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1LAFPP Corporate Governance Investing Background – Jan 2009
Corporate Governance BackgroundJanuary 2009
Los Angeles Department of Fire & Police Pensions
2LAFPP Corporate Governance Investing Background – Jan 2009
What is Corporate Governance Investing? A
Evolution of Corporate Governance Investing B
Risks and Returns C
Conclusions E
Appendices DCorporate Governance Manager Report Cards
AgendaTab
3LAFPP Corporate Governance Investing Background – Jan 2009
What is Corporate Governance Investing?
4LAFPP Corporate Governance Investing Background – Jan 2009
The guiding principle of corporate governance investing is identical to traditional investing:
• increasing risk adjusted returns.
Security selection is typically of “deep value,” and highly concentrated in a few firms.
Corporate Governance investors tend to hold investments for long periods, typically 2-3 years.
Corporate Governance strategies emphasize direct engagement with a portfolio company’s management and board to influence policies and practices to improve the long-term shareholder value.
Some of the tools advocacy investors use to achieve their desired returns include:• advocacy for Board accountability, • increasing transparency, and • disentangling entrenched boards, often via proxy voting.
What is Corporate Governance Investing?
5LAFPP Corporate Governance Investing Background – Jan 2009
The relatively long holding periods often result in a second objective of increasing equity value over the long-term.
Corporate Governance investing can broaden the opportunity set of the System’s public equity investment portfolio.
Corporate Governance investing adds a complementary investment tool to the Plan’s Corporate Governance efforts.
Corporate Governance investing does not explicitly concern itself with political or social issues.
What is Corporate Governance Investing?
6LAFPP Corporate Governance Investing Background – Jan 2009
Evolution of Corporate Governance Investing
7LAFPP Corporate Governance Investing Background – Jan 2009
Corporate Governance market has grown significantly over the past decade.
CalSTRS, the City of New York, Oregon Investment Council, Virginia Retirement System, Maryland State Retirement Agency, the World Bank and LACERS invest in this market segment.
CalPERS has grown its program from an initial $200 million allocation in 1999, to $12 billion in 2007, with a policy limit of not more than 8% of global equities.
LACERS launched its first efforts in 2005, and in 2007 increased its allocation to Corporate Governance Funds.
Evolution of Corporate Governance Investing
8LAFPP Corporate Governance Investing Background – Jan 2009
An increasing body of academic and practitioner research, and plan sponsor results has shown the efficacy of well conceptualized and implemented Corporate Governance investment and activism.
The number of well-qualified and experienced practitioners has increased.
As the number of firms has expanded, so has the variety of approaches and strategies.
What was once a limited market with few players and limited approaches has become more robust.
Today, there are Corporate Governance Funds that specialize in Large Cap stocks, Small Cap stocks, and in geographic regions across the globe.
Evolution of Corporate Governance Investing
9LAFPP Corporate Governance Investing Background – Jan 2009
SUMMARY OF U.S. CORPORATE GOVERNANCE FIRMS AND PRODUCTS*
Firm/(Headquarters & Offices)
Year FirmInception
Assets: Corp Gov Mandate/Benchmark
U.S. Large Cap
New Mountain Capital (New York) 2000 $1.2B US Mid to Large Cap/S&P500
Pershing Square (New York) 2003 $6.3B US & CA Large Cap/S&P500 or R1000
Relational (San Diego, CA) 1996 $7.1B US Large Cap/S&P500
U.S. Small/Mid Cap
CI-Blum Capital (San Francisco) 1975 $3.7B US Small to MID /R2000
Breeden Capital (Greenwich, CT) 2005 $1.0B US Mid Cap/S&P500
Evolution of Corporate Governance Investing
A handful of Corporate Governance Funds that have existed for over ten years.
Today there are funds that specialize in large cap and mid to small cap investing
* From LACERS’ 2007 Corporate Governance Search
10LAFPP Corporate Governance Investing Background – Jan 2009
Western Europe
Governance for Owners (London) 2004 6 $0.3B European Large Cap/FTSE All World Developed European Total Return
Hermes Europe ex-UK (London) 2001 11(6 dedicated) $3.2 Europe ex-UK
KnightVinke (NY, Eldorado, Monaco) 2003 5 $1.5B Large Cap Western Europe/FTSE Europe
U.K.
