HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 04_02/14/2006
1
~7
1
Village of Tequesta
Public Safety
Officers' Pension Fund
Fourth Quarter Review
ROCKW OOD CAPITAL ADVISORS
' 1401 S. Brentwood Blvd. Suite 400 St. Louis, Missouri 63144 (888) 962-8336 (toll-free) (314) 962-1254 (fax)
Tequesta Public Safety Officers' Pension Fund
-___
Fourth Quarter 2 005
Total Fund
Portfolio Summary
Change in Market Value
Interest /Dividends $15,872
Contributions $94,507
Net Disbursements ($15,508)
Net Realized & Unrealized (G/L) ($52,336)
Accrued Income $14,623
Fxed Incon
40%
Portfolio Summary
Short-Term
nds
i%
Total Fund Performance
-0.9% 5.4%
1.5% 5.9%
(2.4%) (0.5%)
and 40% LBIN
Equities
55%
Tequesta PS
Policy (60/40)
Diff +/-
* Inception 4/22/05
ROCRWOOD CAPITAL ADVISORS 1
Tequesta Public Safety Officers' Pension Fund
Fixed Income -Fourth Quarter 2005
Market Environment
• In December, the Federal Reserve raised the federal funds rate for the thirteenth consecutive time, bringing the funds rate
to 4.25%. The fed funds futures contract, the best predictor of Fed policy moves, indicates that another increase in late
January is a virtual certainty.
• The yield curve continued to flatten in the fourth quarter. Yields rose across all maturities, save for the 30-year bond.
Two-year Treasury yields rose more than 0.2%, while 30-year yields fell 3 basis points. For the year, the spread between
2-and 30-year Treasury yields has narrowed 1.6%, a rather dramatic flattening.
• Two Fed rate hikes in the quarter pushed up rates at the short end of the yield curve. However, continued confidence in
the Fed's inflation-fighting credentials has reduced the inflation risk premium embedded in long term yields, pushing long-
term rates lower and flattening the yield curve.
• Overall, the Lehman Aggregate Index rose 0.6% in the fourth quarter. US Treasuries outpaced all other sectors both in
the quarter and for the year. The Lehman Aggregate had a 2.4% return in 2005, which was the fifth worst return in the 30-
yearhistory of the index.
• The major equity indices had a solid fourth quarter, most with returns in excess of 2%. The fourth quarter rally enabled
the Dow Industrials to finish the year in positive territory. The S&P 500 advanced 2.1 % in the quarter and 4.9% in 2005.
The Dow average rose 2.1 % in the quarter, finishing the year up 1.7%.
Sector Index Returns
U.S. Treasury Yield Curves
s°i°
5%
4% -
i"~
3%~ ~~~
~, l
2% ~ ° 12/31 /2005
1 % 9/30/2005
3 2 5
mos yrs yrs
Y~
- - - - - 12/31 /2004
yrs
Fixed Income Performance
-0.2%
1.6= 1.3%
4th Qtr. 3rd Qtr. Since Inception
2005 2005 (4/22/05)
~ Tequesta Public Safety Lehman Int. Gov't/Credit
,~ ROCgW00D CAPITAL ADVISORS
_~
Tsy Agy IvBS Gedit HY
Fixed Income Portfolio Structure
December 31, 2005
Effective Maturity
Tequesta Public Safety
u.s.
Treasuries
Cash 11%
Agencies
' 41%
' Mortgac
43%
1
I
ROCRWOOD CAPITAL ADVISORS
1 to 3 yrs
3 to 5 yrs ~ Tequesta Pub. Safety
its Lehman Int. G/C
5 to 10 yrs
~-__ -- _ -
0% 20% 40% 60%
Lehman Int. Gov't/Credit
U.S.
Treasuries
Corporate'
32%
Nbrtgages
0%
;ncies
25%
3
Characteristics
Bond Holdings -December 31, 2005 '
0
C
ROCgWOOD CAPITAL ADVISORS 4
1 Tequesta Public Safety Officers' Pension Fund
u
Equity -Fourth Quarter 2005
Market Environment
• The 2005 year was a bit of a roller coaster for equity investors. Returns for the start of
last year were unsettling, as the S8~P 500 declined some 5% through April. Following the
April low, returns began to flow forward until the -6% bruise in October to be followed by a
healthy November. In the end, the major equity benchmark (S8~P 500) returned 4.8% for
2005. This was less than the 10.9% return for the previous year. The Balanced
Composite Index (60% S&P 500/40% Lehman Aggregate Bond) increased 4%.
The "roller coaster" market in 2005 was linked very closely to the dynamics within the
energy component. Energy was the largest driver of returns last year. The Dow Jones
Energy Index advanced 40.2%. The other "market force" was the rising trend for short-
term interest rates which started the year at 2.25% and ended at 4.25%. It is impressive
to us that the U.S. equity market was able to absorb sharply rising energy prices and
short-term interest rates, along with the Iraq strains, and still advance during 2005.
• As we start 2006, your three largest sector positions are industrials (aerospace/defense &
transportation), financials (financial services & insurance), and energy (drillers &
producers). We are currently increasing your positions within information technology. We
are optimistic in our outlook for equity opportunities in 2006.
