HomeMy Public PortalAbout2015 3rd Quarter ReportPerformance
Review
Metropolitan St. Louis Sewer
District Pension Plan
3rd Quarter 2015
Pavilion Advisory Group Inc.
227 W. Monroe Street, Suite 2020
Chicago, IL 60606
Phone: 312-798-3200
Fax: 312-902-1984
www.pavilioncorp.com
1 Performance Summary 1
2 Asset Class Diversification 20
3 Manager Evaluation 26
4 Calendar Year Performance 62
5 Capital Markets Review 64
6 Appendix 72
Table of Contents
Performance Summary
1
Performance Summary - September 2015
During the third quarter, the Metropolitan St. Louis Sewer District pension plan outperformed its benchmark, reporting a return of -4.5% while the Policy
Benchmark reported a return of -4.7%. On a trailing one-year basis, the plan reported a loss of -2.7%, matching the Policy Benchmark.
Asset Class Diversification
Current asset allocation was within investment policy targets. The Plan was slightly overweight in fixed income and real estate and underweight equities and real
assets. Hedge fund manager Entrust was added to the portfolio on August 1st. The portfolio held over $6.3 million in cash at the end of the quarter due to a
contribution to the plan on September 30th.
Manager Evaluation
Third quarter performance was favorably impacted by the following managers as they outpaced their benchmarks: Holland Large Cap Growth, TimeSquare Small
Cap Growth, Morgan Stanley International Equity, Morgan Stanley Emerging Markets Equity, and Lighthouse Global Long/Short. Third quarter performance
was unfavorably impacted by the following managers that underperformed their benchmarks: Kennedy Mid Cap Value and Brandywine Global Opportunistic
Fixed Income.
Capital Markets Review
The Federal Reserve abstained from raising interest rates in September following market turmoil in August. Weak foreign growth prospects and a consensus tilt
toward easing among other central banks gave the Fed pause. Investors pushed back expectations for a shift in Fed policy, giving May 2016 as the earliest time
with a probability over 50% for a rise in rates.
U.S. inflation was unchanged for the last year, owing to falling energy prices. Job growth slowed in the third quarter as manufacturing and industrial sectors
trimmed outlooks for global growth. Consumer demand continued to grow, though restaurant and goods prices are expected to rise as the lowest wages rose at
large retailers and restaurants. Equity market volatility, as measured by the VIX Index, spiked during the quarter, driven by the slowing Chinese economy and
uncertainties surrounding the impact it will have on global economic growth. Additionally, devaluation of the Chinese yuan and the Fed’s decision to delay hiking
interest rates caused further uncertainty.
A move by China to weaken its currency sent shockwaves through world markets. In an attempt to stem a slowdown in exports and support an overbuilt
manufacturing base, the yuan fell 3% during August. Eroding demand from Europe and the U.S. prompted the Chinese government to undertake the monumental
process of shifting its economy more toward a consumer-based structure and promote internal demand. Although Chinese GDP growth remains above 6%, it is
enough below the past two decades’ average to cause concern. The Chinese stock market sell-off reflected weaker earnings forecasts for Chinese companies and
uncertainty over the economic shift.
Recommendations or Action Items
None at this time.
Pension Plan Executive Summary
2
Total Composite Policy Benchmark
0.0
3.0
6.0
9.0
12.0
15.0
-3.0
-6.0
-9.0
-12.0Return
Quarter Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
-4.7
-3.2 -2.7
4.5
5.9 5.3
7.7
-4.5
-2.3 -2.7
4.3
5.8 5.4
7.3
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Total Composite -4.5 -2.3 -2.7 4.3 5.8 5.4 7.3 22y 9m
Policy Benchmark -4.7 -3.2 -2.7 4.5 5.9 5.3 N/A
Performance Summary
Total Composite vs. Policy Benchmark
As of September 30, 2015
____________
Performance is reported net of fees.
See appendix for full description of the policy benchmark.
3
-16.0
-12.0
-8.0
-4.0
0.0
4.0
8.0
12.0
16.0
ReturnQuarter
Year
To
Date
1
Year
3
Years
5
Years
7
Years
10
Years
Total Composite -4.5 (22)-2.3 (24)-2.7 (86)4.3 (95)5.8 (94)6.1 (90)5.4 (64)¢£
5th Percentile -3.8 -1.1 1.6 9.0 9.4 8.4 6.7
1st Quartile -4.6 -2.4 0.3 7.9 8.6 7.8 6.2
Median -5.1 -3.0 -0.4 7.2 7.8 7.3 5.8
3rd Quartile -5.6 -3.6 -1.1 6.4 7.0 6.7 5.2
95th Percentile -7.8 -5.5 -4.8 4.0 5.6 5.7 4.2
Performance Comparison
All Public Plans <= $500 mil
As of September 30, 2015
_________________________
Performance is reported net of fees.
Parentheses contain percentile rankings.
Calculation based on monthly periodicity.
4
-16.0
-12.0
-8.0
-4.0
0.0
4.0
8.0
12.0
16.0
ReturnQuarter
Year
To
Date
1
Year
3
Years
5
Years
7
Years
10
Years
Total Composite -4.5 (23)-2.3 (32)-2.7 (85)4.3 (96)5.8 (96)6.1 (91)5.4 (66)¢£
5th Percentile -3.2 -0.8 1.7 9.0 9.4 8.4 6.7
1st Quartile -4.6 -2.1 0.3 7.9 8.5 7.7 6.1
Median -5.0 -2.9 -0.5 7.1 7.8 7.2 5.8
3rd Quartile -5.6 -3.5 -1.5 6.3 7.1 6.7 5.3
95th Percentile -7.2 -4.7 -4.5 4.4 6.0 5.7 4.6
Performance Comparison
All Public Plans
As of September 30, 2015
_________________________
Performance is reported net of fees.
Parentheses contain percentile rankings.
Calculation based on monthly periodicity.
5
3 Years 5 Years
0.0
2.0
4.0
6.0
8.0
10.0
Return (%)3.0 3.8 4.6 5.4 6.2 7.0 7.8
Risk (Standard Deviation %)
Policy Benchmark
(5.5 , 4.5)
Total Composite
(5.6 , 4.3)
0.0
2.0
4.0
6.0
8.0
10.0
Return (%)5.0 5.7 6.4 7.1 7.8 8.5 9.0
Risk (Standard Deviation %)
Policy Benchmark
(6.9 , 5.9)
Total Composite
(7.1 , 5.8)
Performance Summary
Risk and Return Summary
As of September 30, 2015
6
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Total Composite 244,044,013 100.0 -4.5 -2.3 -2.7 4.3 5.8 5.4 7.3 22y 9m
Policy Benchmark -4.7 -3.2 -2.7 4.5 5.9 5.3 N/A
Total Equity Composite 92,660,417 38.0 -8.1 -3.9 -2.8 N/A N/A N/A 6.6 2y 1m
MSCI AC World IMI -9.5 -6.4 -5.7 7.8 7.5 5.4 4.9
Domestic Equity Composite 61,303,830 25.1 -7.1 (28)-3.8 (24)0.5 (23)N/A N/A N/A 9.9 (N/A)2y 1m
Russell 3000 Index -7.2 (32)-5.4 (44)-0.5 (31)12.5 (18)13.3 (10)6.9 (24)9.8 (N/A)
Broad Equity Peer Group Median -8.1 -5.9 -2.1 11.0 11.3 6.1 N/A
Large-Cap Equity Composite 47,191,958 19.3 -5.9 (28)-2.8 (24)1.0 (27)12.4 (34)12.9 (30)6.9 (31)8.0 (N/A)12y 4m
Russell 1000 Index -6.8 (43)-5.2 (44)-0.6 (38)12.7 (31)13.4 (22)7.0 (31)8.3 (N/A)
Large-Cap Equity Peer Group Median -7.2 -5.8 -1.9 11.5 11.8 6.1 N/A
Small-Cap Equity Composite 14,111,872 5.8 -11.1 (52)-7.1 (49)-1.4 (61)12.3 (30)13.1 (23)8.5 (3)10.7 (N/A)12y 4m
Russell 2000 Index -11.9 (66)-7.7 (56)1.2 (40)11.0 (49)11.7 (46)6.5 (34)9.1 (N/A)
Small-Cap Equity Peer Group Median -11.0 -7.2 0.0 10.9 11.4 6.0 N/A
International Equity Composite 31,356,587 12.8 -10.2 (27)-4.1 (19)-9.2 (42)N/A N/A N/A 0.4 (N/A)2y 1m
MSCI AC World ex USA Index -12.2 (67)-8.6 (77)-12.2 (73)2.3 (60)1.8 (56)3.0 (65)-0.8 (N/A)
International Equity Peer Group Median -11.4 -6.7 -10.0 2.8 2.1 3.5 N/A
Developed International Equity Composite 24,777,618 10.2 -9.2 (39)-2.6 (34)-7.8 (55)5.3 (47)5.4 (24)3.7 (44)4.4 (N/A)16y 5m
MSCI EAFE Index -10.2 (57)-5.3 (64)-8.7 (63)5.6 (42)4.0 (48)3.0 (58)3.1 (N/A)
Developed International Equity Peer Group Median -9.9 -4.2 -7.2 5.1 3.8 3.3 N/A
Emerging International Equity Composite 6,578,969 2.7 -14.0 (19)-9.9 (14)-15.5 (24)-3.5 (39)-2.4 (33)4.4 (39)6.3 (32)10y 6m
MSCI Emerging Markets Index -17.9 (82)-15.5 (58)-19.3 (56)-5.3 (61)-3.6 (52)4.3 (44)6.1 (38)
Emerging Markets Equity Peer Group Median -16.2 -14.7 -18.8 -4.7 -3.5 3.9 5.8
Fixed Income Composite 88,168,055 36.1 -0.8 (94)-1.4 (100)-2.0 (100)0.4 (95)2.7 (57)4.9 (17)4.5 (27)12y 3m
Barclays Intermediate U.S. Government/Credit 0.9 (20)1.8 (9)2.7 (14)1.4 (52)2.4 (65)4.2 (63)3.7 (66)
Intermediate Duration Fixed Income Peer Group Median 0.6 0.9 1.9 1.5 2.8 4.4 4.1
Performance Summary
Total Pension Fund Asset Allocation and Performance
As of September 30, 2015
_________________________
Performance is reported net of fees.
7
Performance Summary
Total Pension Fund Asset Allocation and Performance
As of September 30, 2015
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Hedge Funds Composite 34,202,326 14.0 -3.1 N/A N/A N/A N/A N/A -0.6 0y 7m
HFRI Fund of Funds Composite Index -3.7 -1.1 -0.1 4.1 2.7 2.4 -2.8
Real Estate Composite 14,724,932 6.0 3.1 8.7 11.7 10.1 10.6 6.0 5.6 9y 4m
NCREIF Property Index 3.1 10.1 13.5 11.9 12.6 8.0 7.3
Real Assets Composite 7,955,534 3.3 -15.4 -17.3 -27.7 -11.9 -5.4 N/A -4.3 5y 6m
Wellington DIH Multi-Asset Inflation Index -14.7 -16.8 -25.5 -10.8 -5.2 -0.5 -4.4
Cash Account 6,332,749 2.6 0.0 0.1 0.7 0.3 0.2 1.3 1.3 12y 4m
BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.1 0.1 1.3 1.4
_________________________
Performance is reported net of fees.
8
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Domestic Large-Cap Equity Managers
Vanguard Windsor II 11,766,779 4.8 -8.2 (35)-7.3 (18)-4.0 (29)10.9 (48)12.2 (19)5.8 (27)5.9 (25)14y 5m
Russell 1000 Value Index -8.4 (42)-9.0 (55)-4.4 (39)11.6 (28)12.3 (18)5.7 (30)5.8 (26)
IM U.S. Large Cap Value Equity -8.9 -8.7 -5.1 10.9 10.9 5.0 5.0
Vanguard Institutional Index Fund 14,076,459 5.8 -6.4 (32)-5.3 (43)-0.6 (40)12.4 (35)13.3 (23)6.8 (31)4.5 (47)16y
S&P 500 -6.4 (32)-5.3 (43)-0.6 (39)12.4 (34)13.3 (23)6.8 (32)4.5 (48)
IM U.S. Large Cap Equity -7.3 -5.9 -1.7 11.6 12.0 6.1 4.4
T. Rowe Price Inst. Large-Cap Core Growth 11,662,054 4.8 -4.9 (23)1.3 (10)5.7 (12)15.8 (5)16.1 (2)8.6 (13)16.5 (7)2y 7m
Russell 1000 Growth Index -5.3 (28)-1.5 (41)3.2 (40)13.6 (31)14.5 (21)8.1 (21)14.1 (33)
IM U.S. Large Cap Growth Equity -6.1 -2.0 2.5 12.8 13.1 7.1 13.4
Holland Large Cap Growth 9,686,666 4.0 -3.3 (4)0.9 (12)2.8 (47)11.7 (76)12.8 (57)7.6 (34)11.4 (84)2y 7m
Russell 1000 Growth Index -5.3 (28)-1.5 (41)3.2 (40)13.6 (31)14.5 (21)8.1 (21)14.1 (33)
IM U.S. Large Cap Growth Equity -6.1 -2.0 2.5 12.8 13.1 7.1 13.4
Domestic Small-Cap Equity Managers
Kennedy Mid Cap Value 6,913,730 2.8 -11.4 (90)-11.0 (87)-7.8 (84)11.9 (64)11.9 (52)N/A 8.9 (8)7y 9m
Russell Midcap Value Index -8.0 (36)-7.7 (54)-2.1 (50)13.7 (37)13.2 (31)7.4 (22)7.1 (36)
IM U.S. Mid Cap Value Equity -9.3 -7.3 -2.2 13.1 12.1 6.4 6.6
TimesSquare Small Cap Growth Fund 7,198,142 2.9 -10.9 (33)-2.8 (30)6.6 (19)12.1 (44)14.0 (22)9.6 (1)9.7 (1)13y 8m
Russell 2000 Growth Index -13.1 (63)-5.5 (39)4.0 (39)12.8 (33)13.3 (31)7.7 (12)7.3 (47)
IM U.S. Small Cap Growth Equity -12.3 -7.2 2.0 11.8 12.8 6.5 7.3
Developed International Equity Manager
Morgan Stanley International Equity Fund I 24,777,618 10.2 -9.2 (28)-2.6 (26)-7.8 (41)5.3 (36)5.4 (19)3.7 (46)3.9 (60)10y 6m
MSCI EAFE Index -10.2 (41)-5.3 (45)-8.7 (47)5.6 (33)4.0 (35)3.0 (60)3.7 (64)
IM International Equity -11.1 -6.1 -9.2 4.0 3.0 3.4 4.4
Emerging Markets Equity Manager
Morgan Stanley Emerging Markets Fund I 6,578,969 2.7 -14.0 (20)-9.8 (13)-15.4 (23)-3.5 (38)-2.3 (31)4.4 (34)6.3 (28)10y 6m
MSCI Emerging Markets Index -17.9 (79)-15.5 (59)-19.3 (55)-5.3 (59)-3.6 (50)4.3 (38)6.1 (33)
IM Emerging Markets Equity -16.3 -14.7 -18.8 -4.7 -3.6 3.9 5.7
Performance Summary
Manager Asset Allocation and Performance
As of September 30, 2015
_________________________
Performance is reported net of fees.
