HomeMy Public PortalAbout2012 1st Quarter ReportInvestment Performance AnalysisMay 8, 2012Douglas W. Moseley, PartnerKristin Finney-Cooke, CAIA, Senior ConsultantKristen Jackson, CFA, Sr. AnalystMetropolitan St. Louis Sewer District
Table of ContentsMarket Commentary & Update1Executive Summary2Investment Performance Analysis as of March 31, 20123Preliminary Flash Report as of March 31, 20124Appendix 5 Tab1
Market Commentary & Update2
" W e h a v e r e - e v a l u a t e d t h e f u n d a m e n t a l b u i l d i n g b l o c k s o f o u r v a l u a t i o n m o d e l s a n d c o n c l u d e : E q u i t i e s a n d c r e d i t ( i n c l u d i n g e m e r g i n g m a r k e t s ) s t i l l a p p e a r r e l a t i v e l y a t t r a c t i v e o n a v a l u a t i o n b a s i s T r e a s u r y y i e l d s h a v e r i s e n m o d e s t l y , b u t r e m a i n n e a r s e c u l a r l o w s T h e u n d e r l y i n g e c o n o m i c e n v i r o n m e n t h a s n o t c h a n g e d m e a n i n g f u l l y ( a n d h a s p e r h a p s g o t t e n b e t t e r ) " T h e r e f o r e , w e a r e c o m f o r t a b l e t h a t o u r 2 0 1 2 r e c o m m e n d a t i o n s r e m a i n s o u n d E m e r g i n g m a r k e t s t o c k s a n d b o n d s r e m a i n a t t r a c t i v e C r e d i t s t r a t e g i e s h a v e h i g h e s t r i s k - a d j u s t e d e x p e c t e d r e t u r n s L o c k - u p s t r a t e g i e s a r e p o s i t i o n e d t o h a r v e s t a t t r a c t i v e i l l i q u i d i t y p r e m i u m " I m p o r t a n t t o p u r s u e i n c o n t e x t o f r i s k - b u d g e t i n g f r a m e w o r k D o n o t g e t c o m p l a c e n t , s h o r t - t e r m s p i k e s i n v o l a t i l i t y a r e l i k e l y " R i s k s i n c l u d e : E u r o - z o n e d e b t c r i s i s f l a r e - u p , p o l i t i c a l i s s u e s d u r i n g P r e s i d e n t i a l e l e c t i o n y e a r i n U S , h a r d - l a n d i n g i n C h i n a , t u r m o i l i n t h e M i d d l e E a s t M a i n t a i n e x p o s u r e t o d e f l a t i o n - a n d i n f l a t i o n - h e d g i n g a s s e t s , i d e a l l y t h r o u g h r i s k p a r i t y s t r a t e g i e s T a k e a d v a n t a g e o f m a r k e t d i p s t o b u i l d e x p o s u r e t o r i s k y a s s e t s I s I t S t i l l O k a y T o B e A d d i n g t o R i s k y A s s e t s ? 3
Market Environment - OverviewSources: Barclays Live, eVestment Alliance, Wilshire4
Treasury Yields Still Near Secular LowsSource: US Treasury5
Stock and Credit Valuations Remain AttractiveSource: Bloomberg, Barclays, NEPC6
S&P 500 P/E Up Slightly But Still Below AverageSource: Bloomberg7
Emerging Market Equity P/E Up But Still Below AverageSource: Bloomberg11.58
Economic Environment9
Market SummarySource: ICC10
