HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 16_08/07/2006~~
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Village of Tequesta
Public Safety
Officers' Pension Fund
June 30, 2006
ROCKW OOD CAPITAL ADVISORS
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1401 S. Brentwood Blvd. Suite 400 St. Louis, Missouri 63144 (888) 962-8336 (toll-free) (314) 962-1254 (fax)
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ROCKW OOD CAPITAL ADVISORS 1
Tequesta Public Safely Officers' Pension Fund
Second Quarter 2 006
Total Fund
Portfolio Summary
Change in Market Value
Interest /Dividends
Contributions
Net Disbursements
Net Realized & Unrealized (G/L)
Portfolio Summary
' "`-rt-Term
Fxed hcoi unds
39% 4%
Equities
57%
ROCKWOOD CAPITAL ADVISORS
$17,785
$70,119
($37,240)
($44,346)
Total Fund Performance
2
(Policy) 60% S&P 500 and 40% LBIN
1 Teauesta Public Safety Officers' Pension Fund
Equity -Second Quarter 2006
Market Environment
The U.S. equity markets were turbulent in the second quarter leading into the heat of the
summer. While the quarter got off to a nice start in April (S&P 500 +1.2%), we saw
investors recoil in May as market breadth deteriorated (S&P 500 -3.1 %), and while most
of June was ugly (S&P 500 0.0%), a few strong days toward the end of the month left
investors with renewed optimism. For the quarter the S&P 500 fell 1.4% while the
Russell 3000 was down 2%.
• Though the dominant market trend is still positive, a true "stock pickers" environment has
finally emerged as breadth has deteriorated.
Leadership within our portfolio continues to be concentrated in the cyclical groups:
aerospace/defense, machinery and financials, where we are impressed with the
resilience of the uptrends through this market pullback.
• Laggards came mostly from our exposure to the technology sector, select energy
holdings and healthcare. Information Technology is downgraded further from neutral to
negative as the sector is unable to follow through on earlier positive development as
weakness has spread across all industries. The energy sector rebounded in June;
' however, the sector continues to flash early warning signals as more downgrades occur.
The managed health care group has finally rallied within a downtrend and is our group
focus sell for July.
Looking forward, we have reduced our technology and energy exposure. We continue to
remain bullish on industrials and financials. Large cap stocks are showing signs of
improvement which we may be adding to in the coming months.
Performance
24%
19% I'
14% - 12.6%
10.4%
o ' 8.6%
4% - 2.7% 2.7%
a;~^ y,
-1 % " - -~-
-1.6% -1.4%
-6% j - --
2nd Qtr. YTD One Since Inception
2006 2006 Year (5/ 1 /05)
Tequesta Public Safety S&P 500
ROCKWOOD CAPITAL ADVISORS 3
Equity Characteristics
Second Quarter 2006
i
1
1
I
Sector Weighting
ROCRW OOD CAPITAL ADVISORS
1
Top 10 Holdings
1. J2 Global Communications 3.5%
2. Halliburton Co. 3.5%
3. Caterpillar Inc. 3.3%
4. Precision Castparts Co. 3.2%
5. Loews Corp. 3.0%
6. Chesapeake Energy Corp. 3.0%
7. EI Paso Corp. 2.9%
8. Landstar System Inc. 2.9%
9. Boeing Co. 2.8%
10. Seagate Technologies 2.7%
4
Characteristics
Equity Transactions
Second Quarter 2006
Sold
April Goodyear Tire & Rubber Corp.
April Walgreen Co.
May Swift Energy Co.
May Performance Food Group
June Apache Corp.
June Adtran Inc.
Bought
April J2 Global Communcations
April Ryanair Holdings Plc.
May Prudential Financial
May CIT Group Inc.
