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HomeMy WebLinkAbout2010 01 26 Regular 600 Presentation From RBC Global Asset Management Date: January 26, 2010 The following City of Winter Springs Pension Plan Booklet was distributed by Mike Spencer from RBC Global Asset Management (U.S.), Inc. (formally known as Voyageur Asset Management, Inc.) during Regular Agenda Item "600" at the Board of Trustees Regular Meeting on January 26, 2010. Firm Overview RBC Global Asset Management (U.S.) Inc. As of 12.31.09 Founded in 1983, RBC GAM (US) is an SEC - Registered Investment Adviser Headquartered in Minneapolis, MN Comprised of Independent, Experienced Investment Teams Employs 111 Individuals (26 Portfolio Managers) $40.4 Billion in Total Firm Assets Under Management IBC Global Asset Management' *The International Equity strategy is sub - advised by Polaris Capital Management, LLC 3 RBC Global Asset Management As of 9.30.09 RBC Global Asset Management is the umbrella for three investment management businesses owned by RBC • RBC Global Asset Management (U.S.) Inc. (RBC GAM (US)) - formerly Voyageur Asset Management Inc. — (U.S. -Based Institutional) • Phillips, Hager & North Investment Management Ltd. — (Canadian -Based Institutional) • RBC Asset Management Inc.* - (Individual Investors) RBC Global Asset Management group of companies offers a comprehensive range of investment solutions and services Offices Located in the United States, Canada, Europe and Asia Employs 595 Individuals (205 Investment Professionals) Our combined global investment management capabilities manager over $171 billion (USD) ** on behalf of our global client base *Please note; Within the U. S,, RBC Asset Management Inc, in not registered with the SEC or any state as an investment advisor, * *As of 6, 30, 09 RBC Global Asset Management P.. * RBC ,asset Management 0 * Phillips. Hagar& North In estment Managprnc-nt Ltcl Royal Bank of Canada As of 9.30.09 6th largest bank in North America and 13th largest in the world based on market capitalization Credit rating among highest of financial institutions globally • AA- by S &P • Aaa by Moody's Diversified mix of businesses and geographies Approximately 80,000 employees and 18 million clients worldwide 19. Rsc Global Asset Management' 5 International Equity RBC GAM (US) International Equity Overview Objective: To Identify the Best Values in the World • Disciplined, bottom -up value approach • Proprietary investment technology • In -depth fundamental research • Team focuses on absolute risk • Seek high risk - adjusted returns that exceed the global cost of equity Underlying Belief • Companies exist to generate cash flow for owners • Superior returns can be generated by purchasing the most undervalued streams of "free" cash flow 19. Rsc Global Asset Management' 7 RBC GAM (US) International Equity Annualized Returns ( %) as of 12.31.09 City of Winter Springs Pension Fund MSCI EAFE Index *Inception Date; 11,1,07 Source; RBC GAM (US), MSCI 1.52 26.99 53.45 53.45 -15.93 2.23 19.52 32.45 32.45 -14.42 Performance is presented gross of fees. All returns for periods greater than one year are shown on an annualized basis. Past performance is not indicative of future results. IBC Global Asset Management 9 RBC GAM (US) International Equity Composite Performance as of 12.31.09 60% 50% 40% 30% 20% 10% 0% -10% ■ International Equity (Gross) MSCI EAFE Index Returns are presented gross of management fees and include the reinvestment of all income. All returns for periods greater than one year are shown on an annualized basis. Inception of the International Equity Composite is 7 1, 98, The Voyageur International Equity composite is presented as supplemental to the "Performance Presentation & Disclosures" appendix to these materials. The appendix contains additional GIPS'- required disclosures and important information regarding calculation of performance data, and includes net of fees performance returns. Past performance is not indicative of future results, RAG Global go. Asset Management" 9 QTD YTD 1 Year 3 Years 5 Years 7 Years 10 Years RBC GAM (US) International Equity Sector Weightings as of 12.31.09 25% 20% 15% 10% 5% 0% ■ International Equity MSCI World Index Source; MSCI Blue Book Sector weightings are based on a representative account. IBC Global ' Asset Management' 10 Consumer Consumer Energy Financials Health Care Industiials Information Materials Telecomm. Utilities Discretionary Staples Technology Services RBC GAM (US) International Equity Top Country Allocations as of 12.31.09 (% of Equities) Country Japan United Kingdom Germany Finland Ireland Voyageur Portfolio 12.6% 12.2 12.0 10.8 9.1 MSCI EAFE Index 17.9% 11.3 15.2 0.9 1.0 Source; MSCI Blue Book Top country allocations are based on a representative account, IBC Global Asset Management 11 RBC GAM (US) International Equity Buys and Sells 2009 Fourth Quarter New Investments N/A Investments Sold Bank of Ireland Third Quarter New Investments State Bank of India Svenska Handelsbanken Symrise Investments Sold Andritz Austevoll Seafood Bellway Camillo Eitzen & Co. Methanex Corporation Smurfit Kappa Group Taylor Wimpey This should not be construed as a recommendation to buy or sell any financial instruments, RSC Global Asset Management" Second Quarter New Investments Novartis Inforsys Technologies First Quarter New Investments N/A Investments Sold Banco Bilbao Vizcayo Agentario Maruichi Steel Tube Investments Sold Continental 12 RBC GAM (US) International Equity 2009 Strategy Review Strengths • Performance for the year was the result of both security and sector selection. The strongest sector in the market was Materials, up 70 %. The Fund was heavily overweight the sector and gained 85 %. Smurfit Kappa, the Irish box company gained 340% during the year. Also notable were Methanex Corp., up 131 %, and BASF Corp which rose 81 %. • Other sectors in the market also benefited from excellent stock selection. The portfolio positions in the Energy sector gained 87% versus 35% for the sector. Technip, the French oil services company, was up 148 %. Thai Oil gained 100 %. • Consumer Discretionary gained 38% in 2009, while the Fund positions were up 84 %. The four British homebuilder companies gained from 57% to 199 %. Christian Dior gained 94 %, Autoliv was up 106% and Duni AB, the German maker of paper products for restaurants was up 174 %. While the aforementioned Smurfit Kappa was the largest contributor to portfolio performance, YIT OYJ, the Finnish construction company, was a close second, up 260 %, and aided Industrial sector performance. Weaknesses • Hurting performance during a strong year for the market were the Japanese domestically oriented companies, which had helped performance in 2008 and were sold down to lower levels at the beginning of the year. Kansai Electric Power and Tokyo Electric power lost 14% and 18% respectively. Culture Convenience Club, a consumer video product company, also hurt results, down 48 %. 19. RBC Global Asset Management' 13 RBC GAM (US) International Equity Fourth Quarter 2009 Strategy Review Strengths • The best performing market sector was Materials, which gained 13.2 %. The portfolio, while significantly outperforming in this sector for the year, underperformed in the fourth quarter, gaining 10.2 %. • Stock performance relative to sector performance was best in Healthcare where the single holding, Novartis, gained 9.4% versus 5.4% for the EAFE sector and in Technology, where, led by the Indian company Infosys, results were 2.2% versus -2.6% for the Index. The portfolio, however, was underweighted in both sectors. • Portfolio performance was aided by both an overweight and stock selection in the Industrials sector. For the sector, portfolio returns were 4.3% versus 1.5% for the Index. Performance here was led by three Finish companies: Cargotec Corp, a cargo handling company which gained 17.9 %; Kone, an elevator company which rose 17.1 %; and YIT, a construction company which was up 9 %. Weaknesses • The portfolio was held back by performance in the Consumer Discretionary sector, where the portfolio was overweight and where profit- taking in the British homebuilding companies led to a loss of 2% in the sector, versus a gain of 2.9% for the Index, and in the Consumer Staples sector where Greencore Holdings, the Irish food packaging company, lost 10.9 %, and Meiji Holdings, the Japanese diary company which lost 11.9 %. 19. RBC Global Asset Management' 14 RBC GAM (US) International Equity Outlook • At this point, while generally constructive on the worldwide economy, many of our holdings have come close to reaching their selling price or no longer look as inexpensively priced as they once were. At present, we are reviewing all of these holdings and would not be surprised to see more transactions than usual during the first quarter of 2010 as these stocks are sold. 19. RBC Global Asset Management' 15 Appendix Performance Presentation & Disclosure MSCI EAFE Index Composite Dispersion Number of Accounts RBC GAM (US) International Equity as of September 30, 2009 Percent of Firm Assets Total Firm Assets 1999 22.1% ANNUALIZED RETURNS 27.3% NIA' 1 $12 - $6,821.3 2000 -4.7% One Three Five Seven Ten - QTD YTD Year Years Years Years Years International Equity (Gross) 26.8% 50.9% 12.0% -4.3% 6.4% 15.0% 10.4% International Equity (Net) 26.5% 49.9% 10.9% -5.2% 5.4% 13.9% 9.4% M5C1 EAFE Index 19.5% 29.6% 3.8% -3.1% 6.6% 11.4% 3.0% ANNUAL RETURNS Period YTD Gross YTD Net MSCI EAFE Index Composite Dispersion Number of Accounts Market Value ($MM) Percent of Firm Assets Total Firm Assets 1999 22.1% 21.0% 27.3% NIA' 1 $12 - $6,821.3 2000 -4.7% -5.6% - 14.0% NIA' 1 $12 - $14,103.0 2001 0.8% -0.2% - 21.2% NIA' 1 $19 - $15,061.3 2002 5.9% 4.9% - 15.7% NIA' 1 $21 - $20,245.8 2003 54.9% 53.5% 39.2% NIA' 1 $34 - $22,518.8 2004 29.8% 28.6% 20.7% NIA' 1 $90 - $26,858.3 2005 16.7% 15.6% 14.0% NIA' 2 $153 - $27,018.8 2006 34.6% 33.3% 26.9% NIA' 3 $283 - $28,358.1 2007 1.7% 0.8% 11.6% 0.2% 3 $378 1.2% $32,045.1 2008 -50.1% - 50.6% - 43.1% 0.2% 2 $217 <1% $32,140.1 2009 YTD 50.9% 49.9% 29.6% 0.9% 2 $313 <1% $40,258.9 'NIA - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. Prior to January 1, 2006, the firm was defined to include all discretionary and non - discretionary assets managed by Voyageur Asset Management Inc. (Performance Presentation and Disclosures continued on next page) RBC Global Asset Management' 17 Performance Presentation & Disclosure RBC GAM (US) International Equity as of September 30, 2009 International Equity Composite contains fully discretionary accounts invested in a diversified portfolio of foreign equity securities deemed to be undervalued by the strategys investment team. Beginning 7.1.98, Polaris Capital Management LLC is the sub - advisor for this strategy. For comparison purposes, the composite is measured against the MSO EAFE (gross) Index (gross of withholding taxes on dividends). Effective 1.31.06, the firm changed the benchmark for comparison purposes from the MSCI FAFE Net Index to the MSCI FAFE Gross Index in order to align the comparison against the industries more widely reported by the Gross Index. The MSCI FAFE Index uses withholding tax rates applicable to a Luxembourg based holding company. Additional information regarding the percentage of the composite which may be invested in countries or regions not included in the index is available upon request. The minimum account size for this composite is $1 million. Voyageur Institutional Services (" 05 ") is a division of Voyageur Asset Management Inc. (`VAM'), a federally registered investment adviser founded in 1983. VAM was purchased in December 2000 by RBC Capital Markets Holdings (USA) Inc. formerly known as R8C Dain Rauscher Corp. On 1. 5.07, VAM purchased substantially all of the assets of Freedom Capital Management, LLC ("Freedom'). Prior to 1.5.07 the performance represents that of a composite from Freedom. The firm maintains a complete list and description of composites, which is available upon request. Effective 1.1.06, VAMs wrap fee15MA business was defined as a separate division under the name Voyageur Advisory Services ("VAS') forpurposes of VIS comptving with the CFA Institutes Global Investment Performance Standards (" GIPS Prior to 1.1.06, the GiPS defined firm included all discretionary and non - discretionary assets managed by VAM. Effective 1.1.06, Total Firm Assets are represented by assets managed by VIS; before this date, Total Firm Assets were based on assets managed at VAM. Results are based an fully discretionary accounts under management; including those accounts no longer with the firm. Beginning 1.5.07, for composites with more than three accounts, composite policv requires the temporary removal of anyportfolio incurring a client initiated significant cash inflow or outflow of at least 10% of portfolio assets. The temporary removal of such an account occurs at the beginning of the month in which the significant cash flow occurs and the account re- enters the composite the first full month of being fulk invested. Additional information regarding the treatment of significant cash flows is available upon request. Past performance is not indicative of future results. Composite performance is presented net of foreign withholding taxes. The index grosses -up dividends, where this is appropriate, to reflect the position of an international investor with the benefit of double taxation agreements, if any. Withholding taxes may vary according to the investors domicile. Composite returns represent investors domiciled in the United States. Trade date accounting is used and returns are presented in U.S. dollars. Returns include the effect of foreign currencv exchange rates. Dispersion of annualreturns is measured by the equal weighted standard deviation of all accounts in the composite for a full year. Prior to 1.1.07, asset weighted standard deviation was used if there were more than five portfolios in the composite for a full calendarperiod. Returns are presented gross and net of management fees and include the reinvestment of all income. Actual returns will be reduced by investment advi ory fees and other expenses that may be incurred in the management of the account The collection of fees produces a compounding effect on the total rate of retum net of management fees. Additional information regarding policies for calculating and reporting returns is available upon request Institutional Fee Schedule: 0.95% on all assets. Voyageur reserves the right to negotiate all advisory fees. The international Equity Composite was created on 1.5.07 and has an inception date of 7.1.98. VIS has prepared andpresented this report in compliance with the Global Investment Performance Standards (GIPS*). Compliance with GIPSO has been verified firm -wide by an independent third party from 1. 1.93 through March 2009. In addition, a performance examination was conducted on the International Equity Composite beginning 7.1.98. Their report is available upon request. © 2009 Voyageur Asset Management Inc. IBC Global Asset Management" 18