Rockwood Strategic Equity
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
4th Qtr. 3rd Qtr. Since Inception
2005 2005 (4/22/05)
Tequesta Public Safety S&P 500
ROCRW OOD CAPITAL ADVISORS 5
1
Equity Characteristics
Fourth Quarter 2005
Holdings
• ~ - 3.3% 1. Swift Energy Co 3.4%
• ' • 7.5% 2. Chesapeake Energy 3.4%
• 20.4% 3. Goodyear Tire 3.2%
20.8%
4. Halliburton Co. 3.1
7.6%
5. Precision Castparts 3.0%
• 19.0%
6. Loews Corp. 2.9%
• 7.6%
° 7. Caterpillar Inc. 2.7%
0.0 /o
- 9.1 % 8. Landstar Sys. Inc. 2.7%
~ ' 4.7% 9. Simon Property Group 2.7%
100% 10. McKesson Corp. 2.6%
ROCgW00D CAPITAL ADVISORS 6
Sector Weighting
Top 10
Characteristics
Equity Transactions
Fourth Quarter 2005
Sold
Oct Carnival Corp.
Oct Graco Inc.
Oct Verisign Inc.
Nov Bunge Limited
Nov Lennar Corp.
Nov MDC Holdings Inc.
Nov Tenet Healthcare Corp.
Dec Abbott Laboratories
Dec Duke Energy Co.
Dec Timberland Co.
Bought
Oct AFLAC Inc.
' Oct HCC Ins. Holdings Inc.
Oct Teco Energy Inc.
' Nov McKesson Corp.
Nov Price T. Rowe Group Inc.
' Nov Safeway Inc.
Dec Canadian Pacific Railway Ltd
' Dec Fiserv Inc.
' Dec Texas Instruments Inc.
' 2005 Commissions paid to Lynch, Jones & Ryan $2,239
ROCKW OOD CAPITAL ADVISORS 7
1
Equity Holdings -December 31, 2005
CASH 87 1.00 NA 86,955.42 1.00 86,955.42 5.150 3721.69 4.28
AFLAC INC 815 45.28 0.69 36,901.00 46.42 37,832.30 2.241 340.49 0.90
APACHE CORP 620 58.99 0.17 36,573.99 68.52 42,482.40 2.516 237.90 0.56
APARTMENT INVT & MGMT CO 970 38.98 0.52 37,806.04 37.87 36,733.90 2.176 2181.99 5.94
BAXTER INTERNATIONAL INC. 1,000 36.58 0.30 36,580.00 37.65 37,650.00 2.230 564.75 1.50
BOEING CO 620 58.58 0.61 36,317.99 70.24 43,548.80 2.579 762.10 1.75
CANADIAN PACIFIC RAILWAY LTD 935 44.44 NA 41,555.98 41.95 39,223.25 2.323 509.90 1.30
CATERPILLAR INC 800 44.77 0.81 35,812.00 57.77 46,216.00 2.737 757.94 1.64
CENTERPOINT ENERGY INC 3,090 11.86 0.34 36,647.09 12.85 39,706.50 2.352 734.57 1.85
CHESAPEAKE ENERGY CORP 1,790 20.50 0.87 36,695.00 31.73 56,796.70 3.364 352.14 0.62
DEERE & CO 560 64.81 0.56 36,293.99 68.11 38,141.60 2.259 869.63 2.28
EL PASO CORP 3,540 10.38 0.92 36,744.85 12.16 43,046.40 2.550 555.30 1.29
ENTERGY CORP 500 72.02 0.74 36,010.00 68.65 34,325.00 2.033 1060.64 3.09
FISERV INC 960 43.76 0.30 42,009.98 43.27 41,539.20 2.460 0.00 0.00
GOODYEAR TIRE & RUBBER CO 3,080 11.72 0.28 36,109.92 17.38 53,530.40 3.171 0.00 0.00
HALLIBURTON CO 840 43.97 0.46 36,936.98 61.96 52,046.40 3.083 385.14 0.74
HCC INSURANCE HOLDINGS INC 1,305 28.05 0.85 36,603.03 29.68 38,732.40 2.294 375.70 0.97
INDYMAC BANCORP INC 1,020 36.12 0.93 36,841.99 39.02 39,800.40 2.357 1643.76 4.13
LANDSTAR SYSTEM INC 1,100 32.79 0.10 36,069.00 41.74 45,914.00 2.719 110.19 0.24
LOCKHEED MARTIN CORP 610 59.24 0.20 36,135.97 63.63 38,814.30 2.299 714.18 1.84
LOEWS CORP 510 71.47 0.21 36,448.99 94.85 48,373.50 2.865 295.08 0.61
MCKESSON CORP 860 45.92 0.64 39,488.96 51.59 44,367.40 2.628 208.53 0.47
MURPHY OIL CORP 740 51.35 0.60 37,999.00 53.99 39,952.60 2.366 323.62 0.81
P G & E CORP 1,050 34.97 0.96 36,721.97 37.12 38,976.00 2.309 1383.65 3.55
PERFORMANCE FOOD GROUP CO 1,340 29.50 0.57 39,529.06 28.37 38,015.80 2.252 0.00 0.00
PRECISION CASTPARTS CORP 960 37.69 0.69 36,182.02 51.81 49,737.60 2.946 109.42 022
PROTECTIVE LIFE CORP 960 38.56 0.97 37,022.02 43.77 42,019.20 2.489 714.33 1.70
ROCKWELL COLLINS INC. 780 46.61 0.40 36,356.03 46.47 36,246.60 2.147 373.34 1.03
SAFEWAY INC 1,720 22.29 0.95 38,342.07 23.66 40,695.20 2.410 333.70 0.82
SCHERING-PLOUGH CORP 1,760 20.74 0.57 36,503.98 20.85 36,696.00 2.174 392.65 1.07
SEAGATE TECHNOLOGY 2,165 18.97 NA 41,070.05 19.99 43,278.35 2.563 0.00 0.00
SIMON PROPERTY GROUP INC 590 62.30 0.66 36,757.00 76.63 45,211.70 2.678 1559.80 3.45
