31 9/30/2011
Performance Summary – ICC Universe as of 9/30/11
32 9/30/2011
Performance Summary – ICC Universe as of 9/30/11
33 9/30/2011
Performance Summary – ICC Universe as of 9/30/11
34 9/30/2011
Performance Summary – ICC Universe as of 9/30/11
35 9/30/2011
Domestic Equity - Vanguard Institutional Fund
36
Characteristics
Vanguard
Institutional
Russell 1000
Value
P/E Ratio 13.72 13.20
P/B 2.08 1.96
P/S 1.31 1.23
P/CF 7.39 6.86
Dividend Yield 2.10 2.28
Top 10 Holdings
Exxon Mobil
Apple Inc
Chevron
General Electric
International Business Machines
Microsoft Corp
AT&T
Johnson & Johnson
Proctor & Gamble
Pfizer
Ten Largest Holdings = 21.1% total net assets
Source: Vanguard
9/30/2011
-10
-5
0
5
10
15
20
ConsumerDiscretionaryConsumer StaplesEnergyFinancialsHealth CareIndustrialsInformation TechMaterialsTelecomUtilitiesVanguard Institutional Russell 1000 Value
Domestic Equity - Vanguard Windsor II
37
Equity Characteristics
Windsor II Fund Russell 1000 Value
P/E 12.08 11.76
P/B 1.75 1.36
P/S 1.18 1.00
P/CF 6.44 5.49
Dividend Yield 2.27 2.61
-5
0
5
10
15
20
25
ConsumerDefensiveConsumer CyclicalEnergyFinancialsHealth CareIndustrialsTechnologyMaterialsReal EstateTelecomUtilitiesWindsor II Fund Russell 1000 Value
Top 10 Holdings
Conoco Phillips
Pfizer
Int'l Business Machines
JPMorgan
Microsoft
Wells Fargo
Philip Morris
Hewlett Packard
Intel Corp
Raytheon
Ten Largest Holdings = 29.2% total net assets
Source: Vanguard
9/30/2011
Domestic Equity – BDH & S
38
Source: BDH&S
9/30/2011
Weight
(%)
APPLE INC 7.7
ALLERGAN INC 4.8
CASH 4.7
PRECISIONCASTPARTS CORP 4.2
MASTERCARDINC CLASS A 4.0
STARBUCKSCORP 4.0
GOOGLE INCCL A 3.8
SCHLUMBERGER LTD 3.7
WYNN RESORTS LTD 3.5
COGNIZANTTECH SOLN 3.3
Waddell & Reed R 1000 Growth
Market Cap ($Mil) 68,034 88,204
P/E Ratio 22.7 16.6
P/B Ratio 4.1 4.5
Dividend Yield(%) 1.0 1.6
Earnings Growth (5 yrs) 15.5 14.3
Return on Equity(%) 18.9 26.4
-2
0
2
4
6
8
10
10 15 20 25 30 35Return Std Dev.
Wadell & Reed R 1000 Growth
Characteristics - Equity Top 10 Holdings
3Yr. Risk vs. Return (Large Cap Growth) Sector Over/Under vs. Return
Waddell & Reed – Large Cap Growth
*S&P 500/BC Agg/90 Day T -Bills
September 30 2011
-28
-24
-20
-16
-12
-8
-4
0
4
8
12
16
20 OVER / UNDER Waddell & Reed R 1000 Growth
Domestic Equity - Kennedy
40
Source: Kennedy
9/30/2011
TimesSquare
Russell 2000
Growth
Number of Issues 105 1159
Market Cap ($Mil) 1,441 1,181
P/E Ratio 19.0 18.9
P/B Ratio 3.3 3.6
Dividend Yield(%) 0.6 0.8
Earnings Per Share (Trailing 12 Months)($) 1.7 1.3
Return on Equity(%) 12.6 12.7
Beta 1.0 1.0
Weight
(%)
Return
(%)
GLOBAL PAYMENTS INC 2.3 -20.8
ULTIMATE SOFTWARE GROUP INC 2.2 -14.2
SOLERA HOLDINGS INC 2.2 -14.5
MONTPELIERRE HOLDINGS LTD 2.0 -1.2
GENESEE +WYOMING INC CL A 2.0 -20.7
WRIGHT EXPRESS CORP 1.8 -26.9
CATALYST HEALTH SOLUTIONS IN 1.8 3.4
BOTTOMLINETECHNOLOGIES INC 1.7 -18.5
JACK HENRY+ ASSOCIATES INC 1.7 -3.1
COSTAR GROUP INC 1.7 -12.3
Characteristics
Top 10 Holdings
3 YR Risk vs. Return (Small Cap Growth Equity) Sector Over/Under vs. Return
TimesSquare Capital Management – Small Cap Growth
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
OVER / UNDER TimesSquare Russell 2000 Growth
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
0 10 20 30 40 50 60Return Std Dev.