Domestic EquitySource: ICC11
International EquitySource: ICC12
Emerging EquitySource: ICC13
Currency Markets & Yield CurveSource: ICC14
Bond MarketsSource: ICC15
4/30/2012Investment Market Update: As of April 30, 2012 Sources: Barclays Capital, Bloomberg, Wilshire SectorIndex20092010QTR 1QTR 2QTR 3QTR 42011JanFebMarQTR 1Apr2012Large Cap Growth R1000 Growth 37.2% 16.7% 6.0% 0.8%-13.2%10.6% 2.6% 6.0% 4.8% 3.3% 14.7%-0.2%14.5%REITSWilshire REIT 28.6% 28.6% 6.7% 3.9%-5.0%15.4% 9.2% 6.5%-1.1%5.2% 10.8% 2.9% 14.0%Emerging EM (net)78.5% 18.9% 2.1%-1.1% -22.5%4.4%-18.4%11.3% 6.0%-3.3%14.1%-1.2%12.7%Large Cap Russell 1000 28.4% 16.1% 6.2% 0.1%-14.8%11.8% 1.5% 4.9% 4.4% 3.1% 12.9%-0.6%12.2%SMID Cap R250034.4% 26.7% 8.7%-0.6% -21.2%14.6%-2.5%6.7% 3.7% 2.2% 13.0%-0.7%12.2%Large Cap S&P 50026.5% 15.1% 5.9% 0.1%-13.8%11.8% 2.1% 4.5% 4.3% 3.3% 12.6%-0.6%11.9%Small Cap Growth R2000 Growth 34.5% 29.1% 9.2%-0.6% -22.3%15.0%-2.9%7.5% 3.3% 2.0% 13.3%-1.6%11.4%Small Cap Russell 2000 27.2% 26.9% 7.9%-1.6% -21.9%15.5%-4.2%7.1% 2.4% 2.6% 12.4%-1.5%10.7%Small Cap Value R2000 Value 20.6% 24.5% 6.6%-2.7% -21.4%16.0%-5.5%6.6% 1.5% 3.1% 11.6%-1.4%10.0%Large Cap Value R1000 Value 19.7% 15.5% 6.5%-0.5% -16.2%13.1% 0.4% 3.8% 4.0% 3.0% 11.1%-1.0%10.0%Int. Equity EAFE (net)31.8% 7.8% 3.4% 1.6%-19.0%3.3%-12.1%5.3% 5.7%-0.5%10.9%-2.0%8.7%Diversified Diversified*17.5% 12.6% 3.6% 1.1%-8.7%6.7% 2.0% 4.0% 2.6% 1.3% 8.2%-0.1%8.1%Emerging FI BC Emerging ($US) 34.2% 12.8% 1.6% 3.4%-2.9%4.9% 7.0% 2.3% 2.7% 0.4% 5.5% 1.4% 6.9%High Yield BC HY58.2% 15.1% 3.9% 1.1%-6.1%6.5% 5.0% 3.0% 2.4%-0.1%5.3% 1.0% 6.4%Long Credit BC Long Credit 16.8% 10.7% 0.6% 3.3% 9.1% 3.2% 17.1% 2.3% 1.0%-2.4%0.8% 2.4% 3.2%Muni BondsBC Muni (unadj) 12.9% 2.4% 0.5% 3.9% 3.8% 2.1% 10.7% 2.3% 0.1%-0.6%1.7% 1.2% 2.9%Int. Gov/Credit BC Intermediate GC 5.2% 5.9% 0.3% 2.1% 2.4% 0.8% 5.8% 1.0%-0.1% -0.4%0.6% 0.9% 1.5%Int. Core FI BC Intermediate Agg 6.5% 6.2% 0.5% 2.2% 2.3% 0.9% 6.0% 0.8% 0.0%-0.2%0.7% 0.8% 1.5%Core FIBC Aggregate 5.9% 6.5% 0.4% 2.3% 3.8% 1.1% 7.8% 0.9% 0.0%-0.5%0.3% 1.1% 1.4%Long Gov/Credit BC Long Gov/Credit 1.9% 10.2%-0.0%3.3% 15.6% 2.6% 22.5% 1.3%-0.4% -3.0% -2.1%3.2% 1.0%Global FI Citigroup WGBI 2.6% 5.2% 0.7% 3.3% 2.4%-0.1%6.4% 1.5%-0.9% -1.0% -0.5%1.5% 1.0%Gov/Credit BC 1-5 Yr Gov/Cred 4.6% 4.1% 0.3% 1.5% 0.9% 0.4% 3.1% 0.7%-0.0% -0.1%0.5% 0.4% 1.0%Gov/Credit BC 1-3 Yr Gov/Cred 3.8% 2.8% 0.2% 0.9% 0.3% 0.2% 1.6% 0.4% 0.0% 0.0% 0.4% 0.2% 0.6%Commodities DJ UBS Commodity 18.9% 16.8% 4.4%-6.7% -11.3%0.3%-13.3%2.5% 2.7%-4.1%0.9%-0.4%0.5%Treasury STRIPS BC 20+ STRIPS-36.0%10.9%-3.7%3.7% 55.3% 2.3% 58.5%-1.3% -3.7% -6.7% -11.3%6.8%-5.3%* 35% LC, 10% SC, 12% Intl, 3% Emerging, 25% FI, 5% HY, 5% Global FI, 5% REITSPERFORMANCE THROUGH 4/30/201216
Executive Summary17
