Post on 31-May-2015
LGIP QUARTERLY MEETING & CONFERENCE CALL
OFFICE OF THE ARIZONA STATE TREASURER
11.1.2012
CONFERENCE CALL
AGENDA
� LGIP Performance
� Endowment Performance
� Endowment Distribution Formula
State Cash Flow
ARIZONA STATE TREASURER DOUG DUCEY
� State Cash Flow
� Guest Presentation: Dr. Jim Paulsen, Chief Investment Strategist for Wells Capital Management
� Q & A
INVESTMENT PHILOSOPHY
SAFETYbefore
LIQUIDITY
ARIZONA STATE TREASURER DOUG DUCEY
LIQUIDITYbefore
YIELD
EARNINGS FOR FY 2013 YTD
$29,673,076
ARIZONA STATE TREASURER DOUG DUCEY
$29,673,076
LGIP PERFORMANCEQ1 FY2013Q1 FY2013
POOL 5
ARIZONA STATE TREASURER DOUG DUCEY
POOL 7
ARIZONA STATE TREASURER DOUG DUCEY
POOL 500
ARIZONA STATE TREASURER DOUG DUCEY
POOL 700
ARIZONA STATE TREASURER DOUG DUCEY
Separately Managed Accounts (SMAs)
� Designed for those seeking a customized investing solution based on your risk tolerance, liquidity needs and duration target.
� Monthly Liquidity
� Requires $100 million minimum deposit
ARIZONA STATE TREASURER DOUG DUCEY
� Requires $100 million minimum deposit
� Pre-Meeting with Portfolio Manager to set up Account and determine investing needs.
� Costs: Standard 6 basis points, plus yearly accounting charges of $20,000 out of earnings (equivalent to 2 basis points.)
� Contact Deputy Treasurer Mark Swenson
OPERATING UPDATES
New key phone numbers:
� Main number 602-542-7800� LGIP Line 602-542-7834
ARIZONA STATE TREASURER DOUG DUCEY
� Mark Swenson 602-542-7877� Dale Stomberg 602-542-7833
ENDOWMENT PERFORMANCE
OFFICE OF THE ARIZONA STATE TREASURER
PERFORMANCEQ1 FY2013
$2.00
$2.50
$3.00
$3.50
$4.00
Bil
lio
ns
Endowment Market Value
ENDOWMENT MARKET VALUE $3.7
Billion
ARIZONA STATE TREASURER DOUG DUCEY
$0.00
$0.50
$1.00
$1.50
De
cem
be
r 2
00
6
Ma
rch
20
07
Jun
e 2
00
7
Se
pte
mb
er
20
07
De
cem
be
r 2
00
7
Ma
rch
20
08
Jun
e 2
00
8
Se
pte
mb
er
20
08
De
cem
be
r 2
00
8
Ma
rch
20
09
Jun
e 2
00
9
Se
pte
mb
er
20
09
De
cem
be
r 2
00
9
Ma
rch
20
10
Jun
e 2
01
0
Se
pte
mb
er
20
10
De
cem
be
r 2
01
0
Ma
rch
20
11
Jun
e 2
01
1
Se
pte
mb
er
20
11
De
cem
be
r 2
01
1
Ma
rch
20
12
Jun
e 2
01
2
Se
pte
mb
er
20
12
$0.60
$0.80
$1.00
$1.20
Bil
lio
ns
Total Endowment Unrealized gains/losses
ENDOWMENT UNREALIZED GAINS
$1.05 Billion
ARIZONA STATE TREASURER DOUG DUCEY
-$0.20
$0.00
$0.20
$0.40
De
cem
be
r 2
00
6
Ma
rch
20
07
Jun
e 2
00
7
Se
pte