June Brown-Forman Cop
June Hewlett-Packard Co
1
ROCRWOOD CAPITAL ADVISORS
5
it
Equity Holdings -June 30, 2006
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CASH 82 1.00 NA 81,578.71 1.00 81,578.71 4.514 3295.78 4.04
AFLAC INC 815 45.28 0.32 36,901.00 46.35 37,775.25 2.090 434.42 1.15
APARTMENT INVT & MGMT 970 38.98 0.53 37,806.04 43.45 42,146.50 2.332 2191.62 5.20
BOEING CO 620 58.58 0.91 36,317.99 81.91 50,784.20 2.810 756.68 1.49
BROWN-FORMAN CORP •CL 8 610 74.52 0.04 45,457.99 71.45 43,584.50 2.412 692.99 1.59
CANADIAN PACIFIC RAILW 935 44.44 NA 41,555.98 51.14 47,815.90 2.646 664.64 1.39
CATERPILLAR INC 800 44.77 0.89 35,812.00 74.48 59,584.00 3.297 1012.93 1.70
CHESAPEAKE ENERGY CORP 1,790 20.50 0.97 36,695.00 30.25 54,147.50 2.996 438.59 0.81
CIT GROUP INC 855 54.92 0.90 46,956.00 52.29 44,707.95 2.474 701.91 1.57
EL PASO CORP 3,540 10.38 0.78 36,744.85 15.00 53,100.00 2.938 557.55 1.05
FAIR ISAAC CORP 990 44.36 0.68 43,918.97 36.31 35,946.90 1.989 82.68 0.23
FISERV INC 960 43.76 0.41 42,009.98 45.36 43,545.60 2.410 0.00 0.00
HALLIBURTON CO 840 43.97 0.62 36,936.98 7421 62,336.40 3.450 498.69 0.80
HCC INSURANCE HOLDINGS 1,305 28.05 0.84 36,603.03 29.44 38,419.20 2.126 522.50 1.36
HENRY SCHEIN INC 985 45.52 0.84 44,841.04 46.73 46,029.05 2.547 0.00 0.00
HEWLETT-PACKARD CO 1,385 32.32 0.84 44,769.99 31.68 43,876.80 2.428 447.54 1.02
INDYMAC BANCORP INC 1,020 36.12 0.89 36,841.99 45.85 46,767.00 2.588 1945.51 4.16
J2 GLOBAL COMMUNICATIO 2,010 23.18 0.23 46,582.96 31.22 62,752.20 3.473 0.00 0.00
LANDSTAR SYSTEM INC 1,100 32.79 0.38 36,069.00 47.23 51,953.00 2.875 119.49 0.23
LOCKHEED MARTIN CORP 610 59.24 0.54 36,135.97 71.74 43,761.40 2.422 700.18 1.60
LOEWS CORP 1,530 23.82 0.22 36,449.04 35.45 54,238.50 3.001 379.67 0.70
MCKESSON CORP 860 45.92 0.66 39,488.96 47.28 40,660.80 2.250 207.37 0.51
MEDIMMUNE INC 1,185 35.32 0.05 41,853.96 27.10 32,113.50 1.777 0.00 0.00
P G & E CORP 1,050 34.97 0.87 36,721.97 39.28 41,244.00 2.282 1361.05 3.30
PRECISION CASTPARTS CO 960 37.69 0.52 36,182.02 59.76 57,369.60 3.175 120.48 0.21
PROTECTIVE LIFE CORP 960 38.56 0.96 37,022.02 46.62 44,755.20 2.477 832.45 1.86
PRUDENTIAL FINANCIAL INC 585 78.05 0.74 45,657.03 77.70 45,454.50 2.515 454.55 1.00
RYANAIR HOLDINGS PLC 845 55.22 NA 46,664.03 52.72 44,548.40 2.465 0.00 0.00
SAFEWAY INC 1,720 22.29 0.83 38,342.07 26.00 44,720.00 2.475 415.90 0.93
SEAGATE TECHNOLOGY 2,165 18.97 NA 41,070.05 22.64 49,015.60 2.712 0.00 0.00
SIMON PROPERTY GROUP I 590 62.30 0.14 36,757.00 82.94 48,934.60 2.708 1751.86 3.58
