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2009 01 21 Investment Manager Report from Bogdahn
Date: January 21, 2009 ATTACHED INVESTMENT MANAGER SEARCH DOCUMENT DISTRIBUTED BY DAVE WEST, BOGDAHN CONSULTING UNDER REGULAR 602. City of Winter Springs Employees' Retirement System Investment Manager Search Oppo~^tunistic Uczlue Equity Presented January 21, 2009 WWW.BC~GDAHI~ICGR~~U['.CC~M THE BC~CDAH~T ~~4LJP sirriplifyireg yaarr investment acrd fzrlreriary decisions Table of Contents Correlation to Lateef's All Cap Growth Performance Evaluation Strategy Narratives Statistics Definitions Appendix ~~ Pages: 1-2 Pages: 3-13 Pages: 14-18 Page: 19 Pages: 20-24 THIS PAGE WAS LEFT BLANK INTENTIONALLY. City of Winter Springs Employees' Retirement System Rolling Correlations: Lateef: All Cap Growth Equity 8-Quarter Moving Windows, Computed Quarterly o.a 0.6 0 0.4 .~ `o U 0.2 0 -0.2 -0.4 Q3 2000 O Anchor Capital: Anchor All Cap Value • Moody Aldrich Partners, LLC: Focused Value • Heartland: Opportunistic Value Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Zephyr StyIeADVISOR: The Bogdahn Group ® DGHM: AIICap Value • Robeco Investment Management: RBP Premium Equity • Westwood Management Corp.: AIICap Value Page 1 ~~~~ Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q3 2008 City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Rolling Correlations: Lateef: All Cap Growth Equity Rolling 8 Quarter Periods Sep 2008 Jun 2008 Mar 2008 Dec 2007 Sep 2007 Jun 2007 Mar 2007 Dec 2006 Sep 2006 Jun 2006 Mar 2006 Dec 2005 Sep 2005 Anchor Capital: Anchor All Cap Value 0.60 0.77 0.89 0.74 0.63 0.61 0.57 0.60 0.81 0.77 0.71 0.68 0.89 DGHM: AIICap Value 0.50 0.62 0.76 0.78 0.69 0.70 0.57 0.65 0.81 0.85 0.81 0.79 0.90 Moody Aldrich Partners, LLC: Focused Value 0.38 0.63 0.62 0.47 0.48 0.43 0.72 0.75 0.86 0.86 0.83 0.82 0.91 Robeco Investment Management: RBP Premii 0.69 0.78 0.82 0.71 0.61 0.57 0.50 0.60 0.86 0.92 0.89 0.87 0.96 Heartland: Opportunistic Value 0.61 0.72 0.78 0.87 0.83 0.84 0.84 0.86 0.94 0.96 0.96 0.96 0.98 Westwood Management Corp.: AIICap Value 0.68 0.88 0.94 0.84 0.74 0.73 0.59 0.55 0.75 0.74 0.67 0.59 0.83 Lateef: All Cap Growth Equity 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Rolling Correlations: Lateef: All Cap Growth Equity Rolling 8 Quarter Periods Jun 2005 Mar 2005 Dec 2004 Sep 2004 Jun 2004 Mar 2004 Dec 2003 Sep 2003 Jun 2003 Dec 2002 Jun 2002 Dec 2001 Jun 2001 Dec 2000 Anchor Capital: Anchor All Cap Value 0.89 0.95 0.96 0.97 0.98 0.96 0.92 0.87 0.89 0.91 0.88 0.80 0.93 0.87 DGHM: AIICap Value 0.89 0.98 0.99 0.95 0.97 0.96 0.95 0.96 0.93 0.83 0.77 0.80 0.71 0.50 Moody Aldrich Partners, LLC: Focused Value 0.93 0.97 0.98 0.96 0.98 0.99 0.98 0.93 0.94 0.91 0.91 0.87 0.78 0.52 Robeco Investment Management: RBP Premii 0.97 0.98 0.99 0.98 0.99 0.97 0.94 0.93 0.92 0.84 0.67 0.69 -0.21 -0.28 Heartland: Opportunistic Value 0.98 0.98 0.99 0.96 0.98 0.98 0.98 0.98 0.96 0.90 0.79 0.70 N/A N/A Westwood Management Corp.: AIICap Value 0.79 0.90 0.96 0.95 0.97 N/A N/A N/A N/A N/A N/A N/A N/A N/A Lateef: All Cap Growth Equity 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 2 ~~~: City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Trailing Performance: Return through September 2008 20°ro 15% ------------------------------------------------------------------------------------------- 10% ----------------------------------------------------------------------------- 5% ---------------------------------------------------- ---------- ----- ---- -- ;= 0% -~ ~ -5% - ---- ----- ----------- ---------------------------------------------------- -10% ---- --------- -15% ---- ----------- -- ------- - - ~noc ---------------- ----------- - - 1 quarter YTD 1 year 2 years 3 years 4 years 5 years 6 years ^ Anchor Capital: Anchor All Cap Value ^DGHM: AIICap Value ^ Moody Aldrich Partners, LLC: Focused Value ^ Robeco Investment Management: RBP Premium Equity ^ Heartland: Opportunistic Value ^ Westwood Management Corp.: AIICap Value ^ Russell 3000 Value Trailing Performance: Return through September 2008 1 quarter YTD 1 year 2 years 3 years 4 years 5 years 6 years 7 years 8 years 10 years Anchor Capital: Anchor All Cap Value -6.54% -10.08% -9.34% 4.24% 5.30% 8.40% 11.00% 12.96% 8.37% 5.26% 8.79% DGHM: AIICap Value -5.37% -5.20% -9.26% 3.68% 5.74% 9.42% 12.15% 15.08% 10.30% 9.87% 12.60% Moody Aldrich Partners, LLC: Focused Value -15.62% -21.79% -20.01 % -3.80% 0.43% 9.23% 12.83% 17.66% 14.81 % 12.80% 15.87% Robeco Investment Management: RBP Premium Equity -6.37% -13.65% -17.08% -1.58% 2.13% 6.88% 10.62% 13.43% 9.68% 10.10% 11.21 Heartland: Opportunistic Value -6.67% -9.38% -14.75% 1.56% 3.91% 8.81% 12.14% 14.37% 12.14% 11.90% N/A Westwood Management Corp.: AIICap Value -9.06% -16.21 % -17.38% 0.30% 4.51 % 9.20% 12.01 % 12.97% N/A N/A N/A Russell 3000 Value -5.26% -17.84% -22.70% -6.24% 0.24% 4.14% 7.29% 10.04% 5.90% 4.06% 5.86% Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 3 ~~ City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Trailing Rank vs Universe: For the Periods Ended September 2008 eA US All Cap Value Universe 0% ® a • i 25% ~ ~ ~ ~ ~ ® • ~ M di ~ ~ e an • ~ ~ • ~ 75% • ~ ~ • s 100% 1 quarter YTD 1 year 2 years 3 years 4 years 5 years 6 years O Anchor Capital: Anchor All Cap Value ®DGHM: AIICap Value • Moody Aldrich Partners, LLC: Focused Value ®Robeco Investment Management: RBP Prem • Heartland: Opportunistic Value • Westwood Management Corp.: AIICap Value • Russell 3000 Value ^ 5th to 25th Percentile ^ 25th Percentile to Median ^ Median to 75th Percentile ^ 75th to 95th Percentile Trailing Rank vs Universe: Return Rank through September 2008 Median Rank Volatility of Rank 1 quarter 91 mng YTD 91 mng 1 year 91 mng 2 years 91 mng 3 years 91 mng 4 years 83 mng 5 years 80 mng 6 years 72 mng Anchor Capital: Anchor All Cap Value 16 8 39 18 10 8 16 26 32 38 DGHM: AIICap Value 14 6 31 9 10 9 14 12 22 17 Moody Aldrich Partners, LLC: Focused Value 37 30 86 87 57 60 70 15 14 7 Robeco Investment Management: RBP Premiu 42 7 37 30 36 49 52 45 34 32 Heartland: Opportunistic Value 23 3 41 14 21 18 27 23 23 23 Westwood Management Corp.: AIICap Value 25 8 61 48 40 24 21 17 25 38 Russell 3000 Value 72 2 31 58 75 77 72 70 69 72 Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance eA US All Cap Value Universe ~~ Page 4 City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Calendar Year Performance: As of September 2008 c tY 60% 50% 40% 30% 20% 10% 0% -10% -20% YTD 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 ^ Anchor Capital: Anchor All Cap Value ^DGHM: AIICap Value ^ Moody Aldrich Partners, LLC: Focused Value ^Robeco Investment Management: RBP Premium Eq ^ Heartland: Opportunistic Value ^ Westwood Management Corp.: AIICap Value ^ Russell 3000 Value Calendar Year Performance: As of September 2008 YTD 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Anchor Capital: Anchor All Cap Value -10.08% 11.46% 16.48% 10.97% 14.29% 33.37% -15.50% -8.11 % -8.12% 42.31 % 10.10% 29.24% 15.49% DGHM: AIICap Value -5.20% 5.49% 16.71% 7.63% 21.53% 38.75% -22.11% 16.90% 22.03% 18.59% 9.44% 26.60% 17.74% Moody Aldrich Partners, LLC: Focused Value -21.79% 6.12% 20.61 % 22.59% 23.60% 59.15% -2.32% 2.33% 24.48% 28.53% 12.85% N/A N/A Robeco Investment Management: RBP Premium Eqr -13.65% 2.44% 18.62% 12.15% 22.07% 39.13% -14.89% 14.79% 42.75% -2.60% -4.35% 31.90% 27.86% Heartland: Opportunistic Value -9.38% 5.39% 14.78% 15.83% 18.60% 36.67% -10.14% 15.63% 30.21 % N/A N/A N/A N/A Westwood Management Corp.: AIICap Value -16.21 % 11.52% 19.96% 16.00% 19.53% 28.64% N/A N/A N/A N/A N/A N/A N/A Russell 3000 Value -17.84% -1.01 % 22.34% 6.85% 16.94% 31.14% -15.18% -4.33% 8.04% 6.65% 13.50% 34.83% 21.59% Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 5 ~~ City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Calendar-Year Rank vs. Universe 0% 25% Y C CO c Median L 75% 100% eA US All Cap Value Universe -- -- a ----- ' --- - - • --- - - ~ ---- -- - __ -___= a =____ _____ -___= o =__ Q4 2007 Q4 2006 Q4 2005 Q4 2004 Q4 2003 O Anchor Capital: Anchor All Cap Value ®DGHM: AIICap Value ® Robeco Investment Management: RBP Premium Equity • Heartland: Opportunistic Value • Russell 3000 Value ^ 25th Percentile to Median ^ Median to 75th Percentile Calendar-Year Rank vs Universe: Return Rank Median Rank Volatility of Rank Dec 2007 g2 mng Dec 2006 92 mng