HomeMy WebLinkAboutGeneral Executive SummaryPage 2 of 41
Investment Market Summary
2' Quarter 2009
Dislocation Nation
The second quarter of 2009 posted some of the strongest equity performance
numbers in years and represented a welcome relief after more than a year of
negative results. The market rally, which began in mid March, continued unabated
for most of the quarter despite rising unemployment and disappointing economic
statistics. The broad market Russell 3000 Index posted a return of 16.8% for the
quarter. While all ten economic sectors of the Russell 3000 Index posted positive
returns for the quarter, performance was particularly strong in materials, industrials,
consumer discretionary, financials and information technology sectors, each of
which posted returns in excess of the broad index. While the index's other five
sectors finished behind the 16.8% return of the Russell 3000 index, only
telecommunications services (4.2 returned less than 10% for the quarter. Due to
the broad -based sector strength in the various indices, particularly in financials,
value style benchmarks outpaced growth benchmarks by a narrow margin <1 in
all but the small capitalization space.
Equity market strength was not isolated to domestic markets during the quarter
as both developed and emerging international markets advanced. Un- hedged
international holdings got an additional boost from U.S. dollar weakness, which
was widespread during the second quarter. The developed markets as measured
by the MSCI -EAFE Index, increased in both U.S. dollars (25.8 and local
currency (17.3
The "risk" trade returned to the bond market with a vengeance during the second
quarter as investors sought the yield advantage of corporate obligations. As
spreads continued to narrow during the quarter, lower quality debt got the largest
boost with the Merrill Lynch High Yield Master II index posting an "equity -like"
return of 23.2 Despite the Fed's best efforts to keep interest rates low to fuel its
numerous recovery programs and foster attractive mortgage rates, the yield curve
steepened measurably during the quarter for maturities beyond one year. Although
the Barclays Capital U.S. Aggregate Index returned a seemingly mild 1.8% for the
quarter, things were not as smooth in the government, mortgage and credit sectors
that make up the broad index. The Barclays Government Index posted its second
straight quarterly loss with a return if -2.2 The mortgage sector was not much
stronger but did manage to post a positive return of 0.7 The narrowing credit
spreads previously mentioned also benefited higher quality corporate issues with
the Barclays Corporate Investment Grade Index posting a strong return of 10.4%
for quarter.
Portfolio Attribution:
(Reference pages 11, 16, 17 and 18 of the Bogdahn Group June 2009 Report)
Investment results for the Plan were significantly positive capturing the rebound in
the broad equity markets. While broad fixed income markets were positive, the
active management emphasis in non -U.S. Treasury investments also provided a
significant boost to returns. The Fund investment returns net of management fees,
were measurably better than the program benchmark for the quarter ended
June (11.59% vs. 10.13 Despite benchmark outperformance, peer group results
were below median (63" percentile). A conservative portfolio allocation to equity
below targets was a drag to relative performance results (49.3% vs. 60% Total
Fund Policy). The equity allocation in aggregate benefited from active management
which was positioned well for the recovery with returns relative to the domestic
benchmark of (20.52 vs. (17.89 Foreign equity performed well both absolute
and relative to the benchmark (31.73 vs. (25.85 The portfolio also received a
meaningful boost from the active fixed income allocation which in aggregate
returned (3.98 vs. (1.51
Year over year results for the period ended June are now moderately lagging the
benchmark declining 15.5 vs. 13.85 These results improve the Fund
ranking to 56 percentile from the (68 percentile of peers reported for the March
period. Past quarters steep market declines continue to impact rolling returns with
all trailing periods below the actuarial required rate of return. Investment results
place the Fund in the (68th) percentile and (69 percentile of peers respectively
for the rolling 3 and 4 year periods ended June. Total Fund down capture has
been slightly more than the market benchmark (104.3 As previously reported,
investment results for Snow Capital Management have weighed heavily on overall
program results. Snow Capital was replaced and the assets transitioned to Dalton
Greiner, Hartman, Maher Co., LLC. during the quarter, on April 8 2009. DG
assumes the domestic equity, all -cap value mandate.
What helped?
Active management of equity mandates provided an additional boost to strong
absolute market returns (20.5% vs. 17.8
Transition timing was fortuitous with partial period out performance from both the
Snow Capital portfolio and DG.
Huge returns from foreign equity (largely due to dollar weakness) were boosted
significantly by Voyageur active management (31.73% vs. 25.85 posting peer
group results of Top 7'" percentile.
Successful active sector positioning by Galliard Capital Management provided
significant outperformance to the core bond benchmark (4.8 vs. (1.68
What hurt?
Under allocation to equity (49.2 relative to the Policy (60 and current target
(65
Declines in Real Estate continued in the June quarto THE
BOGDAHN
GROUP
7.17% vs. 9.33
Page 3 of 41
Investment Market Summary
2nd Quarter 2009
Program Measurement The target policy incorporates a fixed rate of return target
of 8% absolute for alternatives (Real Estate). Asset class results have been
negative affecting the benchmark return comparisons. The new benchmarked
policy which remedies this measurement deficiency will take effect in the 3
Quarter.
