HomeMy WebLinkAboutHandouts_Pension General_Handout No. 4_02/01/2010Treasury Inflation Protected Securities (TIPS)
Overview
Treasury Inflation Protected Securities (TIPS) Defined
• Treasury Inflation Protected Securities (TIPS) are a type of Treasury
bond that provide protection against inflation. The principal
amount of the security is adjusted based upon the Consumer Price
Index (CPI), and is increased with inflation and decreased with
deflation. TIPS pay interest semiannually based on the principal
amount. As a result of this principal fluctuation interest payments
rise or fall based upon inflation or deflation of the principal.
This information is provided for educational purposes only. Investing in TIPS does not guarantee preservation of capital or
hedges against inflation. Past performance is used for illustrative reasons and cannot be used to represent future returns.
Objectives of Investment in Treasury Inflation Protected
Securities (TIPS)
Typical objectives of investments in TIPS by pension fund investors
include:
Hedge against inflation
Preserve purchasing power
Increased cash flows
Greater diversification of fixed income assets
(reduce total portfolio volatility)
This information is provided for educational purposes only. Investing in TIPS does not guarantee preservation of capital or
hedges against inflation. Past performance is used for illustrative reasons and cannot be used to represent future returns.
TIPS Investment Vehicles
Direct Investment
Separate Managed Accounts
Commingled Funds
-- Open Ended Mutua/Fund
--Exchange Traded Fund (ETF)
This information is provided for educational purposes only. Investing in TIPS does not guarantee preservation of capital or
hedges against inflation. Past performance is used for illustrative reasons and cannot be used to represent future returns.
TIPS Review as of Dec 31 ~ ZOOJ Zephyr StyIeADVISOR: The Bogdahn Group
- - - --
Manager vs Benchmark: Return through December 2009
(not annualized if less than 1 year)
3
2
c
~ ~~
~--~
I..L
-1
J
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D
------- i
1 year 2 years 3 years 4 years 5 years 7 years 10 years
^ Vanguard Inflation-Protected Secs
^ Barclays Capital U.S. Treasury: U.S. TIPS
^ Barclays Capital U.S. Aggregate
^ S&P 500
Created with Zephyr SlyIeADVISOR. Manager returns supplied by: Morningstar, Inc.
30%
20%
10%
0%
N
~ -10%
-20%
-30%
-40%
TIPS Review as of Dec 31, 2009__
Calendar Year Return
As of December 2009
R: The
^ Vanguard Inflation-Protected Secs
^ Barclays Capital U.S. Treasury: U.S. TIPS
^ Barclays Capital U.S. Aggregate
^ S&P 500
2008 2007 2006 2005 2004 2003 2002 2001 2000
Calendar Year Return
As of December 2009
2009 2008 2007 2006 2005 2004 2003 2002 2001
Vanguard Inflation-Protected Secs 10.80% -2.85% 11.59% 0.43% 2.59% 8.27% 8.00% 16.61 % 7.61
Barclays Capital U.S. Treasury: U.S. TIPS 11.41 % -2.35% 11.63% 0.41 % 2.84% 8.46% 8.39% 16.56% 7.89%
Barclays Capital U.S. Aggregate 5.93% 5.24% 6.96% 4.33% 2.43% 4.34% 4.11 % 10.27% 8.42%
S&P 500 26.46% -37.00% 5.49% 15.79% 4.91 % 10.88% 28.68% -22.10% -11.88%
Created with Zephyr SryIeADVISOR. Manager returns supplied by: Morningstar, Inc.
_ ________ TIPS Rev__ iew as of Dec 31, 2009
Manager Risk/Return
Single Computation
July 2000 -December 2009
C
L
N
s°i°
•
6%
a°i°
z°i°
o°ro
0
-2 ®/0
2%
4%
6%
8%
10%
12%
14%
16%
18
SOR: The Bogdahn Grou
• Vanguard Inflation-Protected Secs
• Barclays Capital U.S. Treasury: U.S. TIPS
• Barclays Capital U.S. Aggregate
Market Benchmark:
~ S&P 500
0 Cash Equivalent:
Citigroup 3-month T-bill
Standard Deviation
Risk-Return Table
Julv 2000 -December 2009: Annualized Summarv Statistics
Return
(%)
Std Dev
~%~ Downside
Risk Beta
vs.
Sharpe
Ratio
Observs.
St le
Vanguard Inflation-Protected Secs 7.13 6.84 5.25 1.5414 0.6488 114
Barclays Capital U.S. Treasury: U.S. TIPS 7.37 6.87 5.29 1.5363 0.6814 114
Barclays Capital U.S. Aggregate 6.24 3.86 2.90 1.1978 0.9188 114
S&P 500 -0.95 16.09 12.36 0.9937 -0.2265 114
Created with Zephyr StyIeADVISOR. Manager returns supplied by: Morningstar, Inc.
TIPS Review as of Dec 31, 2009
Risk/Return Recent 5 years
Single Computation
January 2005 -December 2009
tJ
L
N
3 %or O
I%
~°i°
0 % 2% 4% 6% 8% 10% 12% 14% 16 % 18
OR: The Boadahn
• Vanguard Inflation-Protected Secs
• Barclays Capital U.S. Treasury: U.S. TIPS
• Barclays Capital U.S. Aggregate
Market Benchmark:
~ S&P 500
~ Cash Equivalent:
Citigroup 3-month T-bill
%
Standard Deviation
Risk/Return 5 Years ending Oct 2004
Single Computation
July 2000 -October 2004
+-~
N
Iz°i°
I o°i°
s°i° ~
6%
4%
2% O
o°i°
-2°r°
-a°i
°
°
2% 4% 6% 8% 10% 12% 14% 16% 18%
• Vanguard Inflation-Protected Secs
• Barclays Capital U.S. Treasury: U.S. TIPS
• Barclays Capital U.S. Aggregate
Market Benchmark:
~ S&P 500
~ Cash Equivalent:
Citigroup 3-month T-bill
Standard Deviation
Created with Zephyr StyIeADVISOR. Manager returns supplied by: Morningstar, Inc.