9
Performance Summary
Manager Asset Allocation and Performance
As of September 30, 2015
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Fixed Income Managers
Income Research 37,021,690 15.2 0.7 (36)1.7 (12)2.5 (13)1.5 (19)2.8 (17)4.9 (4)5.2 (4)14y 3m
Barclays Intermediate U.S. Government/Credit 0.9 (20)1.8 (10)2.7 (11)1.4 (21)2.4 (28)4.2 (17)4.5 (15)
IM U.S. Intermediate Duration Fixed Income 0.4 1.0 1.5 0.8 1.9 3.6 3.9
Prudential Core Plus Bond Fund 29,452,582 12.1 0.6 (15)0.7 (23)2.4 (9)2.8 (14)4.8 (7)6.0 (5)-0.8 (34)0y 4m
Barclays U.S. Aggregate 1.2 (2)1.1 (7)2.9 (1)1.7 (57)3.1 (68)4.6 (63)0.1 (1)
IM U.S. Broad Market Core+ Fixed Income 0.0 0.1 1.3 1.8 3.5 5.0 -1.1
Brandywine Global Opportunistic Fixed Income 21,693,365 8.9 -4.3 (90)-7.9 (97)-7.8 (92)-1.0 (54)2.8 (23)5.7 (1)5.3 (6)10y 9m
Citigroup World Government Bond Index 1.7 (1)-2.4 (42)-3.8 (52)-2.9 (85)-0.2 (82)3.4 (64)2.6 (75)
IM Global Fixed Income -0.4 -2.9 -3.8 -0.5 1.3 3.8 3.4
Penn Capital 418 0.0 N/A N/A N/A N/A N/A N/A N/A 10y 3m
_________________________
Performance is reported net of fees.
10
Performance Summary
Manager Asset Allocation and Performance
As of September 30, 2015
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Hedge Fund Managers
Lighthouse Global Long/Short Fund Limited 17,416,988 7.1 -1.3 3.2 5.3 9.5 7.1 5.8 1.2 0y 7m
HFRI Equity Hedge (Total) Index -5.9 -2.3 -2.3 5.0 3.6 3.6 -3.9
Entrust Capital Diversified Fund 16,785,338 6.9 -5.5 -4.9 -6.2 4.3 3.4 4.6 -5.2 0y 2m
HFRI Fund of Funds Composite Index -3.7 -1.1 -0.1 4.1 2.7 2.4 -3.8
Real Estate Manager
UBS Trumbull Property Fund 14,724,932 6.0 3.1 8.7 11.7 10.1 10.6 6.0 5.6 9y 4m
NCREIF Property Index 3.1 10.1 13.5 11.9 12.6 8.0 7.3
Real Asset Manager
Wellington Diversified Inflation Hedges 7,955,534 3.3 -15.4 -17.3 -27.7 -11.9 -5.4 N/A -4.3 5y 6m
Wellington DIH Multi-Asset Inflation Index -14.7 -16.8 -25.5 -10.8 -5.2 -0.5 -4.4
Cash Account 6,332,749 2.6 0.0 0.1 0.7 0.3 0.2 1.3 1.3 12y 4m
BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.1 0.1 1.3 1.4
Total Composite 244,044,013 100.0 -4.5 -2.3 -2.7 4.3 5.8 5.4 7.3 22y 9m
_________________________
Performance is reported net of fees.
11
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Return (%)10.0 10.9 11.8 12.7 13.6 14.5 15.4 16.3 17.2 18.1 19.0
Risk (Standard Deviation %)
MSCI EAFE
Russell 2000 Growth Russell Midcap Value
Russell 1000 Growth
S&P 500
Russell 1000 Value
Holland Large Cap Growth
Kennedy Mid Cap Value
TimesSquare Small Cap Growth
Morgan Stanley International Equity
Vanguard Windsor II Fund
Vanguard Institutional Index Fund
T. Rowe Price Inst. Large-Cap Core Growth
Performance Summary
Risk and Return Summary - Equity Managers
5 Years Ending September 30, 2015
12
-1.4
-0.7
0.0
0.7
1.4
2.1
2.8
3.5
4.2
4.9
5.6
Return (%)1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5
Risk (Standard Deviation %)
Citigroup World Government Bond Index
BC Intermediate U.S. Government/Credit
Barclays U.S. Aggregate
Prudential Core Plus Bond Fund
Income Research
Brandywine Global
Performance Summary
Risk and Return Summary - Fixed Income Managers
5 Years Ending September 30, 2015
13
-10.0
-6.0
-2.0
2.0
6.0
10.0
14.0
18.0
22.0
Return (%)0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0
Risk (Standard Deviation %)
HFRI Fund of Funds Composite Index
Entrust Capital Diversified Fund
HFRI Equity Hedge (Total) Index
NCREIF Property Index
Lighthouse Global Long/Short Fund Limited
Wellington DIH Multi-Asset Inflation Index
Wellington DIH
UBS TPF
Performance Summary
Risk and Return Summary - Alternative Managers
5 Years Ending September 30, 2015
14
Manager Compliance Checklist
Third Quarter 2015
Mana ge rs
Va ngua rd
Windsor
Vangua rd
Insti tu ti ona l
T.Ro we
Price Hol land Ke nne dy TimesS qua re
Morga n
Stanley Int'l
Morgan
Stanley EM
Organizati onal /Produ ct Is sues
No ma teria l c hanges to investment team -+++-+++
No ma teria l o rg aniza tional changes ++++++++
Accounting or re gulatory concerns ++++++++
Cu rrently in adherence to guidelin es ++++++++
Po rt fo lio characteris tics me et s tylis tic expectations ++++++++
Re lati ve Perfor mance 1
Th re e-year re turn better than benchmark -N/A +----+
Th re e-year ra nkin g better than peer group median +++--+++
Fiv e year return better than benchmark -N/A +--+++
Fiv e year rankin g better than peer group media n +++--+++
1 Manager performance is evaluated net of investment management fees.
Fiv e year rankin g better than peer group media n +++--+++
Perfor mance s tatus ++++++++
Da te perfo rmance s tatus changed
Summary status ++++++++
Da te s umma ry status changed
15
Manager Compliance Checklist
Third Quarter 2015
Mana ge rs
Income
Re se arch Prude ntial
Bra ndyw ine
Global Lighthouse Entrust UBS Wellington
Organi zati onal /Produ ct Is sues
No ma teria l c hanges to investme nt team -+++++-
No ma teria l o rg aniza tional c hanges +-+++++
Accounting or re gulatory concerns +++++++
Cu rre ntly in adherence to guidelin es +++++++
Po rt fo lio characteris tics me et s tylis tic expectations +++++++
Re lati ve Perfor mance 1
Th re e-year return better than benchmark +++++--
Th re e-year rankin g better than peer group median ++-N/A N/A N/A N/A
Fiv e year re turn better than benchmark +++++--
+++
1 Manager performance is evaluated net of investment management fees.
Fiv e year ra nkin g better than peer group median +++N/A N/A N/A N/A
Perfor manc e s tatus +++++++
Da te perfo rmance s tatus changed
Summary status +++++++
Da te s umma ry status changed
16
Manager
Compliance
Issue Explanation
Recommended
Action Comments
Vanguard
Windsor II
Investment
Team
Changes
Vanguard and Barrow Hanley
announced that Jim Barrow will be
stepping down as PM of Windsor II at
the end of 2015. He has managed
Barrow Hanley’s portion of W indsor II
assets (approximately 60%) since
1985. As has already been well-
communicated over the past couple of
years, his replacements will be David
Ganucheau and Jeff Fahrenbruch.
It was also announced that a second
generation PM, Tim Culler, will be
retiring in March 2016.
Hold Messrs. Ganucheau and Fahrenbruch have 19
and 18 years of investment experience,
respectively, and have managed money for
Barrow Hanley since July 2011. However,
investors are losing a great deal of experience
with this change. W e recommend holding on the
to the Fund but will observe performance and
flows as the transition takes place over the coming
months.
The Barrow Hanley process is structured so that
different accounts are managed by different PMs
so Mr. Culler’s departure should not impact
Windsor II.
Kennedy Investment
Team
Doug Fisher, the former Director of
Research, resigned from the firm
Hold The key individuals on the mid-cap value team,
PM Frank Latuda and Associate-PM Gary
Manager Compliance Checklist
Third Quarter 2015
Team
Changes
Research, resigned from the firm
effective July 31, 2015 to return to
Florida. His departure was entirely
amicable and driven by a set of family
health circumstances.
As it pertains to the role of Director of
Research and leadership of the
research analyst team, their Chief
Portfolio Manager and co-founder, Dick
Sinise, will be assuming these duties
for the foreseeable future.
PM Frank Latuda and Associate-PM Gary
Kauppila, remain in place. Pavilion does not
believe Doug Fisher’s departure should be of
concern.
Morgan
Stanley
International
Equity
Investment
Team
Changes
Richard Perrott joined the team on July
13th as Vice President. He is co-
covering technology and working on
specialty financials.
Nic Sochovsky joined the team on July
27th as Executive Director. He is joining
William Lock and Vladimir Demine to
cover consumer staples.
Hold
17
Manager
Compliance
Issue Explanation
Recommended
Action Comments
Prudential
Fixed
Income
Investment
Team
Changes
Chief Compliance Officer, James
Hartmann, has resigned effective
September 4th. A search for his
replacement has been initiated and
they expect to have a candidate in
place shortly. In the interim, Teresa
Gilbreath, who is James’ supervisor
and Chief Compliance Officer for
Prudential’s asset management
businesses, will serve as Prudential
Fixed Income’s Chief Compliance
Officer.
The head of Prudential Fixed Income,
Jim Sullivan, will transition into the role
of Executive Chairman effective
Hold The announcements do not impact Pavilion’s
opinion or rating on any Prudential strategies, but
it will be important to monitor Mike Lillard’s future
workload.
Manager Compliance Checklist
Third Quarter 2015
of Executive Chairman effective
January 1, 2016. As Executive
Chairman, Sullivan will oversee the
strategic direction of the
business. Mike Lillard, currently CIO,
will become head of Prudential Fixed
Income and maintain his CIO role.This
change will have minimal impact on the
day-to-day portfolio management.
Income
Research
Investment
Team
Changes
Jen Karpinski, Portfolio Manager on the
Corporate team, has left Income
Research as of June 1st. Her
responsibilities have been reallocated
to the other Corporate Portfolio
Managers on the team.
Hold Given IR+M’s team approach to managing
portfolios we do not have concerns about the
departure.
18
Manager
Compliance
Issue Explanation
Recommended
Action Comments
Wellington Investment
Team
Changes
Lindsay Politi, the Inflation-Linked Bond
Portfolio Manager, left W ellington
during the second quarter. Joe Marvan,
the current portfolio manager of the US
Broad Market Team, will assume
managing responsibilities for the
Inflation-Linked Bond Portfolio while
maintaining his current role.
Hold Ms. Politi is one of seven underlying sector PM’s
in the W ellington DIH strategy. W e believe Mr.
Marvan’s assumption of PM responsibilities for the
Inflation-Linked Bond strategy is an upgrade.
Manager Compliance Checklist
Third Quarter 2015
19
Asset Class Diversification
20
September 30, 2015 : $244,044,013
Target Allocation Actual Allocation Allocation Differences
0.0%8.0%16.0%24.0%32.0%40.0%48.0%-8.0 %
Cash Account
$6,332,749
Real Asset Composite
$7,955,534
Real Estate Composite
$14,724,932
Hedge Funds Composite
$34,202,326
Fixed Income Composite
$88,168,055
Emerging International Equity Composite
$6,578,969
Developed International Equity Composite
$24,777,618
Small-Cap Equity Composite
$14,111,872
Large-Cap Equity Composite
$47,191,958
0.0%
5.0%
5.0%
15.0%
35.0%
4.0%
10.0%
6.0%
20.0%
2.6%
3.3%
6.0%
14.0%
36.1%
2.7%
10.2%
5.8%
19.3%
2.6%
-1.7 %
1.0%
-1.0 %
1.1%
-1.3 %
0.2%
-0.2 %
-0.7 %
Asset Class Diversification
Investment Policy Allocation
As of September 30, 2015
21
Asse t Cl ass/Type Manage r
Total Asse ts
($,mil.)as of
9/30/2015
Perce nt of
Total
Ta rge t
Allocation
Weighting
Re lati ve to
Ta rge t
Al low able
Ra nge
Total Asse ts
($,mil.)as of
6/30/2015
La rge -Ca p Equity $47.2 19.3%20.0%- 0 .7 %15 -25%$54.2
Co re Va nguard Ins titutional $14.1 5.8%6.0%- 0.2%$15.5
Va lu e Va nguard Windsor $11.8 4.8%5.0%- 0.2%$12.8
Gr owth T. Rowe Price $11.7 4.8%5.0%- 0.2%$13.0
Gr owth Ho lla nd $9.7 4.0%4.0%- 0.0%$12.8
Small-Ca p Equity $14.1 5.8%6.0%- 0 .2 %2 -8%$15.9
Va lu e Kennedy $6.9 2.8%3.0%- 0.2%$7.8
Gr owth Time sSquare $7.2 2.9%3.0%- 0.1%$8.1
Inte rna ti ona l Equity $31.4 12.8%14.0%- 1 .2 %$35.4
Developed Morgan Stanley $24.8 10.2%10.0%+ 0.2%5 -15%$27.8
Eme rg in g Marke ts Morgan Stanley $6.6 2.7%4.0%- 1.3%2 -8%$7.6
Fix ed Income $88.2 36.1%35.0%+ 1 .1 %$88.3
Asset Class Diversification
Investment Program Structure
As of September 30, 2015
Fix ed Income $88.2 36.1%35.0%+ 1 .1 %$88.3
Do me stic Core In come Res earch $37.0 15.2%14.0%+ 1.2%10 -20%$37.3
High Yie ld Pe nn Capit al $0.0 0.0%0.0%+ 0.0%0 -7%$3.4
Op portunistic Credit Lo omis $0.0 0.0%0.0%+ 0.0%0 -5%$5.1
Global Br andywin e Glo bal $21.7 8.9%9.0%- 0.1%4 -14%$22.6
Eme rg in g Marke ts De bt Pictet $0.0 0.0%0.0%+ 0.0%0 -7%$10.3
Do me stic Core Plu s Pru dential $29.5 12.1%12.0%+ 0.1%10 -20%$9.6
Ta cti ca l $0.0 0.0%0.0%+ 0 .0 %$17.8
Ba la nced GM O $0.0 0.0%0.0%+ 0.0%0 -12%$17.8
He dge Funds $34.2 14.0%15.0%- 1 .0 %0 -20%$17.7
Hedge Funds Li ghthouse Glo bal $17.4 7.1%7.5%- 0.4%$17.7
Hedge Funds En trust $16.8 6.9%7.5%- 0.6%$0.0
Real Es tate $14.7 6.0%5.0%+ 1 .0 %$14.3
Re al Es tate UBS Tru mb ull $14.7 6.0%5.0%+ 1.0%0 -10%$14.3
Real As set $8.0 3.3%5.0%- 1 .7 %$9.4
Re al Asset Wellin gton $8.0 3.3%5.0%- 1.7%0 -10%$9.4
Ca sh $6.3 2.6%0.0%+ 2 .6 %$1.5
Ca sh Account Ca sh Account $6.3 2.6%0.0%+ 2.6%$1.5
Tota l $244.0 100.0%100.0%+ 0 .0 %$254.4
*Totals may not add to exactly 100.0% due to rounding.
