Saff Fall 2009 Investment Committee Presentation
50
Student and Foundation Fund Second Quarter 2009 & Third Quarter 2009
description
This presentation is the result of a collaborative effort of the entire Fall 2009 SAFF Class.
Transcript of Saff Fall 2009 Investment Committee Presentation
Student and Foundation Fund
Second Quarter 2009 & Third Quarter 2009
Outline
2
• Introduction• Economic Forecast• Sector Allocation• Portfolio Detail• Equity• Fixed Income• Future of SAFF• CFA Challenge • Newsletter / Pamphlet• Website
Class Objectives
3
• Investment Mission• Grow Foundation Assets• Attract New Donors
• Educational Goal• Gain “Real World” Experience• Interact with Business Professionals
Class Construction Process
4
• Application/Interview• Selection• 10-15 members per semester• Assign Positions• Portfolio Managers• Equity Managers• Fixed Income Managers• Newsletter Editor• Webmaster• Special Projects Managers• Assign Securities/Sectors• Investment Process
Fund Managers
Portfolio Managers Micah Lile, Katie Young
Equity Managers Jay Fells, Nate Wills
Fixed Income Managers Michael Mrozek, Brandon Luther
Webmaster Tim Haverkate
Newsletter Editor Lizette Salazar
Special Projects Managers Josh Daugherty, Robert Clark
CIS ProjectVinnie Fallico, Ashley Malsam, Erica Ferge, Tim Haverkate
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Investment Process• Six month• One year• Three year
Economic Forecast
• Equity• Fixed Income• Cash
Asset Allocation
• Market Capitalization• Growth/Value/Income/Int’lEquity
Allocation
• Underweight or overweight relative to benchmarks• S&P 500 • Barclays US Aggregate Bond Index
Sector Weightings
Individual Sector Selection
Class Resources
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• Charles Schwab
•Research Insight
•Bloomberg
•Morningstar
Individual Security Selection
8
Analyze overall position of portfolio
Research potential buy/sells
Create and submit proposal for class to review
Debate proposal
Vote on proposal• 9
to buy
• 7 to sell
Portfolio Guidelines
9
Portfolio• At least 30% in Fixed Income• At least 5% in Cash
Equity
• No more than 25% in any one sector• No more than 15% in a single industry• No more than 5% in a single security• No more than 10% in foreign securities
Fixed Income
• At least 85% of Fixed Income must have a credit rating of “BBB”
• No more than 10% in any one corporate issuer• Duration should fall within a 25% range of
benchmark index
Portfolio Benchmarks
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• 60% S&P 500• 40% Barclays US Aggregate Bond Index
• Equity• S&P 500• Fixed Income• Barclays US Aggregate Bond Index
Economic Forecast
Economic Forecast
Energy Prices
12
The Money Supply
Value of the Dollar
Individual Taxes
Corporate Taxes
Economic Forecast Fall 2009
13
Current as of
Sept 8th6-month 12-month 36-month
GDP -1.0% -1.0% -2.0% 0.0%
Unemployment 9.7% 10.0% 10.3% 9.9%
Inflation 0.0% 0.0% 1.0% 4.5%
90-day T-Bill 0.1% 0. 1% 1.1% 5.0%
10-Year T-Note 3.2% 3.0% 4.2% 6.8%
30-Year T-bond 4.6% 4.5% 5.9% 8.1%
DJIA 9,497 8,500 7,500 10,500
S&P 1,025 930 850 1,150
Portfolio Details
Portfolio Allocation
15
Equity Distributions
30%
50%
20%
Target Allocation
GrowthValueIncome
17%
61%
23%
Current Allocation
GrowthValueIncome
• Income stocks provide stability through dividends• Minimum at 20%
• Growth stocks may have difficulty expanding in predicted economy• Minimum at 30%
• Value stocks have potential to increase from depressed values• Maximum at 50%
Portfolio Allocation
16
Asset Distributions
55%40%
5%