Dec 2005 86 mng Dec 2004 83 mng Dec 2003 76 mng Anchor Capital: Anchor All Cap Value 52 18 17 71 35 76 68 DGHM: AIICap Value 37 14 44 68 65 27 37 Moody Aldrich Partners, LLC: Focused Value 22 17 41 25 2 21 5 Robeco Investment Management: RBP Premiu 37 9 64 45 28 26 35 Heartland: Opportunistic Value 41 15 45 85 14 43 49 Westwood Management Corp.: AIICap Value 32 10 16 35 13 37 87 Russell 3000 Value 66 10 78 15 70 59 81 Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance eA US All Cap Value Universe Page 6 • Moody Aldrich Partners, LLC: Focused Value • Westwood Management Corp.: AIICap Value ^ 5th to 25th Percentile ^ 75th to 95th Percentile ~~ City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Rank vs Universe: Rolling 3-Year Return eA US All Cap Value Universe c m c Me 1 O Anchor Capital: Anchor All Cap Value ®DGHM: AIICap Value • Moody Aldrich Partners, LLC: Focused Value ®Robeco Investment Management: RBP Premi • Heartland: Opportunistic Value • Westwood Management Corp.: AIICap Value • Russell 3000 Value ^ 5th to 25th Percentile ^ 25th Percentile to Median ^ Median to 75th Percentile ^ 75th to 95th Percentile Rolling 3-Year Return Dec 1997 Sep 1999 Jun 2001 Jun 2003 Mar 2005 Sep 2005 Mar 2006 Dec 2006 Mar 2007 Dec 2007 Jun 2008 Sep 2008 Anchor Capital: Anchor All Cap Value 23.03 17.80 7.72 -3.50 8.89 21.17 22.05 13.89 14.03 12.94 9.94% 5.30% DGHM: AIICap Value 23.65 14.11 17.93 6.25 6.70 25.25 28.12 15.14 13.90 9.84 9.62% 5.74% Moody Aldrich Partners, LLC: Focused Value N/A N/A 19.90 11.42 20.19 37.85 40.91 22.26 21.10 16.20 11.30% 0.43% Robeco Investment Management: RBP Premiu N/A 11.69 11.96 12.39 12.08 25.98 27.75 17.54 15.56 10.87 5.92% 2.13% Heartland: Opportunistic Value N/A N/A N/A 14.13 10.60 25.89 29.88 16.39 16.81 11.90 8.64% 3.91% Westwood Management Corp.: AIICap Value N/A N/A N/A N/A N/A 22.12 25.65 18.48 19.42 15.78 10.40% 4.51 Russell 3000 Value 30.97 19.52 5.37 0.57 7.48 20.81 22.46 15.20 14.42 8.97 3.34% 0.24% Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 7 ~~ Q4 2000 Q3 2001 Q3 2002 Q3 2003 Q3 2004 Q3 2005 Q3 2006 Q3 2007 Q3 2008 City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Manager Risk/Return Longest Concurrent Timeframe: 25 Quarters Ended September 2008 40 35 30 25 3 20 a~ 15% 10% 5% ~ ~% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Standard Deviation O Anchor Capital: Anchor All Cap Value •DGHM: AIICap Value • Moody Aldrich Partners, LLC: Focused \ •Robeco Investment Management: RBP f • Heartland: Opportunistic Value • Westwood Management Corp.: AIICap ~ • Russell 3000 Value Risk-Return Table Longest Concurrent Timeframe: 25 Quarters Ended September 2008 Return (%) Std Dev (%) Downside Risk (%) Beta vs. Market Alpha vs. Market R-Sgared vs. Market Sharpe Ratio Tracking Error vs. Market Anchor Capital: Anchor All Cap Value 10.01 11.59 8.51 0.7003 5.52 84.46 0.6281 6.4505 DGHM: AIICap Value 9.82 16.82 12.38 1.0408 3.65 88.53 0.4211 5.7279 Moody Aldrich Partners, LLC: Focused Value 13.14 19.97 13.70 1.1694 6.39 79.25 0.5208 9.4547 Robeco Investment Management: RBP Premium Equity 10.16 14.31 9.86 0.9115 4.46 93.78 0.5189 3.8130 Heartland: Opportunistic Value 10.22 16.16 11.62 1.0054 4.14 89.44 0.4629 5.2521 Westwood Management Corp.: AIICap Value 9.28 13.55 10.31 0.8341 4.11 87.58 0.4832 5.4007 Russell 3000 Value 6.00 15.20 10.94 1.0000 0.00 100.00 0.2143 0.0000 Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 8 ~~ City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Manager Risk/Return Late Mutually-Exclusive Timeframe: 3 Years Ended September 2008 3 N ~® 3 N Standard Deviation Standard Deviation O Anchor Capital: Anchor All Cap Value ®DGHM: AIICap Value • Moody Aldrich Partners, LLC: Focused Value ®Robeco Investment Management: RBP Prem • Heartland: Opportunistic Value ®Westwood Management Corp.: AIICap Value • Russell 3000 Value Risk-Return Table Risk-Return Table Late Mutually-Exclusive Timeframe: 3 Years Ended September 2008 Early Mutually-Exclusive Timeframe: 3 Years Ended December 2005 Return (~) Std Dev (~) Beta vs. Market Alpha vs. Market (/) RSquared vs. Market (~) Sharpe Ratio Return (~) Std Dev (~) Beta vs. Market Alpha vs. Market (%) RSquared vs. Market (~) Sharpe Ratio Anchor Capital: Anchor All Cap Value 5.30 9.35 0.66 5.17 60.65 0.14 Anchor Capital: Anchor All Cap Value 19.15 9.90 0.72 5.80 89.59 1.76 DGHM: AIICap Value 5.74 9.20 0.67 5.59 63.71 0.19 DGHM: AIICap Value 21.98 15.62 1.17 0.99 93.94 1.29 Moody Aldrich Partners, LLC: Focused Value 0.43 14.34 0.92 0.66 50.12 -0.25 Moody Aldrich Partners. LLC: Focused Value 34.10 18.59 1.33 8.91 86.04 1.74 Robeco Investment Management: RBP Premium Equity 2.13 10.46 0.89 1.93 86.81 -0.18 Robeco Investment Management: RBP Premium Equity 23.96 13.15 1.00 5.40 97.31 1.69 Heartland: Opportunistic Value 3.91 11.41 0.85 3.82 67.40 -0.01 Heartland: Opportunistic Value 23.37 14.95 1.12 2.92 94.67 1.44 Westwood Management Corp.: AIICap Value 4.51 11.17 0.88 4.39 74.45 0.05 Westwood Management Corp.: AIICap Value 21.27 10.61 0.79 6.63 92.42 1.84 Russell 3000 Value 0.24 10.98 1.00 0.00 100.00 -0.34 Russell 3000 Value 17.89 12.99 1.00 0.00 100.00 1.24 Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 9 Manager Risk/Return Early Mutually-Exclusive Timeframe: 3 Years Ended September 2005 15% 10% ~~ City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group a~ `m C1 0 a~ n E Z 1 1; 1i Histogram of Returns 25 Quarters Ended September 2008 .. i.. 10to 15 > 15 12 10 < -10 -10 to -5 -5 to 0 0 to 5 5 to 10 Returns Range (%) Histogram of Excess Returns vs. Russell 3000 Value 25 Quarters Ended September 2008 1 ., .1 ~ 8 a~ m Ci 0 6 a~ n E z 4 2 ~.I.. ~I ~ <-4 -4to-2 -2to0 Oto2 2to4 4to6 >6 Excess Returns vs. Russell 3000 Value Range (%) k,,,:o.,r.,..a.~~a,:.~..~,-,.,s..y,,.~..~.©.,,~µ,~_ _.~......... _,.,,,,,, ~ ~,~„~~•,.M,,,, ~~....a„~a",,. ,,.,,,,~ ~ w,~a,~_-,,,,,,«,~,~~,;,~.,-~«AU:.,,,,.,,.:,_~~~~4„ ~,-3~~~e '~~ Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 10 ~$i City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Annualized Excess Return /Standard Deviation of Excess Return 25 Quarters Ended September 2008 X W -------------------- -----~----- --- ~-- -- -a ---- ----------- ------- ----- ~ ~~~, d~/ R~/ R~/ 1 n~/ Standard Deviation of Excess Return vs. Russell 3000 Value O Anchor Capital: Anchor All Cap Value ® DGHM: AIICap Value • Moody Aldrich Partners, LLC: Focused Value ® Robeco Investment Management: RBP Prem • Heartland: Opportunistic Value ® Westwood Management Corp.: AIICap Value • Russell 3000 Value Rolling Risk Statistics: Alpha Rolling Risk Statistic: Information Ratio 12-Quarter Moving Windows, Computed Quarterly relative to Russell 3000 Value 12-Quarter Moving Windows, Computed Quarterly relative to Russell 3000 Value 3 2.5 2 i ~~r O fB L _Q Q Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance 3 Page 11 fB ~ 1.5 C O ~ 1 L 0 0.5 0 0.5 1'y ~~~~~~~~ 2 2005 04 2005 02 2006 04 2006 02 2007 04 2007 03 200 ~~~~ tl City of Winter Springs Employees' Retirement System Upside vs. Downside Capture Late Mutually-Exclusive Timeframe: 3 Years Ended September 2008 120 115 110 105 0 v ,v_ j 100 95 90 85 • ® • 20 30 40 50 60 70 80 90 100 110 Downside% Single Computation Zephyr StyIeADVISOR: The Bogdahn Group Upside vs. Downside Capture Early Mutually-Exclusive Timeframe: 3 Years Ended September 2005 0 v ,v_ a • ® O ~0 0 20 40 60 80 100 120 140 160 Downside% Single Computation Upside vs. Downside Capture 25 Quarters Ended September 2008 150 140 130 0 v H 120 a 110 100 90 • 0 4U 5U 6U /U ttU y0 100 Downside% Single Computation O Anchor Capital: Anchor All Cap Value ® DGHM: AIICap Value • Moody Aldrich Partners, LLC: Focused Val ® Robeco Investment Management: RBP Pre • Heartland: Opportunistic Value • Westwood Management Corp.: AIICap Val ~ Market Benchmark: Russell 3000 Value Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance '^~ Page 12 ~~.. City of Winter Springs Employees' Retirement System 160 140 120 100 80 60 40 20 n Multi Statistic Graph ~~ II III Zephyr StyIeADVISOR: The Bogdahn Group Multi Statistic Graph 1_ 11 Batting Up Capture Down Capture Excess Return Information Treynor Average Ratio Ratio vs. Market Ratio Ratio ^ Anchor Capital: Anchor All Cap Value ^DGHM: AIICap Value ^ Moody Aldrich Partners, LLC: Focused Value ^Robeco Investment Management: RBP Premii ^ Heartland: Opportunistic Value ^ Westwood Management Corp.: AIICap Value ^ Russell 3000 Value Multi-statistics Summary Table: 25 Quarters Ended September 2008 Batting Average # of Up Periods Up Capture Ratio # of Down Periods Down Capture Ratio Excess Return vs. Market Information Ratio Treynor Ratio Anchor Capital: Anchor All Cap Value 56.00% 20 91.78% 5 46.58% 4.02% 0.62 10.37 DGHM: AIICap Value 60.00% 17 112.81% 8 79.59% 3.82% 0.67 6.78 Moody Aldrich Partners, LLC: Focused Value 72.00% 16 148.58% 9 94.39% 7.14% 0.76 8.86 Robeco Investment Management: RBP Premium Equity 68.00% 17 112.33% 8 75.48% 4.17% 1.09 8.10 Heartland: Opportunistic Value 60.00% 18 122.04% 7 88.13% 4.22% 0.80 7.42 Westwood Management Corp.: AIICap Value 60.00% 20 102.48% 5 70.44% 3.29% 0.61 7.87 Russell 3000 Value 0.00% 17 100.00% 8 100.00% 0.00% 0.00 3.26 iv 8 6 4 2 Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 13 ~~? ~, City of Winter Springs Employees' Retirement System Anchor Capital Advisors LLC Anchor All Cap Value Investment Strateav aintalning prudent and appropriate levels of risk. They believe In investing In sound companies with strong outlooks when they are available at attractive prices. They also believe that capital preservation is as important as capital appreciation in achieving long-term investment The firm uses abottom-u p, value-driven. highly disciplined security analysis approach in selecting securities for th air All Cap Value discipline. The objectlve of their process Is to identify opportunities that are undervalued. have moderate downside risk. and a high probability of above average returns. -Value Driven -Quantitative Screening & Modeling -Fundamental Research /Bottom-Up Analysis - Up & Down Side Review Prices /Sell Discipline -Team Approach The ultimate Investment decision Is made by the Indlv ldual portfolio manager. However. portfolio managers may not deviate from the estment Committee's buy list Managers select which stocks to include in a portfolio based upon a written statement of the client's objectives. All portfolios are reviewed on a regular basis by the portfolio manager as well as the portfolio manager's peers to ensure that client portfolios confo nn to firm policies. Screening Process The firm's investment process utilizes a combination of quantitative screening, fundamental. hands-on analysis. and company visits. Drawing from a universe of 5.000 securities. the firm screens for low valuation based upon the following criteria: 1) low price/earn logs ratios in relationship to the market as well as the company's peers. 2) high current div ldend yield and growth. and 3) stock market valuations at large discounts to private market value. Securities meeting these criteria are the focus of more intensive fundamental analysis. including internal financial mod eling. Wall Street research. co mpeny visits. and competitive analysis. risk and a high probability of above-average return. Once a candidate stock has gone through this process it is presented to our Investment Committee for inclusion in our All Cap Value portfolios. Buy/Sell Discipline A buy list is generated by Anchor's Investment Committee, which meets formally every Tuesday and informally during the week as needed. Stocks on the list are used in a model and portfolio managers can only deviate from the model to take into consideration restrictions on the portfolio. such as no tobacco. ora tax consideration. Initial. minimum and maximum individual holding weightings: Minimum holding weight: None Maximum individual holding weight: 10% at market 5% at cost. Initial holding weight Generally 2%+/- for a combination of factors including relative liquidity characteristics. Capitalization Range $1 billion and Brea The firm's equity sell disci pllne is based upon predeterm toed price targets on both the upside and downside. As stocks approach these designated targets. we identify key change factors which can lead to a buy. sell. or hold decision. The criteria we use for a sell are'. (1) achievement of predate nnin ed price targets. (2) negative changes with In the company. (3) more attractive alternatives exist. TradinglExecution Strategy Anchor trades with brokers who work the firm's orders to achieve best execution. The fine monitors best execution by checking the hme and sales in Telemet against our execution prices. They monitor the settlement process to ensure trades are processed correctly and evaluate brokers on how they perfo nn in handling our trades. Qaafad Icy cASE Analytics Systom Dalton, Greiner, Hartman, Maher and Co., LLC AIICap Value u~rf lw employs a team approacn to saucap vawe mvesnng. u~rf lv is a sector-anven m estment management nrm. Ina nrm believes roar the best method to Identify undervalued stocks is through detailed fundamental securities analysts conducted by experienced Chartered Financial Analysts focusing on specific sectors of the market. The DGHM investment process involves approximately 15 % of quantitative research and r alysis. and approximately 8596 fundamental research and analysis. The result is a portfolio of diversified AIICap Value stocks that exhibit superior valuation. flnan cial strength and profitability characteristics relative to their peers. Screening Process Define Universe We define the universe of potential investments for our AIICap Value product to include all stocks over $1.0 billion in market capitalization. There are approximately 1600 securities In this universe. Multifactor Model Score DGHM uses a proprietary Multifactor Model that screens the in ltial universe of stocks In order to focus our Sector Specialists on potential investments that meet stringent valuation and profitability criteria. The Multifactor Model examines eight factors in varying degrees of importance § Total Firm Value/Earnings Before Interest. Taxes. Deprec and Amort (EBIT DA) § LastTwelve Months Price-to-Earnings § Price-to-Book Value § Price/Free Cash Flow § Graham & Dodd Ratio § Dividend Vield § Last Twelve Months Return on Equity § 5-Year Average Return on EquRy The percentage weight attributed to each factor is based on our research over a 25-year period While the factors remain constant for the model. the initial universe of securities that the model screens varies by product (i. e. m cap. cap. and midcap). Occasionally. the frm will realign the weight given to each factor based on its ongoing research. The Multifactor Model identifies undervalued stocks based on these factors relative to the initial universe. The output of the model orders the universe of stocks cording to their relative athactiveness. However. DGHM's historical research indicates that there are sectors that possess distinctively different characteristics from each other. These sectors include. technology. financials. healthcare and real estate investment trusts (R EITs). Thus, while the models are essentially the same. specific subgroups we recognize Include Industrials. Financials. Technology, Healthcare. and REITs. I[ is important to note that DGHM's first phase of the stock selection process eliminates approximately 80°io of the initial universe. There are relatively few stocks within the capitalization parameters that meet the initial criteria for valuation. financial strength and profitability. Portfolio Construction Methodology Please see section above. BuylSell Discipline Stock Purchase After reviewing the company with the investment team. the Sector Specialist inshucts our traders to purchase a position of approximately 3 of the portfolio. Barbara Kirby. our head trader. possesses 18 years of experience trading small cap and mid cap value stocks with low liquidity. Additionally she is highly skilled in using Electronic Communications Networks (EGNs). such as Instinet to minimize transaction costs for our clients. Portfolio Management The DGHM AIICap Value product was designed to achieve results that are superior to both that of the Russell 3000 and Fussell 3000 Value indices over market cycles. The Team Leader (Baker) enacts a portfolio management discipline that seeks to: ontinually monitor held positions so that fewer problem stocks ,suit. void capita llzation drift. temper risk by maintaining relative sector weights at+/- 2596 of the designated benchmark onitor the position and review model scores on a weekly basis. monitor portfolio/performance dispersion between accounts. Sell Discipline We sell stocks because 1) our proprietary Multifactor Model indicates that an acceptable trade-off of valuation. financial strength and profitability no longer exists. 