Recommendations:
Portfolio: Monitor the pace of rebalancing with consideration given to moving to
Policy targets.
Asset Allocation By Style as of Mar 2009
Page 11 of 41
Segments
Domestic Equity
International Equity
Domestic Fixed Income
Real Estate
Cash Equivalent
March 31, 2009 $13,358,262
Market Value
(5)
5,299,899
1,277,678
5,474,476
778,845
527,365
Allocation
39.7
9.6
41.0
5.8
3.9
Total Fund Portfolio
June 30, 2009
Asset Allocation By St. lc Current Quarter
Segments
Domestic Equity
D International Equity
Domestic Fixed Income
Real Estate
Cash Equivalent
June 30, 2009: $15,278,761
Market Value
(5)
6,516,654
1,762,078
5,837,351
714,964
447,715
Allocation
42.7
11.5
38.2
4.7
2.9
THF.
BOGDAHN
GROUP
Page 16 of 41
Defined Benefit Plan Trust for the Employees of the City of Winter Springs
Comparative Performance
As of June 30, 2009
Quarter
Oct 21100
T o
Jun- 21109
Since Inception
1 car Inception Date
Total Fund Portfolio (Net)
Total Fund Policy
Difference
Mixed Asset Target Aloe Moderate Funds (MF) Median
Total Fund Portfolio (Gross)
Total Fund Policy
Difference
11.59 (63)
10.13 (85)
1.46
12.51
Returns for periods greater than one year are annualized.Returns are expressed as percentages.
Total Fund Policy Target Allocations 50% S&P500, 15% MSCI EAFE, 30% LB Int. Aggregate, 5% NCREIF
Total Fund Policy 60% S &P 500, and 40% LB hit. Aggregate
-9.54 (72)
-9.24 (69)
-0.30
-7.78
-15.50 (56)
-13.85 (37)
-1.65
-14.88
-15.00 N/A 10/01/2007
12.12 NA
2.88
N/A
11.74 -9.04 -14.94 -14.52 10/01/2007
10.13 9.24 13.85 12.12
1.61 0.20 -1.09 -2.40
Total Fund Portfolio (Net) 11.59 (63) -9.54 (72) -15.50 (56) -15.00 N/A 10/01/2007
Total Fund Policy Target Allocations 11.88 (60) 10.44 (81) 16.99 (65) 14.23 N
Difference -0.29 0.90 1.49 -0.77
Mixed Asset Target Alloc Moderate Funds (MF) Median 12.51 7.78 14.88 N/A
Total Fund Portfolio (Gross) 11.74 -9.04 -14.94 -14.52 10/01/2007
Total Fund Policy Target Allocations 11.88 10.44 16.99 14.23
Difference -0.14 1.40 2.05 -0.29
THE
T BOGDAHN
GROUP
Page 17 of 41
Total Equity Portfolio
Total Equity Policy
Difference
Total Equity Portfolio
Total Equity Policy Target Allocations
Difference
Defined Benefit Plan Trust for Employees of the City of Winter Springs
Comparative Performance Trailing Returns
As of June 30, 2009
i
Quarter
Oct -2008
lu
.Jun -2009
I ear
3 4
1 ear.
ear. 1 ear.
Since Inception
Inception Date
20.52
15.93
4.59
-16.23
-19.47
3.24
-23.89
-26.21
2.32
-8.22
-8.19
-0.03
-3.94
-3.67
-0.27
-1.39
-1. 54
0.15
-0.34
-1. 84
1.50
01/01/2001
20.52 -16.23 -23.89 -8.22 -3.94 -1.39 -0.34 01/01/2001
17. -18.19 -27.09 -8.03 -3.54 -1.43 -1.78
2.63 1.96 3.20 -0.19 -0.40 0.04 1.44
Domestic Equity Portfolio 17.93 (14) 17.31 (30) -21.19 (14) -7.23 (42) -3.79 (54) -1.37 (56) -0.52 N/A 11/01/2000
S &P 500 15.93 (40) -19.47 (62) -26.21 (53) -8.22 (66) -4.27 (71) 2.24 (86) -3.19 N/A
Difference 2.00 2.16 5.02 0.99 0.48 0.87 2.67
US Core/I rge Cap Equity (SA+CF) Median 15.43 -19.05 -26.08 -7.82 -3.57 -1.18 N/A
Lateef Asset Mgmt.Equity 14.76 (55) -12.84 (24) -13.28 (2) N/A N/A N/A -15.83 N/A 10/01/2007
Russell 1000 Growth Index 16.32 (35) -13.89 (33) -24.50 (45) -5.45 (42) -2.68 (54) 1.83 (71) -19.69 N/A
Difference -1.56 1.05 11.22 N/A N/A N/A 3.86
US Growth/Large Cap Equity SA+CF) Median 15.09 -15.07 -25.23 -5.90 -2.58 -1.01 N/A
Dalton, Greiner, Hartman, Maher Co. N/A N/A N/A N/A N/A N/A 6.95 N/A 05/01/2009
Russell 3000 Value Index 16.81 (78) -24.78 (96) -28.73 (74) -11.20 (81) -5.83 (77) -2.14 (76) 5.11 N/A
Difference N/A N/A N/A N/A N/A N/A 1.84
US All Cap Value Equity (SA+CF) Median 18.12 -18.60 -25.73 -7.59 -3.19 -0.62 N/A
International Equity Portfolio 31.73 (7) -11.91 (51) -33.30 (88) -11.86 (100) -3.26 (100) -0.10 (100) 0.45 N/A 11/01/2000
MSCI SAFE Index 25.85 (30) -13.16 (57) -30.96 (74) -7.51 (69) 0.13 (64) 2.79 (72) 1.21 NA
Difference 5.88 1.25 -2.34 -4.35 -3.39 -2.89 -0.76
International Active Value Equity (SA+CF) Median 23.96 -11.72 -27.91 -6.01 1.35 4.06 NA
Voyageur Asset Mgmt. International 31.73 (7) -11.91 (51) -33.30 (88) N/A N/A N/A -30.24 N/A 10/01/2007
MSCI EAFE Index 25.85 (30) -13.16 (57) -30.96 (74) -7.51 (69) 0.13 (64) 2.79 (72) -24.83 WA
Difference 5.88 1.25 -2.34 N/A N/A N/A -5.41
International Active Value Equity SA+CF) Median 23.96 -11.72 -27.91 -6.01 1.35 4.06 N/A
Returns for periods greater than one year are annualized. Returns are expressed as percentages. Total Fund Policy= 50% S&P 500. 15 °ro MSCI EAFE. 30% LB Int.