STERICYCLE INC 670 63.44 0.21 42,506.01 65.10 43,617.00 2.414 0.00 0.00
SUNRISE SENIOR LIVING 1,300 34.46 0.26 44,800.99 27.65 35,945.00 1.989 0.00 0.00
T ROWE PRICE GROUP INC 1,150 33.76 0.06 38,819.06 37.81 43,481.50 2.406 334.81 0.77
TD AMERITRADE HOLDING 1,885 21.46 0.20 40,459.07 14.81 27,916.85 1.545 0.00 0.00
TEXAS INSTRUMENTS INC 1,265 33.58 0.55 42,483.00 30.29 38,316.85 2.120 160.93 0.42
THOINC 1,645 27.20 0.33 44,748.94 21.60 35,532.00 1.966 0.00 0.00
VCA ANTECH INC 1,470 28.86 0.07 42,429.05 31.93 46,937.10 2.597 0.00 0.00
VOLVO AB-SPONSORED ADR 850 43.66 NA 37,111.00 49.01 41,658.50 2.305 1766.32 4.24
'I 1 11 :1 1 II 11.1 :~1' 1:
~~ ROCRW OOD
CAPITAL ADVISORS
6
Tequesta Public Safety Officers' Pension Fund
Fixed Income -Second Quarter 2006
Market Environment
• In the second quarter, the Federal Reserve raised the federal funds rate an additional 50 basis points to
5.25%. The fed funds futures contract, the best predictor of Fed policy moves, indicates that another
increase in August is a strong possibility.
• Yields continued their upward climb in the second quarter of 2006. Treasury yields rose approximately 0.3%
across most maturities. The treasury yield curve is virtually flat, with the six month and 30-year yields both at
5.2% at quarter end.
• Recently, with their economy showing signs of life, the Bank of Japan abandoned their easy money policy
and withdrew the equivalent of $188 billion from the banking system. This move delivered a powerful
monetary shock and contributed to higher rates across the globe.
• Overall, the Lehman Aggregate Index fell 0.1% in the second quarter, and is down 0.7% YTD. US Agency
securities had a very good quarter, with a 0.2% return. Yield spread widening hurt the Corporate sector,
which fell 0.4%.
Sector Index Returns U.S. Treasury Yield Curves
4%
3%
2%
1%
0%
-1%
-2%
4%
2 % ~~
0.1 % 0.2%
0% - -~~
6%
5% ~ ~. .<. .,... ~.,...... ~e~, ~~. ..~~,,,~.~.
3% -' ~ ' -
2% = .6/30/2006
1% ~ 3 2 5 10 3/31 /2006 30
0% nos yrs yrs yrs r - • - - - 6/30/2005 yrs
Fixed Income Performance
0.0%
0.6%
1.4%
1.0%
-0.2%
-2
2nd Qtr. YTD
2006 20ns
One Since Inception
Year (5/1 /05)
~ Tequesta Public Safety ~ Lehman Int. Gov't/Credit
ROCRWOOD CAPITAL ADVISORS
7
Tsy Agy IvBS Q-edit HY
Fixed Income Portfolio Structure
1
June 30, 2006
1
I~
Characteristics
1
t
Tequesta Public Safety
' u.s.
Treasuries
Cash 16%
' 3%
Corporates
5%
' Agencies
40%
' iVbrtgages
36%
ROCKWOOD CAPITAL ADVISORS
1
Effective Maturity
1 to 3 yrs ~
3to5yrs
~ Tequesta Pub. Safety
5 to 10 yrs ^ Lehman Int. G/C
10+
0% 20% 40% 60%
Lehman Int. Gov't/Credit
u.s.