" 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 1 1 . 8 m i l l i o n , a n i n c r e a s e o f $ 1 1 . 3 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 $ 1 4 . 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 . 4 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 0 . 8 % 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 ) , 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 3 . 7 % . 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 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 7 . 4 % r e t u r n f o r t h e q u a r t e r , r a n k i n g i n t h e 5 5 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 5 0 b p s t o p e r f o r m a n c e F o r t h e p a s t 1 2 m o n t h s , t h e F u n d p o s t e d a r e t u r n o f 5 . 9 % , r a n k i n g i n t h e 1 2 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 1 2 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 1 5 . 5 % , w h i c h r a n k e d i n t h e 5 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 5 . 2 % r a n k e d i n t h e 9 t h p e r c e n t i l e . " A h i g h e r r e l a t i v e r e t u r n f o r t h e f i v e - y e a r p e r i o d w a s e a r n e d w i t h a l o w e r l e v e l 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 . 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 1 8
Total Fund Asset Growth Summary19
Performance20
Performance – Public Funds Universe21
Three Year Risk vs. Return – Public Funds Universe22
Five Year Risk vs. Return – Public Funds Universe23
Manager Executive Summary24
Manager Executive Summary, Continued25
Buford, Dickson, Harper & Sparrow•Gerald Sparrow is rejoining BDH&S as Chief Investment Officer. He will bring his asset base of approximately $45 million with him.•Gerald Sparrow will purchase ownership stake in firm. Other owners include Reginald Dickson, Tad Buford, Alex Ramos, David Harper, and Bill Young.•Investment Committee going forward will consist of Gerald Sparrow, Reginald Dickson, Alex Ramos, and Robert Gay.Morgan Stanley – Emerging Markets•James Cheng, head of the Asian equity team, is retiring from Morgan Stanley Investment Management at the end of 2012. He will continue his current responsibilities through the end of the year and will then assume the role of a Senior Advisor to the team. Upon his retirement, Munib Madni and Sam Rhee will serve as co-lead portfolio managers for Asian equities.•Munib Madni is a Managing Director with 18 years of experience and is the lead portfolio manager for the ASEAN countries and Australia and leads research on the commodities sector.•Sam Rhee is an Executive Director with 18 years of experience and is the lead portfolio manager for Korea and Taiwan and leads research for the technology sector.•No action recommended.Manager Updates26