Hermes UK large cap (London) 1998 12(7 dedicated) $2.1B UK Large Cap
Hermes UK small Cap (London) 2002 11(3 dedicated) $0.4B UK Small Cap
Principle Capital Fund(Geneva, Switzerland) 2004 11 $0.3B UK SMID/FTSE All Share
Japan
Nissay Hermes Stewardship Fund(London, Japan) 2005 28 $0.3B Japan All Cap/Topix
SPARX (Ohsaki, Japan, New York) 1989 24 $1.4B Japan Mid-Large Cap /Topix
Taiyo Pacific Partners (Monterey, CA) 2003 22 $1.3B Japan Small Cap/Topix
SUMMARY OF NON-U.S. CORPORATE GOVERNANCE FIRMS AND PRODUCTS*
Geographic regions of coverage have expanded.
Evolution of Corporate Governance Investing
* From LACERS’ 2007 Corporate Governance Search
11LAFPP Corporate Governance Investing Background – Jan 2009
Risks and Returns
12LAFPP Corporate Governance Investing Background – Jan 2009
• Gompers et.al studied a sample of 1,500 firms and 24 corporate governance “provisions” such as poison pills and other anti-hostile takeover devices, found that in the 1990’s corporate governance was positively and strongly correlated with stock returns.
• The study shows that corporations with the highest shareholder rights (“good” corporate governance), outperform firms with low shareholder rights by 8.5% annually.
• Bebchuk (2004) isolates 6 “entrenching provisions” that are negatively correlated with firm performance, such as golden parachutes.
• Bebchuk’s findings show that the entrenching provisions corresponds negatively with firm valuation and with a reduction in stock returns from 1990-2003.
Risks and Returns
Does “good” corporate governance achieve the goal of increased returns?
Academic Studies
13LAFPP Corporate Governance Investing Background – Jan 2009
“The ‘CalPERS Effect’ on Targeted Company Share Prices,” a 2007 report by Wilshire Associates, studies 128 companies targeted by CalPERS between 1987 and 2006.
The study finds that prior to CalPERS’ involvement the companies on the list had a -13.8% annualized return.
Immediately after being contacted by CalPERS, stock prices actually increase for some companies as this may indicate to the market that their governance is about to improve.
Anson notes that some companies that are told they will be on the list are actually able to improve governance enough in the time between being notified and the list being published that they do not make it onto the final list at all.
Another study found that on the day that the CalPERS list comes out, there is a positive market reaction of 23 basis points for firms on the list.
After 5 years inclusion on the CalPERS Focus List, the Wilshire report found a company produced “12.2% above their respective benchmark return on a cumulative basis, or 2.3% per year on an annualized basis” [Wilshire].
Barber calculates total wealth creation of $3.1 billion between 1992-2005 attributable to CalPERS’ activism.
The Focus List makes a more significant impact on large cap (S&P 500) companies than those with a small market cap.
Anson finds that large cap companies earn an “excess return of 68% while small cap companies earn 38.3%.”
Studies of the CalPERS’ Corporate Governance Program
Risks and Returns
14LAFPP Corporate Governance Investing Background – Jan 2009
The market is new, and thus lacks a proven long-term track record.
Corporate governance investing has no substantial track record for such uncertain times as today’s markets.
The performance results of individual funds can be highly volatile, given the concentrated nature of the portfolios.
In general, Corporate Governance Funds are closely aligned with value investing, and will typically be affected by different style preference periods over a business cycle.
The funds typically charge fees more standard of private equity funds, because of the active engagement they undertake with investee companies.