Treasuries
AAO/
Corporate
37%
0%
~encies
22%
8
Bond Holdings -June 30, 2006
41 USDCASHI USD CASH - 4.041 7/1/2006 100.000 40860 3.36 4.080 0.00 0.00 0.00
120 3128X4YB FEDERAL HOME LN MTG Aaa -- 4.868 7/612007 100.000 121385 9.97 4.920 0.96 0.06 0.00
50 31359MZD FEDERAL NAIL MTG ASS Aaa - 4.250 9/28/2007 98.406 49746 4.09 5.590 1.18 1.16 -0.01
60 31359ME7 FEDERAL NATL MTG ASS Aaa -- 5.000 1/23/2009 96.844 60615 4.98 5.490 2.32 1.61 -0.65
25 3133MLT8 FEDERAL HOME LN BKS Aaa - 5.250 2/13/2009 99.438 25352 2.08 5.480 2.37 2.37 0.07
20 3134A3EM FEDERAL HOME LN MTG Aaa -- 5.750 3/15/2009 100.781 20492 1.68 5.430 2.44 2.44 0.07
50 3133X15Y FEDERAL HOME LN BKS Aaa - 4.100 3!30/2009 96.625 48825 4.01 5.440 2.53 2.53 0.08
70 9128275N UNITED STATES TR NT Aaa - 6.000 8/15/2009 102.496 73314 6.02 5.120 2.77 2.77 0.10
60 912828DX UNITED STATES TREAS Aaa - 3.625 6/15/2010 94.793 75953 6.24 5.090 3.62 3.62 0.15
105 31359MHK FEDERAL NATL MTG AS Aaa - 5.500 3/15/2011 100.063 106751 8.77 5.480 4.04 4.04 0.20
50 3133X8RO FEDERAL HOME LN BKS Aaa - 4.700 10/4/2011 95.938 48530 3.99 5.600 4.53 3.39 -0.93
50 912828AP UNITED STATES TREAS Aaa - 4.000 11/15/2012 93.992 47246 3.88 5.120 5.49 5.49 0.35
10 742718DA PROCTER 8 GAMBLE CO Aaa NA 4.950 8/15/2014 95.108 9696 0.80 5.710 6.44 6.44 0.51
10 78387GAP SBC COMMUNICATIONS I A2 C+ 5.100 9/15/2014 92.771 9426 0.77 6.240 6.44 6.44 0.51
15 595620AD MIDAMERICANENERGYC A2 B- 4.650 10/1/2014 91.385 13880 1.14 5.990 6.59 6.59 0.53
11 17275RAC CISCO SYSINC SR NT Al NA 5.500 2/22/2016 96.023 10778 0.89 6.050 7.20 7.19 0.65
15 52517PF6 LEHMAN BROS HLDGS IN Ai B- 5.500 4/4!2016 95.555 14542 1.19 6.110 7.30 7.29 0.66
28 31402DJS FNMA POOL #725773 - 5.500 912512034 96.109 26775 2.20 6.240 5.21 4.66 -1.10
54 36200EUP GNMA I POOL #599190 -- 6.000 3/1512035 99.214 53501 4.40 6.200 4.57 3.90 -1.50
92 36291W7H GNMA (POOL#640896 - 7.000 4/15/2035 103.133 95761 7.87 5.790 2.59 1.86 -1.50
78 36291XMW GNMA IPOOL#641273 - 4.500 4/15/2035 91.552 72062 5.92 5.970 5.83. 5.96 -0.39
44 31402RDG FNMA POOL #735503 -- 6.000 4125/2035 98.441 43940 3.61 6.320 4.67 3.91 -1.49
68 31407NOM FNMA POOL #835760 -- 4.500 9/25/2035 90.514 61452 5.05 6.130 5.83 6.05 -0.40
AO 91d(17RRS FAIAAA P(1(11 873SHQ7 -- 5 SM 1h/95/9(134 QR 139 ARf1RS 7 N F 91h F dd d 7F -1 93
ROCRW OOD CAPITAL ADVISORS g
Economic Environment & Outlook
June 30, 2006
• In the second quarter, the Federal Reserve raised the federal funds rate an
additional 50 basis points to 5.25%. The fed funds futures contract, the best
predictor of Fed policy moves, indicates that another increase in August is a
strong possibility. Most analysts believe the Fed would like to pause, however,
the Fed recently stated that future action is data dependent.
