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HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 03_11/02/2009~~~ :~ tea;, ~~~ ~R ~,M, ~~~ Tequesta Public Safety Officers' Preliminary Report 3rd Quarter 2009 ~K'~~~~r.t~c?c;t~;~tthc;ttc~t~t~.c:ont THE ~o~ DAHN ~RQUP simplifying ynxr i~it~esrn~rui rru.i ~rlrn~i.~ry d.~risio»s No Text 3~d Quarter 2009 Market Environment THF. BOGDAHN GROUP The Market Environment Major Market Index Performance Period Ended: September 30, 2009 ^ Both equity and fixed income markets posted strong results for the quarter ended September 30, 2009. However, evidence of the recent financial crisis is still very visible in the 1-year performance of the domestic equity indices. ^ Outside of the United States, emerging markets once again outpaced developed markets during the quarter. While the performance differential for the quarter is small (+1.5%), the 1-year differential of +15.6% is substantial. ^ Domestic smaller capitalization issues, represented by the Russell 2000 (+19.3%) and Russell MidCap (+20.6%) indices, respectively, exceeded large cap issues for the quarter. However, the dominance of small and midcap indices reflected in the 3rd quarter performance diverges over the 1-year period. During this timeframe, the Russell 2000 posted the weakest domestic equity index performance (-9.5%) while the Russell P~IidCap index posted the strongest (-3.5%) relative result. MSCI ACWxUS MSCIEAFE MSCI Emerg. Mkts. S&P 500 Russel 13000 Russell 1000 Russell MidCap Russel 12000 Barclays US Agg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill Quarter Performance 19.8 19.5 z1.o % 15.6 16.3 1s.1 % 20.6 % 19.3 3.7 z.o % 2.3 8.1 ^ The Barclays aggregate return of +3.7% for the quarter was dominated by the continued recovery in credit as the Barclays Corporate Investment Grade index returned an impressive +8.1%. For the trailing 1-year period, the Barclays Aggregate posted a strong +10.6% return, which easily outpaced the majority of both domestic and international equity indices. Source: Barclays Capital, MSCI Capital Markets, Russell Investments 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% One Year Performance I MSCI ACWxUS MSCI EAFE MSCI Emerg. Mkts. SS~P 500 Russel 13000 Russel 11000 Russell MidCap Russell 2000 Barclays US Agg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% THF. 2 ~ BOGDAHN GROUP The Market Environment Domestic Equity Style Index Performance Period Ended: September 30, 2009 ^ Led by the continued recovery in financial issues, value indices outpaced their growth counterparts by 5.4% on average for the 3rd quarter. The financial sector, which represented more than 25% of each of the Russell value indices at the end of the quarter, was the largest contributor to value index outperformance. ^ The 5.4% average differential between value and growth index results for the 3rd quarter were much larger than the 1.5% average experienced between the style indices during the 2nd quarter. However, regardless of a portfolio's particular style allocation, much like last quarter, the 3rd quarter's domestic equity performance represented a welcome relief to portfolios that continue to rebuild from a historically difficult period for long-term investors. 3000 Value 30001ndex 3000 Growth 1000 Value 10001ndex 1000 Growth MidCap Value MidCaplndex MidCap Growth 2000 Value 20001ndex 2000 Growth Quarter Performance One Year Performance I ^ The strength of value indices that is evident in the 3rd quarter's results disappears and reverses in the 1-year performance of the value benchmarks. This weakness in the 1-year results is the impact of the market crisis, particularly in the financial sector, and is visible across the capitalization spectrum in the value index returns. 