Total Fund Asset AllocationNote: Totals include manager cash; totals may not add to 100% due to roundingAlts16.4%Equities38.0%Fixed Income33.0%Alts19.0%Equities41.0%Fixed Income32.5%27
Asset Allocation History28
Commitment To Equity – Public Funds Universe29
Actual vs. Policy Weights – as of March 31, 2012Note: Totals may not add to 100% due to rounding. Asset ClassTarget AllocationActual AllocationVariance From TargetEquity 38.0% 41.0% 3.0%Large Cap Equity 20.0% 21.9% 1.9%Small Cap Equity 5.0% 6.2% 1.2%International Equity 10.0% 9.9% -0.1%Emerging Markets Equity 3.0% 3.0% 0.0%Fixed Income 33.0% 32.5% -0.5%Core Fixed Income 13.0% 12.9% -0.1%High Yield 5.0% 4.5% -0.5%Global Bonds 8.0% 8.0% 0.0%Emg Mkts Debt (LC) 5.0% 5.1% 0.1%Credit Opportunity 2.0% 2.0% 0.0%GTAA 10.0% 10.0% 0.0%Real Assets 10.0% 8.7% -1.3%Absolute Return 4.0% 2.7% -1.3%Market Neutral 5.0% 4.6% -0.4%Cash 0.0% 0.5% 0.5%Total 100.0% 100.0%30
Manager Allocation31
Investment Performance Analysis as of March 31, 201232
Performance Summary – ICC Universe33
Performance Summary – ICC Universe, Continued34
Performance Summary – ICC Universe, Continued35
Performance Summary – ICC Universe, Continued36
Preliminary March 31, 2012 Flash Report37
Investment Market Update: As of March 31, 2012 Sources: Lehman Live, Bloomberg, Wilshire SectorIndex200820092010QTR 1QTR 2QTR 3QTR 42011JanFebMar2012Large Cap Growth R1000 Growth-38.4%37.2% 16.7% 6.0% 0.8%-13.2%10.6% 2.6% 6.0% 4.8% 3.3% 14.7%Emerging EM (net)-53.3%78.5% 18.9% 2.1%-1.1% -22.5%4.4%-18.4%11.3% 6.0%-3.3%14.1%Small Cap Growth R2000 Growth-38.5%34.5% 29.1% 9.2%-0.6% -22.3%15.0%-2.9%7.5% 3.3% 2.0% 13.3%SMID Cap R2500-36.8%34.4% 26.7% 8.7%-0.6% -21.2%14.6%-2.5%6.7% 3.7% 2.2% 13.0%Large Cap Russell 1000-37.6%28.4% 16.1% 6.2% 0.1%-14.8%11.8% 1.5% 4.9% 4.4% 3.1% 12.9%Large Cap S&P 500-37.0%26.5% 15.1% 5.9% 0.1%-13.8%11.8% 2.1% 4.5% 4.3% 3.3% 12.6%Small Cap Russell 2000-33.8%27.2% 26.9% 7.9%-1.6% -21.9%15.5%-4.2%7.1% 2.4% 2.6% 12.4%Small Cap Value R2000 Value-28.9%20.6% 24.5% 6.6%-2.7% -21.4%16.0%-5.5%6.6% 1.5% 3.1% 11.6%Large Cap Value R1000 Value-36.8%19.7% 15.5% 6.5%-0.5% -16.2%13.1% 0.4% 3.8% 4.0% 3.0% 11.1%Int. Equity EAFE (net)-43.4%31.8% 7.8% 3.4% 1.6%-19.0%3.3%-12.1%5.3% 5.7%-0.5%10.9%REITS Wilshire REIT-39.2%28.6% 28.6% 6.7% 3.9%-5.0%15.4% 9.2% 6.5%-1.1%5.2% 10.8%Diversified Diversified*-23.3%17.5% 12.6% 3.6% 1.1%-8.7%6.7% 2.0% 4.0% 2.6% 1.3% 8.2%Emerging FI BC Emerging ($US)-14.8%34.2% 12.8% 1.6% 3.4%-2.9%4.9% 7.0% 2.3% 2.7% 0.4% 5.5%High Yield BC HY-26.2%58.2% 15.1% 3.9% 1.1%-6.1%6.5% 5.0% 3.0% 2.4%-0.1%5.3%Muni BondsBC Muni (unadj)-2.5%12.9% 2.4% 0.5% 3.9% 3.8% 2.1% 10.7% 2.3% 0.1%-0.6%1.7%Commodities DJ UBS Commodity-35.7%18.9% 16.8% 4.4%-6.7% -11.3%0.3%-13.3%2.5% 2.7%-4.1%0.9%Long Credit BC Long Credit-3.9%16.8% 10.7% 0.6% 3.3% 9.1% 3.2% 17.1% 2.3% 1.0%-2.4%0.8%Int. Core