Risks and Returns
Specific Risks Associated with Corporate Governance Investing
15LAFPP Corporate Governance Investing Background – Jan 2009
Corporate Governance Manager Gross Returns (Periods Ending Sept. 30. 2008)Quarter 1 Year 2 years 3 Years 4 Years 5 Years
Breeden -Corp 2.6 1.7 4.1 NA NA NABlum Stimson-Corp -7.5 -22.4 -3.2 1.3 5 3.4Russell 2000 Index -1.1 -14.5 -2 1.8 5.6 8.1
New Mountain- Corp -14.4 -13.2 -4.1 NA NA NAPershing Corp 1 15.5 20.9 23.9 33.7 NARelational-Corp -5.7 -28.2 -9.7 -5.4 1.9 6.1S&P 500 Index -8.4 -22 -4.7 0.2 3.1 5.2
Hermes Eur.-Corp -22.1 -40.9 -16.8 -4.4 5 6.9MSCI Europe ex UK -20.6 -30 -4.2 4.7 10 13.1
Hermes UK-Corp -9.4 -33.6 -17.5 -7.5 0.2 5.3MSCI United Kingdom -21 -31.5 -8.4 -0.1 4.7 8.6
Knight Vinke-Corp -4.2 -15.9 -3.9 9.7 19.3 NAGov4owners-Corp -32.2 -48.5 -17.1 NA NA NAMSCI Europe -20.7 -30.5 -5.6 3 8.1 11.5
Risks and Returns
Few Investment Managers with 5-year track record
Gross Returns vs. Benchmark Mixed.
Time periods too short to make long-term judgment on performance.
16LAFPP Corporate Governance Investing Background – Jan 2009
Risks and ReturnsRisk Return Statistics (Two Years Ending September 30, 2008)
Avg # of Holdings
Annualized Return, %
Annualized StdDev, %
Total Excess Total Excess Alpha, % BetaR-Squared,
%Sharpe Ratio
Batting Average
New Mountain- Corp 24 -4.09 0.6 14.2 10.01 -0.76 0.8 53.23 -0.48 0.38Pershing Corp 15 20.93 25.61 17.37 18.51 19.7 0.37 7.55 0.98 0.63Relational-Corp -9.7 -5.02 18.89 11.46 -3.17 1.17 64.1 -0.64 0.54S&P 500 Index -4.68 0 13.07 0 0 1 100 -0.59 0Blum Stimson-Corp 16 -3.21 1.47 19.48 13.74 2.97 1.06 49.71 -0.26 0.54Breeden -Corp 7.5 4.11 8.8 15.59 10 8.64 0.93 59.32 0.1 0.46Russell 2000 Index -1.98 2.7 14.98 6.64 3.31 1.03 80.26 -0.31 0.63
Knight Vinke-Corp 5-10 -3.88 0.81 17.49 10.94 1.91 1.05 60.79 -0.35 0.54Gov4owners-Corp 10-12 -17.15 -12.46 25.29 23.29 -13.32 0.76 15.15 -0.76 0.54MSCI Europe -5.65 -0.96 18.08 9.23 1.33 1.2 75.41 -0.44 0.54Hermes Eur.-Corp 16 -16.79 -12.1 22.97 13.15 -7.47 1.54 75.99 -0.84 0.5MSCI Europe ex UK -4.23 0.45 18.86 10.06 3.26 1.24 73.72 -0.33 0.54Hermes UK-Corp 12 -17.53 -12.85 19.07 14.26 -13.6 0.97 43.43 -1.11 0.46MSCI United Kingdom -8.42 -3.73 17.24 9.13 -2.41 1.12 72.05 -0.64 0.5
MPT Statistics
Highly concentrated number of holdings.
Greater volatility than benchmark is typical.
Time periods too short to make long-term judgment on performance.
17LAFPP Corporate Governance Investing Background – Jan 2009
Fees
18LAFPP Corporate Governance Investing Background – Jan 2009
Product Annual Core Fees
(% of Assets Under Mgt) Annual Performance Fees
U.S. Large Cap
New Mountain Capital 2% 20% net of mgt fees on ‘absolute high water mark return or on net of benchmark return
Pershing Square 1.5% 20% absolute with a high water mark Relational Investors 1.5% 20% of net of fees outperformance over benchmark U.S. Small Cap
Blum Capital 1% 20% net of fees absolute return with high water mark provision, 1-year lockup
Breeden Capital Mgt 2% 20% absolute return with high water mark Evercore Asset Mgt 1.5% 20% net of fees absolute high water mark return Western Europe Governance for Owners 1% 20% of net of fees outperformance over benchmark
Hermes West Europe 1.5% 20% net of fees subject to high water mark w/ 7% compound annual hurdle.