3000 Value 30001ndex 3000 Growth 1000 Value 10001ndex 1000 Growth MidCap Value MidCaplndex MidCap Growth 2000 Value 20001ndex 2000 Growth -io.a % -6.4 -2.2 -10.6 -6.7 -1.9 -7.1 -3.5 A.4 -12.6 -s.s % -6.3 -20.0% -15.0% -10.0% -5.0% 0.0% Source: Russell Investments ~~ ThIF. 3 ~ ,. BOGDAHN GROUP 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% The Market Environment GICS Sector Performance & (Quarter-End Sector Weight) Period Ended: September 30, 2009 ^nTR Russe111000 ^ Large cap stock performance was positive across all ten o,-Year GICS (global industry classification standard) sectors with five of the index's ten sectors outpacing the +16.1 return of the Russell 1000. ^ The financial sector returned of +24.9% for the quarter, which was the strongest sector of the Russell 1000 index. This was the second consecutive quarter of top performance for the financial sector, which is now up more than 50% over the last 6-months. However, the financial sector's steep decline is still evident in the 1- yearsector performance of -22.3%. ^ The strength of 3rd quarter returns in the consumer discretionary (+20.5%) and information technology (+17.2%) sectors were enough to push the trailing 1-year results of both sectors into positive territory. ^ Small cap stock performance was also positive across all ten GICS sectors with the energy (+27.9%), materials (+36.1 %) and consumer discretionary (+26.4%) sectors finishing well ahead of the +19.3% return of the Russell 2000 index. ^ The combination of a strong 3rd quarter of 2009 being added and a weak 3rd quarter of 2008 falling off resulted in the performance of the materials (+5.0%) and information technology (+9.1 %) sectors of the Russell 2000 index turning positive for the 1-year period. Source: Thompson Financial 4 Energy (11.3%) Materials (4.0%) Industrials (10.4%) Consumer Disc (10.0%) Consumer Staples (10.7%) Health Care (12.9%) Financials (15.3%) Info Technology (18.4%) Telecom Services (3.1%) Utilities (3.9%) ^QTR o1-Year Energy (4.9%) Materials (4.4%) Industrials (15.8%) Consumer Disc (13.8°/ ) Consumer Staples (3.3%) Health Care (14.3%) Financials (19.8%) Info Technology (19.3%) Telecom Services (1.2%) Utilities (3.2%) 11.3 -14.1 22.1 % -3.6 21.7 % -11.6 20.5 1.1 11.4 ~.3 % 9.8 -2.8 24.9 -22.3 17.2 6.s % 6.6 % -1.0 % 6.7 -5.7 -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% Russell 2000 27.9 -32.6 36.1 5.0 % 7.8 % -15.9 26.4 -1.a% 11.7 % -2.2 13.7 -5.9 % 16.1 -23.5 20.3 9.1 8.5 % -11.0 7.0 % -7.3 % -50.0% -30.0% -10.0% 10.0% 30.0% ~~ BOGDAHN GROUP The Market Environment Quality Rankings* Breakdown by Weight and Quarterly Performance Period Ended: September 30, 2009 ^ Within the Russell 1000 index, the performance by each of the quality segments was more equally distributed than the 2nd quarter where lower quality issues dominated performance. The only rating segment of the index to show noticeably weaker results than the broad index return of +16.1 % during the current quarter was stocks in the "A-" category, which returned +9.2% . ^ Unlike the large cap index, the "performance by quality" of the small cap Russell 2000 index continued to be led by lower quality issues. Stocks rated "C" and "D" within the index returned +30.7% and +75.7% ,respectively, for the 3rd quarter. - ,,, . A+ 10.4% - 17.9% A 10.5% 14.9% A- 14.7% 9.2% B+ 17.3% 18.1% B 5.8% 19.4% B- 28.4% 16.7% C 2.1% 16.3% D 0.0% 0.0% Not Rated 10.8% 