South Carolina Firefighter’s ... - Abacus Planning Group

South Carolina Firefighter’sRetirement Plan – Investment Update

February 23, 2016

abacusplanninggroup.com

Agenda

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South Carolina Firefighters’ Retirement Plan

Introduction and overview

Plan performance and fees

Economic outlook

Questions and answers

Abacus team biography

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Charles B. Flowers, AIF®[email protected]

Bethany M. Griffith, CFP®, EA [email protected]

Edward W. Kramer, CFP®[email protected]

Cheryl R. Holland, CFP® [email protected]

William R. [email protected]

Anne Marie E. [email protected]

Trustees

Tommy Norris

Skip Hannon

Brantley Hanna

Kyle Minick

Raymond Lloyd

Les Williamson

Tres Atkinson

Dale Worthy

Charlie King

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Quick facts

10,552 participants

592 withdrawals in 2015 = $2,876,680

120 deposits in 2015 = $5,985,061

Portfolio value 12/31/15 = $52,108,019.06

Before any fees(Gross)

After Investment fees have been taken out

After administrative fees have been taken out

1 year12/31/2014 – 12/31/2015

(1.61%) (1.70%) (2.45%)

3 year12/31/2012-12/31/2015

13.89% 12.79% 10.16%

5 year12/31/2010-12/31/2015

21.92% 19.84% 14.30%

Since inception7/31/07 – 12/31/2015

27.45% 23.64% 13.71%

Moderate growth portfolio performance December 31, 2015

Source | Thompson Financial and Portfolio Center

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Portfolio Option 2015 Previous Three Years12/31/2012 – 12/31/2015

Previous Five Years12/31/2010 – 12/31/2015

Conservative Growth (2.44%) 6.48% N/A

Moderate Growth (2.45%) 10.16% 14.30%

Growth (1.90%) 8.90% 15.32%

Portfolio Option Portfolio value12/31/2015

Conservative Growth $393,187

Moderate Growth $51,215,996

Growth $476,912

5 Years till retirement* $21,922

* Individual firefighters who are five years from retirement can choose to move their funds to a money market account

Portfolio Performance December 31, 2015

Source | Portfolio Center

Advisor Fee as % of total plan assets

Fees for a $1,000 investment

Abacus Planning Group 0.31% $3.10

Trading fees 0.01% $0.05

Underlying mutual fund managers 0.43% $4.30

Nexsen Pruet 0.01% $0.10

Toledano and Associates 0.70% $7.00

Total fees 1.46% $14.55

Fees December 31, 2014 – December 31, 2015

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Portfolio fees over time

0.50%

1.00%

1.50%

2.00%

2.50%

2008 2009 2010 2011 2012 2013 2014 2015

Fees over time

US EQUITY LARGE COMPANY 20.0%

US EQUITY SMALL COMPANY 9.0%

INTERNATIONAL EQUITY LARGE

COMPANY 12.0%

INTERNATIONAL EQUITY SMALL COMPANY 7.0%

EMERGING MARKETS 8.0%

INFLATION PROTECTION

8.0%

HEDGING STARTEGIES 6.0%

BONDS 30.0%

Target asset allocation

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Source | Morningstar

What helped returns

What hurt returns

Investment Return % of portfolio Contribution to return

International small company stocks 5.99% 6.6% 0.4%

Hedging Strategies 1.70% 10.0% 0.2%

Fixed Income 0.80% 26.9% 0.2%

Investment Return % of portfolio Impact on return

Emerging Markets (11.66%) 7.5% (0.9%)

Inflation Protection (commodities) (9.25%) 7.1% (0.7%)

US Small Company Stocks (5.63%) 8.6% (0.5%)

What helped and what hurt portfolio returnsDecember 31, 2014 – December 31, 2015

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Benefits of diversification | Moderate

Source | JP Morgan Securitized Product Research, J.P. Morgan Asset Management

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Economic outlook

Is the stock market a good investment?

Is the bond market a good investment?

What are the headwinds our economy is facing?

What are the opportunities for the portfolio?