FI BC Intermediate Agg 4.9% 6.5% 6.2% 0.5% 2.2% 2.3% 0.9% 6.0% 0.8% 0.0%-0.2%0.7%Int. Gov/Credit BC Intermediate GC 5.1% 5.2% 5.9% 0.3% 2.1% 2.4% 0.8% 5.8% 1.0%-0.1% -0.4%0.6%Gov/Credit BC 1-5 Yr Gov/Cred 5.1% 4.6% 4.1% 0.3% 1.5% 0.9% 0.4% 3.1% 0.7%-0.0% -0.1%0.5%Gov/Credit BC 1-3 Yr Gov/Cred 5.0% 3.8% 2.8% 0.2% 0.9% 0.3% 0.2% 1.6% 0.4% 0.0% 0.0% 0.4%Core FIBC Aggregate 5.2% 5.9% 6.5% 0.4% 2.3% 3.8% 1.1% 7.8% 0.9% 0.0%-0.5%0.3%Global FI Citigroup WGBI 10.9% 2.6% 5.2% 0.7% 3.3% 2.4%-0.1%6.4% 1.5%-0.9% -1.0% -0.5%Long Gov/Credit BC Long Gov/Credit 8.4% 1.9% 10.2%-0.0%3.3% 15.6% 2.6% 22.5% 1.3%-0.4% -3.0% -2.1%Treasury STRIPS BC 20+ STRIPS 59.5%-36.0%10.9%-3.7%3.7% 55.3% 2.3% 58.5%-1.3% -3.7% -6.7% -11.3%* 35% LC, 10% SC, 12% Intl, 3% Emerging, 25% FI, 5% HY, 5% Global FI, 5% REITSPERFORMANCE THROUGH 3/31/201238
Flash Report as of March 31, 201239
Flash Report as of March 31, 201240
Flash Report as of March 31, 201241
Appendix42
Domestic Equity - Vanguard Institutional FundCharacteristicsVanguard Institutional S&P 500P/E Ratio 16.2 16.2P/B 2.3 2.3Median Market Cap (billions) 57.6 57.6Top 10 HoldingsApple IncExxon Mobil CorpInternational Business Machines CorpMicrosoft CorpGeneral Electric CoChevron CorpAT&T IncProcter & Gamble Co/TheJohnson & JohnsonWells Fargo & CoTen Largest Holdings = 20.4% total net assetsSource: Vanguard0510152025Consumer DiscretionaryConsumer StaplesEnergyFinancialsHealth CareIndustrialsInformation TechnologyMaterialsTelecomUtilitiesManagerIndex43
Domestic Equity - Vanguard Windsor IICharacteristicsWindsor II FundRussell 1000 Value P/E Ratio 14.3 15.4P/B1.91.6Median Market Cap (billions)54.940.7Top 10 HoldingsInternational Business Machines CorpPfizer IncConocoPhillipsPhillip Morris International IncJP Morgan Chase & CoWells Fargo & CoMicrosoft CorpAmerican Express CoJohnson & JohnsonBaxter International IncTen Largest Holdings = 27.3% total net assetsSource: Vanguard051015202530Consumer DiscretionaryConsumer StaplesEnergyFinancialsHealth CareIndustrialsInformation TechnologyMaterialsTelecomUtilitiesManagerIndex44
Domestic Equity – BDH & SSource: BDH&S45
Domestic Equity - Waddell & ReedSource: Waddell & Reed46
Characteristics3Yr. Risk vs. ReturnDomestic Equity - KennedySource: KennedyKENNEDYNumber of Issues 54Market Cap (millions) (wtd. avg) 6,827P/E Ratio (trailing) 12.4P/B Ratio 2.1Dividend Yield(%) 1.5Return on Equity(%) 12.3101520253035404510 15 20 25 30 35ReturnStd Dev.KENNEDYRUSSELL MIDCAP VALUESector AttributionTop 10 Holdings47