Target Allocation
EquityFixed Cash 53%
31%
17%
Current Allocation
EquityFixed Cash
• Fixed Income has stability of payments and less risk• Maximum at 40%
• Cash is maximized to provide safety and liquidity• Maximum at 5%
• Equity holds residual amount to still hedge predicted inflation• Minimum at 40%
Second Quarter 2009 Returns
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SAFF Benchmark
Equity* 14.85% 15.22%
Fixed Income†
6.63% 1.78%
Overall 11.56% 9.84%
* Benchmark for Equity is the S&P 500 Index† Benchmark for Fixed Income is the Barclays US Aggregate Bond Index
Third Quarter 2009 Returns
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* Benchmark for Equity is the S&P 500 Index† Benchmark for Fixed Income is the Barclays US Aggregate Bond Index
SAFF Benchmark
Equity* 14.10% 14.98%
Fixed Income†
4.31% 3.74%
Overall 10.18% 10.48%
Second and Third Quarter Returns
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Quarter 2 Quarter 38.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%11.6%
10.2%
9.8%
10.5%
Overall Performance Comparison
SAFFBenchmark
Equity
Sector Managers
Sector Managers Financials Lizette Salazar & Jay Fells
Health Care Nate Wills & Brandon Luther
Technology Micah Lile & Josh Daugherty & Ashley Malsam
Utilities Vinnie Fallico
Industrials Erica Ferge
Energy Tim Haverkate & Michael Mrozek
Cyclicals Katie Young
Telecommunications Jay Fells
Consumer Staples Josh Daugherty & Robert Clark
Basic Materials Timothy Haverkate
5 Largest HoldingsCompany Ticker Sector Market Cap % of Equity
Caterpillar CAT Industrial Large 5.32%
Apple Inc. AAPL Technology Large 4.09%
AstraZeneca AZN Healthcare Large 3.70%
JP Morgan JPMFinancial Services
Large 3.56%
Qualcomm QCOM Technology Large 3.58%
Company Ticker Sector Class% of
EquityYTD Return
1) Cognizant Tech-A CTSH Technology Growth 2.66% 136.88%
2) Network Appliance Inc. NTAP Technology Growth 0% 104.80%
3) Reliance Steel RS Materials Value 1.84% 95.94%
4) Transocean RIG Energy Value 2.41% 81.65%
5) Texas Instruments TXN Technology Value 2.53% 55.80%
5 Best Performers
5 Worst Performing Stocks
Company Ticker Sector Class % of Equity YTD Return
1) Kimco Realty KIM Financials Income 0% -27.02%
2) Lowe’s LOW Cyclicals Value 2.12% -22.28%
3) Valero Energy Company
VLO Energy Value 1.05% -18.11%
4) General Electric GE Industrial Value 1.75% -10.93%
5) AT&T T Telecom Income 1.06% -8.98%
Sector WeightingsSAFF* S&P 500* Target
Financials – Under 9.74% 13.60% 12.00%
Healthcare – Over 12.85% 14.00% 15.00%
Technology – Equal 17.43% 18.30% 18.30%
Utilities – Over 5.48% 4.10% 4.50%
Industrials – Under 10.06% 9.90% 9.20%
Energy – Equal 17.02% 12.40% 12.40%
Cyclicals – Under 5.80% 9.00% 8.00%
Telecommunications – Equal 2.60% 3.50% 3.50%
Consumer Staples – Over 15.12% 12.00% 13.90%
Basic Materials - Equal 3.91% 3.20% 3.20%
* Current weights, as of 11/10/09
International Exposure
American Depository Receipts• AZN, DEO, HNP, TOT
Total International Exposure (Revenue)• 41.11% of sales
Holdings with Highest Int’l Exposure• Phillip Morris, Huaneng Power, Total, Qualcomm,
Agrium
International Sales
86.16%
12.41%1.43%
US & CanadaEuropeAsia & AustraliaOther
Equity Performance
Quarter 2 Quarter 3 YTD0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
14.9% 14.1%
18.9%
15.0% 15.0%
21.0%
SAFF S&P
Q2 Sector Returns
Financial Services
Health Care
Technology
Utilities
Industrials
Energy
Cyclicals
Telecom
Staples
Materials
0% 5% 10%
15%
20%
25%
30%
35%
40%
S&P
SAFF
Q3 Sector Returns
Financial Services
Health Care
Technology