TimesSquare RUSSELL 2000 GROWTH
41
Morgan Stanley
MSCI EM
Free
Average Market
Cap $16.0B $15.1B
Price / Earnings 12.0% 9.8%
Dividend Yield 1.97 3.30
Price / Book 2.2% 1.6%
Number of
Securities 146 825
Characteristics Sector Weights
3Yr. Risk vs. Return Country Allocation
International Equity - Morgan Stanley Emerging Markets
-13
-11
-9
-7
-5
-3
-1
1
3
5
7
0 10 20 30 40 50 60Return Std Dev.
Morgan Stanley Int'l MSCI EAFE (NET)
42
Morgan
Stanley
MSCI EM
Free
ASIA 57.8 59.3
EMERGING EURO. M. EAST,
AFRICA 21.1 18.3
LATIN AMERICA 16.8 22.3
CASH 2.8 0.0
OTHER 1.6 0.0
9/30/2011
Morgan
Stanley
MSCI EM
Free
Consumer Discretionary 10.8 8.1
Consumer Staples 17.5 7.5
Energy 6.6 13.8
Financials 20.6 23.7
Health Care 2.5 1.1
Industrials 4.6 6.6
Information Technology 12.1 12.9
Materials 6.7 13.9
Mutual Funds 0.9 0.0
Telecom 13.1 8.8
Utilities 2.9 3.5
Cash 1.6 0.0
Characteristics Top 10 Holdings
3Yr. Risk vs. Return Country Allocation
International Equity - Morgan Stanley
-8
-6
-4
-2
0
2
4
6
8
10
12
15 25 35 45 55Return Std Dev.
Manager Index
43
Manager Benchmark
Number of Issues 72 943
Market Cap ($Mil) 48,484 43,750
P/E Ratio 11.4 11.7
P/B Ratio 2.1 2.1
Weight (%) Return (%)
IMPERIAL TOBACCO GROUP PLC 4.5 6.5
UNILEVER NV CVA 4.2 6.2
BRITISH AMERICAN TOBACCO PLC 4.1 1.3
RECKITT BENCKISER GROUP PLC 3.6 -3.3
NESTLE SAREG 3.5 -4.1
PRUDENTIALPLC 2.5 -21.6
HSBC HOLDINGS PLC 2.5 -18.8
BAYER AG REG 2.5 -25.2
NOVARTIS AG REG 2.4 -1.4
VODAFONE GROUP PLC 2.3 0.6
9/30/2011
24.4
3.2
34.9
32.2
1.9 3.6
23.1
13.0
22.2
41.1
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
MANAGER BENCHMARK
Characteristics Average Maturity % Held
Coupon Distribution Distribution Analysis
Domestic Fixed Income (High Yield) – Penn Capital
44
9/30/2011
Global Fixed Income - Brandywine
45
Source: Brandywine
9/30/2011
Domestic Fixed Income – Income Research
46
Source: Income Research
9/30/2011
Loomis, Sayles & Company – Credit Asset Trust
47
Source: Loomis
9/30/2011
0.2
29.2
37.4
25.0
8.1
0.0
30.1
49.5
20.4
0.0
10.0
20.0
30.0
40.0
50.0
60.0 PICTET JPMorgan GBI-EM
Pictet JPM GBI EM
Average Coupon(%) 7.0 6.8
Average Maturity(Yrs) 7.8 6.5
Duration(Yrs) 5.2 4.4
Quality BBB BBB+
Yield to Maturity(%) 5.6 6.7
Characteristics
Sector Allocation
3Yr. Risk vs. Return (Emerging Market)
Credit Distribution
Pictet Emerging Debt
*Source: Pictet
9/30/2011
92.3
9.1
0.8
-2.3
100.0
(20.00)
0.00
20.00
40.00
60.00
80.00
100.00
120.00
PICTET JPMorgan GBI-EM
0
3
6
9
12
15
18
10 12 14 16 18 20Return (%) Std Dev. (%)
Pictet JPM GBI EM
Absolute Return – PIMCO All Asset Fund
Source: PIMCO
49 9/30/2011
Fund Number 736
Fund Name
All Asset
Fund
Total Fund Net Assets ($US MM)23,004.5
12/31/2009 3/31/2010 6/30/2010 9/30/2010 12/31/2010 3/31/2011 6/30/2011 7/31/2011 8/31/2011 9/30/2011
Short-Term Strategies:5.0%3.9%3.2%5.1%0.7%0.1%0.3%0.1%0.1%0.1%
Low Duration Fund 2.3%2.5%1.3%2.6%0.7%0.0%0.2%
Short Term Fund 2.7%1.4%1.9%2.5%0.1%0.0%0.0%
US Core and Long Maturity Bond Strategies:27.4%28.1%13.9%12.4%9.8%8.0%13.3%11.3%8.7%8.4%
GNMA Fund -------
Investment Grade Corporate Bond Fund 12.1%8.4%5.9%5.7%5.3%4.8%4.1%