Knight Vinke 1.5% 20% net of fees subject to high water mark w/ 10% IRR annual
hurdle; 20% clawback clause’. Or 20% net of fees outperformance over benchmark
U.K.
Hermes UK LgCap 1.0.% 20% net of fees outperformance over benchmark – highwater marked
Hermes UK SmCap 1.5% 20% net of fees outperformance over benchmark – highwater marked
Principle Capital Fund 1.5% 20% net of fees subject to high water mark w/ 7% compound annual hurdle.
Japan
Nissay Hermes Japan 1.0.% 20% net of fees outperformance over benchmark – highwater marked
SPARX Asset Mgt 2.0% 20% net of fees absolute high water mark Taiyo Pacific Partners 2.% 20% net of fees outperformance over benchmark Corporate Governance Fund fee structures are similar to those of private equity funds.
Typically, these funds charge an annual management fee and a performance-based fee.
Corporate Governance Funds – (Fees assume $50 million under management)
Fees
19LAFPP Corporate Governance Investing Background – Jan 2009
Conclusion
20LAFPP Corporate Governance Investing Background – Jan 2009
Summary and Conclusion
Corporate Governance investing is relatively new.
The profiles are generally highly concentrated, deep value investors that work actively with a small number of companies over several years to improve corporate governance and thereby increase shareholder returns.
The Risk/Return Profiles are unproven.
There is little experience with corporate governance investing in a deep recessionary market.
There have been positive returns from this type of investment strategy.
The fees have been structured more like private equity managers due to the active nature of the manager involvement with the public companies.
The additional risks of corporate governance investing should be well understood prior to adding to an institutional portfolio.
21LAFPP Corporate Governance Investing Background – Jan 2009
Appendix – Corporate Governance Manager Report Cards
22LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerNov-05 - Oct-08
0
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t, %
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EUROPE VALUEEUROPE GROWTHPAC ex JP VALPAC ex JP GRJAPAN VALJAPAN GRCash
Asset Loadings - Benchm arkNov-05 - Oct-08
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JAPAN GRJAPAN VAL
PAC ex JP GRPAC ex JP VAL
EUROPE GROWTHEUROPE VALUE
Hermes Eur.-CorpMSCI Europe ex UK
Cumulative Excess Performance
Oct-03 - Oct-08
80100120140160180200220240260
Gro
wth
of $
100
Oct-03 Dec-04 Dec-05 Dec-06 Dec-07 Oct-08
Herm es Eur.-CorpM SCI Europe ex UK
Hermes Eur.
Monthly Added ValueNov-05 - Oct-08
-7-6-5-4-3-2-101234567
Exc
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Ret
urn,
%
Nov-05 Dec-06 Dec-07 Oct-08
Monthly Added Value from SelectionNov-05 - Oct-08
-7-6-5-4-3-2-101234567
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etur
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Nov-05 Dec-06 Dec-07 Oct-08
Monthly Added Value from Style TimingNov-05 - Oct-08
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Tim
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Ret
urn,
%
Nov-05 Dec-06 Dec-07 Oct-08
Annualized Return, % -8.9Annualized StdDev, % 9.8Information Ratio -0.9Significance Level, % 94.6
Annualized Return, % -2.2Annualized StdDev, % 8.4Information Ratio -0.3Significance Level, % 69.2
Annualized Return, % -5.7Annualized StdDev, % 2.7Information Ratio -2.1Significance Level, % 100.0
Appendix - Corporate Governance Manager Report Cards
23LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerNov-05 - Oct-08
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EUROPE VALUEEUROPE GROWTHPAC ex JP VALPAC ex JP GRJAPAN VALJAPAN GRCash
Asset Loadings - Benchm arkNov-05 - Oct-08
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JAPAN GRJAPAN VAL
PAC ex JP GRPAC ex JP VAL
EUROPE GROWTHEUROPE VALUE
Hermes UK-CorpMSCI EAFE Small Cap
Cumulative Excess Performance
Oct-03 - Oct-08
80100120140160180200220240
Gro
wth
of $
100
Oct-03 Dec-04 Dec-05 Dec-06 Dec-07 Oct-08
Herm es UK-CorpM SCI EAFE Sm al l Cap
Hermes Eur.