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Small and value premium in the equity markets⌃

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SmaU and value premium in the equity markets

Company Higher Expected Return

Large

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m VT A _ jw A i ^ * '¦k. 1

Small

Large

Value

Small

P1

P2

Q1 Q2Q1 Q2

P1

P2

Traditional Markets Commodity Markets

Oil prices⌃

Communication program ⌃

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Semi-annual webinar – February and August

Chief’s survey

Semi-annual newsletter

Department visits

Website updates

Convention booth

Quarterly huddle with Toledano & Associates and Association staff

We are always open for suggestions on how we can better communicate with participants

Options available to individuals

Options available to departments

Questions to ask potential investment advisors

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Plan options ⌃

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What may I do with my 1% money when I retire?

Transfer your money to another qualified retirement plan, e.g., 401(k), a Rollover IRA, or transfer your balance to a new department

Withdraw your money, pay federal and state income taxes, and depending on your age potentially an early distribution penalty of 10%

Leave your money in the plan

Combine one or more of the above options

Paid firefighters

Volunteer firefighters

Your money is held in the plan until normal retirement age or years of service.

(Typically between age 55 -62 or 20 years of service). Your withdrawal will be subject

to federal and state income taxes.

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Best Practices for 1% retirement accounts

Update beneficiary designations yearly.

Keep the most recent beneficiary designations on file at the department.

Submit a list of terminated department members that you no longer have their

contact information to Toledano and Associates.

Keep all file of all returned participant statements at the fire department

Withdraw your money, pay federal and state income taxes, and depending on your age potentially an early distribution penalty of 10%

Leave your money in the plan

Combine one or more of the above options

Paid firefighters

Volunteer firefighters

Your money is held in the plan until normal retirement age or years of service. (Typically between age 55 -62 or 20 years of service). Your withdrawal will be subject to federal and state income taxes.

Indicator Current value Reference value good, bad, better

Unemployment 5.0% 5.7% (a year ago) better

Household debt payments as a percent of disposal income

10.02% 11.3% (average) good

Months supply of existing homes 5.2 months 6.2 (average) good

Average hourly earnings all employees $25.24 $22.08 (3/2009) In line with inflation, but not uniform across the workforce.

Household debt to GDP 79.5% 87% (average) good

Car sales 17.2 million 14 million (average) good

Federal debt to GDP 102.5% 53% (average) can be addressed. 118% in 1946

Health care expenditures 2.28 billion 1.1 billion (in 2000) ??

Shiller PE 10 for the S&P 500 index 24.6 16.6 (average) warning signal for expectations.

Bulls vs. Bears⌃What are the economic gauges telling us?

Source | St. Louis Federal Reserve

128.4

‐43.5

480.2

0?

1952 – 1965 1966 – 1980 1981 – 2000 2001 - 2020

Cumulative Real Growth of Household Financial Asset Wealth⌃Data lumped into regimes

US Small Company stocks (ticker DFSCX), US Large Company stocks (ticker VFINX)

Small premium^US Small Company stocks minus US Large Company stocks 1993–2015

$‐

$0.200

$0.400

$0.600

$0.800

$1.000

$1.200

$1.400

$1.600

$1.800

$2.000

5/96 – 3/99 3/06 – 3/09 11/13 – 12/15

35 months 37 months 26 months

DFA US Large Cap Value (ticker DFLVX) minus Vanguard Index 500 (ticker VFINX)

Value Premium^US Large Company Value stocks minus US Large Company stocks1993–2015

$‐

$0.200

$0.400

$0.600

$0.800

$1.000

$1.200

$1.400

$1.600

9/95 – 2/00 7/07 - 2/09 4/11 - 8/12 8/14 – 12/15

54 months 20 months 17 months 17 months

US long rates heavily influenced by global rates ⌃

Source | Bloomberg

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US Long rates heavily influenced by global ratesA

0 9 Correlation between US short-term and US long-term interest rates

0.8

0.7

-| o Correlation between US and developed markets tong-term interest rates

Source | Bloomberg

Model Portfolios ⌃

Conservative Growth

50% conservative oriented investments. 50% growth oriented investments.

Projected return 5.25%Range (20%) – 24%Dollar range for a $5,000 investment: ($1,000) - $1,200

Moderate Growth Portfolio


Projected return 6.75%Range (26%) – 32%Dollar range for a $5,000 investment: ($1,300) - $1,600

Growth Portfolio


Projected return 7.25%Range (31%) – 38%Dollar range for a $5,000 investment ($1,550) - $1,900

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We at Abacus feel truly honored to have the opportunity of working with the South Carolina Firefighters’ Association, the Trustees and the participants and look forward to continuing to serve each of you.

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