18.3% N/A 0.0% -13.9% ~~~ . - A+ 3.1% 12.4% A 5.1% 13.9% A- 0.8% 12.7% B+ 17.8% 18.0% B 20.2% 22.3% B- 12.3% 14.3% C 10.7% 30.7% D 0.1% 75.7% Not Rated 29.3% 17.7% N/A I Ii ~ 0.6% a.,_ 26 9°~ Quality Rankings Table Highest ~ High ~ Above Average ~ Average ~ Below Average ~ Lower ~ Lowest ~ In Reorganization *Standard and Poor's rankings are generated by a computerized system and are based on per-share earnings and dividend records of the most recent 10 years. -October 2005 report Source: Thompson Financial ~~ Ttt1~: 5 ~ BOGDAHN GROUP The Market Environment International and Regional Market Index Performance (# Countries) Period Ended: September 30, 2009 ^ As the United States tries to bolster the domestic economy through its various stimulus programs, the value of the USD (U.S. dollars) continues to weaken across the globe. This USD depreciation is evident in the performance differentials of both the broad (EAFE: 4.6%) and regional segments (Pacific: 7.8%) of the international indices. ^ International Markets posted strong results for the 3ra quarter, 2009 in both local currency and USD. The MSCI-EAFE (Europe, Australasia & Far East), which represents the world's 21 developed markets (excluding Canada), returned +19.5% in USD (+14.9% local). The MSCI-EM (22 emerging market countries) returned a stronger ~-21.0% in USD (+16.9% local). As a result, 3rd quarter results of international portfolios with emerging market holdings should benefit relative to those with holdings limited to developed market countries. ^ The "one-sided" currency effect that is clearly visible in the 3rd quarter's results is not as linear when reviewing the 1-year performance. In fact, the European region of the developed markets actually show dollar strength in the 1-year period with a return of +2.3% in USD vs. +2.7% in local currency. Source: MS!:l Capital Markets s ^QTR (USD) ^QTR (Local) AC World x US (44) WORLD x US (22) EAFE (21) Europe (16) Pacific (5) Emerging Mkt (22) EM Europe (5) EM Asia (8) EM Latin Amer (7) Frontier(25) Quarter Performance 1s.o°i° 17.1% 17.6% 15.0% 19.5% 14.9% 23.0% 20.3% 13.2% 5.4 21.0% 16.9% 29.4% 24.0% 19.8 16.9% 24.8% 17.5 10.9% 10.5 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% ^1-Year (USD) 01-Year (Local) Ac world x us (44) WORLD x US (22) EAFE (21) Europe (16) Pacific (5) Emerging Mkt (22) EM Europe (5) EM Asia (8) EM Latin Amer (7) Frontier(25) One-Year Performance -1.8 -2.1 °~ -1.s°ro -3.9% 3.8% -1.2 2.3% 2.7% 7., % -7.3% 19.4% -8.4% 18.5% -6.6 28.1 27.9% 19.8 -26.8 18.4 °/ -21.6 -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 7tit. BOGDAHN GROUP The Market Environment Country Index Performance in U.S. Dollars Period Ended: September 30, 2009 ^ Quarter ^Quarter Developed Market Countries Developing Market Countries ^ 1-Year ~ 1-Year USA Canada Singapore New Zealand Japan Hong Kong Australia United Kingdom Switzerland Sweden Spain Portugal Norway Netherlands Italy Ireland Greece Germany France Finland Denmark Belgium Austria South Africa Morocco Egypt Turkey Russia Poland Israel Hungary Czech Republic Peru Mexico Colombia Chile Brazil Thailand Taiwan Philippines Malaysia Korea Indonesia India China -50.0% -30.0% -10.0% 10.0% 30.0% 50.