22
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)79,756 75,241
Median Mkt. Cap ($M)11,549 1,292
Price/Earnings ratio 17.8 16.1
Price/Book ratio 3.0 2.6
5 Yr. EPS Growth Rate (%)12.6 10.6
Current Yield (%)2.1 2.7
Debt to Equity 1.0 1.1
Number of Stocks 936 8,588
Beta -1.00
Consistency --
Sharpe Ratio --
Information Ratio --
Up Market Capture --
Down Market Capture --
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Apple Inc 1.4 1.6 -0.2 -11.7
Amazon.com Inc 1.4 0.5 0.9 17.9
British American Tobacco PLC 1.3 0.3 1.1 4.2
Nestle SA, Cham Und Vevey 1.3 0.6 0.7 3.8
Reckitt Benckiser Group PLC 1.3 0.2 1.2 5.9
Unilever NV 1.2 0.2 1.0 -3.1
Visa Inc 1.0 0.4 0.7 3.9
Microsoft Corp 1.0 0.9 0.1 0.9
Novartis AG 1.0 0.5 0.5 -7.2
Google Inc (Class C)1.0 0.5 0.5 16.9
% of Portfolio 11.9 5.6
Distribution of Market Capitalization (%)
Total Equity Composite MSCI AC World IMI
0.0
10.0
20.0
30.0
40.0
>$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash
30.4 29.7
24.1
15.8
32.3 30.9
23.4
11.6
1.9
Sector Weights (%)
Total Equity Composite MSCI AC World IMI
0.0 5.0 10.0 15.0 20.0 25.0 30.0
Other
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.1
1.9
1.5
2.2
3.6
17.1
10.5
15.1
15.6
4.0
13.0
15.5
0.0
3.3
3.4
5.0
14.1
11.2
12.0
21.9
6.1
9.5
13.3
Equity Portfolio - Characteristics
Total Equity Composite vs. MSCI AC World IMI
As of September 30, 2015
23
Total Equity
Composite MSCI AC World IMI
Australia 0.0 2.2
Hong Kong 0.5 1.8
Japan 4.8 8.1
New Zealand 0.0 0.1
Singapore 0.0 0.6
Pacific 5.4 12.7
Austria 0.2 0.1
Belgium 0.4 0.5
Finland 0.0 0.3
France 2.5 3.0
Germany 2.2 2.9
Ireland 0.6 0.5
Italy 0.1 0.9
Netherlands 1.9 1.1
Portugal 0.1 0.1
Spain 0.0 1.1
EMU 8.0 10.6
Denmark 0.0 0.6
Norway 0.0 0.3
Sweden 0.3 1.1
Switzerland 4.5 3.3
United Kingdom 9.8 7.1
Europe ex EMU 14.7 12.5
Canada 0.9 3.1
United States 62.2 51.8
Israel 0.0 0.2
Middle East 0.0 0.2
Developed Markets 91.2 91.0
Total Equity
Composite MSCI AC World IMI
Brazil 0.4 0.5
Cayman Islands 0.0 0.0
Chile 0.0 0.1
Colombia 0.1 0.0
Mexico 0.5 0.4
Peru 0.1 0.0
Virgin Islands 0.0 0.0
EM Latin America 1.0 1.2
China 1.5 1.5
India 0.9 0.9
Indonesia 0.2 0.2
Korea 0.9 1.6
Malaysia 0.0 0.3
Philippines 0.3 0.1
Taiwan 0.8 1.3
Thailand 0.1 0.2
EM Asia 4.7 6.1
Czech Republic 0.1 0.0
Egypt 0.0 0.0
Greece 0.0 0.0
Hungary 0.0 0.0
Poland 0.2 0.1
Qatar 0.0 0.1
Russia 0.0 0.3
South Africa 0.5 0.7
Turkey 0.1 0.1
United Arab Emirates 0.0 0.1
EM Europe + Middle East + Africa 0.9 1.6
Emerging Markets 6.7 8.9
Frontier Markets 0.1 0.0
Cash 1.9 0.0
Other 0.1 0.1
Total 100.0 100.0
Equity Portfolio - Country/Region Allocation
Total Equity Composite vs. MSCI AC World IMI
As of September 30, 2015
24
Portfolio Characteristics
Maturity Distribution (%)
Credit Quality Distribution (%)
Risk Characteristics - 3 Years
Sector Distribution (%)
Portfolio Benchmark
Effective Duration 5.1 4.0
Avg. Maturity 6.5 4.3
Avg. Quality A+AA
Yield To Maturity (%)3.2 1.7
Total Fixed Income Composite
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
AAAAAABBBBBBBelow BNot Rated64.8
5.8
14.6 14.8
0.0 0.0 0.0 0.0
37.2
11.7
20.5 20.8
1.8 0.3
7.5
0.2
Consistency
Sharpe
Ratio
Information
Ratio
Up
Market
Capture
Down
Market
Capture
Total Fixed Income Composite 50.0 0.1 -0.4 103.3 148.2
Barclays Intermediate U.S. Government/Credit 0.0 0.7 N/A 100.0 100.0
90 Day U.S. Treasury Bill 44.4 N/A -0.7 0.9 -0.9
Total Fixed Income Composite
Barclays Intermediate U.S. Government/Credit
0.0
15.0
30.0
45.0
60.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0
39.1
26.9
17.3 16.7
0.0
4.1
20.8
26.9
31.7
3.9
12.6
Total Fixed Income Composite
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS57.1
5.0
25.4
0.0 0.0 0.0
10.3
2.2 0.0 0.0 0.0 0.0
15.6
3.2
29.2
5.0 2.0
9.9
16.0
1.7 1.7 1.4 5.0 9.3
Fixed Income Portfolio - Characteristics
Total Fixed Income Composite vs. Barclays Intermediate U.S. Government/Credit
As of September 30, 2015
25
Manager Evaluation
26
Historical Performance
Buy and Hold Attribution
Risk and Return (Oct - 2010 - Sep - 2015)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Vanguard Windsor II -8.2 -7.3 -4.0 10.9 12.2 5.8 11.3 30.8 16.8 2.8 10.7 27.2 -36.6 2.3 18.4 7.2
Russell 1000 Value Index -8.4 -9.0 -4.4 11.6 12.3 5.7 13.5 32.5 17.5 0.4 15.5 19.7 -36.8 -0.2 22.2 7.1
IM U.S. Large Cap Value Equity -8.9 -8.7 -5.1 10.9 10.9 5.0 10.9 32.5 15.3 -2.4 12.8 24.3 -36.9 1.5 17.8 5.2
Vanguard Windsor II Rank 35 18 29 48 19 27 42 75 30 14 84 28 47 43 43 28
Vanguard Windsor II Russell 1000 Value Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 12.1
12.2
12.3
12.4
Return (%)12.6 12.9 13.2 13.5 13.8 14.1 14.4
Risk (Standard Deviation %)
Russell 1000 Value Index
Vanguard Windsor II
Average Active Weight
0.0 8.0 16.0-8.0-16.0
Utilities
Telecommunication Services
Other
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-2.9
0.2
0.4
-2.4
2.3
-1.2
4.9
-6.9
-5.2
1.9
6.4
2.6
Allocation
(Total: 0.5)
0.0 0.5 1.0-0.5-1.0
-0.4
0.0
0.0
0.2
0.0
0.0
-0.1
-0.1
0.5
0.1
0.0
0.2
Stock
(Total: 0.1)
0.0 0.7 1.4-0.7-1.4
-0.2
0.0
0.0
0.0
0.0
0.3
0.1
-0.7
-0.1
0.6
0.1
0.0
Vanguard Windsor II
0.0 0.6 1.2 1.8-0.6-1.2-1.8
-0.6
0.0
0.0
0.2
0.1
0.4
0.0
-0.8
0.3
0.7
0.1
0.2
Manager Evaluation
Vanguard Windsor II vs. Russell 1000 Value Index
As of September 30, 2015
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
27
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)100,454 99,799
Median Mkt. Cap ($M)20,212 7,056
Price/Earnings ratio 14.9 15.9
Price/Book ratio 2.4 2.0
5 Yr. EPS Growth Rate (%)7.8 5.3
Current Yield (%)2.8 2.8
Debt to Equity 1.4 1.0
Number of Stocks 267 689
Beta (5 Years, Monthly)0.96 1.00
Consistency (5 Years, Monthly)48.33 1.00
Sharpe Ratio (5 Years, Monthly)1.04 1.02
Information Ratio (5 Years, Monthly)-0.06 -
Up Market Capture (5 Years, Monthly)97.95 -
Down Market Capture (5 Years, Monthly)96.67 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
JPMorgan Chase & Co 3.0 2.4 0.7 -9.4
Microsoft Corp 3.0 1.6 1.3 0.9
Medtronic PLC 2.8 1.0 1.8 -9.2
Wells Fargo & Co 2.6 2.5 0.1 -8.1
Pfizer Inc 2.5 2.1 0.5 -5.6
Citigroup Inc 2.3 1.6 0.7 -10.1
Philip Morris International Inc 2.3 0.7 1.6 0.2
Target Corp 2.2 0.5 1.7 -3.0
PNC Financial Services Group Inc.2.2 0.5 1.7 -6.3
Sanofi 2.0 0.0 2.0 -4.2
% of Portfolio 25.0 12.8
Distribution of Market Capitalization (%)
Vanguard Windsor II Russell 1000 Value Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash
41.7
29.5
22.5
6.3
43.3
36.5
14.2
3.2 2.8
Sector Weights (%)
Vanguard Windsor II Russell 1000 Value Index
0.0 8.0 16.0 24.0 32.0 40.0
Other
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.4
2.8
2.9
2.7
0.5
13.6
9.2
16.3
22.4
7.9
9.5
11.8
6.4
2.5
2.7
11.3
10.0
11.6
30.3
12.9
7.0
5.4
Manager Evaluation
Vanguard Windsor II vs. Russell 1000 Value Index
As of September 30, 2015
*Manager characteristics are updated through 06/30/2015 as current quarter data was not available at the time of report production.
28
Historical Performance
Three Year Rolling Percentile Ranking Relative Performance
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Vanguard Institutional Index -6.4 -5.3 -0.6 12.4 13.3 6.8 13.7 32.3 16.0 2.1 15.0 26.6 -37.0 5.5 15.8 4.9
S&P 500 Index -6.4 -5.3 -0.6 12.4 13.3 6.8 13.7 32.4 16.0 2.1 15.1 26.5 -37.0 5.5 15.8 4.9
IM U.S. Large Cap Equity -7.3 -5.9 -1.7 11.6 12.0 6.1 11.0 32.6 15.3 -1.3 13.4 28.1 -37.8 6.8 13.1 5.3
Vanguard Institutional Index Rank 32 43 40 35 23 31 15 54 41 19 33 58 40 59 30 56
Vanguard Institutional Index S&P 500 Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 Cumulative Annualized Over/Under Relative Performance
Over/Under Performance
0.0
0.1
0.2
-0.1
-0.2Return (%)12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Vanguard Institutional Index 13.3 12.8 13.4 0.0 1.0 1.1 0.0 -3.4 7.0 5.0 16y
S&P 500 Index 13.3 12.8 13.5 0.0 1.0 1.1 0.0 N/A 6.9 0.0 16y
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 12.8 -1.1 0.0 20.0 16y
Manager Evaluation
Vanguard Institutional Index vs. S&P 500 Index
As of September 30, 2015
29
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)126,626 126,635
Median Mkt. Cap ($M)17,000 16,986
Price/Earnings ratio 18.0 18.0
Price/Book ratio 3.0 3.0
5 Yr. EPS Growth Rate (%)11.6 11.2
Current Yield (%)2.3 2.3
Debt to Equity 1.2 1.2
Number of Stocks 504 505
Beta (5 Years, Monthly)1.00 1.00
Consistency (5 Years, Monthly)28.33 1.00
Sharpe Ratio (5 Years, Monthly)1.15 1.15
Information Ratio (5 Years, Monthly)-1.80 -
Up Market Capture (5 Years, Monthly)99.92 -
Down Market Capture (5 Years, Monthly)100.06 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Apple Inc 3.7 3.7 0.0 -11.7
Microsoft Corp 2.1 2.1 0.0 0.9
Exxon Mobil Corp 1.8 1.8 0.0 -9.8
Johnson & Johnson 1.5 1.5 0.0 -3.5
General Electric Co 1.5 1.5 0.0 -4.2
Wells Fargo & Co 1.4 1.4 0.0 -8.1
Berkshire Hathaway Inc 1.4 1.4 -0.1 -4.2
JPMorgan Chase & Co 1.3 1.3 0.0 -9.4
Facebook Inc 1.2 1.2 0.0 4.8
AT&T Inc 1.2 1.2 0.0 -7.0
% of Portfolio 17.2 17.3
Distribution of Market Capitalization (%)
Vanguard Institutional Index S&P 500 Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil
50.3
32.4
16.8
0.6
50.3
32.4
16.8
0.6
Sector Weights (%)
Vanguard Institutional Index S&P 500 Index
0.0 5.0 10.0 15.0 20.0 25.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
3.1
2.4
2.8
20.4
10.1
14.7
16.5
6.9
9.9
13.1
3.1
2.4
2.8
20.4
10.1
14.7
16.5
6.9
9.9
13.1
Manager Evaluation
Vanguard Institutional Index vs. S&P 500 Index
As of September 30, 2015
30
Historical Performance
Buy and Hold Attribution
Risk and Return (Oct - 2010 - Sep - 2015)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
T. Rowe Price LCC Growth -4.9 1.3 5.7 15.8 16.1 8.6 9.3 41.4 18.5 1.5 16.4 43.0 -42.6 13.0 9.1 4.0
Russell 1000 Growth Index -5.3 -1.5 3.2 13.6 14.5 8.1 13.1 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3
IM U.S. Large Cap Growth Equity -6.1 -2.0 2.5 12.8 13.1 7.1 10.5 34.1 14.9 -1.7 15.1 35.0 -39.8 13.8 6.7 5.7
T. Rowe Price LCC Growth Rank 23 10 12 5 2 13 66 6 18 20 35 20 73 56 24 68
T. Rowe Price LCC Growth Russell 1000 Growth Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 12.0
14.0
16.0
18.0
20.0
Return (%)12.0 12.5 13.0 13.5 14.0 14.5 15.0 15.5
Risk (Standard Deviation %)
Russell 1000 Growth Index
T. Rowe Price LCC Growth
Average Active Weight
0.0 10.0 20.0-10.0-20.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.0
-1.8
-0.6
-2.0
-0.9
8.2
1.8
0.6
-7.7
2.5
Allocation
(Total: -1.1)
0.0 0.4-0.4-0.8-1.2
0.0
0.0
0.1
0.0
0.0
-0.6
0.0
-0.1
-0.5
0.1
Stock
(Total: 1.4)
0.0 1.0 2.0 3.0-1.0-2.0
0.0
0.0
0.0
0.3
0.1
-0.3
-0.3
0.1
-0.1
1.6
T. Rowe Price LCC Growth
0.0 1.0 2.0 3.0-1.0-2.0
0.0
0.0
0.1
0.3
0.1
-0.9
-0.3
0.0
-0.6
1.7
Manager Evaluation
T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index
As of September 30, 2015
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
31
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)111,207 123,670
Median Mkt. Cap ($M)26,172 8,393
Price/Earnings ratio 23.9 20.9
Price/Book ratio 4.8 5.0
5 Yr. EPS Growth Rate (%)18.6 17.7
Current Yield (%)0.7 1.6
Debt to Equity 0.8 0.7
Number of Stocks 130 642
Beta (5 Years, Monthly)1.09 1.00
Consistency (5 Years, Monthly)56.67 1.00
Sharpe Ratio (5 Years, Monthly)1.19 1.22
Information Ratio (5 Years, Monthly)0.42 -
Up Market Capture (5 Years, Monthly)107.77 -
Down Market Capture (5 Years, Monthly)103.00 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Amazon.com Inc 6.4 2.0 4.5 17.9
Priceline Group Inc (The)3.4 0.7 2.7 7.4
Facebook Inc 3.3 2.0 1.3 4.8
Google Inc (Class C)3.1 1.8 1.3 16.9
Danaher Corp 3.0 0.1 2.9 -0.3
Visa Inc 3.0 1.4 1.6 3.9
MasterCard Inc 2.7 0.9 1.8 -3.4
McKesson Corp 2.6 0.4 2.2 -17.6