Aggregate, 5% NCREIF. Total Equity Policy 80% S&P 500, 20% MSCI EAFE. Total Fixed Policy= 85% LB Int. Agg, 15% Tips
BOGDAHN
GROUP
Page 18 of 41
Total Fixed Policy
Difference
Total Fred Portfolio
Total Fixed Policy Target Allocations
Difference
Defined Benefit Plan Trust for Employees of the City of Winter Springs
Comparative Performance Trailing Returns
As of June 30, 2009
Quarter
Oct -2008
I'o
Jun- 2009
3 4 5 Since Inception
1 car Years Years Years Inception Date
Total Flied Portfolio
3.98
5.48
2.32
4.90
3.37
4.02
5.48
11/01/2000
1.68
2.30
6.28
-0.80
6.14
-3.82
6.53
-1.63
.4.65
-1.28
5. 0y
-1.06
-0.49
3.98 5.48 2.32 4.90 3.37 4.02 5.48 11/01/2000
1 51 5.52 4.94 6.47 4.60 5.04 5
2.47 -0.04 -2.62 -1.57 -1.23 -1.02
Gaillard Core Fixed Portfolio 4.80 (18) 6.52 (68) 3.31 (84) N/A N/A N/A 2.68 N/A 10/01/2007
Barclays Capital Intermediate Aggregate 1.68 (77) 6.28 (71) 6.14 (51) 6.43 (50) 4.79 (59) 4.92 (51) 5.98 N/A
Difference 3.12 0.24 -2.83 N/A N/A N/A -3.30
US Intermediate Fixed Income (SA+CF) Median 2.77 7.56 6.16 6.43 4.92 4.92 N/A
Gaillard TIPS 0.65 (44) 1.27 (88) -1.66 (84) N/A N/A N/A 5.09 N/A 10/01/2007
Barclays Capital U.S. Treasury Inflation Notes: 1- 0.57 (56) 1.01 (91) -1.92 (89) 5.60 (85) 4.23 (45) 4.69 (100) 5.04 NA
Difference 0.08 0.26 0.26 N/A N/A N/A 0.05
US TIPS SA+CF) Median 0.59 3.08 -1.13 5.82 4.13 5.11 N/A
American Stable Value Fund REIT -7.17 (39) -25.21 N/A -25.43 N/A N/A N/A N/A -13.36 N/A 10/01/2007
Real Estate Policy 1.71 (1) 5.21 N/A 7,00 N/A 7.00 N/A 7.00 N A 7.00 N/A 7.00 N A
Difference -8.88 -30.42 -32.43 N/A N/A N/A -20.36
US Private Real Estate -Open End (SA+CF) Median -9.20 N/A N/A N/A N/A N/A N/A
American Stable Value Fund REIT -7.17 (39) -25.21 N/A -25.43 N/A N/A N/A N/A -13.36 N/A 10/01/2007
NCREIF Property Index -9.33 (51) -22.94 N/A -23.07 N/A -0.50 N/A 3.98 N A 6.65 N/A -11.27 N/A
Difference 2.16 -2.27 -2.36 N/A N/A N/A -2.09
US Private Real Estate -Oven End (SA+CF) Median -9.20 N/A N/A N/A N/A N/A N/A
Returns for periods greater than me year are annualized. Returns are expressed as percentages. Total Fund Policy= 50% S&P 500, 15% MSCI EAFE, 30% LB Int.
Aggregate, 5% NCREIF. Total Equity Policy= 80% S&P 500, 20% MSCI EAFE. Total Fixed Policy= 85% LB Int. Agg, 15% Tips
BOGDAHN
GROUP