TIMESSQUARE R 2000 GROWTHNumber of Issues 108 1145Market Cap ($Mil) 1,790 1,555P/E Ratio 22.0 20.4P/B Ratio 4.2 4.4Dividend Yield(%) 0.5 0.7Earnings Per Share (Trailing 12 Months)($) 1.8 1.5CharacteristicsMarket Value Weight (%)Buy/HoldReturn (%)MANAGERS AMG FUNDS TIMESSQUA$5,836,828 50.1ULTIMATE SOFTWARE GROUP INC $131,340 1.1 12.5WRIGHT EXPRESS CORP$118,290 1.0 19.3BOTTOMLINETECHNOLOGIES INC $109,973 0.9 20.6GENESEE & WYOMING INC CL A $109,332 0.9 -9.9COSTAR GROUP INC$109,199 0.93.5SOLERA HOLDINGS INC$106,117 0.93.2GLOBAL PAYMENTS INC$103,497 0.90.2MONTPELIERRE HOLDINGS LTD $97,092 0.88.9UNITED NATURAL FOODS INC $95,107 0.8 16.6Top 10 Holdings510152025303540455010 15 20 25 30 35 40ReturnStd Dev.TIMESSQUARERUSSELL 2000 GROWTH3Yr. Risk vs. Return (Small Growth)Sector Over / Under vs. Return Domestic Equity - TimesSquare-10.0-5.00.05.010.015.020.0OVER / UNDERTIMESSQUARER 2000 GROWTH48
International Equity - Morgan Stanley3Yr. Risk vs. Return (Emerging Markets)051015202530350 5 10 15 20 25 30 35 40 45 50ReturnStd Dev.MORGAN STANLEYMSCI EAFECharacteristicsMORGAN STANLEY MSCI EAFEWtd. Average Market Cap 53,176 44,187Price / Earnings 13.0 11.5Price / Book 1.5 1.4Return on Equity % 17.5 16.4Country AllocationEquity Sectors/Top HoldingsPortfolio BenchmarkPortfolio Benchmark49
CharacteristicsTop Holdings3Yr. Risk vs. Return (Emerging Markets)Country AllocationInternational Equity - Morgan Stanley Emerging Equity051015202530354045500 5 10 15 20 25 30 35 40 45 50 55 60ReturnStd Dev.MORGAN STANLEY EMERGING MARKETMSCI EMERGING MARKETS (NET)MORGAN STANLEYMSCI EM FreeWtd. Average Market Cap 17,829 20,155Price / Earnings 15.3 11.8Price / Book 2.5 1.7Return on Equity % 23.8 14.5PortfolioPortfolio Benchmark50
Domestic Fixed Income – Income ResearchSource: Income Research51
CharacteristicsAverage Maturity % HeldCoupon DistributionDistribution AnalysisDomestic Fixed Income (High Yield) – Penn Capital52
Portfolio and Quality CharacteristicsSector AllocationLoomis, Sayles & Company – Credit Asset Trust53
Global Fixed Income - BrandywineSource: Brandywine54
Absolute Return – PIMCO All Asset FundSource: PIMCOFund Number736Fund NameAll Asset FundTotal Fund Net Assets ($US MM) 27,541.56/30/2010 9/30/2010 12/31/2010 3/31/2011 6/30/2011 9/30/2011 12/31/2011 1/31/2012 2/29/2012 3/31/2012Short-Term Strategies: 3.2% 5.1% 0.7% 0.1% 0.3% 0.1% 0.1% 0.1% 0.1% 0.1%Low Duration Fund 1.3% 2.6% 0.7% 0.0% 0.2% 0.0% 0.0%Short Term Fund 1.9% 2.5% 0.1% 0.0% 0.0% 0.1% 0.0%US Core and Long Maturity Bond Strategies: 13.9% 12.4% 9.8% 8.0% 13.3% 8.4% 8.2% 6.5% 6.3% 6.3%GNMA Fund -------Investment Grade Corporate Bond Fund 5.9% 5.7% 5.3% 4.8% 4.1% 5.0% 5.0%Long Duration Total Return Fund 0.3% 0.0% 0.0% 0.0% 1.3% 0.1% 0.1%Long Term Credit Fund 6.2% 6.1% 4.2% 3.1% 2.8% 3.1% 3.0%Long-Term US Government Fund 0.2% 0.1% 0.1% 0.1% 2.1% 0.1% 0.1%Mortgage-Backed Securities Fund -------Total Return Fund 1.3% 0.6% 0.2% 0.1% 2.9% 0.0% 0.0%EM and Global Bond Strategies: 16.6% 11.8% 12.0% 12.1% 13.1% 19.4% 24.1% 25.4% 26.3% 28.3%Diversified Income Fund 3.4% 3.5% 3.6% 4.2% 3.9% 4.2% 