Utilities
Industrials
Energy
Cyclicals
Telecom
Staples
Materials
0% 5% 10% 15% 20% 25% 30%
S&P
SAFF
YTD Sector Returns
Financial Services
Health Care
Technology
Utilities
Industrials
Energy
Cyclicals
Telecom
Staples
Materials
-20% 0% 20% 40% 60% 80%
S&P
SAFF
Style Classification
61%15%
23%
Current Weights
ValueGrowthIncome
45%
30%
25%
Target Weights
ValueGrowthIncome
Fixed Income
Fixed Income Snapshot
CurrentSAFF
BC US Aggregate
Duration 3.62 4.48
YTM 3.22% 7.05%
Average Maturity 4.40 6.56
Average Coupon 4.60% 4.81%
Average Quality AA- AA
Fixed Income Management
0-2 Years 2-4 Years 4-6 Years 6-8 Years 8-10 Years $-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
$110,000
$120,000
Current Standing Ladder Strategy
CurrentProposedTarget Allocation
Maturity
Am
oun
t
Fixed Income Returns
SAFF BC US Aggregate
Second Quarter 6.638% 1.78%
Third Quarter 4.308% 3.74%
YTD (11/05/09) 14.60% 5.71%
Spread Analysis
MBS/ABS
Government
Corporate
Spread Analysis
Government – 3.4
Mortgage Backed – 3.81
Mortgage Backed – 3.81
Corporate AAA – 5.13
Corporate AAA – 5.13
Government – 3.4
0.67
0.66
1.32
ChangeNeeded
0.41
1.32
1.73
Current
0.26
0.66
0.41
0.26
0.66
0.41
5 Year Average
+0.38
+0.63
-0.03
MBS/ABS4.44%
AAA5.10%
10 Yr Treas.3.78%
Target Sector WeightingSector SAFF Target
MBS/ABS 33.5% 33.5%
Government 23.2% 23.2%
Corporate 43.3% 43.3%
34%
23%
43%
TARGET DISTRI-BUTION
MBS/ABSGovernmentCorporate
34%
23%
43%
CURRENT DIS-TRIBUTION
MBS/ABSGovernmentCorporate
Current Sector WeightsSector SAFF BC US AGG
MBS/ABS 33.5% 40%
Government 23.2% 35%
Corporate 43.3% 25%
34%
23%
43%
CURRENT DIS-TRIBUTION
MBS/ABSGovernmentCorporate
40%
35%
25%
BS US AGG BOND INDEX
MBS/ABSGovernmentCorporate
Fixed Income Strategy Ladder Strategy
◦Suitable for Inactive Periods Winter Break Summer Break
◦Protection in Volatile Markets Not locked into specific bonds for a long duration
◦Steadily Maturing Bonds Relatively Liquid Money
◦Economic Forecast Expectations Interest rates will not significantly increase in the near
future
Future of SAFF
Returning SAFF Members
Joshua Daugherty
Ashley Malsam
Returning SAFF Members
Jay Fells
Erica Ferge
CFA ChallengeConsists of students, investment industry
professionals, publicly traded companies and corporate sponsors
Nearly 300 of the top schools compete to form an analysis of a company chosen for them
Each school has a team consisting of 3-5 business students
Each team is assigned one CFA advisor
CFA Challenge In Relation to SAFF
UNC’s Challenge team: Micah Lile, Ashley Malsam, Jay Fells, Josh Daugherty, Erica Ferge
CFA volunteer in conjunction with Challenge is Matthew Blair
Company chosen by CFA Institute: Chipotle (CMG)
First competition: final report is submitted for grading on January 29th
CIS ProjectWorking with the CIS class to make a more
accurate portfolio database for SAFF
• Real time valuation
• Integrate fixed income with equity in spreadsheet
• Instantaneous graphs to compare/evaluate evidence
• Indicator for unstable stocks
Newsletter and Pamphlet
Fall 2009 Newsletter to be mailed during the final week of the semester
UNC SAFF Pamphlet◦In the works◦Provide history and information regarding SAFF◦To be used as a marketing tool
SAFF Websitehttp://www.mcb.unco.edu/Clubs/SAFF/
Mission StatementMembersAdvisorMeeting MinutesRésumésContact InformationFormer MembersPortfolio
SAFF in ProgressNear Target on Equity and Fixed Income
◦Currently working on buy proposals to decrease cash
Equity Strategy in Place◦Working towards target equity distribution and
sector allocation