2) the Sector Specialist feels the company's fundamentals are deteriorating. or 3) a position reaches 6 % of the portfolio. which calls for an automatic trim back to 4%. Page 14 ''1 ~~~ ~ ;,~ City of Winter Springs Employees' Retirement System Trading/Execution Strategy Our hading desk in New York handles all trading. Buy and sell orders are determined by portfolio managers and are given over to the trading desk by telephone or in person. Once received by the desk. orders are entered into a sophisticated paperless hading and blotter system that asides on the trading desk. The software enables the traders to know precisely at any point during the trading day the status of all orders and how the execution of that order compares with the stock's action In the market. The software also provides the proper SEC-mandated regulatory compliance for tracking orders. as well as recording broker interaction with an order. The trading desk is In constant co ntact with portfolio managers to keep them up-to-date with en orders progress and changing market onditions. At the end of each trading day portfolio managers receive a report compiling firm wide trading activity. The report allows the portfolio manager to review an orders status as well as the exec uhon price. The trading desk also circulates weekly reports summarizing outstanding orders. and monthly commission reports detailing business done with various brokerage fines are provided to ensure that commission targets are met. Barbara Kirby is head of trading and senior vice president of DGH M. She is responsible for the firm's trading activities. Ms. Kirbyjo fined Dillon Read Capltel In November 1988 and in February 1589 became a member of the hading department She is a member of the industry organization. Trader Forum. Kate Schwartz assists Barbara In the trading operation. Heartland Advisors, Inc. Oaoortunistic Value Eauitv Strateav team believes are undervalued relative to their intrinsic value. The Opportunistic Value Equity Strategy utilizes Heartland's disciplined and time-tested 10 Principles of Value Investing framework to identify companies with strong financial profiles and low prices relative to their pings. cash flows and book values. The Opportunistic Value Equity Strategy team believes this value-based investment approach provides a margin of safety and limits downside risk relative to other equity investment strategies. The distinguishing characteristic of the Opportunistic Value Equity Strategy is its ability to Invest In companies of all sizes. usually greater than $500 million. providing It the flexibil lty to generate consistent returns In a variety of market en vlron meets. l2 VppORUnls[IC ValLle tgul[y Jtrategy generally Irlves5 In coin ponies Wlrn a marKe[ caplmllZanOn greater man ~SUU mllllOn. Wnlen me estment team believes encompasses a unlve rse of approximately 3.700 stocks. Utilizing tools such as FactSet and Bloomberg. the estment team conducts an initial quanfmtive screen by searching for stocks that are trading at low price-to~arnings. low price-to-book and low price-to-cash-Flow among other measures. After the Initial screen. the team begins its fundamental analysis process whereby it employs the proprietary 10 Principles of Value InvestingTM framework to assess the suitability for the portfolio. Portfolio Construction Methodology nstructing a po rtfollo, the Op po rtunistlc Value Equity Strategy strives to achieve diversification and minim lze overall porttollo risk by inv e~ ting in approximately 30-50 stocks across a wide variety of Industries. To further manage portfolio risk. the Investment team typically does nor myesr mop: man s°i in any one individual seconry ar cost and rypmalry does nor myesr more man 2sio of me portfono m any one industry sector. Given the portfolio is actively managed and does not seek cu ne nt income as an investment objective. the Opportunistic Value Equity Strategy generally has a cash level of less than 5% of the market value of the portfolio. The Opportunistic Value Equity Strategy is an actively managed strategy and since its inception has relied on a bottom-u p. fundamental approach to research uti llzing Heartland's 10 Princlp les of Value Investing framework to select secu rules. While the in vestment team is cognizant ofbanchmark weightings. the primary driver of Its stock selection Is the merits of the individual stock. Gonseq uently. while the team might select stocks in certain sectors that it feels will outperform the relevant benchmarks In certain macroeconomic or financial market ants. its underlying strategy of focusing on the individual stock does not change. As a result. the Opportunistic Value Equity Strategy may be significantly underweight or overweight a particular sector relatve to the benchmark. The securities to be added or removed from the portfolio are derived from the formal and -informal investment meetings held throughout the eek and can stem from a recommendation from a research analyst or a portfo llo manager. The final decision is typically derived from consensus among the portfolio managers of the Opportunistic Value Equity Strategy. process for the Upportu nishc Value tyuity Strategy generally begins with an initial yuanhmhve screen of the 3. /VV stocks I omprises the Fund's relevant investment universe. The Investment team. utilizing tools such as FactSet or Bloomberg. al universe for stocks that are trading at low price-to-earnings. low price-to-book and low price-to~ash flow among other Depending on the results of the quantitative screen. the Investment team generally finds approximately 250 stocks that meet Its In itlal criteria. At this juncture. the team begins to conduct Its fundamental analysis on this set of 250 stocks. whereby I[ employs the proprietary 10 Principles of Value Investing framework to assess the suitabil lty for the portfolio. The key criteria included in the 10 Principles of Value Investing include'. a) Catalyst for recognition b) Low price-to~arnings c) Low price-to-cash flow d) Low price-to-book value e) Financial soundness f) Positive earnings dynamics g) Sound business shategy h) Capable management and insider ownership i) Value of the company j) Positive technical analysis In general. this process entails an In lepth review of the financials. discussions with management regarding strategy and an assessment of industry dynamics. This review is rypmauy aeeomposhed mrough internal research but also ineludes meeeng wim company exeeueves in our offices. atbroker-sponsored conferences. a well as at the company's facilities. Upon completion of this process. the team assesses how any of the ten criteria are met. Some securtes may score lower on fundamental financial attributes but may still be included due to other value-based attributes which the team believes have appropriate appreciation potential. If most of the criteria are met. the stock gets added to the watch list The watch list generally encompasses approximately 100 stocks. At this juncture. the investment team monitors the stock price and valuation relative to Its peer group and relative to Its historical levels. The investment team also monitors industry developments end the rail condition of the market to determine an attractive entry point to initiate a position in the stock. The Opportunistic Value Equity Strategy typically has 30-50 stocks in the portfolio. The Opportunistic Value Equlty Strategy generally evaluates positions to sell using the same criteria It uses to purchase stocks-the 10 Page 15 ''1 ~~~ ~ ;.