Google Inc 2.6 1.9 0.7 18.2
Allergan PLC 2.4 0.5 1.9 -10.4
% of Portfolio 32.4 11.6
Distribution of Market Capitalization (%)
T. Rowe Price Large-Cap Core Growth
Russell 1000 Growth Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil
46.4
28.8
21.0
3.8
43.8 43.7
12.4
Sector Weights (%)
T. Rowe Price Large-Cap Core Growth
Russell 1000 Growth Index
0.0 8.0 16.0 24.0 32.0 40.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
3.0
26.4
10.5
24.6
6.7
1.4
2.8
24.7
0.0
2.1
3.5
27.7
11.1
16.8
5.4
0.7
11.2
21.5
Manager Evaluation
T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index
As of September 30, 2015
32
Historical Performance
Buy and Hold Attribution
Risk and Return (Oct - 2010 - Sep - 2015)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Holland Large Cap Growth -3.3 0.9 2.8 11.7 12.8 7.6 7.2 30.3 13.1 4.3 15.3 40.0 -33.8 9.4 6.4 -0.1
Russell 1000 Growth Index -5.3 -1.5 3.2 13.6 14.5 8.1 13.1 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3
IM U.S. Large Cap Growth Equity -6.1 -2.0 2.5 12.8 13.1 7.1 10.5 34.1 14.9 -1.7 15.1 35.0 -39.8 13.8 6.7 5.7
Holland Large Cap Growth Rank 4 12 47 76 57 34 91 82 74 5 49 30 5 81 54 99
Holland Large Cap Growth Russell 1000 Growth Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 10.0
12.0
14.0
16.0
18.0
Return (%)11.2 11.6 12.0 12.4 12.8 13.2 13.6
Risk (Standard Deviation %)
Russell 1000 Growth Index
Holland Large Cap Growth
Average Active Weight
0.0 4.0 8.0-4.0-8.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
0.0
-1.8
-2.6
4.0
1.4
-3.9
-1.5
0.7
0.7
0.7
2.3
Allocation
(Total: 0.7)
0.0 0.3 0.6-0.3-0.6
0.0
0.0
0.3
0.1
0.0
0.3
0.0
-0.1
0.0
0.0
0.1
Stock
(Total: 1.5)
0.0 2.0 4.0-2.0
0.0
0.0
0.2
0.4
0.7
0.0
-0.4
-0.1
-0.7
1.6
0.0
Holland Large Cap Growth
0.0 0.9 1.8 2.7-0.9-1.8
0.0
0.0
0.4
0.4
0.7
0.2
-0.4
-0.3
-0.7
1.6
0.1
Manager Evaluation
Holland Large Cap Growth vs. Russell 1000 Growth Index
As of September 30, 2015
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
33
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)104,597 123,670
Median Mkt. Cap ($M)37,389 8,393
Price/Earnings ratio 22.5 20.9
Price/Book ratio 4.6 5.0
5 Yr. EPS Growth Rate (%)17.1 17.7
Current Yield (%)1.1 1.6
Debt to Equity 0.6 0.7
Number of Stocks 52 642
Beta (5 Years, Monthly)1.00 1.00
Consistency (5 Years, Monthly)48.33 1.00
Sharpe Ratio (5 Years, Monthly)1.06 1.22
Information Ratio (5 Years, Monthly)-0.50 -
Up Market Capture (5 Years, Monthly)96.00 -
Down Market Capture (5 Years, Monthly)104.77 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Visa Inc 4.8 1.4 3.4 3.9
Apple Inc 4.1 6.4 -2.3 -11.7
Google Inc (Class C)4.1 1.8 2.3 16.9
Priceline Group Inc (The)3.8 0.7 3.2 7.4
Adobe Systems Inc 3.7 0.4 3.3 1.5
Amazon.com Inc 3.7 2.0 1.7 17.9
Citrix Systems Inc.3.5 0.1 3.4 -1.3
Gilead Sciences Inc 3.0 1.5 1.6 -15.8
Southwest Airlines Co.2.9 0.3 2.6 15.2
Cisco Systems Inc 2.9 0.0 2.9 -3.7
% of Portfolio 36.5 14.5
Distribution of Market Capitalization (%)
Holland Capital Management Russell 1000 Growth Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash
46.4
28.8
21.0
3.8
38.7
35.2
20.5
3.5 2.1
Sector Weights (%)
Holland Capital Management Russell 1000 Growth Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
2.1
1.3
29.6
12.5
14.8
3.8
1.1
10.4
24.3
0.0
2.1
3.5
27.7
11.1
16.8
5.4
0.7
11.2
21.5
Manager Evaluation
Holland Capital Management vs. Russell 1000 Growth Index
As of September 30, 2015
34
Historical Performance
Buy and Hold Attribution
Risk and Return (Oct - 2010 - Sep - 2015)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Kennedy Mid Cap Value -11.4 -11.0 -7.8 11.9 11.9 N/A 15.8 33.3 13.6 -0.8 27.0 34.8 -27.0 N/A N/A N/A
Russell Midcap Value Index -8.0 -7.7 -2.1 13.7 13.2 7.4 14.7 33.5 18.5 -1.4 24.8 34.2 -38.4 -1.4 20.2 12.6
IM U.S. Mid Cap Value Equity -9.3 -7.3 -2.2 13.1 12.1 6.4 9.8 35.8 16.1 -3.7 22.9 36.3 -37.7 0.7 14.8 10.1
Kennedy Mid Cap Value Rank 90 87 84 64 52 N/A 4 78 87 21 14 53 1 N/A N/A N/A
Kennedy Mid Cap Value Russell Midcap Value Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 10.0
12.0
14.0
16.0
Return (%)14.4 15.0 15.6 16.2 16.8 17.4 18.0
Risk (Standard Deviation %)
Russell Midcap Value Index
Kennedy Mid Cap Value
Average Active Weight
0.0 8.0 16.0-8.0-16.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-2.9
-1.6
-3.9
4.2
4.7
0.2
-4.9
-5.8
0.4
7.9
1.6
Allocation
(Total: 0.8)
0.0 0.8 1.6-0.8-1.6
-0.4
0.1
0.4
0.1
-0.3
0.0
-0.2
1.0
0.0
0.0
0.1
Stock
(Total: -3.7)
0.0 0.8 1.6-0.8-1.6
-0.2
0.0
-0.4
-0.4
-0.7
-0.6
-0.9
-0.9
0.3
0.1
0.0
Kennedy Mid Cap Value
0.0 0.6 1.2-0.6-1.2-1.8
-0.5
0.1
0.0
-0.2
-1.0
-0.6
-1.2
0.1
0.3
0.1
0.1
Manager Evaluation
Kennedy Mid Cap Value vs. Russell Midcap Value Index
As of September 30, 2015
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
35
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)7,501 10,626
Median Mkt. Cap ($M)6,498 5,450
Price/Earnings ratio 15.3 16.9
Price/Book ratio 2.1 1.9
5 Yr. EPS Growth Rate (%)15.5 10.7
Current Yield (%)2.1 2.5
Debt to Equity 1.0 0.9
Number of Stocks 59 557
Beta (5 Years, Monthly)1.10 1.00
Consistency (5 Years, Monthly)53.33 1.00
Sharpe Ratio (5 Years, Monthly)0.86 1.04
Information Ratio (5 Years, Monthly)-0.29 -
Up Market Capture (5 Years, Monthly)102.49 -
Down Market Capture (5 Years, Monthly)113.77 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Reinsurance Group of America Inc.2.7 0.2 2.5 -4.1
Brixmor Property Group Inc 2.7 0.1 2.6 2.5
Mid-America Apartment Communities Inc.2.6 0.2 2.3 13.6
Best Buy Co. Inc.2.5 0.4 2.1 14.5
Ingredion Inc 2.5 0.2 2.3 10.0
Tyson Foods Inc.2.3 0.4 1.9 1.3
UGI Corp 2.3 0.2 2.1 1.8
Westar Energy Inc.2.2 0.2 2.0 13.5
Torchmark Corp 2.1 0.2 1.9 -2.9
MAXIMUS Inc.2.1 0.0 2.1 -9.3
% of Portfolio 24.0 2.2
Distribution of Market Capitalization (%)
Kennedy Capital Management Russell Midcap Value Index
0.0
25.0
50.0
75.0
100.0
$20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash
9.4
70.3
20.3
72.3
25.4
2.3
Sector Weights (%)
Kennedy Capital Management Russell Midcap Value Index
0.0 8.0 16.0 24.0 32.0 40.0 48.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
2.3
9.1
4.2
13.7
12.4
4.2
29.8
6.1
4.8
13.4
12.1
1.5
6.1
9.6
9.5
6.0
34.1
8.8
3.9
8.4
Manager Evaluation
Kennedy Capital Management vs. Russell Midcap Value Index
As of September 30, 2015
36
Historical Performance
Buy and Hold Attribution
Risk and Return (Oct - 2010 - Sep - 2015)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
TimesSquare Small Cap Growth -10.9 -2.8 6.6 12.1 14.0 9.6 -2.5 47.7 13.1 2.6 27.3 35.7 -32.3 10.0 16.5 13.4
Russell 2000 Growth Index -13.1 -5.5 4.0 12.8 13.3 7.7 5.6 43.3 14.6 -2.9 29.1 34.5 -38.5 7.0 13.3 4.2
IM U.S. Small Cap Growth Equity -12.3 -7.2 2.0 11.8 12.8 6.5 1.4 43.6 11.8 -4.9 26.6 33.1 -42.8 7.5 9.3 4.7
TimesSquare Small Cap Growth Rank 33 30 19 44 22 1 83 29 38 7 41 42 1 35 14 2
TimesSquare Small Cap Growth Russell 2000 Growth Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 11.9
12.6
13.3
14.0
14.7
15.4
Return (%)18.2 18.4 18.6 18.8 19.0 19.2 19.4
Risk (Standard Deviation %)
Russell 2000 Growth Index
TimesSquare Small Cap Growth
Average Active Weight
0.0 15.0 30.0-15.0-30.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-0.1
0.0
-2.2
5.8
9.8
-15.7
-1.8
0.6
-0.1
-1.8
5.6
Allocation
(Total: 1.3)
0.0 0.5 1.0 1.5-0.5-1.0
0.0
0.0
0.1
0.2
-0.1
0.8
-0.1
-0.1
0.0
0.0
0.7
Stock
(Total: 1.7)
0.0 2.0 4.0-2.0
0.0
-0.1
-0.1
2.2
-0.1
0.1
-0.2
0.3
-0.5
0.0
0.0
TimesSquare Small Cap Growth
0.0 2.0 4.0-2.0
0.0
-0.1
0.0
2.4
-0.2
0.9
-0.4
0.2
-0.5
0.0
0.7
Manager Evaluation
TimesSquare Small Cap Growth vs. Russell 2000 Growth Index
As of September 30, 2015
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
37
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)2,141 1,953
Median Mkt. Cap ($M)1,679 754
Price/Earnings ratio 28.5 24.4
Price/Book ratio 3.4 3.8
5 Yr. EPS Growth Rate (%)18.2 14.4
Current Yield (%)0.5 0.8
Debt to Equity 0.4 1.0
Number of Stocks 101 1,155
Beta (5 Years, Monthly)0.88 1.00
Consistency (5 Years, Monthly)55.00 1.00
Sharpe Ratio (5 Years, Monthly)0.94 0.83
Information Ratio (5 Years, Monthly)0.10 -
Up Market Capture (5 Years, Monthly)89.31 -
Down Market Capture (5 Years, Monthly)78.29 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Ultimate Software Group Inc 2.3 0.0 2.3 8.9
Henry (Jack) & Associates Inc.2.1 0.0 2.1 8.0
On Assignment Inc 2.0 0.2 1.8 -6.1
j2 Global Inc 1.9 0.4 1.5 4.7
Bright Horizons Family Solutions Inc 1.9 0.3 1.6 11.1
Imax Corp 1.8 0.3 1.5 -16.1
ExlService Holdings Inc 1.7 0.1 1.6 6.8
MKS Instruments Inc 1.7 0.0 1.7 -11.2
Albany International Corp.1.6 0.0 1.6 -27.7
PolyOne Corp 1.6 0.3 1.3 -24.9
% of Portfolio 18.6 1.7
Distribution of Market Capitalization (%)
TimesSquare Small Cap Growth Russell 2000 Growth Index
0.0
50.0
100.0
150.0
$5 Bil - $20 Bil $0 - $5 Bil Cash
1.2
98.8
6.4
88.2
5.4
Sector Weights (%)
TimesSquare Small Cap Growth Russell 2000 Growth Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
5.4
0.7
1.9
30.6
18.6
15.2
4.7
1.2
3.0
18.8
0.1
0.8
4.0
24.5
12.8
26.6
7.9
1.3
3.5
18.5
Manager Evaluation
TimesSquare Small Cap Growth vs. Russell 2000 Growth Index
As of September 30, 2015
38
Historical Performance
Buy and Hold Attribution
Risk and Return (Oct - 2010 - Sep - 2015)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Morgan Stanley International Equity -9.2 -2.6 -7.8 5.3 5.4 3.7 -6.1 20.4 19.6 -7.6 6.1 21.6 -33.1 9.8 22.5 6.5
MSCI EAFE Index -10.2 -5.3 -8.7 5.6 4.0 3.0 -4.9 22.8 17.3 -12.1 7.8 31.8 -43.4 11.2 26.3 13.5
IM International Equity -11.1 -6.1 -9.2 4.0 3.0 3.4 -4.5 17.4 18.6 -14.9 12.9 36.3 -46.0 13.2 26.2 15.7
Morgan Stanley International Equity Rank 28 26 41 36 19 46 67 38 40 7 89 92 4 70 78 97
Morgan Stanley International Equity MSCI EAFE Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 2.0
4.0
6.0
8.0
Return (%)12.8 13.2 13.6 14.0 14.4 14.8 15.2
Risk (Standard Deviation %)
MSCI EAFE Index
Morgan Stanley International Equity
Average Active Weight
0.0 15.0 30.0-15.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-3.6
-1.6
0.9
-0.1
-4.2
3.2
-7.0
-0.4
14.3
-3.1
1.7
Allocation
(Total: 1.5)
0.0 0.8 1.6 2.4-0.8
-0.2
0.0
-0.1
0.0
0.0
0.2
0.1
0.0
1.2
0.0
0.2
Stock
(Total: -1.2)
0.0 0.5 1.0-0.5-1.0
0.0
0.0
-0.3
-0.3
-0.4
-0.3
0.0
-0.5
0.4
0.2
0.0
Morgan Stanley International Equity
0.0 0.8 1.6 2.4 3.2-0.8-1.6
-0.2
0.0
-0.4
-0.3
-0.4
-0.1
0.1
-0.5
1.6
0.3
0.2
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
As of September 30, 2015
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
39
Total Attribution
0.0 0.3 0.6 0.9 1.2 1.5 1.8 2.1-0.3-0.6-0.9-1.2
Pacific
Other
North America
Middle East
Europe ex EMU
EMU
EM Asia
Cash
-0.3
0.0
-0.5
0.0
1.2
-0.1
-0.2
0.2
Performance Attribution
Average Active Weight
0.0 15.0 30.0-15.0-30.0
Pacific
Other
North America
Middle East
Europe ex EMU
EMU
EM Asia
Cash
-13.3
-0.3
1.8
-0.6
15.3
-5.6
1.0
1.7
Allocation
(Total: 0.0)
0.0 0.4 0.8-0.4-0.8-1.2
0.4
0.0
-0.5
0.0
0.2
-0.1
-0.2
0.2
Stock
(Total: 0.3)
0.0 0.6 1.2 1.8-0.6-1.2-1.8
-0.7
0.0
0.0
0.0
1.0
0.0
0.0
0.0
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
1 Quarter Ending September 30, 2015
40
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)73,878 55,169
Median Mkt. Cap ($M)26,289 8,332
Price/Earnings ratio 16.3 15.0
Price/Book ratio 2.8 2.2
5 Yr. EPS Growth Rate (%)8.0 8.9
Current Yield (%)3.0 3.4
Debt to Equity 1.3 1.4
Number of Stocks 66 913
Beta (5 Years, Monthly)0.92 1.00
Consistency (5 Years, Monthly)46.67 1.00
Sharpe Ratio (5 Years, Monthly)0.44 0.33
Information Ratio (5 Years, Monthly)0.38 -
Up Market Capture (5 Years, Monthly)97.13 -