• The Fed must remain on guard against the prospect of rising inflation
expectations. CPI has risen 4.2% over the past 12 months. A tightening labor
market has put upward pressure on wages. In September 2005, average hourly
earnings were rising at a modest 2.7% year-over-year rate; but by June 2006 the
rate had climbed to 3.9%. Labor costs are clearly on the upswing.
• Employment growth has slowed from an average of 176,000 jobs per month in
the first quarter of 2006 to 108,000 in Q2. However, other labor market
indicators are painting a different picture. The unemployment rate dropped to
4.6% in June, a level not seen since mid-2001. High employment coupled with
strong wage growth should maintain the economy's momentum.
' • 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 also been elevated due to the high level of cash-out
refinancings and home equity lending. An increase in long-term interest rates is
likely to put the brakes on housing and could slow consumer spending.
• The Bank of Japan has pursued a zero interest rate policy for years to stimulate
their moribund economy. Recently, with their economy showing signs of life, the
BOJ decided to abandon their easy money policy and withdrew the equivalent of
$188 billion from the banking system. This move delivered a powerful monetary
shock and contributed to higher rates across the globe.
• We have become less defensive from a duration standpoint, and our portfolios
maintain durations near their respective benchmarks. While another Fed rate
hike to 5.5% is likely, the end of this tightening cycle is in sight. However, the
interest rate outlook will be driven by the economic data releases over the next
several months.
ROCRWOOD CAPITAL ADVISORS ~p
Monetary Policy
1
' Fed Funds Target Rate
' 8%
6%
4%
' 2%
0%
6/00 12/00 6/01 12/01 6/02 12/02 6/03 12/03 6/04 12/04 6/05 12/05 6/06
Real GDP Growth
' (Quarterly Growth at Annualized Rate)
0
10 /o
8%
6%
4%
2%
' 0%
-2%
-4%
2002 2003 2004 2005 2006
7.2
5.6
4.3 3.8 4.1
3.7 3.6 3.5 4.0 3.3 3.3 3.0'
2.7
2.2 2.4 1.7
1.7
0.2
Q1 Q2 Q3 Q4 Qi Q2 Q3 Q4 Qi Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
ROCKW OOD CAPITAL ADVISORS
"Bloomberg Median Estimate
11
Inflation Pressures Building
Capacity Utilization
86
84
fO
U 82
a
m
U
~' 80
.`
78
c
co
~ 76
0
0
74
72
70 - - -- -- -- _---- -
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
ROCRWOOD CAPITAL ADVISORS
12
Labor Market Keeps Tightening
Unemployment Rate
9%
8%
7%
' 6%
5%
' 4%
3% - - ____-___- - ~- ----~- __-
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
ROCKWOOD CAPITAL ADVISORS
13
i
Can the Fed Pause?
1
1
1
7%
6%
°
5 /o
0
. °
4 /o
~
c
' p 3%
a~
i~
D'
} 2%
1% J
° I~
- T
0 /o
88 90 92 94
ROCKW OOD CAPITAL ADVISORS
Median CPI
96 98 00 02 04 06
14
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Proxy Voting Record
'~~ROCxw ooD
CAP[TAL ADVISORS
15
1~
' Proxy Voting Record - (continued)
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ROCKWOOD CAPITAL ADVISORS 16
I Henry Schein, Inc. HSIC I
~1~
' Proxy Voting Record - (continued)
Inc. SWY
Elect Directors For For 1720 5/25/06
Approve Executive Incentive Bonus Pln For For 1720 5/25/06
Ratify Auditors For For 1720 5/25/06
Provide for Cumulative Voting Against For 1720 5/25/06
Eliminate or Restrict Severance Against For 1720 5/25/06
Company-Specific-Establishment of an Against Against 1720 5/25/06
Office of the Board
Adopt Policy to Identify and Label Food
Products that Contain Genetically Against Against 1720 5/25!06
Engineered Ingredients
Issue Sustainability Report Against For 1720 5!25/06
ROCRWOOD CAPITAL ADVISORS 17
1~
' Proxy Voting Record - (continued)
1
'~,, ROCRWOOD CAPITAL ADVISORS 18
~ VCA Antech, Inc. WOOF ~