® City of Winter Springs Employees' Retirement System Principles of Value Investing. The investment team uses these ten principles as the framework to assess whether or not the stock is still meeting the original investment thesis. Some examples of factors. which may be considered when stocks are sold. include: a) Valuation targets being achieved b) Change in in vestment thesis c) Deteriorating financial position d) Meeting fewer criteria of 10 Principles of Value InvestingTM Trading/Execution Strategy Heartland utilizes an electronic order man age meet system called Charles River Development System to handle the order flow from portfolio anage rs to the trading desk as well as to monitor certain Investment resMctions on a pra-trade basis. In addition. the hading team maintains FIX connections with a number of brokers to automate and expedite order flow and trade execution. For those brokers that our team does not have a FIX connection with orders are relayed telephonically. The trading team also utilizes OASYS to automate order allocations. From a collaborat'on standpoint. the trading team works closely with the Investment team 'n common cat'ng which secur tes should be added ved from the portfol o as well as discussing how the ma k t conditions may mpact the execut or of those orders. The trading team attends the Investment team meetings where existl ng and prospective positions are discussed. Furthermore. portfolio managers sit next to the trading desk in an open cu blcle en viron meet facilitating communication regarding new and pending orders. In order to achieve best execution. Heartland has formed a Brokerage Committee that meets on a quarterly basis and consists of the Head of Trading. the Director of Research. the Chief Compliance Officer and the Chief Financial Officer. The committee reviews trading costs and other meMcs to gauge if Heartland is achieving best execution on behalf of its clients. Heartland also utilizes Abel Noser to track and monitor our trading costs. Please refer to Heartland's ADV. Schedule F for additio nal Information regard leg Its trading practices. Geated by eASE AnalyGCS SysYarn r Moody Aldrich Partners, LLC Focused Value Investment Strategy Seeks capital app rc iefion using bottom-u p. fundamental research and aMulti-Dlmen sio eel approach to value. This strategy invests in sound businesses that are undervalued relative to earnings. cash flows. assets. and future prospects. Investments with strong return potential are pursued across the capitalization spectrum. This separate account strategy is designed for institutions and individuals that want high return potential from a concentrated portfolio of actively managed stocks. Screening Process Our initial universe begins with the value stocks of the Russell 3000 Index. The first step in generating investment ideas is a proprietary quantitative screen. performed monthly. that reduces our field of choice to 150 stocks by highlighting companies with attractive value characteristics. The screen identifies potential attractiveness by ranking and weighting the following factors on a percentile basis'. price/value. quality rating. growth persistence rating. projected growth rate. e nings momentum percentile. price momentum percentile. value/momentum pe rce stile. c e rt rah n sets. n malzed retr rn on equity (ROE). Sr rv'ving stocks tend to have the follovv ng character sties: r rr r ode valr ed. based o r a dvde rd d scot nt model. low normalized PIE. high ROE. reasonable quality and stability. growth pars stance. so ne positive earnings end price momentum. Next. a preliminary valuation review based on consensus earnings and growth rates is performed. This step involves a discounted cash flow estimation of mhinsic value as well as relative measures such as P/B. P/E and yields. We then begin more extensive fundamental research entrating first on a qualitative assessment of the business and company strategy. Through extensive contact with management. company reports and Independent research we try to understand the drivers of value. where they are in their business cycle. capRal allocation plans. and competitive advantages. The next step is an assessment of the financial trends (margins. asset and inventory turns. re .etc.). capital allocation pattern, earnings quality and the manageability of debt. Our trend analysis focuses In on the factors man agement can influence to boost return on invested capital. We want evlden ce that supports the stated business strategy. The next step is judg meet about the future prospects of a business. and catalysts that we believe must happen for our return expectation to be achieved. Catalysts can include new products. n anagement. a strategy shift. better utilization of working capital. lower cost of capital, better cost controls. etc. These improvements tend to manifest themselves in corresponding improvements in cash flow. capital eFticiency. returns on invested capital and equity. margins and rave noes. the end result should be a high er stock price. The final step Is a refinement of valuation utilizing a multl-dlmensio nal approach. We value each company as If buying the whole business sing a discounted cash flow (economic value added -EVA) analysis. We also look at valuation measures such as P/B. P/E. PIS and various ash flow yields. Relative valuation measures are compared to industry peer groups and adjusted for cyclicalaed seasonal factors. The end result Is a reasonable range of fair value. not a precise number. Portfolio Construction Methodology Flexlb pity is a priority with this strategy that Is free to go where the values a e. Provides exposure to small. medium. and large companies and nable diversification across sectors. Investments are concentrated In the firm's best ideas. Investors can expect to be fully invested at all times in 20 to 30 stocks. up to 50°% In the top 10 holdings. 10 o maximum in any one stock. Along-term investment horizon leads to low turnover. Portfolios are invested quickly into a model portfolio and hold the same stocks in the same weights to keep dispersion among accounts to a minimum. Client directed exclusions are considered prior to purchase. BuylSell Discipline The buy discipline employed by Moody Aldrich Partners (MAP) seeks companies with some. if not all. of the following characteristics: 1. Distinct undervaluation. including (but not limited to) absolute and relative measures of earnings. cash flow. assets. and book value. 2 Future prospects and durable competitive advantage. 3. Flnanclal statement analysis. including catalysts to improve operating results. 4. Trends of cash flow and returns on invested capital versus cost of capital. 5. Flnanclal strength to execute business strategy 6. Tlmelin ass Moody Ald rich's sell discipline is twofold 1) Stocks are sold based on qualitative judgmentsdarived from the Investment team's fundamental research and tied to the investment thesis for each holding. Signals include an erosion of the business and/or its balance sheet. The team monitors key Indicators continually and nates companies when catalysts expected to unlock value do not materia llze or if the Investment case breaks down. Occasionally. when eternal research uncovers a promising new Idea. the team will sell a more fully valued hold leg to fund the purchase. 2) Also. e nings estimate momentum (EEM) and value provide a very effective unemotional sell discipline. Essentially. as fair value is approached. MAP becomes more demanding of earnings estimate momentum. As a stock becomes fairly valued. if its EEM is still strong. MAP will sell a portion of the hold leg. retaining the rest. Trading/Execution Strategy MAP has a respons ib ll lty to ensure that customers receive best execution orders placed in their accounts. In seeking to achieve best cu tion. MAP will consider the full range and quality of a broker's services Including commission rate. financial responsibility. execution capabll hies. and responsiveness. Page 16 ''1 ~~~ ~ ;,~ City of Winter Springs Employees' Retirement System MAP is committed to achieving best execution with respect to clients'secu rides transactions. MAP does not currently use commissions to obta In regularly Invoiced research services. Robeco Investment Management Robeco Boston Partners Premium Equity Investment Strategy Investment Philosophy Our investment philosophy is grounded in certain "fundamental truths to investing. each proven to have worked over meaningful periods of time and in a variety of market environments: 1. Low valuation stocks outperform high valuation stocks. 2. Companies with strong fundamentals. e.g. high and sustainable returns on Invested capital. outperform companies with weak fundamentals. 