Down Market Capture (5 Years, Monthly)89.63 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
British American Tobacco PLC 5.0 0.9 4.1 4.2
Reckitt Benckiser Group PLC 4.9 0.5 4.4 5.9
Nestle SA, Cham Und Vevey 4.9 2.1 2.8 3.8
Unilever NV 4.3 0.6 3.8 -3.1
Novartis AG 3.8 1.8 2.0 -7.2
Glaxosmithkline PLC 3.3 0.8 2.5 -6.6
Roche Holding AG 3.3 1.6 1.7 -6.2
Sanofi 3.2 1.0 2.2 -3.7
Prudential PLC 2.6 0.5 2.2 -11.7
Japan Tobacco Inc 2.6 0.3 2.3 -13.4
% of Portfolio 37.9 9.9
Distribution of Market Capitalization (%)
Morgan Stanley International Equity MSCI EAFE Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash
24.1
41.4
29.0
5.5
31.7
40.9
23.8
1.3 2.3
Sector Weights (%)
Morgan Stanley International Equity MSCI EAFE Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
2.3
3.4
6.3
4.3
8.3
16.7
17.2
3.3
28.0
10.3
3.8
4.9
6.6
4.8
12.5
11.8
25.8
4.7
12.0
13.1
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
As of September 30, 2015
41
Morgan Stanley
International Equity MSCI EAFE Index
Australia 0.1 6.4
Hong Kong 0.0 3.0
Japan 17.9 22.5
New Zealand 0.0 0.1
Singapore 0.0 1.3
Pacific 18.0 33.4
Austria 0.0 0.2
Belgium 1.5 1.3
Finland 0.0 0.9
France 7.7 9.6
Germany 8.3 8.8
Ireland 1.0 0.4
Italy 0.4 2.5
Netherlands 6.6 3.1
Portugal 0.0 0.1
Spain 0.0 3.4
EMU 25.6 30.3
Denmark 0.0 1.8
Norway 0.0 0.6
Sweden 1.2 3.0
Switzerland 16.2 9.7
United Kingdom 34.6 20.4
Europe ex EMU 52.0 35.4
Canada 1.4 0.0
United States 0.0 0.0
Israel 0.0 0.6
Middle East 0.0 0.6
Developed Markets 97.0 99.7
Morgan Stanley
International Equity MSCI EAFE Index
Brazil 0.0 0.0
Cayman Islands 0.0 0.0
Chile 0.0 0.0
Colombia 0.0 0.0
Mexico 0.0 0.0
Peru 0.0 0.0
Virgin Islands 0.0 0.0
EM Latin America 0.0 0.0
China 0.7 0.0
India 0.0 0.0
Indonesia 0.0 0.0
Korea 0.0 0.0
Malaysia 0.0 0.0
Philippines 0.0 0.0
Taiwan 0.0 0.0
Thailand 0.0 0.0
EM Asia 0.7 0.0
Czech Republic 0.0 0.0
Egypt 0.0 0.0
Greece 0.0 0.0
Hungary 0.0 0.0
Poland 0.0 0.0
Qatar 0.0 0.0
Russia 0.0 0.0
South Africa 0.0 0.0
Turkey 0.0 0.0
United Arab Emirates 0.0 0.0
EM Europe + Middle East + Africa 0.0 0.0
Emerging Markets 0.7 0.0
Frontier Markets 0.0 0.0
Cash 2.3 0.0
Other 0.0 0.3
Total 100.0 100.0
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
As of September 30, 2015
42
Historical Performance
Buy and Hold Attribution
Risk and Return (Oct - 2010 - Sep - 2015)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Morgan Stanley Emerging Markets -14.0 -9.8 -15.4 -3.5 -2.3 4.4 -4.5 -0.8 20.2 -18.4 18.5 69.5 -56.4 41.6 38.0 34.5
MSCI Emerging Markets Index -17.9 -15.5 -19.3 -5.3 -3.6 4.3 -2.2 -2.6 18.2 -18.4 18.9 78.5 -53.3 39.4 32.2 34.0
IM Emerging Markets Equity -16.3 -14.7 -18.8 -4.7 -3.6 3.9 -3.0 -1.5 18.8 -19.5 18.3 72.9 -54.7 36.9 32.3 32.0
Morgan Stanley Emerging Markets Rank 20 13 23 38 31 34 69 46 32 36 48 63 69 22 12 34
Morgan Stanley Emerging Markets MSCI Emerging Markets Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 -6.0
-4.5
-3.0
-1.5
0.0
1.5
Return (%)12.8 13.6 14.4 15.2 16.0 16.8 17.6 18.4
Risk (Standard Deviation %)
MSCI Emerging Markets Index
Morgan Stanley Emerging Markets
Average Active Weight
0.0 15.0 30.0-15.0
Utilities
Telecommunication Services
Other
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-2.9
-0.6
13.9
-2.1
-2.4
-0.8
0.4
-6.1
-4.6
0.6
2.5
2.1
Allocation
(Total: 1.0)
0.0 0.3 0.6-0.3-0.6
0.0
0.0
0.0
0.0
-0.1
0.0
0.0
0.2
0.3
0.0
0.1
0.4
Stock
(Total: 2.1)
0.0 0.8 1.6 2.4-0.8-1.6
0.0
0.0
0.0
0.3
-0.5
0.3
0.0
1.0
0.2
0.3
0.6
0.0
Morgan Stanley Emerging Markets
0.0 0.7 1.4 2.1-0.7-1.4
-0.1
0.0
0.0
0.3
-0.6
0.3
0.0
1.3
0.5
0.3
0.7
0.4
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
As of September 30, 2015
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
43
Total Attribution
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0-0.5-1.0-1.5-2.0
Pacific
Other
North America
Frontier Markets
Europe ex EMU
EMU
EM Latin America
EM Europe + Middle East + Africa
EM Asia
Cash
0.1
0.1
0.0
-0.2
0.2
0.4
1.0
0.1
3.5
0.4
Performance Attribution
Average Active Weight
0.0 4.0 8.0-4.0-8.0-12.0
Pacific
Other
North America
Frontier Markets
Europe ex EMU
EMU
EM Latin America
EM Europe + Middle East + Africa
EM Asia
Cash
-3.0
1.6
0.9
1.6
1.2
3.3
-1.2
-6.7
0.1
2.1
Allocation
(Total: 0.8)
0.0 0.3 0.6 0.9-0.3-0.6
0.0
0.1
0.1
-0.2
0.2
0.4
0.1
-0.1
0.0
0.4
Stock
(Total: 4.7)
0.0 2.0 4.0 6.0-2.0
0.2
0.0
0.0
0.0
0.0
0.0
0.9
0.2
3.5
0.0
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
1 Quarter Ending September 30, 2015
44
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)33,119 36,529
Median Mkt. Cap ($M)8,187 4,477
Price/Earnings ratio 13.7 11.1
Price/Book ratio 2.6 2.4
5 Yr. EPS Growth Rate (%)16.1 11.2
Current Yield (%)2.3 3.2
Debt to Equity 0.9 0.9
Number of Stocks 143 837
Beta (5 Years, Monthly)0.85 1.00
Consistency (5 Years, Monthly)55.00 1.00
Sharpe Ratio (5 Years, Monthly)-0.08 -0.12
Information Ratio (5 Years, Monthly)0.20 -
Up Market Capture (5 Years, Monthly)87.15 -
Down Market Capture (5 Years, Monthly)84.57 -
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Tencent Holdings LTD 3.3 2.6 0.7 -16.4
Samsung Electronics Co Ltd 2.5 3.2 -0.7 -15.7
China Mobile Ltd 2.5 2.2 0.3 -5.9
Taiwan Semiconductor Manufacturing 2.3 3.0 -0.6 -13.2
Fomento Economico Mex 2.1 0.5 1.6 0.2
Bank of China Ltd 2.1 1.0 1.1 -33.9
BRF SA 2.0 0.4 1.7 -15.5
Naspers Ltd 1.7 1.5 0.2 -19.6
Samsonite International SA 1.7 0.0 1.7 -5.7
Ashok Leyland Ltd 1.7 0.0 1.7 23.4
% of Portfolio 22.2 14.4
Distribution of Market Capitalization (%)
Morgan Stanley Emerging Markets MSCI Emerging Markets Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash
16.3
20.8
43.2
19.7
15.1 16.8
42.8
23.7
1.6
Sector Weights (%)
Morgan Stanley Emerging Markets MSCI Emerging Markets Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
1.6
0.3
7.5
5.9
18.6
8.6
3.2
25.7
3.0
10.2
15.4
3.4
7.4
6.6
18.1
7.3
2.9
28.6
7.5
8.8
9.4
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
As of September 30, 2015
45
Morgan Stanley
Emerging Markets
MSCI Emerging
Markets Index
Australia 0.0 0.0
Hong Kong 5.4 7.5
Japan 0.5 0.0
New Zealand 0.0 0.0
Singapore 0.0 0.0
Pacific 5.9 7.5
Austria 2.3 0.0
Belgium 0.0 0.0
Finland 0.0 0.0
France 0.0 0.0
Germany 0.0 0.0
Ireland 0.0 0.0
Italy 0.0 0.0
Netherlands 0.8 0.0
Portugal 1.1 0.0
Spain 0.0 0.0
EMU 4.2 0.0
Denmark 0.0 0.0
Norway 0.0 0.0
Sweden 0.0 0.0
Switzerland 0.7 0.0
United Kingdom 0.0 0.0
Europe ex EMU 0.7 0.0
Canada 0.0 0.0
United States 1.2 0.1
Israel 0.0 0.0
Middle East 0.0 0.0
Developed Markets 12.0 7.6
Morgan Stanley
Emerging Markets
MSCI Emerging
Markets Index
Brazil 5.1 6.1
Cayman Islands 0.0 0.0
Chile 0.5 1.3
Colombia 0.8 0.5
Mexico 7.1 4.8
Peru 1.0 0.3
Virgin Islands 0.0 0.0
EM Latin America 14.6 13.0
China 11.0 15.8
India 12.3 8.9
Indonesia 2.4 2.1
Korea 11.8 15.5
Malaysia 0.7 3.1
Philippines 4.1 1.5
Taiwan 11.6 12.5
Thailand 1.7 2.2
EM Asia 55.5 61.9
Czech Republic 1.3 0.2
Egypt 0.6 0.2
Greece 0.0 0.3
Hungary 0.0 0.2
Poland 2.6 1.6
Qatar 0.0 1.1
Russia 0.3 3.8
South Africa 7.1 7.9
Turkey 0.9 1.4
United Arab Emirates 0.0 0.8
EM Europe + Middle East + Africa 12.7 17.6
Emerging Markets 82.8 92.4
Frontier Markets 1.6 0.0
Cash 1.6 0.0
Other 1.9 0.0
Total 100.0 100.0
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
As of September 30, 2015
46
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Oct-2010 - Sep-2015)
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Income Research 0.7 1.7 2.5 1.5 2.8 4.9 3.3 -0.9 5.9 5.6 6.2 14.4 0.8 7.4 4.5 2.8
Barclays Intermediate U.S. Government/Credit 0.9 1.8 2.7 1.4 2.4 4.2 3.1 -0.9 3.9 5.8 5.9 5.2 5.1 7.4 4.1 1.6
IM U.S. Intermediate Duration Fixed Income 0.4 1.0 1.5 0.8 1.9 3.6 2.1 -1.3 2.9 5.0 5.2 7.4 1.6 5.6 3.7 1.3
Income Research Rank 36 12 13 19 17 4 31 41 18 40 24 20 53 7 10 1
Income Research
Barclays Intermediate U.S. Government/Credit
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15
1.6
2.0
2.4
2.8
3.2
3.6
Return (%)2.0 2.1
Risk (Standard Deviation %)
Barclays Intermediate U.S. Government/Credit
Income Research
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Income Research 2.8 2.0 2.7 0.5 0.9 1.3 0.7 0.6 1.0 65.0 18y 8m
Barclays Intermediate U.S. Government/Credit 2.4 2.0 2.4 0.0 1.0 1.2 0.0 N/A 1.0 0.0 18y 8m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 2.0 -1.2 0.0 25.0 18y 8m
Manager Evaluation
Income Research vs. Barclays Intermediate U.S. Government/Credit
As of September 30, 2015
47
Portfolio Characteristics
Portfolio Benchmark
Effective Duration 3.9 4.0
Avg. Maturity 4.5 4.3
Avg. Quality AA-AA
Yield To Maturity (%)2.2 1.7
Credit Quality Distribution (%)
Income Research
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
AAAAAABBBNot Rated64.8
5.8
14.6 14.8
0.0
45.3
13.5
18.9 22.0
0.3
Maturity Distribution (%)
Income Research
Barclays Intermediate U.S. Government/Credit
0.0
15.0
30.0
45.0
60.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0
39.1
26.9
17.3 16.7
0.0
4.2
29.4
41.3
21.7
2.4 1.0
Sector Distribution (%)
Income Research
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
TreasuriesAgenciesCreditMBSABSNon-USEmergingMunicipalsCashOtherCMBS57.1
5.0
25.4
0.0 0.0
10.3
2.2 0.0 0.0 0.0 0.0
21.2
0.8
41.4
1.7
9.0
0.0 0.0 3.2 0.3
8.2
14.2
Manager Evaluation
Income Research vs. Barclays Intermediate U.S. Government/Credit
As of September 30, 2015
48
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Oct-2010 - Sep-2015)
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Prudential Core Plus Bond Fund 0.6 0.7 2.4 2.8 4.8 6.0 7.1 -1.0 10.6 7.6 9.6 18.7 -2.1 4.6 5.1 3.0
Barclays U.S. Aggregate 1.2 1.1 2.9 1.7 3.1 4.6 6.0 -2.0 4.2 7.8 6.5 5.9 5.2 7.0 4.3 2.4
IM U.S. Broad Market Core+ Fixed Income 0.0 0.1 1.3 1.8 3.5 5.0 5.4 -1.1 8.2 6.2 8.2 14.2 -2.2 5.6 4.0 1.8
Prudential Core Plus Bond Fund Rank 15 23 9 14 7 5 13 50 11 19 28 27 49 77 18 5
Prudential Core Plus Bond Fund Barclays U.S. Aggregate
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 0.0
1.5
3.0
4.5
6.0
7.5
Return (%)2.6 2.8 3.0 3.2 3.4 3.6
Risk (Standard Deviation %)
Barclays U.S. Aggregate
Prudential Core Plus Bond Fund
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Prudential Core Plus Bond Fund 4.8 3.2 4.7 2.0 0.9 1.4 2.0 0.8 1.7 70.0 16y 4m
Barclays U.S. Aggregate 3.1 2.9 3.0 0.0 1.0 1.1 0.0 N/A 1.4 0.0 16y 4m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 2.9 -1.1 0.0 25.0 16y 4m
Manager Evaluation
Prudential Core Plus Bond Fund vs. Barclays U.S. Aggregate
As of September 30, 2015
49
Portfolio Characteristics
Portfolio Benchmark
Effective Duration 5.7 5.6
Avg. Maturity 4.2 7.9
Avg. Quality A AA+
Yield To Maturity (%)4.1 2.3
Credit Quality Distribution (%)
Prudential Core Plus Bond Fund Barclays U.S. Aggregate
0.0
25.0
50.0
75.0
100.0
AAAAAABBBBelow B71.7
4.4
11.5 12.4
0.0
40.2
3.6
14.1
20.3 21.8
Maturity Distribution (%)
Prudential Core Plus Bond Fund Barclays U.S. Aggregate
0.0
20.0
40.0
60.0
80.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0
22.8 20.5
41.8
3.8
11.1
4.9
10.8
21.1
47.7
3.1
12.4
Sector Distribution (%)
Prudential Core Plus Bond Fund Barclays U.S. Aggregate
0.0
15.0
30.0
45.0
60.0
TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS36.4
3.8
20.2
0.0
28.4
0.6
6.6
2.1 0.0 0.0 0.0 1.9
16.2
0.2
27.8
15.0
1.8
18.3
1.6
5.1
0.7 1.3 2.0
10.0
Manager Evaluation
Prudential Core Plus Bond Fund vs. Barclays U.S. Aggregate
As of September 30, 2015
50
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Oct-2010 - Sep-2015)
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Brandywine Global Opportunistic Fixed Income -4.3 -7.9 -7.8 -1.0 2.8 5.7 6.3 -3.5 14.1 8.0 13.9 20.5 -8.5 10.6 8.4 -0.9
Citigroup World Government Bond Index 1.7 -2.4 -3.8 -2.9 -0.2 3.4 -0.5 -4.0 1.6 6.4 5.2 2.6 10.9 11.0 6.1 -6.9