mb
er
20
07
De
cem
be
r 2
00
7
Ma
rch
20
08
Jun
e 2
00
8
Se
pte
mb
er
20
08
De
cem
be
r 2
00
8
Ma
rch
20
09
Jun
e 2
00
9
Se
pte
mb
er
20
09
De
cem
be
r 2
00
9
Ma
rch
20
10
Jun
e 2
01
0
Se
pte
mb
er
20
10
De
cem
be
r 2
01
0
Ma
rch
20
11
Jun
e 2
01
1
Se
pte
mb
er
20
11
De
cem
be
r 2
01
1
Ma
rch
20
12
Jun
e 2
01
2
Se
pte
mb
er
20
12
ENDOWMENT ASSET ALLOCATION
$1,600.04M $502.79M$1,549.4 million
$542.2 million
40.4%14.9%
8.7%Fixed Income
$3.7 Billion
ARIZONA STATE TREASURER DOUG DUCEY
$1,052.42M$1,122.1 million
40.4%
35.9%
14.9%S&P 500
S&P 400
S&P 600
As of 9/30/2012
PROPOSED ENDOWMENT DISTRIBUTION
OFFICE OF THE ARIZONA STATE TREASURER
DISTRIBUTION FORMULA
SMOOTHER, CONSISTENT DISTRIBUTIONS
5-YearAverage
Market Value
X
2.5%
ARIZONA STATE TREASURER DOUG DUCEY
Takes 2.5% of the average monthly market value from each of the previous five years
Annual Distribution
STATE CASH FLOW
OFFICE OF THE ARIZONA STATE TREASURER
$1,500
$2,000
$2,500
$3,000Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec'07-June '09
Recession
STATE CASH FLOWTOTAL OPERATING ACCOUNT AVERAGE MONTHLY BALANCE
Up 70% in First Quarter YOY
$1.42 billion in September
ARIZONA STATE TREASURER DOUG DUCEY
-$1,000
-$500
$0
$500
$1,000
$1,500
Millio
ns
STATE CASH FLOW
$1,000
$1,500
$2,000
$2,500
$3,000State Operating BalanceFY 2007 - September 2012
ARIZONA STATE TREASURER DOUG DUCEY
-$1,000
-$500
$0
$500
$1,000
Ju
l-06
Oct-
06
Jan
-07
Ap
r-07
Ju
l-07
Oct-
07
Jan
-08
Ap
r-08
Ju
l-08
Oct-
08
Jan
-09
Ap
r-09
Ju
l-09
Oct-
09
Jan
-10
Ap
r-10
Ju
l-10
Oct-
10
Jan
-11
Ap
r-11
Ju
l-11
Oct-
11
Jan
-12
Ap
r-12
Ju
l-12
STATE CASH FLOW
$1,500,000
$2,000,000
$2,500,000
$3,000,000
YTD FY 2013 Cash Flow vs. Last Two Fiscal Years
ARIZONA STATE TREASURER DOUG DUCEY
$-
$500,000
$1,000,000
$1,500,000
7/1 8/1 9/1 10/1 11/1 12/1 1/1 2/1 3/1 4/1 5/1 6/1
FY 2011 FY 2012 Actual FY 2013 Actual
AZ NON-FARM EMPLOYMENT
1750
2000
2250
2500
2750
3000
Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec '07-Jun 09
Recession
AZ Job growth returning
ARIZONA STATE TREASURER DOUG DUCEY
750
1000
1250
1500
1750
Fe
b-8
2
Fe
b-8
3
Fe
b-8
4
Fe
b-8
5
Fe
b-8
6
Fe
b-8
7
Fe
b-8
8
Fe
b-8
9
Fe
b-9
0
Fe
b-9
1
Fe
b-9
2
Fe
b-9
3
Fe
b-9
4
Fe
b-9
5
Fe
b-9
6
Fe
b-9
7
Fe
b-9
8
Fe
b-9
9
Fe
b-0
0
Fe
b-0
1
Fe
b-0
2
Fe
b-0
3
Fe
b-0
4
Fe
b-0
5
Fe
b-0
6
Fe
b-0
7
Fe
b-0
8
Fe
b-0
9
Fe
b-1
0
Fe
b-1
1
Fe
b-1
2
Source:
Bloomberg
2012 L.P.
Jul '81-Nov '82
Recession
AZ UNEMPLOYMENT AT 8.2%
7%
8%
9%
10%
11%
12%
Jan '80-Jul '80
Recession
Jul '81-Nov '82
RecessionJul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec'07-June 09
Recession
National rate of 7.8%
AZ Rate at 8.2%
ARIZONA STATE TREASURER DOUG DUCEY
2%
3%
4%
5%
6%
7%
Fe
b-7
6F
eb
-77
Fe
b-7
8F
eb
-79
Fe
b-8
0F
eb
-81
Fe
b-8
2F
eb
-83
Fe
b-8
4F
eb
-85
Fe
b-8
6F
eb
-87
Fe
b-8
8F
eb
-89
Fe
b-9
0F
eb
-91
Fe
b-9
2F
eb
-93
Fe
b-9
4F
eb
-95
Fe
b-9
6F
eb
-97
Fe
b-9
8F
eb
-99
Fe
b-0
0F
eb
-01
Fe
b-0
2F
eb
-03
Fe
b-0
4F
eb
-05
Fe
b-0
6F
eb
-07
Fe
b-0
8F
eb
-09
Fe
b-1
0F
eb
-11
Fe
b-1
2
Source:Bloomberg2012 L.P.
AZ HOUSING PRICES
150
200
250
S & P/Case Schiller Housing Price Index for Phoenix
ARIZONA STATE TREASURER DOUG DUCEY
0
50
100
Source: Bloomberg 2012 L.P.
Guest Presentation:
Dr. Jim Paulsen, Chief Investment Strategist for
OFFICE OF THE ARIZONA STATE TREASURER
Dr. Jim Paulsen, Chief Investment Strategist for Wells Capital Management
November 2012www.wellscap.com
Economic & Financial Market Update
James W. Paulsen, Ph.D., Chief Investment Strategist
Older Demographics Have Altered EconomicRecoveries in Three Major Ways!!!
1. Slower SPEED LIMIT!
2. Delayed Recoveries!!
“Slow Starters… But, Long FINISHERS”
Economic and Financial Market Update – November 2012
“Slow Starters… But, Long FINISHERS”
3. YEAR “4” GEARING!!?
“New-Normal” Working-Age PopulationGrowth!??!
U.S. Working Age PopulationShown on a natural log scale
Economic and Financial Market Update – November 2012
Annual Growth in U.S. Real GDP
Contemporary Recovery Weaker, But Similar to 1991/2001 Pattern!?
Cumulative Percent Recovery Gain in Real GDP Current Recovery vs. 1990/2001 Average
Cumulative Percent Recovery Gain in Real GDI Current Recovery vs. 1990/2001 Average
Economic and Financial Market Update – November 2012
TOTAL Cumulative Percent Job Creation Current Recovery vs. 1990/2001
Private Cumulative Percent Job Creation Current Recovery vs. 1990/2001 Average
Jobs & Confidence Recoveries Delayed!?!
U.S. Unemployment Rate & RecoveriesConsumer Confidence Index* & Recoveries
*Conference Boards Consumer Confidence Index. Shown on a natural log scale.
Shaded areas represent recessions.
Economic and Financial Market Update – November 2012
“DELAYED” WAGE/GAINS WILL SOON END?!??
Economic and Financial Market Update – November 2012
Federal Reserve Following Playbook of Last Two Recoveries!?!
Federal Reserve Policy ResponseFed Funds Rate2001 Recovery
Federal Reserve Policy ResponseFed Funds Rate1991 Recovery
Economic and Financial Market Update – November 2012
How to GEAR?? Jobs & Confidence!!!
Consumer Confidence vs. U.S. Unemployment Rate
Economic and Financial Market Update – November 2012
ECONOMY is GEARING: #1 JOB MARKET!!
Total U.S. Household Employment In Millions
Total U.S. Labor ForceIn Millions
Economic and Financial Market Update – November 2012
U.S Labor Unemployment Rate
ECONOMY is GEARING: #2 CONFIDENCE!!
Conference Board Consumer ConfidencePresent Situation Index
Economic and Financial Market Update – November 2012
ECONOMY IS GEARING: #3 Net WORTHS & #4 Debt BURDENS!!
U.S. Household Financial Obligations Ratio
Total Household Net Worth In Trillions of U.S. Dollars
Economic and Financial Market Update – November 2012
ECONOMY is GEARING: #5 Housing Activity & #6 Home Prices!!
FHFA U.S. House Price IndexNational Association of Homebuilders Market Survey Index
Economic and Financial Market Update – November 2012