Semi Annual Board Update Introduction I d i Portfolio - - PowerPoint PPT Presentation

Semi‐Annual Board Update

I d i

 Introduction  Portfolio engineering methodology  Portfolio engineering methodology  Fund composition

Fund composition

 Performance  Current economic conditions and future

b l rebalancing

 Fund Manager – Joe Downs

• Amol Agarwal
• Andre Shearer
• Andy Harper
• Ben Hawthorne
• Jameson Bennett
• Jon Kielmeyer
• Praveen Gujar

j

f

 Global diversification across asset classes

f l l

 Core portfolio to preserve capital

d l l l

 Fundamental analysis overlay

• Learning experience

Blend/Style/Focus Asset Allocation Blend/Style/Focus Research and Gathering Data F d t l Industry Allocation Fundamental Analysis and Security Selection

Collect Historical Calculate Variance, d d Calculate Variance, Returns for the Universe of Asset Classes Expected Return, and Covariance for Various Asset Classes , Expected Return, and Sharpe Ratio for Portfolio Ch t

• Charter
• Priors

Adjust Asset Class WPC Gl b l Di ifi d Optimization Asset Class Weights WPC Global Diversified Portfolio Optimization

Fund Composition ‐ Broad Asset Classes

16% 22% 12%

US Equities ‐ SPY US Equities ‐ Individual

50%

Stocks International Funds Fixed Income

 Build a global diversified portfolio  Gain exposure to markets with low

p covariance with US equities

 Gain access to emerging markets  Gain access to emerging markets

• Moderate US economic growth

expectation

 Research on global economic situation and

individual countries f l b l

 Portfolio optimization to obtain initial

portfolio weight d f f l h f

 Modify portfolio weight after group

discussion l d d l

 Select ETFs to gain access to individual

countries

 Short list of ETFs that are in line with

the fund’s objective j

 Select ETFs with five years of history  Analysis of ETF holdings  Analysis of ETF holdings  Select ETFs with high liquidity and low

expense ratios

 Diversification  Gain access to fixed income markets  Low covariance with US equities  Defensive investment in the case of  Defensive investment in the case of

double‐dip recession

 Duration and average maturity

• Intermediate

Intermediate

• Inflation expectations

Credit q alit

I t t R t S iti it

 Credit quality  ETF with low fees

High Interest Rate Sensitivity uality

 VGIT

Medium Low Credit Qu Low Medium High

 Core/satellite strategy

• Capital preservation
• Fundamental analysis and learning experience
• Fundamental analysis and learning experience

 Industry allocation

y



Selected industries based on optimization and priors

 Security selection

Security selection

• LargeCap blend
• Fundamental analysis

US Equity Allocation US Equity Allocation

Industrials 9% 10% 24% Materials Financials 7% 10% 8% 11% 12% 9% Energy IT Consumer Discretionary/Retail Consumer Staples Real Estate

 Standard & Poor’s 500 Index – 65%

k d

 MSCI Emerging Markets Index – 23%

l l d d

 Barclays Capital Aggregate Bond Index – 12%

Performance Summary Total Return 1.03% Benchmark Return 3.49% Alpha ‐2.46% Benchmark Sharpe 0.78 Portfolio Sharpe 0.24

Attribution Metrics Asset Allocation 0.70% Security Selection ‐2.02% Interaction Effect ‐1.13%

Recession Declared Over and Economy Recovering

Jobless Claims Dropping Following Recession Jobless Claims Dropping Following Recession

Manufacturing Showing Signs of Improvement Following Recession

 Moderate recovery through Q4 2010 and 2011

h

 Overweight equities

d h f d d d f

 Underweight fixed income and defensive

positions

f

 Portfolio optimization/engineering process

f d f d

 Importance of diversification and asset

allocation

 Bloomberg and other research tools  Strength of efficient markets

8% 6% 2% 4% 0% 2% ‐2% 10/4/10 10/11/10 10/18/10 10/25/10 11/1/10 11/8/10 11/15/10 11/22/10

MSCI EM WFC I tl

‐4%

WFC Intl

i h Interest Rate Sensitivity Cumulative Return VGIT ‐1.00% High Medium Credit Quality Barclays ‐0.93% Low Low Medium High

Cumulative Return MOS 19.83% FCX 15.82% GLD 4.45% WPC Mining 13.03% SPDR XME 15 60% SPDR XME 15.60%

10% 12%

SPDR Technology WPC Technology Securities

% 6% 8% 0% 2% 4% ‐4% ‐2% 10/4/2010 10/11/2010 10/18/2010 10/25/2010 11/1/2010 11/8/2010 11/15/2010 11/22/2010 ‐8% ‐6%

10%

SPDR Fi

8%

SPDR Finance WFC Finance

4% 6% % 2% ‐2% 0% 10/4/10 10/11/10 10/18/10 10/25/10 11/1/10 11/8/10 11/15/10 11/22/10 ‐4%

10%

WPC Industrials Cumulative

8%

WPC Industrials SPDR Industrials Return ETN 18.94% LMT ‐2.97% MMM ‐2.36% WPC IND 2 99%

4% 6%

WPC IND 2.99% SPDR XLI 6.42%

2% 0% ‐2% 10/4/2010 10/18/2010 11/1/2010 11/15/2010

Cumulative

Cumulative Return

Return SE 7.73% NOV 41.61% XOM 14.38% WPC Energy 19.48% SPDR XLE 12 56%

SE 7.73% NOV 41.61% XOM 14.38% WPC Energy 19.48% SPDR XLE 12 56%

SPDR XLE 12.56%

SPDR XLE 12.56%

Cumulative Return TGT 6.53% HD ‐1.49% WPC Retail 2.20% SPDR XRT 13.86%

10%

SPDR REIT

Cumulative R

6% 8%

WPC REIT Securities

Return VTR ‐0.46% PSA 0.98% WPC REIT 0.14%

4%

SPDR RWR 1.98%

0% 2% ‐2% % 10/4/2010 10/18/2010 11/1/2010 11/15/2010 ‐4%

6%

Cumulative Return

4% 5%

SPDR Consumer Staples WPC Consumer Staples

CL 3.47% KMB ‐5.12% K ‐3.16% WPC CS ‐1.20% SPDR XLP 3.45%

% 3% 4% 1% 2% ‐1% 0% 10/4/2010 10/11/2010 10/18/2010 10/25/2010 11/1/2010 11/8/2010 11/15/2010 ‐3% ‐2%

KMB Announces disappointing quarterly earnings