IM Global Fixed Income -0.4 -2.9 -3.8 -0.5 1.3 3.8 1.9 -2.5 7.4 4.0 6.1 12.1 -2.5 7.4 5.7 -2.7
Brandywine Global Opportunistic Fixed Income Rank 90 97 92 54 23 1 11 72 5 8 1 23 73 2 1 44
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond Index
0
25
50
75
100Return Percentile Rank12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15
-6.0
-3.0
0.0
3.0
6.0
9.0
Return (%)3.9 4.2 4.5 4.8 5.1 5.4 5.7 6.0
Risk (Standard Deviation %)
Citigroup World Government Bond Index
Brandywine Global Opportunistic Fixed Income
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Brandywine Global Opportunistic Fixed Income 2.8 5.3 2.9 3.0 0.7 0.5 4.5 0.7 3.0 70.0 10y 9m
Citigroup World Government Bond Index -0.2 4.5 -0.2 0.0 1.0 0.0 0.0 N/A 3.1 0.0 10y 9m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 4.5 0.0 0.0 55.0 10y 9m
Manager Evaluation
Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index
As of September 30, 2015
51
Portfolio Characteristics
Portfolio Benchmark
Effective Duration 6.5 7.5
Avg. Maturity 12.9 8.6
Avg. Quality A AA
Yield To Maturity (%)3.9 1.1
Credit Quality Distribution (%)
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond Index
0.0
20.0
40.0
60.0
80.0
AAAAAABBBBBBBelow BNot Rated16.8
46.8
24.2
12.2
0.0 0.0 0.0 0.0
19.4 19.5
31.9
19.6
7.2
1.4 1.0 0.0
Maturity Distribution (%)
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond Index
0.0
15.0
30.0
45.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0
23.0
19.5
29.0
14.8 13.8
2.8
19.8
10.1
27.1
7.6
32.6
Sector Distribution (%)
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond Index
0.0
25.0
50.0
75.0
100.0
TreasuriesAgenciesCreditHigh YieldMBSNon-USMunicipalsCashOther33.5
0.0 0.0 0.0 0.0
66.5
0.0 0.0 0.0
5.4
11.3 10.4
0.1 2.6
62.9
0.7 2.8 3.8
Manager Evaluation
Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index
As of September 30, 2015*
_______________________
*Portfolio information is represented as of 06/30/2015. Data as of 09/30/2015 was not yet available at the time of report production.
52
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Oct-2010 - Sep-2015)
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Lighthouse Global Long/Short Fund Limited -1.3 3.2 5.3 9.5 7.1 5.8 4.9 20.2 6.1 -2.1 5.2 10.1 -14.1 13.9 11.3 12.0
HFRI Equity Hedge (Total) Index -5.9 -2.3 -2.3 5.0 3.6 3.6 1.8 14.3 7.4 -8.4 10.5 24.6 -26.7 10.5 11.7 10.6
Rolling 3 Years Active Return Quarterly Active Return
0.0
8.0
16.0
-8.0
-16.0Active Return (%)3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 9/15 -5.0
0.0
5.0
10.0
15.0
Return (%)3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0
Risk (Standard Deviation %)
HFRI Equity Hedge (Total) Index
Lighthouse Global Long/Short Fund Limited
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Lighthouse Global Long/Short Fund Limited 7.1 4.9 7.0 5.2 0.5 1.4 4.9 0.6 1.9 55.0 11y 9m
HFRI Equity Hedge (Total) Index 3.6 8.4 3.8 0.0 1.0 0.5 0.0 N/A 6.0 0.0 11y 9m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 8.4 -0.5 0.0 35.0 11y 9m
Manager Evaluation
Lighthouse Global Long/Short Fund Limited vs. HFRI Equity Hedge (Total) Index
As of September 30, 2015
53
Portfolio Characteristics
Portfolio
Manager Count 22
Net Exposure %32.8
Leverage 116.0
# Managers Funded 2
# Managers Redeemed 0
Region Allocation (Net Geographic Exposure)
Asia
13.6%
Europe
20.3%
Latin America
9.9%
United States
56.2%
Strategy Allocation
Value
13.5%
Trading
17.3%
Event Driven
16.3%
Sector Specialist
52.9%
Manager Evaluation
Lighthouse Global Long/Short Fund Limited
As of September 30, 2015*
*Portfolio Information is represented as of 06/30/2015. Data as of 09/30/2015 was not yet available at the time of report production.
54
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Oct-2010 - Sep-2015)
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Entrust Capital Diversified Fund -5.5 -4.9 -6.2 4.3 3.4 4.6 1.8 13.2 7.4 -4.7 11.1 35.2 -26.0 9.9 12.8 4.5
HFRI Fund of Funds Composite Index -3.7 -1.1 -0.1 4.1 2.7 2.4 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 10.3 10.4 7.5
Rolling 3 Years Active Return Quarterly Active Return
0.0
6.0
12.0
18.0
-6.0
-12.0Active Return (%)12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 9/15 1.4
2.1
2.8
3.5
4.2
4.9
Return (%)3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5
Risk (Standard Deviation %)
HFRI Fund of Funds Composite Index
Entrust Capital Diversified Fund
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Entrust Capital Diversified Fund 3.4 6.5 3.5 0.2 1.2 0.5 3.2 0.3 4.5 55.0 12y
HFRI Fund of Funds Composite Index 2.7 4.6 2.7 0.0 1.0 0.6 0.0 N/A 3.0 0.0 12y
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 4.6 -0.6 0.0 25.0 12y
Manager Evaluation
Entrust Capital Diversified Fund vs. HFRI Fund of Funds Composite Index
As of September 30, 2015
55
Portfolio Characteristics
Portfolio
Manager Count 27
Net Exposure %67.0
Leverage 1.5
# Managers Funded 0
# Managers Redeemed 0
Region Allocation (Net Geographic Exposure)
Asia
0.1%
Europe
22.4%
Japan
5.1%
Latin America
9.2%
Other
0.7%
US/Canada
62.5%
Strategy Allocation
Trading
6.5%
Special Situations
17.6%
Opportunistic
15.9%
Long/Short
9.0%
Event Driven
0.2%
Activist
22.7%
Credit
28.2%
Manager Evaluation
Entrust Capital Diversified Fund
As of September 30, 2015
56
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Oct-2010 - Sep-2015)
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
UBS Trumbull Property Fund 3.1 8.7 11.7 10.1 10.6 6.0 10.4 9.2 9.0 12.1 15.9 -22.9 -8.3 12.8 15.6 20.1
NCREIF Property Index 3.1 10.1 13.5 11.9 12.6 8.0 11.8 11.0 10.5 14.3 13.1 -16.8 -6.5 15.8 16.6 20.1
Rolling 3 Years Active Return Quarterly Active Return
0.0
5.0
10.0
-5.0
-10.0Active Return (%)3/78 6/81 9/84 12/87 3/91 6/94 9/97 12/00 3/04 6/07 9/10 9/15 8.0
10.0
12.0
14.0
16.0
Return (%)1.0 1.1
Risk (Standard Deviation %)
NCREIF Property Index
UBS Trumbull Property Fund
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
UBS Trumbull Property Fund 10.6 1.1 10.1 2.3 0.7 9.3 0.9 -2.0 0.0 20.0 37y 9m
NCREIF Property Index 12.6 1.1 11.9 0.0 1.0 11.2 0.0 N/A 0.0 0.0 37y 9m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 -0.1 0.0 N/A 1.1 -11.2 0.0 0.0 37y 9m
Manager Evaluation
UBS Trumbull Property Fund vs. NCREIF Property Index
As of September 30, 2015
57
Portfolio Characteristics
Portfolio Benchmark
# Properties 214 7,012
# Investors 419 N/A
Total Fund Assets 17,800 458,823
Property Type
UBS Trumbull Property Fund NCREIF Property Index
0.0
15.0
30.0
45.0
60.0
OfficeApartmentRetailIndustrialHotel38.3
24.1 23.2
13.1
1.3
31.0 31.0
23.0
11.0
4.0
Property Location
UBS Trumbull Property Fund NCREIF Property Index
0.0
15.0
30.0
45.0
60.0
EastWestSouthMidwest34.2 36.0
20.4
9.4
37.0 36.0
14.0 13.0
Manager Evaluation
UBS Trumbull Property Fund vs. NCREIF Property Index
As of September 30, 2015
58
Type City
Ac quis ition
Da te
%
Occupa nc y Cos t ($000)
Fa ir Ma rket
Value ($000)
Office Bo ston Dec-11 99%647,253$ 735,000$
Office Ne w York Ju n-06 96%663,778$ 674,000$
Re tail Ca mb rid ge May-89 95%293,153$ 575,063$
Re tail Da lla s Dec-02 94%407,609$ 526,000$
Apart me nts Ne w York Ju l-11 96%391,566$ 510,000$
Office Ne w York Ju l-11 94%205,695$ 494,397$
Office Ch ic ag o Dec-11 100%394,928$ 488,879$
Office Ne w York Se p-14 94%280,203$ 470,138$
Re tail Ch ic ag o No v-13 95%226,317$ 468,789$
As of Se ptembe r 30,2015
20 La rge st Inve st me nts
Manager Evaluation
UBS Trumbull Property Fund
As of September 30, 2015
Re tail Ch ic ag o No v-13 95%226,317$ 468,789$
Office Po rt la nd Aug-15 95%372,860$ 365,751$
Re tail Eme ry ville Aug-14 96%306,815$ 306,000$
Re tail Montebello Dec-88 95%186,702$ 296,000$
Office Se attle Oc t-84 93%233,446$ 292,000$
Office De nver Ju n-06 96%178,188$ 278,000$
Office Sa n Fra ncis co Dec-85 97%166,259$ 261,384$
Office Washin gton Ju n-15 95%246,735$ 248,000$
Office Pa sadena May-84 96%185,467$ 235,000$
Office De nver Apr-82 92%143,745$ 225,000$
Re tail Millb ury Se p-04 99%156,000$ 203,400$
Ho tel Ne w York Ju n-10 N/A 158,950$ 188,900$
All o ther in vestme nts ----10,780,946$ 12,772,787$
Total Properties 16,626,615$ 20,614,488$
59
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Oct-2010 - Sep-2015)
Historical Statistics (Oct-2010 - Sep-2015)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Wellington Diversified Inflation Hedges -15.4 -17.3 -27.7 -11.9 -5.4 N/A -12.8 -3.9 5.2 -8.6 N/A N/A N/A N/A N/A N/A
Wellington DIH Multi-Asset Inflation Index -14.7 -16.8 -25.5 -10.8 -5.2 -0.5 -11.4 -2.1 2.3 -7.0 12.7 30.0 -32.7 25.8 14.1 19.7
Rolling 3 Years Active Return Quarterly Active Return
0.0
2.0
4.0
-2.0
-4.0Active Return (%)6/10 12/10 6/11 12/11 6/12 12/12 6/13 12/13 6/14 12/14 9/15 -6.0
-5.7
-5.4
-5.1
-4.8
-4.5
Return (%)13.0 13.5 14.0 14.5 15.0 15.5 16.0 16.5
Risk (Standard Deviation %)
Wellington DIH Multi-Asset Inflation Index
Wellington Diversified Inflation Hedges
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Wellington Diversified Inflation Hedges -5.4 15.6 -4.3 0.4 1.1 -0.3 2.3 0.0 13.0 55.0 5y 6m
Wellington DIH Multi-Asset Inflation Index -5.2 14.1 -4.3 0.0 1.0 -0.3 0.0 N/A 11.8 0.0 5y 6m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 14.1 0.3 0.0 50.0 5y 6m
Manager Evaluation
Wellington Diversified Inflation Hedges vs. Wellington DIH Multi-Asset Inflation Index
As of September 30, 2015
60
Manager Evaluation
We llington Diversified Inflation Hedges Sector Allocation
As of September 30, 2015
Fund Composition Fund Weights Relative to Benchmark
Energy
27.6%
Commoditi es
23.7%
TIPS
2.9%
Emerging
Markets
In flati on-Link ed
Bond s
5.3%
Cash
1.4%
17.7%
3.6%
0.0%
5.0%
10.0%
15.0%
20.0%
Global Inflation-Sensitive Equities
Commodities
Fixed Income & Cash
Metals &
Mi ni ng
5.9%
Agriculture
6.2%
Enduring
Assets
11 .6%
Precious
Metals
2.1%
In flati on
Opportuni ti es
13.4%
23.7%
-18.8%
-2.5%
-2 0.0%
-1 5.0%
-1 0.0%
-5 .0 %
0.0%
Eq ui ties Fi xed In come Commo dities Cash
61
Calendar Year Performance
62
Year
To
Date 2014 2013 2012 2011 2010 2009 2008 2007 2006
Total Composite -2.3 2.9 10.9 12.1 1.2 11.2 20.2 -20.2 10.7 11.8
Policy Benchmark -3.2 3.5 12.3 11.6 1.1 11.5 19.5 -20.6 8.3 13.0
Total Equity Composite -3.9 4.7 N/A N/A N/A N/A N/A N/A N/A N/A
MSCI AC World Index -7.0 4.2 22.8 16.1 -7.3 12.7 34.6 -42.2 11.7 21.0
Domestic Equity Composite -3.8 (24)10.1 (23)N/A N/A N/A N/A N/A N/A N/A N/A
Russell 3000 Index -5.4 (44)12.6 (8)33.6 (40)16.4 (26)1.0 (16)16.9 (39)28.3 (59)-37.3 (38)5.1 (62)15.7 (31)
Broad Equity Peer Group Median -5.9 8.2 32.5 14.6 -2.1 16.2 29.6 -38.4 6.5 13.6
International Equity Composite -4.1 (19)-5.5 (65)N/A N/A N/A N/A N/A N/A N/A N/A
MSCI AC World ex USA Index -8.6 (77)-3.9 (37)15.3 (54)16.8 (72)-13.7 (32)11.2 (74)41.4 (64)-45.5 (36)16.7 (66)26.7 (55)
International Equity Peer Group Median -6.7 -4.7 15.6 18.5 -15.2 13.6 44.1 -47.0 18.3 27.0
Fixed Income Composite -1.4 (100)2.4 (83)-1.7 (82)10.9 (1)3.8 (72)8.7 (10)18.9 (8)-3.4 (70)6.4 (26)5.6 (8)
Barclays Intermediate U.S. Government/Credit 1.8 (9)3.1 (61)-0.9 (55)3.9 (70)5.8 (22)5.9 (54)5.2 (100)5.1 (13)7.4 (9)4.1 (42)
Intermediate Duration Fixed Income Peer Group Median 0.9 3.4 -0.6 5.1 4.6 6.1 9.8 -1.8 5.5 4.0
Hedge Funds Composite N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
HFRI Fund of Funds Composite Index -1.1 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 10.3 10.4
Calendar Year Performance
Composite Performance
As of September 30, 2015
_________________________
See appendix for a description of the benchmarks and universe. Performance is reported net of fees.