Monthly Added ValueNov-05 - Oct-08
-7-6-5-4-3-2-101234567
Exc
ess
Ret
urn,
%
Nov-05 Dec-06 Dec-07 Oct-08
Monthly Added Value from SelectionNov-05 - Oct-08
-7-6-5-4-3-2-101234567
Sel
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etur
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Nov-05 Dec-06 Dec-07 Oct-08
Monthly Added Value from Style TimingNov-05 - Oct-08
-7-6-5-4-3-2-101234567
Tim
ing
Ret
urn,
%
Nov-05 Dec-06 Dec-07 Oct-08
Annualized Return, % -2.4Annualized StdDev, % 13.1Information Ratio -0.2Significance Level, % 63.7
Annualized Return, % -6.4Annualized StdDev, % 10.5Information Ratio -0.6Significance Level, % 87.0
Annualized Return, % 1.8Annualized StdDev, % 5.6Information Ratio 0.3Significance Level, % 71.0
Appendix - Corporate Governance Manager Report Cards
24LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerMar-06 - Oct-08
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EUROPE VALUEEUROPE GROWTHPAC ex JP VALPAC ex JP GRJAPAN VALJAPAN GRCash
Asset Loadings - Benchm arkMar-06 - Oct-08
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Style Map
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JAPAN GRJAPAN VAL
PAC ex JP GRPAC ex JP VAL
EUROPE GROWTHEUROPE VALUE
Knight Vinke-CorpMSCI World ex USA
Cumulative Excess Performance
Dec-03 - Oct-08
80100120140160180200220240260280300
Gro
wth
of $
100
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Oct-08
Knight V inke-CorpM SCI World ex USA
Knight Vinke
Monthly Added ValueNov-05 - Oct-08
-10
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111315
Exc
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Ret
urn,
%
Nov-05 Dec-06 Dec-07 Oct-08
Monthly Added Value from SelectionMar-06 - Oct-08
-10
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111315
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Monthly Added Value from Style TimingMar-06 - Oct-08
-10
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111315
Tim
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Ret
urn,
%
Mar-06 Dec-06 Dec-07 Oct-08
Annualized Return, % 13.0Annualized StdDev, % 15.5Information Ratio 0.8Significance Level, % 90.8
Annualized Return, % 12.2Annualized StdDev, % 10.9Information Ratio 1.1Significance Level, % 97.0
Annualized Return, % -2.6Annualized StdDev, % 8.5Information Ratio -0.3Significance Level, % 69.6
Appendix - Corporate Governance Manager Report Cards
25LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerJan-08 - Oct-08
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Asset Loadings - Benchm arkJan-08 - Oct-08
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EUROPE GROWTHEUROPE VALUE
Gov4owners-CorpMSCI Europe
Cumulative Excess Performance
Oct-05 - Oct-08
60
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100
120
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of $
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Oct-05 Jun-06 Dec-06 Jun-07 Dec-07 Oct-08
Gov4owners-CorpM SCI Europe
Gov4Owners
Monthly Added ValueNov-05 - Oct-08
-20
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1215
Exc
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%
Nov-05 Dec-06 Dec-07 Oct-08
Monthly Added Value from SelectionJan-08 - Oct-08
-20
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Monthly Added Value from Style TimingJan-08 - Oct-08
-20
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1215
Tim
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%
Jan-08 Jun-08 Oct-08
Annualized Return, % -9.2Annualized StdDev, % 21.6Information Ratio -0.4Significance Level, % 77.5
Annualized Return, % -17.3Annualized StdDev, % 29.3Information Ratio -0.6Significance Level, % 83.8