3. Stocks with positive business momentum. e.g. rising earn In gs estimates. outperform stocks with negative bush ass momentum. We believe value opportunities are best identified through a combination of fundamental bottom-up research that is aided by quantitative tools. We construct portfolios that consistently possess these three characteristics'. they are simple rules that limit downside risk. preserve capital and maximize the power of compounding. The inception date of Robeco Boston Partners Premium Equity is June 1.1595. ristics that wori<''. attractive valuation. sound business fundamentals and improving business momentum. The process is a teamroriented culture that upholds individual accountability and provides the clarity of having final decision makers at the r level. Our -investment process begins with quantitative scoring and screening to cull atarget-rich subset universe based on the Three Circle characteristics for our fu nda mental research. We cast our net wide. s ring over 6.000 stocks worldwide every week based on their fundamentals. valuation and momentum. Our rating system dates back e quarter century and has been refined instep with the market`s evolution over time. We validate each candidate's screening score by using customized reporting tools to help us evaluate the company's financial history. This nables us to efficiently identify bona fide candidates within our Three Circle stock selection framework and provides a roadmap for our fundamental research. Our fundamental work incorporates the full menu of public filings. industry information and management discussion. which in conjunction with ur professionaljudgment and experience, formulate our assessment of each company's intrinsic value and. where applicable. Its prospects for achieving It. Research findings are formally discussed and debated during our formal bi-weekly meetings. Portfolio managers are the final decision makers and every investment professional is accountable for the holdings in our portfolios. The investment team meets formally twice a week to discuss Investment candidates and current holdings. Our directors of research manage the fulfillment of research work among our pool of analysts. which maximizes productivity and enables portfolio man agars to focus on adding basis po'mts. As detailed in our discussion regarding our"investment process.` o arch work is aided by quantitative efficiency tools and grounded in fundamental. bottom-up analysis of each company in terms of our Three Glrcle criteria'. attractive valuation. sound business fundamentals and improving business momentum. We conduct all of our research internally and utilize industry resources on an ~mfo nmational basis. We steadfastly adhere to our investment process and discipline. which have been in place far nearly a quarter century. While other organizations' portfolio management and investment arch departments operate independently of one another. our portfolio management and research teams work in unison. m zing our time and resources. The consistency of our results Is largely due to our commitment to our efficient and repeatable research process and the development of a culture that promotes frequent and meaningful Interaction among our analysts and portfolio managers. Portfolio Construction Methodology Robeco BP portfo fios are built from the bottom-up through fundamental re arch. Our portfolio construction process is aided by quantitative efficiency tools. Efficient and repeatable. the construction Is grounded in ouer Three Glrcle stock selection framework. The sizing of each hold ing is determined by the degree of upside potential. our conviction level to the upside and the trading liquidity of the stock. BuylSell Discipline Buy Discipline Bottom-up stock selection drives our investment process. Our buy discipline is conducted within our Three Circle framework (1) attractive u anon. (2) sound business fundamentals and (3) improving business momentum. We ask three questions about every stock that we uate for Investment. 1 V Is the company priced at an attractive discount to its intrinsic value and its valuation attractive relative to its own history and growth and profitability dynamics? 2 Is the company engaged in a fundamentally attractive business (i. e.. does it generate high and sustainable returns on invested capital)? 3. Is the business Improving and is there an Identifiable catalyst that will drive the stock price up toward fair value? Our fundamental research enables us to determ lne if candidates successfully meet these criteria and thus merit purchase in the portfolio. Sell Discipline We sell a stock when it no longer meets one or more of the Three Circles criteria. either through obtaining fair value or due to an adverse change in fundamentals or business momentum. Each holding has a target valuation established at purchase. which we constantly monitor Page 17 ''1 ~~~ ~ ;,~ City of Winter Springs Employees' Retirement System and ad;ustas appropriate. 2. Providing information flow regarding securities holdings and order status to portfolio managers and analysts: and 3. Managing any regulatory and technological change that Is specific to trading and the investment process. Each day. the equity traders cull information on portfolio holdings from brokers and other third party data sources seeking value added commentary within the 'trader information loop' to be relayed to portfolio managers and analysts. The information exchange continues through the execution phase of the investment process as the portfolio managers objectives for implei t g vesture nt'dea are d'rectly cam mu n'cated to the tradng desk. Once coupled w Ih the tr d lysis on factors such as the liyr d ty c,ha attar stcs of the stock. market co ~d'tors and stock rews. the trader -s able to cr stomze a t-adrg st ategy rtent on achieving best execution. order to bring the process full circle. trade data is submitted to Abel Noser. a third parry transaction cost measurement se rvlce. o quarterly and annual basis for analysis. Abel Noser compares our transaction results against standard industry benchmarks such as arrival price (market Impact cost). volume weighted average price (VWAP). prior night's close. closing price. etc. These results are reviewed on a periodic basis by our Transaction Management Oversight Committee to ensure that trade costs are in line with expectations and historical trends. Geafed by oASE AnalVo-cs System Westwood Management Corp. AIICap Value Investment Strategy Westwood Invests In companies whose future profitability they forecast to be significantly higher than what current prices discount The AIICap strategy. like all Westwood strategies. adheres to a 25-year old investment philosophy and disciplined process that seeks to deliver a superior rate of return while controlling risk. I he Westwood investment process begins with all companies above yIUU million (at pu rcYtase) in market capitalization and witYt our team of arch analysts. who specialize In a select number of sectors and are responsible for generating new Ideas and monitoring "companies of merest' withn ther industry. Analysts focus on fnding deas that have limited downside risk and the opportunity to generate earnngs'cash flows that are higher than what the current stock price implies. Other key mehics include improving ROE. a declining DebVEquity ratio. positive ash flow. expanding margins. and positive earnings surprises without a corresponding Increase in Wall Street earnings estimates (a sign of skepticism). After identifying mispriced securities based on key investment metrics and conducting thorough analysis on these securities. the analyst pitches new ideas to his or her Research Group. returns. Specifically. the AIICap portfolio consists of 600 securities. which are held capitalizations above $100 million. Individual hold logs are generally 1'/o-3f'n of the pc sector weightings. Unless specifically outlined in client investment guidelines. all por will have unts. with market selection process drives I tie tour Kesearcn lirou ps are made up of several analysts that cover mdus[nes within a group of correlated sectors. After the analyst perfo ours the initial analysis. the Research Group begins its formal due diligence. During that period. the Research Group questions umptions (growth rates. valuation) and rationales in an attempt to uncover any pitfalls. The Research Group can affirm the analyst rating or end the stock back to the analyst for further research. Stocks affirmed by the Research Groups become Approved Portfolio Candidates. The Approved Portfolio Candidates are an inventory of affirmed