63
Capital Markets Review
64
0.1
0.11
0.12
0.13
0.14
0.15
0.16
0.17
3/20003/20013/20023/20033/20043/20053/20063/20073/20083/20093/20103/20113/20123/20133/20143/2015$/YuanChinese Yuan We akens
Strengthening
Weakening
Source: Bloomberg
Capital Markets Rev iew
Economy
0.0 0
0.2 0
0.4 0
0.6 0
0.8 0
1.0 0
1.2 0
1.4 0
1.6 0
1.8 0
2.0 0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27Percent
Months
Fed Rate Hik e Expectations
9/30/2013
9/30/2014
12 /31/2014
6/30/2015
9/30/2015
Source: Bloomberg
Tepid Economic Growth and Chinese Currency Moves Hurt Outlook
Current
50
55
60
65
70
75
40 00
60 00
80 00
10 00 0
12 00 0
14 00 0
16 00 0
18 00 0
10/200010/200110/200210/200310/200410/200510/200610/200710/200810/200910/201010/201110/201210/201310/2014Rail (1000s employees)Thousands EmployeesSect or Employ me nt
Ma nuf ac turing Cons truction Rail
Source:BLS
Tepid Economic Growth and Chinese Currency Moves Hurt Outlook
•A move by China to weaken its currency sent shockwaves through world markets.
In an attempt to stem a slowdown in exports and support an overbuilt
manufacturing base,the yuan fell 3%during August.Eroding demand from
Europe and the U.S.prompted the Chinese government to undertake the
monumental process of shifting its economy more toward a consumer-based
structure and promote internal demand.Although Chinese GDP growth remains
above 6%,it is enough below the past two decades’average to cause concern.
The Chinese stock market sell-off reflected weaker earnings forecasts for Chinese
companies and uncertainty over the economic shift.
•The Federal Reserve abstained from raising interest rates in September following
market turmoil in August.Weak foreign growth prospects and a consensus tilt
toward easing among other central banks gave the Fed pause.Investors pushed
back expectations for a shift in Fed policy,giving May 2016 as the earliest time
with a probability over 50%for a rise in rates.Two years ago,investors expected
the Fed to initiate rate hikes by this time,though expectations diminished as time
progressed.Whenever the Fed does begin tightening,it is expected to be a very
gradual process.
•U.S.inflation was unchanged for the last year,owing to falling energy prices.Job
growth slowed in the third quarter as manufacturing and industrial sectors trimmed
outlooks for global growth.Consumer demand continued to grow,though
restaurant and goods prices are expected to rise as the lowest wages rose at
large retailers and restaurants.
65
-9.5%
-6.4%
-8.4%-8.7%-10.2%
-13.2%-14.1%-15.4%-16.1%-17.0%-17.9%
-24.3%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
3rd Quarter and Year-to-Date Sector Returns
Capital Markets Rev iew
Equities
3rd Quarter 2015 World Equity Returns (USD)
Developed Markets Emerging Markets
-22.3%
-17.2%
-1.5%
-10.1%
-5.4%
-3.5%
-5.7%
-3.0%
1.7%
-1.3%
-6.8%
-19.0%
-17.3%
-11.6%
-8.1%
-7.2%
-6.8%
-6.0%
-4.8%
-4.2%
-0.9%
4.2%
-3 0.0%-25.0%-20.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%
Energy
Mate rials
Health Care
Industrials
Russell 300 0
Telecom
Financ ials
Info Te ch
Cons. Disc.
Cons. Staples
Utilities 3Q1 5
YTD
0
5
10
15
20
25
30
35
40
45
50
VIX Volatility Inde x 10 Year Average
Historic Volatility Levels
Source: CBOE
Stocks Suffer Worst Quarterly Decline in Four Years
•The Russell 3000 Index suffered its worst quarterly decline in four years during the
third quarter,declining 7.2%.After advancing during July,U.S.stock indices
retreated significantly in August and September amid concerns over the global
economic growth outlook and uncertainty regarding U.S.monetary policy.Signs
of an economic slowdown in China,and its repercussions,weighed on investor
risk appetite.The energy and materials sectors performed the worst,hurt by
declining oil and commodity prices.Defensive sectors,such as utilities and
consumer staples,performed best with utilities the only sector experiencing
positive absolute returns.
•Non-U.S.equities fared even worse than U.S.equities.The slowdown in Chinese
economic growth was the main driver of losses;however,weakening commodity
prices,devaluation of the Chinese yuan,and uncertainty surrounding the timing of
a U.S.interest rate hike also hurt returns.Currency weakness versus the U.S.
dollar weighed on most non-U.S.equity returns.Emerging markets
underperformed developed non-U.S.equities as the impact of China’s slowdown,
falling commodity prices,and a possible rise in U.S.interest rates was more
impactful on emerging economies.
•Equity market volatility,as measured by the VIX Index,spiked during the quarter,
driven by the slowing Chinese economy and uncertainties surrounding the impact
it will have on global economic growth.Additionally,devaluation of the Chinese
yuan and the Fed’s decision to delay hiking interest rates caused further
uncertainty.
-3 0.0%-25.0%-20.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%
66
Source: Barclays Source: Barclays
Duration-adjusted Excess Returns to Treasuries (bps) Trailing Ten-Year Credit Spreads
Capital Markets Rev iew
Fixed Income
Best Period Second Bes t Period Worst Period Second Worst Period
0
250
500
750
1000
1250
1500
1750
2000
Option-Adjusted Spread (OAS)Date
Barclays U.S. Credit
U.S. Credit 10-Year Average
Barclays U.S. HY
HY 10-Year Average
2008 2009 2010 2011 2012 2013 2014 1Q15 2Q15 3Q15
Aggre gate -710 746 171 -114 226 93 10 -9 -19 -57
Agency -110 288 77 -25 166 1 10 -3 19 146
MBS -232 495 225 -106 91 98 40 -50 5 -22
ABS -2223 2496 169 52 246 24 53 14 21 16
CMBS -3274 2960 1501 47 841 97 108 37 -31 -5
Credit -1786 1990 192 -322 693 226 -18 17 -67 -170
Hi gh Yield -3832 5955 974 -240 1394 923 -112 109 69 -631
Em erging -2842 3797 508 -537 1503 -32 -120 49 196 -441
US Treasury Yield Curve Change
Source: US Dept of The Treasury
Yields Fall and Spreads Widen as Global Slowdown Halts the Fed
•Higher quality fixed income sectors ended the quarter with modestly positive
returns as investors moved to safer assets.Market volatility spiked on China
growth concerns and the impact of a potential Fed rate lift-off.High quality and
structured products performed best as investors moved towards assets with
relatively strong liquidity.Treasury yields fell across the curve as the Federal
Reserve opted to delay a rate hike boosting results for all long duration
segments.A lack of inflationary pressure caused TIPS (-1.2%)to lag nominal
Treasuries during the quarter.
•Investment grade corporate spreads increased 24 bps,although falling interest
rates more than offset spread widening leading to a positive 0.8%return.High
yield returned -4.9%as spreads widened by 154 bps on the quarter.
Continued low energy prices and fear of rising default rates negatively
impacted high yield as the sector represents a significant portion of the high
yield market.
•Emerging markets debt registered a sharp decline.Falling commodity prices,
slower Chinese growth and the possibility of a U.S.interest rate hike drove a
widespread decline of emerging markets currencies against the U.S.dollar.
Locally denominated bonds were broadly negative with many losing more than
10%on the quarter.Brazil was a major focus as S&P downgraded the
country’s debt to non-investment grade.
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0 5 10 15 20 25 30Yield to MaturityMaturity (Years)
9/30/2014 6/30/2015 9/30/2015
U.S. Treasury Yield Curve Change
67
1.1%
-6.6%
-1.1%
-1.5%
1.5%
-1.0%
-2.9%
3.3%
-2.3%
-4.0%
1.8%
1.2%
-9.3%
-3.7%
-3.9%
-1.6%
-0.6%
-5.1%
1.2%
-5.9%
-4.5%
-1.6%
-12%-10%-8%-6%-4%-2%0%2%4%6%
BC Aggregate Bond Index
MSCI All-Country World Index
Fund of Funds
Hedge Fund Composite
Merger Arbitrage
Global Macro
Event Driven
Equity Market Neutral
Equity Hedge
Distressed Securities
Convertible Arbitrage
Q3
YTD
Capital Markets Review
Hedge Funds
HFRI Index Performance –Third Quarter and YTD 2015
Cyclical vs. Defensive Exposure
Equity Market Neutral Strategies
Source: JPM Prime BrokerageNet Market Value Ratio¹Da NMV Cyc = Daily Net Market Value Cyclical Stocks, Da NMV Def = Daily Net Market Value Defensive Stocks
DA NMV Cyc/Da NMV Def = Daily Net Market Value Cyclical Stocks divided by Daily Net Market Value Defensive Stocks
¹
Source: HFR Inc.
Macroeconomic Volatility Weighs on Hedge Fund Returns
•Hedge fund manager performance was negative across all strategies during the
third quarter,with the exception of equity market neutral managers (+1.2%).Hedge
funds (-3.7%)provided mixed results compared to broad market indices as they
handily outperformed the MSCI All-Country World Index (-9.3%),but
underperformed the Barclays Capital Aggregate Bond Index (+1.2%)by a wide
margin.
•Equity hedge and event driven managers were the worst performers during the
quarter,returning -5.9%and -5.1%,respectively.Equity hedge strategies were
negatively impacted by the continued fall in commodity prices during the third
quarter,as well as the U.S.Federal Reserve’s decision to delay an increase in the
federal funds rate at their mid-September meeting.Event driven managers were
hampered by the decline in healthcare and energy stocks.Activists and distressed
managers,many of whom had significant exposure to those sectors,returned -
10.3%and -4.9%,respectively.
•Equity market neutral managers provided positive results during the quarter.These
managers benefited from net short exposure in cyclical companies,according to
JPMorgan Prime Brokerage (see chart above).
•Hedge fund assets declined by $95 billion during the third quarter.The drop in
assets can be wholly attributed to performance as investors contributed $10.5 billion
through new subscriptions during the quarter.Multi-strategy and long/short equity
managers received nearly half of the new contributions,according to HFR Inc.
Hedge Fund Assets and Flows
-$5 00,000
$0
$500,000
$1,0 00,000
$1,5 00,000
$2,0 00,000
$2,5 00,000
$3,0 00,000
Assets ($MM)Net Asset Flow Esti mated Assets
68
NCREIF 3 M on.1 Y r.3 Yr s.5 Yrs.10 Yrs.
NCREIF 3.1%13.0%11.6%12.7%8.2%
Ap artm ents 3.0%11.6%10.7%13.3%7.8%
In dus trials 3.8%14.8%12.7%13.0%8.0%
Office 3.1%12.9%10.9%11.7%8.0%
Retail 3.0%13.6%13.3%13.7%9.1%
Eas t 2.9%11.0%9.7%11.6%7.6%
Mi dwes t 3.0%12.5%11.1%11.6%7.1%
South 3.1%13.9%12.9%13.2%8.5%
West 3.4%14.5%12.9%13.9%8.9%
Capital Markets Review
Real Assets
Real Estate Returns as of Second Quarter 2015
Private Real Estate Performs Well While REITs Decline; Commodities
Source: NCREIF
6.0%5.6%5.4%5.1%4.9%
0%
5%
10 %
20 11 Q2 20 12 Q2 20 13 Q2 20 14 Q2 20 15 Q24 Qtr vs Avg Value Wtd Cap RateNCREIF Property Index (NPI) –Implied Appraisal Cap Rates Fall
Below 5% -Touching a New Low
Source: NCREIF
Private Real Estate Performs Well While REITs Decline; Commodities
Drop Once Again
•Private real estate returned 3.1%during the second quarter and 13.0%for the
trailing one year period.By sector,industrial properties experienced the best
returns for the quarter and year.By region,the West was the strongest
performing area for the quarter and year,as well as longer term.Low interest
rates and strong property fundamentals continue to push cap rates down,
contributing to appreciation.Cap rates hit a new low of 4.9%.
•During the quarter,the S&P GSCI returned -19.3%,with 23 of 24 commodities
declining in value.Energy posted the worst returns for the quarter,down 24.4%.
Gold performed best,down 5.0%Year-to-date through September,the Index
was down 19.5%-the third worst year recorded for commodities according to
S&P.Ample oil supplies,overcapacity in metals,a strong dollar and generally
weakening demand –especially from China –accounted for the market drop in
commodity prices.On a three-year basis,commodity prices are down 19.8%
annualized or approximately 50%on a cumulative basis.
•REITs rebounded a bit during the third quarter as uncertainty increased over the
potential for a rise in U.S.rates.The FTSE NAREIT All REIT Index returned
0.7%during the quarter and -4.5%year-to-date through September.Global
REITs,however,declined 3.2%during the third quarter,bringing the year-to-date
return to -4.4%.The Asia/Pacific market,which was down 12.3%,accounted for
much of the negative return for the quarter.
NCREIF Quar te r YT D 1 Year 3 Y ears
S&P GS Commodity Index -19.3%-19.5%-41.7%-19.8%
S&P GSCI Energy -24.4%-22.2%-52.4%-23.4%
S&P GSCI Oil -26.9%-27.8%-57.5%-24.5%
S&P GSCI Natural Gas -14.4%-21.2%-47.7%-19.1%
S&P GSCI In dus trial Metals -9.9%-19.2%-24.0%-14.3%
S&P GSCI Precious Me tals -5.2%-6.4%-9.3%-16.2%
S&P GSCI Ag ricultural -12.9%-13.7%-6.2%-17.2%
Commodity Returns –Periods Ended September 30, 2015
Source: Morningstar
69
$0
$2 0
$4 0
$6 0
$8 0
$1 00
$1 20
$1 40
$1 60
0
50
10 0
15 0
20 0
25 0
30 0
35 0
40 0
45 0
50 0
Aggregate Exit Value ($,Billions)# of PE-Backed Deals# of PE-Backed Exits Aggregate Exit Value
Private-Equity Backed Exit ActivityInvestment Horizon Pooled IRR (As of 6/30/15)
Fund Type 3 Months 1 Year 3 Years 5 Years 10 Years 20 Years
Early Stage VC 8.3%31.2%22.6%20.3%11.4%53.5%
Late/Expansion Stage VC 3.5%13.9%15.9%16.3%13.3%10.3%
Multi-Stage VC 5.0%22.2%19.4%16.7%10.9%12.2%
Al l Venture Capital 6.8%26.8%21.0%18.7%11.4%27.1%
Small Buyouts 3.3%5.0%11.5%14.9%17.9%14.6%
Medium Buyouts 4.6%7.0%11.7%12.4%14.2%15.4%
Large Buyouts 4.8%4.9%13.7%15.1%13.6%15.7%
Mega Buyouts 5.9%9.4%18.0%16.5%11.1%11.2%
Al l Buyouts 5.3%7.7%15.7%15.4%12.5%13.2%
Mezzanine/Sub Debt 3.6%8.5%11.3%11.8%10.7%10.0%
Distressed 1.6%4.2%13.3%12.2%10.4%11.2%
Al l Private Equity 4.6%8.2%14.9%14.7%11.9%14.0%
Capital Markets Rev iew
Pr ivate Equity
# of PE-Backed Exits Aggregate Exit Value
$0
$1 0
$2 0
$3 0
$4 0
$5 0
$6 0
$0
$2 0
$4 0
$6 0
$8 0
$1 00
$1 20
$1 40
Amount Raised by Fund Type ($, Billions)Total Raised ($,Billions)Total R aised VC Bu yout
Real Assets Secondary Funds Distressed/SS
Fundraising Slows Amid Public Market Declines
•The pooled IRR for private equity funds significantly outperformed the MSCI All
Country World Index during the second quarter and trailing one-year period
through June 30,2015.For the quarter,early stage venture funds were the top
performers while distressed strategies lagged other fund types.Venture funds
outperformed their LBO counterparts by a wide margin over the trailing one-
year period driven by strong performance within the health care and information
technology sectors,which account for a vast majority of venture investments.
•Private equity fundraising slowed considerably during the third quarter amid
investor concerns regarding global financial markets.In total,private equity
funds raised $74 billion in 3Q15,34%less than the prior quarter and the lowest
quarterly total in two and a half years.All fund types experienced a slowdown,
with the exception of distressed/special situations funds,which saw a modest
increase in total commitments from the prior quarter.
•Private equity-backed exit activity experienced only a slight decrease during
3Q15 despite a tumultuous environment for public markets.According to
Preqin,there were 397 PE-backed exits in 3Q15 with an aggregate value of
$116 billion,compared to 413 exits worth $122 billion in 2Q15.It was a mixed
bag for venture-backed liquidity events in 3Q15 as the number of IPOs fell to
13 from 29 in 2Q15,while the number of M&A deals increased from 74 to 90.
Source: ThomsonOne/Cambridge Associates database, October 2015.
Note: Data is continuously updated and is therefore subject to change.
MSCI AC World Index 0.5%1.1%14.1%12.7%7.0%6.7%
Source: Thomson Reuters, ThomsonOne database, October 2015.
Source: The 3Q 2015 Preqin Quarterly Update; Preqin Buyout Deals Analyst
Global Fundraising
70
Quarter
Year
To
Date
1
Year
2
Years
3
Years
5
Years
7
Years
10
Years
Domestic Equity Indices
Dow Jones Wilshire 5000 -6.9 -5.4 -0.4 8.4 12.4 13.1 9.8 7.0
S&P 500 -6.4 -5.3 -0.6 9.1 12.4 13.3 9.8 6.8
Russell 1000 Index -6.8 -5.2 -0.6 8.8 12.7 13.4 10.0 7.0
Russell 1000 Growth Index -5.3 -1.5 3.2 10.9 13.6 14.5 11.7 8.1
Russell 1000 Value Index -8.4 -9.0 -4.4 6.6 11.6 12.3 8.2 5.7
Russell Midcap Index -8.0 -5.8 -0.2 7.5 13.9 13.4 11.4 7.9
Russell Midcap Growth Index -8.0 -4.1 1.4 7.7 14.0 13.6 12.1 8.1
Russell Midcap Value Index -8.0 -7.7 -2.1 7.2 13.7 13.2 10.5 7.4
Russell 2000 Index -11.9 -7.7 1.2 2.6 11.0 11.7 8.6 6.5
Russell 2000 Growth Index -13.1 -5.5 4.0 3.9 12.8 13.3 10.4 7.7
Russell 2000 Value Index -10.7 -10.1 -1.6 1.2 9.2 10.2 6.8 5.3
International Equity Indices
MSCI EAFE -10.2 -5.3 -8.7 -2.4 5.6 4.0 3.8 3.0
MSCI EAFE Growth Index -8.7 -2.4 -4.7 -1.0 6.5 4.8 4.5 3.8
MSCI EAFE Value Index -11.8 -8.1 -12.6 -3.9 4.7 3.1 3.0 2.1
MSCI EAFE Small Cap -6.8 2.6 0.3 1.6 10.2 7.3 8.5 4.7
MSCI AC World Index -9.4 -7.0 -6.7 1.9 7.0 6.8 6.0 4.6
MSCI AC World ex US -12.2 -8.6 -12.2 -4.1 2.3 1.8 3.2 3.0
MSCI Emerging Markets Index -17.9 -15.5 -19.3 -8.2 -5.3 -3.6 2.6 4.3
Fixed Income Indices
Barclays U.S. Aggregate 1.2 1.1 2.9 3.4 1.7 3.1 4.8 4.6
Barcap Intermediate U.S. Government/Credit 0.9 1.8 2.7 2.4 1.4 2.4 4.2 4.2
Barclays U.S. Long Government/Credit 2.2 -2.4 3.1 7.9 2.2 6.0 8.7 6.6
Barclays US Corp: High Yield -4.9 -2.5 -3.4 1.7 3.5 6.1 10.0 7.3
BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.0 0.1 0.1 0.1 1.3
Barclays U.S. TIPS -1.1 -0.8 -0.8 0.4 -1.8 2.5 3.9 4.0
Citigroup Non-U.S. World Government Bond 1.7 -4.2 -7.0 -4.1 -4.6 -1.3 1.8 2.9
JPM EMBI Global Diversified (external currency)-1.7 -0.1 -0.6 4.4 1.5 4.7 8.2 6.9
JPM GBI-EM Global Diversified (local currency)-10.5 -14.9 -19.8 -11.1 -8.7 -3.6 1.7 4.5
Real Asset Indices
Bloomberg Commodity Index Total Return -14.5 -15.8 -26.0 -16.8 -16.0 -8.9 -8.7 -5.7
Dow Jones Wilshire REIT 2.9 -3.0 11.7 12.6 10.1 12.5 7.5 6.8
Capital Markets Review
Index Returns
As of September 30, 2015
(Percentage Return)
_________________________
Returns for periods greater than one year are annualized.
71
Appendix
72
2013 Acti on
Sep tember •The M et rop olit an St . Louis Sewer District hired Pavilion Advisory Group as their invest ment consult ant.
2014 Acti on
February •Pavilion p resent ed an asset allocat ion and investment and manager struct ure review to the F inance Commit tee.Pavilion recommended t he adop tion
of new asset allocat ion targe ts and allowable ranges that would p ermit the eliminat ion of t he tact ical as set allocat ion and market neut ral s trat egies ,
the ad dit ion of hedge fund strat egies through hedge f und of funds, and the reduction of t he number of managers and exposure to high yield and non-
US debt in the fixed income p ortfolio. T he following asset allocat ion s tructure was p rop os ed:
40% Equit y
35% Fixed Income
25% Alt ernatives
Appendix
History of Investment Decisions
Given Pyramis ' p oor p er formance and rapidly declining as sets in the s trat egy,Pavilion furt her recommended the manager be t erminat ed
immediat ely . T he Commit tee ap proved these recommendations.
Sep tember •Pavilion downgraded PIM CO’s manager rating stat us from “negat iv e w at ch” t o “sell.” Pavilion init ially downgraded PIM CO to “negat iv e w at ch” in
January following the dep art ure of co-CIO Mohamed El-Erian, and noted we would closely monit or t he firm for organiz at ional s tabilit y,asset
flow s,and p erformance.
November & December •Pavilion conducted an equit y long/s hort hedge fund of funds search and p resent ed the rep ort to the F inance Commit tee.Pavilion recommended
Light house C ap it al P artners Global Long/Short Fund which was support ed by Metrop olit an St Louis Sew er St aff. T he F und rep laced PIMCO All
Asset Fund on M arch 1, 2015.
73
2015 Acti on
May
•Pavilion recommended liquidat ing the t he Pict et Local Currency Emerging Market Debt Fund, Loomis Say les Credit Fund and t he Penn Capital
High Yield Fund and investing the p roceeds int o the Prudent ial T otal Ret urn Fund. T he recommendation is support ed by the Office of t he
Secr et ary Treas urer and t he Investment Commit tee.The F inance Commit tee ap proved t he recommendat ion t o go t o t he Board of T rust ees .
Pavilion p rovided t he Finance Commit tee w it h a revised St at ement of Investment Policy , Object iv es and Operating Guidelines. T he p olicy was
reviewed with and sup port ed by the O ffice of t he Secr et ary Treas urer. T he Finance Commit tee requested addit ional t ime t o review the documen t.
June •Pavilion recommended liquidat ing the G MO Asset Allocat ion Fund and investing the p roceeds in t he Light house G lobal Long/Short Equit y Fund
and t he Entrust Diversified Hedge F und of F unds. T he recommendat ion is support ed by the O ffice of t he Secr et ar y Treasurer and t he Investment
Commit tee.The F in ance Commit tee ap proved t he recommendat ion t o go to t he Board of T rustees . T he Finance Commit tee reviewed and
ap proved t he revised Statement of Investment Policy , Object ives an d Op erat ing G uidelines provided at the M ay meet ing.The revised Investment
Policy document will go t o t he Board of T rust ees for approval.
Appendix
History of Investment Decisions
74
All Total Composite, asset class composite and manager returns in this report are shown net of fees as of September 1, 2013.
To tal Composite returns prior to September 1, 2013 were provided by New England Pension Consultants.
Separate account manager returns prior to September 1, 2013 were provided by the investment managers and are displayed net of fees.
Benchmark Comparison
One relative comparison for a fund is with a market index or blend of indices. We call this a benchmark comparison. The benchmark should be
predefined as an objective. This passive investment alternative is one measure for evaluating relative performance success.
Universe Comparison
A p erformance measurement universe is created by arraying the results of a large number of professional investment managers from the best to
worst. Results are grouped in percentiles. The first percentile represents the top performing 1% of the managers; the 99th percentile represents
the bottom performing 1% of managers.
Performance measurement universes are differentiated by time period and asset classes. Investment manager rankings within these broad
Appendix
Benchmark and Universe Descriptions
Performance measurement universes are differentiated by time period and asset classes. Investment manager rankings within these broad
universes will vary throughout market cycle depending on the manager's investment style or philosophy. Over longer time periods (7 to 10 years
or more), a manager ranking in the top quartile (top 25%) of these broad universes would be perceived as performing well.
Policy Benchmark
As of August 1, 2015, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI
Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index,
15% HFRI Fund of Funds Composite Index, 5% We llington DIH Multi-Asset Inflation Index and 5% NCREIF Property Index.
From March 1, 2015 to August 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE
Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25%
BC High Yield Blend Index,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US
High Yield Cash Pay Index, 4% HFRI Equity Hedge (Total) Index, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index-OEDCE.
75
Policy Benchmark(Cont.)
From April 1, 2014 to March 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE
Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25%
BC High Yield Blend Index,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US
High Yield Cash Pay Index, 4% CPI+5%, 5% We llington DIH Benchmark, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index-
OEDCE.
Prior to April 1, 2014, the Policy Benchmark is comprised of 20% Russell 1000 Index, 5% Russell 2000 Index, 10% MSCI EAFE Index,3%
MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High
Yi eld Blend Index, 13% BC Intermediate Gov/Credit Index, , 8% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High
Yi eld, Cash Pay Index, 5% 3 Month T-Bills + 3%, 4% CPI + 5%, 5% We llington DIH Multi-Asset Inflation Index, 5% JPM GBI-EM Global
Diversified Index, and 5% NCREIF Fund Index-OEDCE.
Note: Wellington DIH Multi-Asset Inflation Index consists of 50% MSCI ACW Commodity Producers Index, 25% DJ AIG Commodity To tal
Return Index and 25% BC US Treasury Inflation Notes: 1-10 Year
Appendix
Benchmark and Universe Descriptions
Return Index and 25% BC US Treasury Inflation Notes: 1-10 Year
76