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

Semi ‐ Annual Board Update

 Introduction I d i  Portfolio engineering methodology  Portfolio engineering methodology  Fund composition Fund composition  Performance  Current economic conditions and future rebalancing b l

 Fund Manager – Joe Downs  Amol Agarwal  Andre Shearer  Andy Harper  Ben Hawthorne  Jameson Bennett  Jon Kielmeyer  Praveen Gujar j

 Global diversification across asset classes f  Core portfolio to preserve capital f l l  Fundamental analysis overlay d l l l  Learning experience

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

Calculate Variance, Collect Historical Calculate Variance, , Expected Return, and d d Returns for the Expected Return, and Covariance for Various Universe of Asset Sharpe Ratio for Asset Classes Classes Portfolio • Charter Ch t • Priors Adjust Asset Class Asset Class Optimization Optimization WPC Gl b l Di WPC Global Diversified ifi d Weights Portfolio

Fund Composition ‐ Broad Asset Classes US Equities ‐ SPY 12% 16% 22% US Equities ‐ Individual Stocks International Funds 50% 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  Portfolio optimization to obtain initial f l b l portfolio weight  Modify portfolio weight after group d f f l h f discussion  Select ETFs to gain access to individual l d d l 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 quality Credit q alit I t Interest Rate Sensitivity t R t S iti it High  ETF with low fees uality Credit Qu Medium  VGIT Low 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 Materials Financials 9% 24% 10% 7% Energy 9% 10% IT 12% 8% 11% Consumer Discretionary/Retail Consumer Staples Real Estate

 Standard & Poor’s 500 Index – 65%  MSCI Emerging Markets Index – 23% k d  Barclays Capital Aggregate Bond Index – 12% l l d d

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  Overweight equities h  Underweight fixed income and defensive d h f d d d f positions

 Portfolio optimization/engineering process f  Importance of diversification and asset f d f d allocation  Bloomberg and other research tools  Strength of efficient markets

8% 6% 4% 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 ‐ 2% MSCI EM WFC I tl WFC Intl ‐ 4%

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

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

SPDR Technology 12% WPC Technology Securities 10% 8% 6% 4% % 2% 0% 10/4/2010 10/11/2010 10/18/2010 10/25/2010 11/1/2010 11/8/2010 11/15/2010 11/22/2010 ‐ 2% ‐ 4% ‐ 6% ‐ 8%

10% SPDR Finance SPDR Fi WFC Finance 8% 6% 4% 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 ‐ 2% ‐ 4%

10% Cumulative WPC Industrials WPC Industrials Return SPDR Industrials ETN 18.94% 8% LMT ‐ 2.97% MMM ‐ 2.36% WPC IND WPC IND 2.99% 2 99% 6% SPDR XLI 6.42% 4% 2% 0% ‐ 2% 10/4/2010 10/18/2010 11/1/2010 11/15/2010

Cumulative Cumulative Return Return SE 7.73% SE 7.73% NOV 41.61% NOV 41.61% XOM 14.38% XOM 14.38% WPC Energy 19.48% WPC Energy 19.48% SPDR XLE SPDR XLE 12 56% 12.56% SPDR XLE SPDR XLE 12 56% 12.56%

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

10% Cumulative SPDR REIT R Return WPC REIT Securities 8% VTR ‐ 0.46% PSA 0.98% WPC REIT 0.14% 6% SPDR RWR 1.98% 4% 2% 0% % 10/4/2010 10/18/2010 11/1/2010 11/15/2010 ‐ 2% ‐ 4%

Cumulative 6% Return CL 3.47% KMB ‐ 5.12% SPDR Consumer Staples 5% K ‐ 3.16% WPC Consumer Staples WPC CS ‐ 1.20% SPDR XLP 3.45% 4% 4% 3% 2% % 1% 0% 10/4/2010 10/11/2010 10/18/2010 10/25/2010 11/1/2010 11/8/2010 11/15/2010 ‐ 1% ‐ 2% ‐ 3% KMB Announces disappointing quarterly earnings