Annualized Return, % 12.8Annualized StdDev, % 11.9Information Ratio 1.2Significance Level, % 94.0
Appendix - Corporate Governance Manager Report Cards
26LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerDec-07 - Sep-08
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Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08
Sm GrowthSm ValueMid GrowthMid ValueTop GrowthTop ValueCash
Asset Loadings - Benchm arkDec-07 - Sep-08
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Russell Style IndicesBreeden -CorpRussell 2000 Index
Cumulative Excess Performance
M ay-06 - Sep-08
95
100
105
110
115
120
125
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of $
100
M ay-06 Dec-06 Jun-07 Dec-07 Sep-08
Breeden -CorpRussel l 2000 Index
Breeden
Monthly Added ValueJun-06 - Sep-08
-8-7-6-5-4-3-2-1012345678
Exc
ess
Ret
urn,
%
Jun-06 Mar-07 Dec-07 Sep-08
Monthly Added Value from SelectionDec-07 - Sep-08
-8-7-6-5-4-3-2-1012345678
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Monthly Added Value from Style TimingDec-07 - Sep-08
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Tim
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Ret
urn,
%
Dec-07 Mar-08 Jun-08 Sep-08
Annualized Return, % 6.2Annualized StdDev, % 7.4Information Ratio 0.8Significance Level, % 89.3
Annualized Return, % 19.1Annualized StdDev, % 6.2Information Ratio 3.7Significance Level, % 99.7
Annualized Return, % -0.4Annualized StdDev, % 3.6Information Ratio -0.1Significance Level, % 54.6
Appendix - Corporate Governance Manager Report Cards
27LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerJul-07 - Sep-08
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Russell Style IndicesNew Mountain- CorpS&P 500 Index
Cumulative Excess Performance
Dec-05 - Sep-08
9095
100105110115120125130
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of $
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Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Sep-08
New M ountain- CorpS&P 500 Index
New Mountain
Monthly Added ValueJan-06 - Sep-08
-10-8-6-4-202
468
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Exc
ess
Ret
urn,
%
Jan-06 Dec-06 Dec-07 Sep-08
Monthly Added Value from SelectionJul-07 - Sep-08
-10-8-6
-4-2024
68
10
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ectio
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etur
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Monthly Added Value from Style TimingJul-07 - Sep-08
-10-8-6
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68
10
Tim
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Ret
urn,
%
Jul-07 Dec-07 Sep-08
Annualized Return, % -1.4Annualized StdDev, % 9.3Information Ratio -0.2Significance Level, % 59.9
Annualized Return, % 1.6Annualized StdDev, % 7.9Information Ratio 0.2Significance Level, % 60.5
Annualized Return, % 0.8Annualized StdDev, % 6.0Information Ratio 0.1Significance Level, % 57.1
Appendix - Corporate Governance Manager Report Cards
28LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerOct-05 - Sep-08
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Sm GrowthSm ValueMid GrowthMid ValueTop GrowthTop ValueCash
Asset Loadings - Benchm arkOct-05 - Sep-08
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100
Oct-05 Jun-06 Dec-06 Jun-07 Dec-07 Sep-08
Style Map
-2
-1
0
1
2
Sm
all -
Lar
ge
-2 -1 0 1 2
Value - Growth
Top Value Top Growth
Mid Value Mid Growth
Sm Value Sm Growth
Russell Style IndicesPershing-CorpS&P 500 Index
Cumulative Excess Performance
Dec-03 - Sep-08
100
150
200
250
300
350
400
450
Gro
wth
of $
100
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Sep-08