securifies from which the Portfolio Team makes Its selections. Westwood continually evaluates its existing holdings and has disciplines in place [hat serve as sell signals. The buy and sell decisions occur at the portfolio team level. Specifically. sell signals for AIICap include the following: 1) stocks reaching their predetermined price target. and 2) changes to the companies fundamentals that make the risk/reward profile unattractive. A formal review of a name is automatically conducted if it is down 20°% over any 30-day period. thereafter. Trading/Execution Strategy All trades are transacted on a best execution basis to avoid a negative impact on performance. All accounts are traded on a pro rata basis utilizing block trading. An internal compliance committee monitors executed trades to ensure that cost falls within proper trading levels. Westwood formed the Trade Order Management Gom mittee in order to regularly review and monitor all aspects of trading. Topics reviewed nclude. but are not li mlted to: c soft dollar practices and best execution testing as well as a review of the financial health of fissions. various brokerage Hnms utilized on a regular basis. Soft Dollar Policy. Westwood. a matter of policy. does utilize research. re arch-related products and other brokerage services on a soft dollar commission basis. Westwood's soft dollar policy is to make a good faith determination of the value of the research product or services in elation to the commissions paid. Westwood also maintains soft dollar arrangements for those research products and services th at assist Westwood In its Investment decision-making process. In the event Westwood obtains any mixed-use products or se rvices on asoft dollar basis (e.g. Hubdata and I55 Proxy). Westwood will make a reasonable allocation of the cost between that portion which Is ellg lble as research or brokerage services and that portion which is not so qualified. The portion efig lble as research or other brokerage services will be paid for with discretionary clientcommissions and the non-eligible portion. e.g. computer hardware. accounting systems. etc. (under the Section 28(e) safe harbor) will be paid for with Westwood's own funds. For any mixed-use products or services. Westwood will maintain appropriate records of its reviews and good faith determinations of its reasonable allocations. Creatod by oASE Anal ylics Systom Page 18 ''1 ~~~ ~ ;.® City of Winter Springs Employees' Retirement System Zephyr StyIeADVISOR: The Bogdahn Group Return Compounded rate of return for the period. Standard Deviation A statistical measure of the range of a portfolio's performance, the variability of a return around its average return over a specified time period. Sharpe Ratio Represents the excess rate of return over the risk free return divided by the standard deviation of the excess return. The result is the absolute rate of return per unit of risk. The higher the value, the better the product's historical risk-adjusted performance. Alpha A measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured by beta. It is a measure of the portfolio's historical performance not explained by movements of the market, or a portfolio's non-systematic return. Beta A measure of the sensitivity of a portfolio to the movements in the market. It is a measure of a portfolio's non-diversifiable or systematic risk. Treynor Ratio Similar to Sharpe ratio, but focuses on beta rather than excess risk (standard deviation). Represents the excess rate of return over the risk free rate divided by the beta. The result is the absolute rate of return per unit of risk. The higher the value, the better the product's historical risk-adjusted performance. Information Ratio Measured by dividing the excess return by the tracking error. The higher the Information Ratio, the more value-added contribution by the manager. Tracking Error A measure of the standard deviation of a portfolio's performance relative to the performance of the benchmark index. Excess Return Arithmetic difference between the managers return and the index return over a specified time period. Up Market Capture The ratio of average portfolio return over the benchmark during periods of positive benchmark return. Higher values indicate better product performance. Down Market Capture The ratio of average portfolio return over the benchmark during periods of negative benchmark return. Lower values indicate better product performance. Batting Average The batting average of the manager vs. a benchmark is the ratio between the number of periods where the manager outperforms the benchmark and the total number of periods. Downside Risk A measure similar to standard deviation, but focuses only on the negative movements of the return series. It is calculated by taking the standard deviation of the negative quarterly set of returns. The higher the factor, the riskier the product. R-Squared The percentage of a portfolio's performance explained by the behavior of the appropriate benchmark. High R-Square means a higher correlation of the portfolio's performance to the appropriate benchmark. Created with Zephyr StyIeADVISOR. Manager returns supplied by: eVestment Alliance Page 19 ~~ Appendix Page 20 //~ l';h~ i .. The wording for the announcement: RFP for Investment Management Proposals The City of Winter Springs, Florida Employees' Pension Plan is seeking investment management proposals for the following mandate: All Cap Value $ 3.5 million The Bogdahn Group is handling the search process. To request an RFP, please contact. alexanderk(c~boadahnproup. com The Bogdahn Group sent the announcement to following publications: Publication Contact Email Fundfire Andy Willmott awillmott( a~fundfire.com Money Management Letter Matt McCue mmccue( a~fin-news.com Financial News Diana Britton dbritton(a ~iinews.com Page 21 //~ ~~,~i ~: After seeing the am7ouncement, a representative from each of the foi-ry-one (41) investment management firms listed on the followin~pa~e contacted The Bogdahn Group (Alexander Kallebq CFA) to inquire further about the RFP. Alexander sent the same e-mail to each individual that contacted him. In addition to attaching a Word document that contained the due diligence questionnaire, the e-mail outlined the minimum criteria to be considered and the deadline to submit. The follo~~~isig text is from art actzral e-mail. Thank you for your interest in our all cap value investment manager search. Please note that the minimum requirements that the strategy must have are: 1. At least a 5-year history 2. Three and Five-year IR > 0 3. Three and Five-year Alpha > 0 4. Three and Five-year Down market capture ratio < 100 5. At least $100M in AUM in the strategy The deadline is Wednesday December 17t". Best regards, J. Alexander Kallebo, CFA Manager, Investment Research & Performance Reporting Direct: 863.904.0860 Office: 863.293.8289 Facsimile: 863.292.8717 AlexanderK(c~BogdahnGroup. com www. BogdahnGroup. com r~ fr ~x iTi+[~~?~' Sir~iplifi~ifig your i~iz~estrtlent F~ fiduciary decisions NOTICE: This ~°l~°ctronic mail transmission is for flu rise of the ncuned indiz~idi~ai or en titiq to uJiich it is directed and mai> contrzin information that is privileged or confid~~ltial. It is not to he hzznsmith~d to or received i~i~ am~rnic oth~~r~ than the n~uned addressee (or a pers~m auflun~i_ed to deli~~er it to the ncnned addressee). It is not to he copied ~» ~ fm~u~arded to amp rmaiith~» ~i~ed persons. If i~ou ha~~e recei~~ed Niis electronic mail h~ansmission in error, delete it ~r~~mi your sr/stem without copi~ing or fm r~~rn~ding it, and noti~i~ the sendt~~ of the error bu repining pia email or biq calling The Bogdahn Group at 863 293-~28~), so flwt our address record can he c'o~Tectcd. Page 22 /~R li,~~ Summary Table of the Forty-One (41) Firms that Contacted The Bogdahn Group ~ _.- . - -.. -.. -. . - - 1 ~•. ~ - ~ - ~~~ ~ - ~~~ ~~ . - ~ ~ - 11Advisory Research Inc. ~ Value I Yes I Yes 1 (0.06)1 (0.04). 