INTRODUCTION INTRODUCTION Undergraduate Student Investment ASSET - - PowerPoint PPT Presentation

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INTRODUCTION INTRODUCTION Undergraduate Student Investment ASSET - - PowerPoint PPT Presentation

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Undergraduate SIM Fund Student Investment Management Fund INTRODUCTION INTRODUCTION Undergraduate Student Investment ASSET ALLOCATION Management Fund REBALANCING PERFORMANCE Semi-Annual Presentation OPPORTUNITY COSTS Friday, April 20,

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Undergraduate SIM Fund

Student Investment Management Fund INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate Student Investment Management Fund

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INTRODUCTION

Semi-Annual Presentation Friday, April 20, 2012

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Undergraduate SIM Fund

Student Investment Management Fund INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Fund Members

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Fund Managers Fund Analysts

Michael Cohn Steven Kutos Michael Ham Aaron Baker Rima Reddy Jenna Hoppe

Kenneth Qian Jonathan Lozano

Ajay Gnanasambanthan

INTRODUCTION

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Investment Goals

  • Diversification
  • Humility in incorporating views
  • Reduce sensitivity to input data

– Resampling vs. static MVO – Increasing Correlations – Different methods to estimate volatility

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ASSET ALLOCATION

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Undergraduate SIM Fund

Student Investment Management Fund INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Asset Allocation Structure

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US Equity Ex-US Equity Fixed Income Commodities REITs

High-Level MVO

ASSET ALLOCATION

B-L

Low-Level MVO Constructed Basket

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Undergraduate SIM Fund

Student Investment Management Fund INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Ex-US Equity Commodities Fixed Income US Real Estate US Equity

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MVO

.51 .05 .19 .05 .2 .51 .05 .19 .05 .2 .507 .032 .19 .05 .22 .51 .05 .19 .05 .2 .507 .032 .19 .05 .22 .49 .049 .19 .05 .22

Risk Return MVO MVO

ASSET ALLOCATION

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Undergraduate SIM Fund

Student Investment Management Fund INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Selected Asset Classes

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  • Equity (Black-Litterman Model)

— Ability to incorporate our own sector views — Lessen the historical returns bias

  • Commodities

― Low correlation, diversification ― Basket of stocks with high commodity exposure

  • Fixed Income

― Selected a intermediate Government/Credit ETF

  • REITs

― Additional diversification, attractive investment

  • International Equity

ASSET ALLOCATION

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Undergraduate SIM Fund

Student Investment Management Fund INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING US Equity 50%

  • Int. Equity

21% Fixed Income 19% Commodities 5% REIT 5%

Broad Allocation

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38% 29% 9% 9% 9% 3% 1% 1% 1%

International Allocation

EU EM Canada Japan Australia Israel NZ HK Singapore

ASSET ALLOCATION

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Reasons for Rebalancing

  • Accumulated cash dividends of $8,000
  • Fixed Income weight below optimal

– Down to 17.4% from 20%

  • Updated view on consumer discretionary

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REBALANCING

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Consumer Discretionary

  • Consumer confidence increasing
  • Unemployment declining
  • Positive environment for cyclical sectors
  • No longer saw a reason to underweight

removed view

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REBALANCING

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Case Study – Hecla Mining

  • Base and precious metal business lines

– Discovery/Exploration – Development/Production

  • Two operational mines

– Greens Creek (Alaska) – Lucky Friday (Idaho)

  • Market Capitalization (mm): $1,193
  • Average Volume (mm): 6.34

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REBALANCING

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Case Study – Hecla Mining

  • Two deaths occurred at Hecla’s Lucky Friday

mine in 2011 – One of deepest mines in US – Safety failures blamed for deaths

  • Mine Safety & Health Administration shut

down Lucky Friday for one year – 2012 silver production estimates reduced by 20%

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REBALANCING

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Case Study – Hecla Mining

  • Mine closure news release (Jan. 11th):

– Stock price plunged 21% – Trading volume spiked 885%

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REBALANCING

10 20 30 40 50 60 70 80 90 100 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 10/17/11 10/24/11 10/31/11 11/07/11 11/14/11 11/21/11 11/28/11 12/05/11 12/12/11 12/19/11 12/26/11 01/02/12 01/09/12 01/16/12 01/23/12 01/30/12 02/06/12 02/13/12 02/20/12 02/27/12 03/05/12 03/12/12 03/19/12 03/26/12 04/02/12 04/09/12 04/16/12 Millions

Hecla Mining Co. (NYSE: HL) Price and Volume

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Case Study – Hecla Mining

  • Correlation to gold index remained favorable

post mine closure

– Commodity exposure maintained

  • Investment horizon: 3-5 years

– Passive strategy

  • P/E of 8.16 vs. industry P/E 13.50

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Do not sell Hecla Mining

REBALANCING

~

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Performance metrics

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PERFORMANCE

Holding Period Return Annualized Return Volatility Sharpe Ratio Undergraduates 6.29% 14.38% 16.35% 0.825 Constrained BM 7.31% 17.27% 12.50% 1.31 Russell 3000 10.48% 23.07% 17.46% 1.31 World Equity 5.90% 13.28% 16.01% 0.77 Non-Rebalanced 6.50% 14.84% 16.37% 0.85

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Fund Performance

15

PERFORMANCE

  • 0.15
  • 0.1
  • 0.05

0.05 0.1 0.15 11/3/2011 12/3/2011 1/3/2012 2/3/2012 3/3/2012 4/3/2012 MSCI World Russell 3000 Portfolio Custom Benchmark Benchmark

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Fund Performance

16

PERFORMANCE

  • 10.00%
  • 5.00%

0.00% 5.00% 10.00% 15.00% 20.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% Commodities International US Equity Fixed Income REIT Portfolio

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Opportunity Costs

Views expressed on U.S. sectors

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OPPORTUNITY COSTS

11.50% 11.60% 11.70% 11.80% 11.90% 12.00% 12.10% 12.20% 12.30% 12.40% 12.50%

Our Portfolio No Views

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Views Expressed on U.S. sectors

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Sector Ticker Return Weight Utilities VPU US 0.38% Neutral Telecom VOX US 3.21% Neutral Industrials VIS US 9.04% Overweight Healthcare VHT US 12.10% Neutral Information Tech VGT US 14.15% Overweight Financials VFH US 13.18% Underweight Energy VDE US

  • 0.74%

Overweight Consumer Staples VDC US 8.95% Neutral Consumer Disc. VCR US 13.97% Underweight - Neutral Materials VAW US 5.21% Neutral

OPPORTUNITY COSTS

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Succession Planning

  • Training for new members

– Bloomberg, Portfolio Theory, Asset Pricing

  • Problems we encountered
  • Hand-over portfolio

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SUCCESSION

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

New Members

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SUCCESSION

Aaron Baker Kenneth Qian Dakota Boyd Shane Carlin Charlotte DeMocker Andrew Farber Lorne Forcum Sean Gormley John Happe Troy Hebert Clayton Jenners Dylan King Kai (Edwin) Lam Jaesung Lee Leo Panopoulos Adrian Reiter Brian Wright Yili Yu

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INTRODUCTION ASSET ALLOCATION PERFORMANCE OPPORTUNITY COSTS SUCCESSION QUESTIONS REBALANCING

Undergraduate SIM Fund

Student Investment Management Fund

Questions?

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QUESTIONS