SPRINT NEXTEL CORP 1,580 23.01 0.26 36,358.01 23.36 36,908.80 2.186 158.71 0.43 ;~
SWIFT ENERGY CO 1,280 29.27 0.55 37,460.99 45.07 57,689.60 3.417 0.00 0.00
T ROWE PRICE GROUP INC 575 67.51 0.14 38,819.00 72.03 41,417.25 2.453 625.40 1.51
TECO ENERGY INC 2,105 17.33 0.63 36,484.91 17.18 36,163.90 2.142 1591.21 4.40
TEXAS INSTRUMENTS INC 1,265 33.58 0.53 42,483.00 32.07 40,568.55 2.403 734.29 1.81
VOLVO AB-SPONSORED ADR 850 43.66 NA 37,111.00 47.09 40,026.50 2.371 1472.98 3.68
WALGREEN CO 880 45.44 0.18 39,987.02 44.26 38,948.80 2.307 233.69 0.60
~ROCgW OOD CAPITAL ADV1 SORS g
i'
Proxy Voting Record
..
Elect Director Bradley N/A For 12,845 10/27/05
Elect Director Coulter N/A For 12,845 10/27/05
Elect Director Davidson N/A For 12,845 10/27/05
Elect Director Hutchins N/A For 12,845 10/27/05
Elect Director Kiernan N/A For 12,845 10/27/05
Elect Director Luczo N/A For 12,845 10/27/05
Elect Director Marquardt N/A For 12,845 10/27/05
Elect Director Marshall N/A For 12,845 10/27/05
Elect Director Reyes N/A For 12,845 10/27/05
Elect Director Thompson N/A For 12,845 10/27/05
Elect Director Watkins N/A For 12,845 10/27/05
Proposal to ratify the appt of
Ernst & Young LLP for the N/A For 12,845 10/27/05
fiscal yr ending 6/30/2006
ROCRWOOD CAPITAL ADVISORS g
Economic Environment & Outlook
December 31, 2005
~ In December, the Federal Reserve raised the federal funds rate for the thirteenth
consecutive time, bringing the funds rate to 4.25%. The fed funds futures contract,
the best predictor of Fed policy moves, indicates that another increase in late
January is a virtual certainty. However, most analysts believe the end of this
tightening cycle is fast approaching.
~ In our view, the Fed must remain on guard against the prospect of rising inflation
expectations. The persistence of high headline inflation and a tighter labor market
has finally started to feed through into wages. In September, average hourly
earnings had risen by 2.7% on ayear-over-year basis, but by December the rate had
climbed to 3.1 %.
~ Alan Greenspan's term as Fed chairman ends January 31, 2006. Ben Bernanke,
former Princeton economist and most recently Chairman of the President's Council
of Economic Advisers, will replace Greenspan. Bernanke will need to convince the
financial markets of his determination to keep the lid on inflationary pressures.
~ Only once in the last 15 months has year-over-year job growth in the US economy
dropped below the 2 million mark. Over this period, the unemployment rate has
dropped from 5.4% to the current 4.9%. The labor market still appears to be
tightening, putting upward pressure on wages and inflation.
~ Housing has been a significant source of growth in the U.S. economy. Not only have
the direct effects of housing construction provided a major boost, but consumer
spending has been elevated due to the high level cash-out refinancings and home
equity lending. An increase in long-term interest rates could put the brakes on
housing and put a big dent in consumer spending.
~ A swing in the inventory cycle is likely to provide significant stimulus for the economy
in the first half of 2006. The inventory-to-sales ratio, a measure of business stocks
of inventories relative to business sales, is at historically low levels. This has been
an excellent indicator of strong near-term economic growth.
~ We have become less defensive as 2005 concluded, however we continue to
maintain a duration shorter than the benchmark. While another Fed rate hike to
4.5% is highly likely, the end of this tightening cycle is in sight. However, more than
at any time in the recent past, the interest rate outlook will be driven by the economic
data releases over the next several months.
ROCgW00D CAPITAL ADVISORS 10