2.05 1 0.47 1 106.93 1 96.34 1 ------- _ - t------------ - - ----------------------------- ------t---------------------- f----------------------F---------------i------------------f------------------F------------------F------------------f----------------------f----------------------f 2~Anchor Capital Advisors LLC I - - - - - - - - - - f - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - f - Value - - - - - - - - - - - - - - - - - - - - - f - - - - - - - Yes - - - - - - - - - - - ~ - - - - F - - - Yes - - - - - - - - - - 1 - - i - - 5.17 1 - - - - - - - - - - - - - - - - f - - - 0.73 1 - - - - - - - - - - - - - - - F - - - - - - - - - 5.65 1 - - - - - - - - - F - - - 0.62 1 - - - - - - - - - - - - - - - f - - - - - - - - - - - 36.81 1 - - - - - - - - - - - f - - - - - - - 31.18 1 - - - - - - - - - - - - - - - Do Not Qualify ------ 3;Aurora Investment Counsel-------------------------- •- ----------------------- ------; - iCore s~le~____ ---- ; T------- ----------- ---- --- Yes ---------- -- -- 2.89 ; ---------------- --- 0.36 ; --------------- --------- 1.71 1 --------- --- 0.17 1 --------------- ----------- 79.45 1 -----------T------- 85.54 1 --------------- I ~ ~ Do Not Qualify ~ ~ ~ ~ ~ ~ ~ I 41Cornerstone Investment Partners. LLC I----------*------------------------------------------ r Core s~le~____ T_______ _Yes ----- ----T--- Yes ---------- 1 --+-- 6.03 ; ----------------T--- 1.25 ; ---------------T--------- 3.92 ; ---------~--- 0.37 ; ---------------T----------- 44.78 ; -----------T------- 42.62 ---------------+ S;Cramer Rosenthal McGlynn • - - - - - - - - - • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - Value - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - No - - - - - - - - - - - - - - - ~ - - - Yes - - - - - - - - - - - - a - - 2.10 ; - - - - - - - - - - - - - - - - • - - - 0.35 ; - - - - - - - - - - - - - - - ~ - - - - - - - - - 2.79 ; - - - - - - - - - ~ - - - 0.60 ; - - - - - - - - - - - - - - - • - - - - - - - - - - - 83.75 ; - - - - - - - - - - - ~ - - - - - - - 81.58 - - - - - - - - - - - - - - - 6;Dalton, Greiner, Hartman, Maher & Co., LLC I . - - - - - - - - - • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - Value - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - Yes - - - - - - - - - - - - - - - ~ - - - Yes - - - - - - - - - - - - ~ - - 5.59 ; - - - - - - - - - - - - - - - - ~ - - - 0.83 ; - - - - - - - - - - - - - - - ~ - - - - - - - - - 5.62 ; - - - - - - - - - ~ - - - 0.89 ; - - - - - - - - - - - - - - - ~ - - - - - - - - - - - 28.88 ; - - - - - - - - - - - ~ - - - - - - - 29.47 - - - - - - - - - - - - - - - 7;Eagle Capital Management I . - - - - - - - - - • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - Value - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - Yes - - - - - - - - - - - - - - - ~ - - - Yes - - - - - - - - - - - - ~ - - 1.40 ; - - - - - - - - - - - - - - - - ~ - - - 0.15 ; - - - - - - - - - - - - - - - ~ - - - - - - - - - 2.58 ; - - - - - - - - - ~ - - - 0.23 ; - - - - - - - - - - - - - - - ~ - - - - - - - - - - - 68.99 ; - - - - - - - - - - - ~ - - - - - - - 66.79 - - - - - - - - - - - - - - - 8;Fifth Third Asset Management. Inc. • ~ Value ~ Yes ~ Yes a 0.35 ; • 0.08 ; ~ 0.04 ; ~ 0.30 ; • 112.17 ; ~ 111.61 • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ' - - - - - - - - - - - - - - - - - - - - - - - - - - - - Do Not Qualify - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I-------9yGlobal Capital Management. Inc. ---------------------------------------------------- ~ ------t- ____iCore s~le~____ y_______ _Yes ----- -- ----t- --Yes --- -- -- --------1.21 ; - -- --;-- ---------0.08 ; ------- -- -- ---2.29 ; - -- -- ---------0.26 ; --------- -- -- ---101 34 ; ------ - - ------108.66 -- 10;M.D. Sass Associates, Inc. I ~ Value ~ Yes ~ Yes ; 1.24 ; 0.07 ; 2.12 ; 0.15 ; 85.41 ; 79.81 • - - - - - - - - - • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ' 111Mesirow Financial - - - - - - - - - - - - - - - - - - - - - - - - - - - - Value - - - - - - - - - - - - - - - - - - - - - - - - - ~ 1 - - - - - - - - - - Yes - - • - - 1 - - - - - - - - - - - - - - - - • - - - (1.68 ' - - - - - - - - - - - - - - - • - - - - - - - - - (0.57 ' - - - - - - - - - ~ - - - (0.80 ' - - - - - - - - - - - - - - - • - - - - - - - - - - - (0.46 ' - - - - - - - - - - - ~ - - - - - - - ~ 99.28 ' - - - - - - - - - - - - - - - ~ 95.70 ' r--------- ----- t-----------------------------------------------------------------t--------------- --f----------------------F---------------i------------------f------------------F------------------F------------------f----------------------f----------------------~ Do Not Qualify -----12;Mitchell Capital Management----------------------- ~•- T----------------------------- ------; T- ~GrowthstyleZ___ --- ; T------- Yes ----------- ----T--- Yes ---------- --1-- 1.04 ; ----------------T--- 0.05 1 ---------------T--------- 0.90 1 ---------~--- (0.10); ---------------T----------- 42.59 1 -----------T------- 49.03 1 ---------------T I 13~Mood Aldrich Partners, LLC I.---------L----------------------------------------------------------- ------L- Value --------------------- 1------- Yes ----------- ~ ----L--- Yes ---------- ~ --J-- 0.66 ~ ----------------+--- 0.02 ~ ---------------L--------- 4.36 ~ ---------L--- 0.56 1 ---------------+----------- 93.71 1 -----------y------- 92.27 1 ---------------J 14;Robeco Investment Management • ~ Value ~ Yes ~ Yes a 1.93 ; • 0.48 ; ~ 3.55 ; ~ 0.97 ; • 77.36 ; ~ 73.68 • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ' - - - - - - - - - - - - - - - - - - - - - - - - - - - - Do Not Qualify - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I-------15~Rockwood Capital Advisors------------------------- --------- ------1- ----iCore style---- ~------- ----------- ----t- -- Yes ---------- ~ -- ~-- --------0.56 ~ - -- -- -- ---------0.02 ~ ------- -- -- ---2.39 ~ - -- -- ---------0.22 ~ --------- --~-- ----72.70 ~ ------ -y- -------78.26 --~ I ~ ~ Do Not Qualify ~ ~ ~ ~ ~ t ~ ~ 1 '.------16~Segall Bryant & Hamill ------------------------------- ------~- --Growth style~___ y_______ ___________ ____~___ __Yes--- --~-- ----------5.48 ~ 0.57 ~ 3.58 1 0.15 ' 17.97 ' 23.52 ' 17;SKBA Capital Management, LLC ~•- T----------------------------------------------------------- ------T- Value --------------------- T------- Yes ----------- ----T--- Yes ---------- --1-- 3.71 ; ----------------T--- 0.87 ; ---------------T--------- 3.36 ; ---------~--- 0.61 ; ---------------T----------- 63.90 ; -----------T------- 61.45 ---------------T 18; Symons Capital Management, Inc. • - - - - - - - - - • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - Value - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - Yes - - - - - - - - - - - - - - - ~ - - - Yes - - - - - - - - - - - - a - - 6.58 ; - - - - - - - - - - - - - - - - • - - - 0.88 ; - - - - - - - - - - - - - - - ~ - - - - - - - - - 7.81 ; - - - - - - - - - ~ - - - 0.83 ; - - - - - - - - - - - - - - - • - - - - - - - - - - - 15.05 ; - - - - - - - - - - - ~ - - - - - - - 1.16 - - - - - - - - - - - - - - - .------19`Tocqueville Asset Management Value -- -- --Yes 1 - ----------2.75 , --------0.37-`--------- ---2.41 `--- ---------0.42------------ ----82.43------- ------_ 75.92- Not all of the firms that responded meet all of the minimum criteria. Only the firm s highlig hted in meet all of the minimum criteria outlined by The Bogdahn Group. The Bogdahn Group applied a proprietary scoring system to rank the eig ht (8) st rategies and the top six (6) ranked strategies were included in the report. Performance data obtained from the eVestment Alliance database. Page 23 //^ l';h~ i .. Artisan Partners Limited Partnershi Core States Capital Advisors Fox Asset Management LLC JPMorgan Asset Management Lord. Abbett & Co. LLC Nicholas Applegate Northbrook Investment Management LLC RS Investments South Texas Money Management, Ltd. SSI Investment Manaaement AMBS Investment Counsel, L.L.C. Barclays Wealth Brandywine Global Investment Management, LLC Buckhead Capital Management, LLC Cedar Partners, Ltd. ClearBridge Advisors Dana Investment HGK Asset Management, Inc. ICON Advisers, Inc. MarketLink Associates, Inc. NMF Asset Management Systematic Financial Manaaement. L. P. No No No No Given our staffing end the client service model at I on this opportunitu. Thank you - we hope to be in Hi there Alex, We;~vere going to submii the NFJ A together on another search in the future. Warm r •--------------------~----------------------F----------- No No Do Not Qualify Page 24 bbett, we are nut well-equipped to offer and ser ct with you soon. Tom Value capability but we dont meet the minimum .Ted , a separate account in this situation. So, will pass uirements. TI; anks. Perhaps we ca;n work ~~~: