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Home My WebLink AboutHandouts_Pension General_05_08/02/2010 , ' . , �,,� ��. � � � " ; � ;�, 3 ��P�� '� _ �� `�� fi�" t p�-�`�'��t ' a . ,.� �� , y , r'�'��S a� •� ..;.,.. :�'"'s��..:,._. � 6.: r� . �� " 7� T jt �� 1 x '� F � Y � . k%. .d�� '4, �„,s . �., ��.. I',�J I,�'-'�", . � s 'e6�.� � n^Y�:�.: ... .�� Review of Asset Allocation Mixes (Historical and Forward Assumptions) �_ THE � Ba��A�N �' �R�UP �ti' VC� W. B O G D A 1 i N G R O U P. C O,�1 simpli yonr innestment anr! fiduciary decuions � b 8�-`C �( ��n d c� 5-��-�-� � S 9- ■ Historical & Economic Forecast Model Results Traditional Asset Classes: Historical Return* Model Forecast Model Forecast Return** Standard Deviation** Large Cap Equity 11.6% 7.5% 16.3% SmaIIlMid Cap Equity 12.7% 7.8% 20.3% Foreign Equity 10.5% 7.8% 17.0% Domestic Core Bond 9.2% 4.5% 3.8% Cash/Short-Term 5.6% 3.5% 0.5% Non & Alternative Asset Classes: Historical Return* Model Forecast Model Forecast Return** Standard Deviation** Hedge Funds 8.2% 6.5% 7.5% Private Equity 11.9% 8.8% 25.3% Direct Real Estate 11.1 % 8.0% 10.9% Real Estate Securities (REIT's) 11.1 % 7.8% 24.5°/o Emerging Market Equity 10.6% 9.5% 25.3% Global Bond 5.5% 3.8% 8.1 % Domestic High-Yield Bond 9.4% 7.5% 11.3% * 13ased upon historical returns provided by repmsentatives indices of the asset classcs over the trailing 30 Year period ending March 31, 2010. The thirty year window was selected as this provided the longest concurrent time frame oF returns for the corresponding indices for all of the traditional asset classes. Returns for the non-traditional asset classes may reflect shorter time frames which rcpresent thc returns since the inception date of the correspondin� indcx. AII of the indices used are indicated in the Appendix Pagc of this presentation. � ** Model Forecast Returns are based upon inpnt variables (including expected return, volatility, and corrclations) as provided by JP Morgan Asset Vlanagement"Long-Term Capital Market Return Assumptions, November 2009". �� : , ■ Economic Forecast Model — Asset Class Risk vs. Return �o.�o��o Errerging Pvlarke* Equity ♦ 9.D�'�a � 4 Priva�e Equity Direci Real Estate Forei n E ui�r '�.a�7°b '� � * Real Es�:a'e �ecuri*iet ♦ � �rraall�Priid Cap Equi�y Garre�*.ic High-Y'ield Band Large Cap Equity; r,'REiT'sl 7.00� +► Hecige Funds o.'��=: a.J1`= i f �:+`Otl^23tIC �6f2 �011{� 4.0ril`� - __---- -- ♦ Global Bond �► Cashi�hort-Terrr, R �.�03� e �.`�a t u ��.��=_ r i , n o.�r�s: � .�1.�1�J?: 5.01?� 1�1.DL1°•� 15.'J'�1?: �C1.D0'_ �5.0IIa� 30.OD°=++6 Standard Deviation ` � � �� ■ Traditional Asset Class -- Sample Asset Mix 1-- 50/50 Mix 1 Large Cap Equity 50% Small/Mid Cap Equity 0% �^, Foreign Equity 0% � °. Domestic Core Bond 50% i ' Total Domestic Equity 50% Total International Equity 0% ■ Domestic � Bonds Total Fixed Income 50% • '- 1 �1'� Best Case 1-Year Expected 24.15% Return Model Forecast Return 6.63% Worst Case 1-Year Expected Return 1-Year Negative Return 21.51 % Model Forecast Std Dev 8.28% Probability j ! � ! �,I ; � � Traditional Asset Class -- Sample Asset Mix 2-- 60/40 � MiX 2 Large Cap Equity 60% SmaIIlMid Cap Equity 0% ,` � Foreign Equity 0% ` �: � Domestic Core Bond 40% � , Total Domestic Equity 60% Total International Equity 0% ■ Domestic � Bonds Total Fixed Income 40% • '- 1 •�'� Best Case 1-Year Expected 2g,01% Return Model Forecast Return 7.04°/o Worst Case 1-Year Expected Return 1-Year Negative Return 24 27% Model Forecast Std Dev 9.82% Probability ��a ,; ■ Traditional Asset Class -- Sample Asset Mix 3-- 40/10/10/40 Mix 3 Large Cap Equity 40% SmaIIlMid Cap Equity 10% ; r i Foreign Equity 10% � Domestic Core Bond 40% `� Total Domestic Equity 50% Total International Equity 10% ■ Domestic ■ Intl � Bonds Total Fixed Income 40% • '- 1 •��s Best Case 1-Year Expected Z$ 77% Return Model Forecast Return 7.21 % Worst Case 1-Year Expected Return 1-Year Negative Return 24.35% Model Forecast Std Dev 10.08% Probability �� -�,�, � Traditional Asset Class -- Sample Asset Mix 4-- 40/10/15/35 Mix 4 Large Cap Equity 40% SmaIIlMid Cap Equity 10% r Foreign Equity 15% �� Domestic Core Bond 35°/a � � Total Domestic Equity 55% Total International Equity 15% ■ Domestic ■ I ntl � Bonds Total Fixed Income 35% . 1 ' � Best Case 1-Year Expected 30.85% Return Model Forecast Return 7.44% Worst Case 1-Year Expected Return 1-Year Negative Return 25 49% Model Forecast Std Dev 10.89% Probabilit �$- , . �:. ■ Traditional Asset Class -- Sample Asset Mix 5— 40/15/15/30 Mix 5 Large Cap Equity 40% Small/Mid Cap Equity 15% �� , Foreign Equity 15% � - 1 Domestic Core Bond 30% Total Domestic Equity 55% Total International Equity 15% ■ Domestic ■ I ntl � Bonds Total Fixed Income 30% . 1 ..� .. � Best Case 1-Year Expected 33.30% Return Model Forecast Return 7.70% Worst Case 1-Year Expected Return 1-Year Negative Return 26 69% Model Forecast Std Dev 11.84% Probabilit �� . �, �- ■ Sample Asset Mixes (Risk vs. Return) :�.��}_ � I s.s�� s.�a�<: �-- 1 ■ Sam;ple Pv�ix 5 a, �am�le Mix �4 I I� � Sample fvlix 3 ,.D�'- carrple �r1ix, 2 ■ �ample Mix 1 h.�J��= � b.J�'� R e ss�� t , u s.��=.:, � r n �sa� . ?.0�?� $.'JO?� 4.D0°o 1D.`J"�'S 11.D`J''� 1�.'�`il°5 13.Ofl°�'v 1�.DQati Standard Deviation � /� �� < �: ■ Tequesta GE -- Sample Asset (including high-yield bonds) , ..�` :- �, � Mix 5 F �- - . � � �� -�� G '�� . q Large Cap Equity 40% ;� "�� a:, �� , SmaIIlMid Cap Equity 10% ��; Foreign Equity 10% � - Domestic Core Bond 35% � -, �.�,�.. _; . �. ,, . High Yield Bond 5% Total Domestic Equity 50% ■ Domestic ■ �Clt� Total International Equity 10% o Bonds � Other Total Fixed Income 35% . 1 .:' , Other 5% Best Case 1-Year Expected 33.30% Model Forecast Return 7.38% Return Worst Case 1-Year Expected Return Model Forecast Std Dev 10.46% 1-Year Negative Return 26.69% Probability � r�f ■ Sample Asset Mixes (Risk vs. Return) 9.'J o a:; — I 8. S 0'.'0 8."J ^J'.e ■ �ample P��ix S '�� Tec�uesta GE Sample Sample Mix 4 i 1 ■ Sa�rple f�1ix 3 i '.��'; .i _ ■ ; Sam�le �viix. � i ■ Sarr��le P�tix 1 6.;�=. L ; b.��=_ -j- i R e = ;°'- t u =.��a _l___ i r i n :�.s�=: -I-- ?.�J'S 8.JOafi 9.00�� 10.fl0°.� 11.00'.� 1�.D0'.S 13.0�1'� 1�.D�'� Standard Deviation � 1 �� ,T ■ Appendix - -.- . - , Historical returns (Representative Retum �Compounded rate of return for the period_ IndiCes ' ---1 - ------------ Large Cap Equity: S&P 500 Standard Deviation IA statistical measure of the range of a portfolio's pertormance, the variability of a return around its average return over a specfied time penod. Small/Mid Cap Equity: Russe112500 Represents the excess rate of retum over the risk free return divided by the standard deviation of the Foreign Equity: MSCI-EAFE Sharpe Ratio i excess return. The resuR is the absolute rate of return per unit of risk. The higher the value, the DomestiC CoCe Bond: BarClays U.S. better the producY historical nsk performance Aggregate A measure of the difference between a portfolio's actual returns and its expected performance, given Cash/Shot-Term Citigroup 3-month Alpha its level of nsk as measured by heta. ft is a measure af the portfolio's histoncal performance not T-bill explained by movements of the market. or a portfolio's non retum. Hedge Funds• HFRI Fund of Funds Beta A measure of the sensitivity of a portfalio to the movements in the market. It is a measure of a Composite Index portfo�io's non-diversifiable or systematic nsk. Private Equity HFRL• PTivate lssue _---- _ -- -- -- _ __-- ' --- �--- �- � Direct Real Estate & Real Estate Similar to Sharpe ratio but focuses on beta rather than excess risk (standard deviakion). Represents Treynor Ratio �the excess rate of retum over the risk free rate divided by the beta The resuft is the absolute rate of SeCUCitles FTSE Nareit Iretum per unit of risk. The higher the value, the better the producYs historical nsk-adjusted Emerging Market Equity: MSCI-EM - � �performance. Global Bond: ML Global Broad ------ _ — Inforn►ation Ratio �Measured by diwiding the excess return by the tracking error_ The higherthe Information Ratia, the Market ex. US more value-added contribution by the manager. Domestic High-Yield: Barclays Capital Tncking Error A measure of the standard deviation of a portfol�o's performance relative to the performance of the US Corp High Yield benchmark index. Exeess Return Arithmetic drfference betwee� the managers retum and the index return over a spec�ed time penod. The information pcovided ln this — - report is provided for informational Up Market Capture The ratio of average portfolio return over the benchmark during periods of positive benchmark return put'poses only Past performance is �Higher values indicate better product performance. not indicative of future results, and Dawn Market Capture �The ratio of average portfolio retum overthe benchmark during periods of negative benchmark forward looking analysis is ireturn_ Lower values indicate better product performance. _ predicated upon assumptions Batting Average �The batting average of the manager vs. a benchmark is the ratio between the number of periads towards the Capital Markets The where the manager outperforms the benchmark and the total number of periods. information is pCOVided for A measure similar to standard deviation, but focuses only on the negative movements of the return �1lustrative purposes to be used as Downside Risk series ft is calculated by taking the standard deviation of the negative quarterly set of retums_ The tool for analysis of different asset higher the factor the riskier the product. mixes. ,The percentage of a portfolio's performance explained by the behavior of the appropnate benchmarfc. i R-Squared �High R-Square means a higher correlation of the portfoiio's performar►ce to the appropriate The modeling in this report has been I benchmark. compiled through AllocationAdvisor. so��ce zeFny StyleAchisor Historical Returns have been �� provided by StyleAdvisor. � ,.0