4.4%Emerging Local Bond Fund 4.1% 2.0% 1.5% 0.8% 1.5% 4.1% 5.7%Emerging Markets Bond Fund 1.2% 0.6% 0.6% 0.2% 0.3% 1.5% 2.7%Emerging Markets Currency 5.6% 3.4% 3.0% 3.9% 4.6% 6.5% 7.1%Foreign Bond Fund (Unhedged) 0.1% 0.1% 0.8% 0.7% 0.7% 0.7% 1.5%Global Advantage Strategy Bond Fund 2.3% 2.2% 2.6% 2.4% 2.2% 2.4% 2.7%Global Bond Fund (Unhedged) -------Credit Strategies: 10.1% 18.9% 23.5% 27.8% 27.0% 29.2% 29.1% 28.1% 27.8% 28.4%Convertible Fund 3.2% 3.6% 3.7% 4.2% 3.4% 3.5% 3.4%Credit Absolute Return Fund -----0.3%0.2%Floating Income Fund 1.2% 5.3% 6.1% 6.6% 7.6% 7.7% 7.4%High Yield Fund 1.7% 2.3% 3.9% 5.7% 4.6% 5.9% 6.5%High Yield Spectrum Fund - 0.4% 0.8% 1.4% 1.7% 1.6% 1.6%Income Fund 4.0% 7.4% 8.9% 9.8% 8.9% 9.4% 9.1%Senior Floating Rate Fund - - - - 0.8% 0.9% 0.8%Inflation Related Strategies: 22.3% 12.0% 18.7% 22.9% 15.3% 17.3% 17.6% 18.1% 17.8% 17.0%CommoditiesPLUS™ Strategy Fund 2.2% 1.8% 3.1% 5.1% 2.6% 3.7% 4.5%CommodityRealReturn Strategy Fund® 3.8% 1.9% 4.2% 5.2% 1.6% 3.8% 4.5%Real Return Asset Fund 12.9% 6.0% 8.2% 8.1% 7.8% 7.3% 5.3%Real Return Fund 1.8% 1.3% 1.7% 1.5% 1.4% 0.0% 0.0%RealEstateRealReturn Strategy Fund 1.5% 1.0% 1.5% 3.1% 1.9% 2.6% 3.3%US Equity Strategies: 1.8% 1.0% 1.0% 1.0% 1.0% 4.5% 1.3% 1.0% 1.0% 1.0%Fundamental IndexPLUSTM0.1% 0.1% 0.1% 0.1% 0.1% --Fundamental IndexPLUSTM TR0.7% 0.4% 0.4% 0.4% 0.4% 1.8% 0.2%Small Cap StocksPLUS® Total Return Fund0.6% 0.1% 0.1% 0.1% 0.2% 0.4% 0.1%Small Company Fundamental IndexPLUS® TR Strategy Fund-----0.1%0.6%StocksPLUS® Fund0.1% 0.1% 0.1% 0.1% 0.1% 1.5% 0.0%StocksPLUS® Total Return Fund0.3% 0.3% 0.3% 0.3% 0.3% 0.7% 0.3%Global Equity Strategies:7.3% 7.8% 7.5% 9.6% 9.6% 12.3% 13.4% 13.9% 14.3% 14.8%EM Fundamental IndexPLUSTM TR Strategy Fund4.7% 6.0% 5.9% 7.1% 6.4% 8.2% 8.9%EqS Dividend Fund------0.1%EqS Emerging Markets Fund--- 0.2% 0.3% 0.3% 0.2%EqS Pathfinder Fund1.2% 1.1% 1.1% 1.4% 1.9% 2.3% 2.3%International Fundamental IndexPLUS® TR Strategy Fund-----0.1%0.8%Int'l StocksPLUS® TR Strategy Fund (U.S Dollar Hedged) 0.8% 0.4% 0.3% 0.4% 0.4% 0.4% 0.5%Int'l StocksPLUS® TR Strategy Fund (Unhedged)0.5% 0.3% 0.3% 0.5% 0.6% 1.0% 0.6%Alternative Strategies:24.7% 31.0% 26.8% 18.7% 20.4% 8.8% 6.2% 6.9% 6.5% 4.1%Fundamental Advantage Total Return Strategy Fund16.9% 19.7% 15.7% 13.5% 14.5% 5.7% 3.6%Unconstrained Bond Fund7.8% 11.4% 11.0% 5.2% 5.8% 3.1% 2.6%100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.00%55
Asset AllocationHistorical AllocationTactical Asset Allocation –GMO Global Balanced56
Market Neutral - Pyramis57
Real Estate – UBS Trumbull Property FundSource: UBS58
Portfolio ReturnsActive Portfolio WeightsAttribution ChartAsset Class Allocation SummaryWellington Diversified Inflation HedgesSource: Wellington59
" 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 6 0