Pershing-CorpS&P 500 Index
Pershing
Monthly Added ValueOct-05 - Sep-08
-15-13-11
-9-7-5-3-113579
111315
Exc
ess
Ret
urn,
%
Oct-05 Dec-06 Nov-07 Sep-08
Monthly Added Value from SelectionOct-05 - Sep-08
-10-8-6-4-202468
101214
Sel
ectio
n R
etur
n, %
Oct-05 Dec-06 Nov-07 Sep-08
Monthly Added Value from Style TimingOct-05 - Sep-08
-10-8-6
-4-2024
68
10
Tim
ing
Ret
urn,
%
Oct-05 Dec-06 Sep-08
Annualized Return, % 23.6Annualized StdDev, % 15.4Information Ratio 1.5Significance Level, % 99.0
Annualized Return, % 19.6Annualized StdDev, % 11.8Information Ratio 1.7Significance Level, % 99.3
Annualized Return, % 3.9Annualized StdDev, % 6.2Information Ratio 0.6Significance Level, % 85.0
Appendix - Corporate Governance Manager Report Cards
29LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerOct-05 - Sep-08
0
10
20
30
40
50
60
70
80
90
100
Res
cale
d W
eigh
t, %
Oct-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08
Sm GrowthSm ValueMid GrowthMid ValueTop GrowthTop ValueCash
Asset Loadings - Benchm arkOct-05 - Sep-08
0
10
20
30
40
50
60
70
80
90
100
Oct-05 Jun-06 Dec-06 Jun-07 Dec-07 Sep-08
Style Map
-2
-1
0
1
2
Sm
all -
Lar
ge
-2 -1 0 1 2
Value - Growth
Top Value Top Growth
Mid Value Mid Growth
Sm Value Sm Growth
Russell Style IndicesRelational-CorpS&P 500 Index
Cumulative Excess Performance
Sep-03 - Sep-08
100
120
140
160
180
200
220
Gro
wth
of $
100
Sep-03 Dec-04 Dec-05 Dec-06 Dec-07 Sep-08
Rela tional -CorpS&P 500 Index
Relational
Monthly Added ValueOct-05 - Sep-08
-15-13-11
-9-7-5-3-113579
111315
Exc
ess
Ret
urn,
%
Oct-05 Dec-06 Nov-07 Sep-08
Monthly Added Value from SelectionOct-05 - Sep-08
-10-8-6-4-202468
101214
Sel
ectio
n R
etur
n, %
Oct-05 Dec-06 Nov-07 Sep-08
Monthly Added Value from Style TimingOct-05 - Sep-08
-10-8-6
-4-2024
68
10
Tim
ing
Ret
urn,
%
Oct-05 Dec-06 Sep-08
Annualized Return, % -5.6Annualized StdDev, % 9.6Information Ratio -0.6Significance Level, % 83.9
Annualized Return, % -5.6Annualized StdDev, % 6.8Information Ratio -0.8Significance Level, % 91.6
Annualized Return, % 0.0Annualized StdDev, % 4.9Information Ratio 0.0Significance Level, % 50.7
Appendix- Corporate Governance Manager Report Cards
30LAFPP Corporate Governance Investing Background – Jan 2009
Asset Loadings - ManagerOct-05 - Sep-08
0
10
20
30
40
50
60
70
80
90
100
Res
cale
d W
eigh
t, %
Oct-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08
Sm GrowthSm ValueMid GrowthMid ValueTop GrowthTop ValueCash
Asset Loadings - Benchm arkOct-05 - Sep-08
0
10
20
30
40
50
60
70
80
90
100
Oct-05 Jun-06 Dec-06 Jun-07 Dec-07 Sep-08
Style Map
-2
-1
0
1
2
Sm
all -
Lar
ge
-2 -1 0 1 2
Value - Growth
Top Value Top Growth
Mid Value Mid Growth
Sm Value Sm Growth
Russell Style IndicesBlum Stimson-CorpRussell 2000 Index
Cumulative Excess Performance
Sep-03 - Sep-08
90100110120130140150160170180190
Gro
wth
of $
100
Sep-03 Dec-04 Dec-05 Dec-06 Dec-07 Sep-08
Blum Stim son-CorpRussel l 2000 Index
Blum
Monthly Added ValueOct-05 - Sep-08
-15-13-11
-9-7-5-3-113579
111315
Exc
ess
Ret
urn,
%
Oct-05 Dec-06 Nov-07 Sep-08
Monthly Added Value from SelectionOct-05 - Sep-08
-10-8-6-4-202468
101214
Sel
ectio
n R
etur
n, %
Oct-05 Dec-06 Nov-07 Sep-08
Monthly Added Value from Style TimingOct-05 - Sep-08
-10-8-6
-4-2024
68
10
Tim
ing
Ret
urn,
%
Oct-05 Dec-06 Sep-08
Annualized Return, % -0.5Annualized StdDev, % 12.3Information Ratio 0.0Significance Level, % 52.7
Annualized Return, % 1.2Annualized StdDev, % 9.4Information Ratio 0.1Significance Level, % 58.7
Annualized Return, % -1.6Annualized StdDev, % 6.3Information Ratio -0.3Significance Level, % 67.1
Appendix - Corporate Governance Manager Report Cards