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% Source: MSCI Capital Markets ~~ BOGDAHN ~' GROUP The Market Environment Domestic Credit Sector & Broad Market Maturity Performance Period Ended: September 30, 2009 ^ Much like the 2"d quarter, the broad market index results, which consist of government, mortgage-backed and corporate securities, mask a much wider performance disparity within the fixed income market's three segments. ^ Government (+2.0%) and mortgage-backed (+2.3%) results were relatively mild, but positive for the quarter. In contrast, Corporate issues in all quality segments posted stronger results that were more than double the performance of the government or mortgage-backed sectors for the quarter. The outsized 1-year performance of the corporate indices, particularly high yield, are a function of the strong 3rd quarter 2009 results that were added (+14.8%) and weak 3rd quarter 2008 results (- 9.5%) that were dropped from the trailing calculation. ^ Although the 1-year performance of the fixed income indices in the graph appear to make a strong argument for both lower quality (+22.4%) and longer maturity (+17.4%) issues within a fixed income portfolio, one must consider ~~vhere we were just 1-year ago. Memories of the volatility and fear associated with the recent crisis should remind investors that such "black and white" conclusions are rarely beneficial to long-term investors. While it is clear that fixed income investors with an appetite for risk have benefited over the last year, the performance of lower quality issues tends to be very cyclical. ~ Quarter Performance AAA a.e% I AA s.o A 7s% BBB 9,9 <BBB ~`~ ~ ~- 1a.e% Govt z.o% Mort 2.3% G/M/C =Broad Market (Government + Mortgage + Corporate) 1-3yrG/M/C 1.s% 1-SyrG/MIC z.z% 1-10yrG/M/C z.s% 10+yr G/M/C s.s% AAA AA A BBB <BBB Govt Mort 1-3yr.. 1-Syr. 1-10yr.. 10+yr.. 0.0% 5.0% 10.0% One Year Performance 10.8 6.7 9.7 % 7.0 % ® a1 % 1 s. o°r° 20. o°i° 15.5 19.5 -- zz.1 % zz.a% 17.a % 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: Merrill Lynch Index System ~~ TF~[` s ` BOGDAHN GROUP The Market Environment Market Rate & Yield Curve Comparison Period Ended: September 30, 2009 ^ The Fed left rates unchanged during the quarter as economic conditions, although still quite weak, continued to improve. The Fed also continued to reassure market participants that economic conditions would likely warrant exceptionally low rates for an extended period of time. ^ As a result of the general stability of the financial markets during the quarter, many of the market's spread levels and "fear" gauges continued to contract from historically wide levels. ^ The Treasury yield curve declined moderately across the maturity spectrum during the third quarter. The benchmark 10-year Treasury finished the quarter with a yield of 3.31 %. This yield represented a decline of 22 basis points from the yield at the end of the 2nd quarter (3.53%). ^ The last day of the 3rd quarter marked the start of the much anticipated PPIP (Pubic-Private Investment Program). The program to purchase the legacy (troubled) mortgage-backed assets of banks started with an initial value of $4.5 billion, 25% of which came from private investors. ~.oo s.oo s. o0 a.oo 3.00 2.00 1.00 6.00 s. o0 a. o0 3.00 2.00 1.00 o. 00 2009 Market Rates ~ Fed Funds Rate -TED Spread - 3-Month Libor -BAA/10yrSpread -10yrTreasury 10yrTIPs o. o0 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Treasury Yield Curve 112/31/2008 ~-3/31/2009 6/30/2009 X9/30/2009 Imo 3mo 6mo 1yr 2yr Syr Syr Tyr 10yr 20yr 30yr Source: Mortgage X.com , US Department of Treasury & St. Louis Fed ~~ TFIF: 9 ~ BOGDAHN GROUP The Market Environment Assessing the Impact of the S&P 500 Decline & the "Cruelty of Math" Period Ended: September 30, 2009 SPX (S8P 500) Index Level VIX Index Level , ~~ ^ The SPX Index measures the daily price change in the S&P 500 (excluding dividends). The CBOE Volatility Index (VIX) is a measure of market