Long Duration Total Return Fund 3.3%3.2%0.3%0.0%0.0%0.0%1.3%
Long Term Credit Fund 6.0%6.8%6.2%6.1%4.2%3.1%2.8%
Long-Term US Government Fund 3.6%3.5%0.2%0.1%0.1%0.1%2.1%
Mortgage-Backed Securities Fund -------
Total Return Fund 2.3%6.2%1.3%0.6%0.2%0.1%2.9%
EM and Global Bond Strategies:11.2%12.4%16.6%11.8%12.0%12.1%13.1%15.7%17.9%19.4%
Diversified Income Fund 3.5%3.4%3.4%3.5%3.6%4.2%3.9%
Emerging Local Bond Fund 1.8%2.0%4.1%2.0%1.5%0.8%1.5%
Emerging Markets Bond Fund 1.4%1.5%1.2%0.6%0.6%0.2%0.3%
Emerging Markets Currency 2.5%3.1%5.6%3.4%3.0%3.9%4.6%
Foreign Bond Fund (Unhedged)0.1%0.1%0.1%0.1%0.8%0.7%0.7%
Global Advantage Strategy Bond Fund 2.0%2.4%2.3%2.2%2.6%2.4%2.2%
Global Bond Fund (Unhedged)-------
Credit Strategies:6.1%6.1%10.1%18.9%23.5%27.8%27.0%26.6%27.7%29.2%
Convertible Fund 2.7%2.6%3.2%3.6%3.7%4.2%3.4%
Credit Absolute Return Fund -------
Floating Income Fund 0.9%1.0%1.2%5.3%6.1%6.6%7.6%
High Yield Fund 0.7%0.7%1.7%2.3%3.9%5.7%4.6%
High Yield Spectrum Fund ---0.4%0.8%1.4%1.7%
Income Fund 1.8%1.8%4.0%7.4%8.9%9.8%8.9%
Senior Floating Rate Fund ------0.8%
Inflation Related Strategies:36.8%29.2%22.3%12.0%18.7%22.9%15.3%17.4%18.5%17.3%
CommoditiesPLUS™ Strategy Fund --2.2%1.8%3.1%5.1%2.6%
CommodityRealReturn Strategy Fund®4.5%2.8%3.8%1.9%4.2%5.2%1.6%
Real Return Asset Fund 26.0%20.5%12.9%6.0%8.2%8.1%7.8%
Real Return Fund 5.9%5.6%1.8%1.3%1.7%1.5%1.4%
RealEstateRealReturn Strategy Fund 0.3%0.3%1.5%1.0%1.5%3.1%1.9%
US Equity Strategies:2.0%2.0%1.8%1.0%1.0%1.0%1.0%1.0%3.9%4.5%
Fundamental IndexPLUSTM 0.1%0.1%0.1%0.1%0.1%0.1%0.1%
Fundamental IndexPLUSTM TR 0.7%0.8%0.7%0.4%0.4%0.4%0.4%
Small Cap StocksPLUS® Total Return Fund 0.7%0.7%0.6%0.1%0.1%0.1%0.2%
Small Company Fundamental IndexPLUS® TR Strategy Fund -------
StocksPLUS® Fund 0.1%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%0.3%
Global Equity Strategies:3.1%3.0%7.3%7.8%7.5%9.6%9.6%10.3%12.3%12.3%
EM Fundamental IndexPLUSTM TR Strategy Fund 1.9%1.8%4.7%6.0%5.9%7.1%6.4%
EqS Emerging Markets Fund -----0.2%0.3%
EqS Pathfinder Fund --1.2%1.1%1.1%1.4%1.9%
International Fundamental IndexPLUS® TR Strategy Fund -------
Int'l StocksPLUS® TR Strategy Fund (U.S Dollar Hedged)0.8%0.8%0.8%0.4%0.3%0.4%0.4%
Int'l StocksPLUS® TR Strategy Fund (Unhedged)0.3%0.3%0.5%0.3%0.3%0.5%0.6%
Alternative Strategies:8.5%15.2%24.7%31.0%26.8%18.7%20.4%17.6%11.0%8.8%
Fundamental Advantage Total Return Strategy Fund 8.5%15.2%16.9%19.7%15.7%13.5%14.5%
Unconstrained Bond Fund --7.8%11.4%11.0%5.2%5.8%
100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%
Asset Allocation Historical Allocation
Tactical Asset Allocation - GMO Global Balanced
Portfolio Characteristics
Sector Allocation
Market Neutral - Pyramis
Source: Pyramis
51 9/30/2011
Real Estate – UBS Trumbull Property Fund
Source: UBS
52 9/30/2011
Wellington Diversified Inflation Hedges
53
Source: Wellington
9/30/2011
Appendix
9/30/2011
Flash Report as of September 30, 2011
55
9/30/2011
Flash Report as of September 30, 2011
56
9/30/2011
Flash Report as of September 30, 2011
57
" 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 8 9 / 3 0 / 2 0 1 1