expectations of near- term volatility conveyed by S&P 500 stock index option prices. It acts as a barometer of investor sentiment and market volatility. ^ After reaching a peak of 1,565.15 on 10/9/07, the SPX fell to a low of 676.53 on 3/9/09. This drop of 888 points on the inclex represented a loss of 56.8% from its peak. This decline, particularly as the financial crisis reached its crescendo, included a significant increase in market volatility as measured by the VIX. ^ From the 676.53 low on 3/9/09, the SPX index rose to 1,057.08 by the close of the 3~d quarter. This 380 point gain from the low represented a return of 56.3%. As would be expected, this equity market gain was coupled with a rc~duction in investor pessimism as the VIX decreased to a more historical level. 1,600 1,soo 1,aoo 1,300 1.zoo 1,100 1.000 900 soo 700 soo so°i° 50% ao°i° ^ Despite a more than 50% gain since its low, the index remains ',i80 points or 48.1 % below its peak level. We 30% call this phenomenon the "cruelty of math" in that a drop of 50% in value requires a gain of 100% to reach its 20°'° original level. 10% ^ In order to put the magnitude of the market's decline in perspective, the lower table illustrates the annualized °% return that the SPX will be required to post from its 9/30/09 level to the previous peak of 1,565.15. Annualized SPX return required to reach 10/9/07 index peak zt7% 1a.o% 10.3 8.2 % i - 6.8% 5.8% 5.0 % 4.5 % 4.0 J~~~ ease ea~~ ~a~~ easy easy easy ~a~~ easy ea~~ so ao 70 so so 1,057.08 ao 30 zo 10 0 Source: Yahoo Finance, CBOE ~~ THt: 10 ~ BOGDAHN GROUP ~ o~ o~ The Market Environment How Quickly Can the Economy Recover from a Recession? Period Ended: September 30, 2009 Q2-2009- Total GDP and its components ($Billions) ^ The Gross Domestic Product (GDP) of the United States is measured by the combination of personal consumption expenditures, gross private (business) investment, government consumption expenditures & investment and net exports. While the National Bureau of Economic Research (NBER) defines the official beginning and end of an economic recession* based on several factors, a recessionary period is commonly defined as two consecutive quarters of negative GDP growth. ^ The decline in housing values, the tightening of consumer credit conditions, the reduction in household wealth, and a deteriorating employment outlook have all combined to cause a reduction in personal consumption. ^ While the Government can provide temporary boost to GDP through various relief programs or direct stimulus, it is clear than personal consumption (70.7%) is the main driver of economic growth. ^ Although the NBER has not declared the recession officially over, many experts, including Fed chairman Bernanke, have stated that the current recession has passed. However, given the length and magnitude of this recession, combined with high unemployment, low capacity utilization and various other factors, it is likely that the ultimate recovery in economic growth will be measured. 'In December of 2008, the NBER officially declared that the current recession began in December of 2007. 16,000 1a.ooo 12.000 10,000 a.ooo s,ooo 4, 000 2,000 0 -2.000 10.0 s.o s.o a.o 2.0 o.o -2.0 -a.o -s.o -8.0 514,151.2 $9,999.3 $2,929.4 $1,561.5 -2.4% -T. 70.7% 11.0% -$339.1 20.7% Gross domestic Personal Gross private Net exports of Government product (GDP) consumption domestic goods and consumption expenditures investment services expenditures and gross investment quarterly GDP percent change 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Bureau of Economic Analysis ~~ THe BOGDAHN GROUP Total Fund September 30, 2009 Asset Allocation By Style -Current Quarter June 30, 2009: $4,126,146 September 30, 2009: $4,683,940 Segments Market Value All ocation Segments Mark et Value Allocation ~$>' / h~o~ // l l $1 ~ ~~o~ ^ Equity 2,454,887 59.5 ^ Equity 2,754,735 58.8 ^ Fixed Income 1,513,376 36.7 D Fixed Income 1,651,142 35.3 ^ Cash Equivalent 157,883 3.8 ^ Cash Equivalent ?78,063 5.9 tz ~~ BOGDAHN GROUP Total Fund September 30, 2009 Asset Allocation By Manager -Current Quarter 1 June 30, 2009: $4,126,146 September 30, 2009: $4,683,940 I•'[arket Value Allocation Market Value Allocation ^ Rockwood Capital Advisors Balanced Account 4,108,133 99.6 ^ Rockwood Capital Advisors Balanced Account 4,680,910 99.9 Receipt & Disbursement 18,012 0.4 ~ Receipt & Disbursement 3,030 O.l ~~ THt. ~s ` BOGDAHN GROUP Tequesta Public Safety Officers' Total Fund October 1, 2008 To September 30, 2009 14 ~~ BOGDAHN GROUP Tequesta Public Safety Officers' Financial Reconciliation As of September 30, 2009 Financial Reconciliation Quarter Rockwood Capital Advisors Balanced Account 4,103.133 5.335 228,593 - -5,385 -1,179 23,686 321 G7R 4.630.910 Receipt & Disbursement IR,012 -5,335 - - - -9.597 - - 3.030 Total Fund Portfolio 4,126,1J1i - 228,593 - -5,385 -10,777 23,686 321,678 J,683,9J0 Financial Reconciliation FYTD Rockwood Capital Advisors Balanced Acrnunt 4,244,973 -63,615 553,434 - -10,942 -23.233 103,045 -122.696 4.680.910 Receipt & Disbursement - l>3,615 5,537 -56,525 - -9,597 - - 3.030 7btal Fund 4.244,973 - 558,971 -SG.525 -10.942 -32,886 103,045 -122.696 4.683 940 ~~ T11E ,5 ` BOGDAHN GROUP Tequesta Public Safety Officers' Comparative Performance Trailing Returns As of September 30, 2009 otal Fund (Net) 8.12 -1.39 -1.39 -6.74 -0.21 0.84 ,~i ,I I~und P~~lie~ 10.6 0_-1ti !)_-lR -b.~l -U.-19 l.~-4 Difference -2.44 -1.87 -1.87 -0.53 0.28 -0.70 'otal Fund (Gross) 8.25 -1.12 -1.12 -6.37 0.22 1.31 ,,~_~I i ~u~d Pc~lic~ I O.~G 0 ~S 0.-13 -6.~ 1 -0.-4'~ I .~ k Difference -2.31 -1.60 -1.60 -0.16 0.71 -0.23 Total Equity Portfolio 11.73 -11.08 -11.08 -16.39 -5.17 -2.64 SR1'S00 Ii.GI -G ')I -G ~~I -1-4.77 -5.-~~ -l.bl Difference -3.88 -4.17 -4.17 -1.62 0.26 -1.03 Domestic Fixed 3.55 9.03 9.03 6.25 6.15 5.57 [iu ..~i~ [ntermcdiatc l .S. Government (~redit ;.'~ 10.01 10.01 ~, ~ I t~. I ~ >.-40 Difference 0.30 -0.98 -0.98 -0?6 0.00 0.08 Returns for periods greater than one year are annualized. Returns are expressed as pe*centages. 16 N/A 2.63 05/O1 /2005 \ \ ~.~~ N/A 0.21 N/A 3.10 05/01/2005 .~ ~.-t~ N/A 0.68 N/A 0.61 05/01/2005 L(1~ 0.07 N/A 0.~4 N/A 5.26 05/01/2005 N/A 0.11 ~~ Tltt, BOGDAHN GROUP Tequesta Public Safety Officers' Comparative Performance Fiscal Year Returns As of September 30, 2009 'otal Fund (Net) -1.39 -11.80 14.24 4.07 rt.~l I~un~l I'~~lic~ !).aS -I~_~h I'_0~ ?.SS iifference -1.87 0.66 2.22 -3.8] otal Fund (Gross) -1.12 -11.34 14.82 4.67 ~~r,~l I~un~l1'~~lic~ I1_~S -I~.-16 I'.IL 7.8R Difference -1.60 1.12 2.80 -3.21 N/A N/A \ \ \ N/A N/A N/A N/A ~ \' :1 N/A N/A Equity -11.08 -21.39 21.99 5.38 N/A N/A tic~l' ~IIU -~> ~~I -~1.9X 16.-t-1 1U.79 I ~.~~ 1:;.87 Difference -4.17 0.59 5.55 -5.41 N/A N/A Fixed Income 9.03 3.55 5.93 3.88 N/A N/A 13~ucl~n ti (~;~~iiial 1 ~.ti_ (~c~ecrnmcni ('rrdit I I .~(, ~.-I I X118 ~.~6 ;j Difference -2.43 1.14 0.85 0.55 N/A N/A Returns ti>r periods greater than one year are annualized. Returns are expressed as percentages. ,~ ~~ BOGDAHN GROUP No Text Ti i i-,, BOGDAHN GRO UP simpli '')w pour ijjl,cstlflvlll Mid fidticiary (h,t I'Siolls C III c �l tit i W alLl C C I d R ti I I I V Road ti I d 1 No Text