Small Cap Value Fact Sheet - Fiduciary Management Associates, Inc.

Fiduciary Management Associates
SMALL CAP VALUE EQUITY
MARCH 31, 2015
FIRM PROFILE/PHILOSOPHY
INVESTMENT PROCESS
Fiduciary Management Associates, LLC (“FMA”) is an
independent
employee-owned
institutional
asset
management firm focused exclusively on small cap value and
small-mid cap value investing. Founded in 1980, FMA is
approximately two-thirds female/minority owned and
manages $1.7 billion in assets.

Identify macro and micro catalysts that should drive the
growth of earnings and cash flow

Employ fundamental research analysis to help identify
attractively valued stocks

FMA believes the key to generating superior performance is
selecting attractively-valued stocks with identifiable catalysts
that we expect to generate accelerating earnings and cash
flow growth.
Construct diversified portfolios designed to participate in
up markets and significantly outperform through the
preservation of capital in down markets

Objective—over a full market cycle, generate 200 bps of
annualized alpha with approximately 85% of the risk of
the market
PORTFOLIO MANAGERS
PORTFOLIO CONSTRUCTION GUIDELINES
Kathryn Vorisek
Chief Investment Officer, Portfolio Manager
 Joined FMA in 1996
 30 Years Experience (19 years at FMA)
 MBA, Northwestern University, Kellogg Graduate School of
Management; BS, Marquette University

Portfolios are well diversified and generally hold 70 to 90
securities

Universe consists of US-based companies with market
capitalizations between $200 million and $3 billion at
time of purchase

Sector weights constrained to the greater of two times
the benchmark or 15% of the portfolio

Individual stock weighting based upon fundamental conviction and liquidity; generally range between 1-2% of the
portfolio with a maximum of 5% in any one security. Fully
invested; 5% maximum cash allocation
Leo Harmon, CFA
Director of Research, Portfolio Manager
 Joined FMA in 2003
 21 Years Experience (11 years at FMA)
 MBA, Duke University, Fuqua School of Business;
BS, Bradley University
TOTAL RISK VERSUS TOTAL RETURN1
UPSIDE/DOWNSIDE CAPTURE1
120
10.0
FMA
SCV
Median*
9.0
RoR
110
Upside
(%)
Russell 2000
Value
8.0
100
FMA Has Outperformed by
Participating in Up Markets
& Preserving Capital in
Down Markets
Russell 2000
Value
FMA
7.0
90
6.0
5.0
18.0
80
19.0
20.0
21.0
Standard Deviation (%)
1
22.0
80
90
100
110
120
Downside (%)
Composite performance for the period March 31, 2005 through March 31, 2015. Software source: PSN, a product of Informa Investment Solutions © 2015 Informa Investment Solutions. All rights reserved. Performance information used by FMA to create the graph is gross of fees and includes reinvestment of all income. Please see the next
page for a comparison of gross and net performance for this period. This is supplemental information only and complements the composite presentation. Please see detailed performance disclosure statements on the last page, which are an integral part of this presentation. *PSN Small Cap Value Universe median statistics.
Fiduciary Management Associates
SMALL CAP VALUE EQUITY
MARCH 31, 2015
COMPOSITE ANNUALIZED PERFORMANCE2
COMPOSITE CALENDAR YEAR PERFORMANCE2
FMA SCV Composite (Gross)
FMA SCV Composite (Net)
Russell 2000 Value Index
1 Year
3 Year
5 Year
7 Year
10 Year
FMA (Gross)
8.8%
16.0%
13.4%
10.8%
10.0%
FMA (Net)
8.2%
15.4%
12.8%
10.1%
Russell 2000
Value
4.4%
14.8%
12.5%
8.9%
FMA SCV Composite (Gross)
FMA SCV Composite (Net)
Russell 2000 Value Index
20152 2014
2011
2010
2009
2008
2007
2006
4.8%
6.5%
36.3% 11.7% -3.7% 25.3% 25.8% -27.0% 2.1%
22.0%
9.2%
FMA (Net)
4.6%
5.9%
35.5% 11.1% -4.3% 24.6% 24.8% -27.6% 1.3%
21.0%
7.5%
Russell 2000
Value
2.0%
4.2%
34.5% 18.1% -5.5% 24.5% 20.6% -28.9% -9.8% 23.5%
MARKET CAP DISTRIBUTION3
FMA
SCV
R2000
Value
Market Cap ($mm)
18.22
20.21
< $250
Sharpe Ratio
0.47
0.31
Alpha
2.93
—
Beta
0.87
Tracking Error
Information Ratio
FMA
SCV
R2000
Value
—
2.5%
2.1%
18.0%
$750—$1,500
12.5%
25.2%
—
$1,500—$2,250
29.7%
19.8%
5.24
—
$2,250—$3,000
31.8%
17.2%
0.56
—
> $3,000
23.9%
17.3%
PORTFOLIO CHARACTERISTICS3
$250—$750
SECTOR WEIGHTS3
FMA
SCV
R2000
Value
76
1,357
Forward P/E (median)
18.1x
17.1x
1-year EPS Growth
13.5%
9.7%
Technology
Wtd Average Market Cap
$2.4 B
$1.8 B
Healthcare
5-year Return on Equity
10.9%
7.3%
Consumer Discretionary
% of Portfolio in Top 10
16.3%
4.6%
Consumer Staples
Number of Holdings
2012
FMA (Gross)
10 YEAR RISK/RETURN STATISTICS2
Standard Deviation (%)
2013
2.1%
Producer Durables
4.8%
13.6%
Materials
Energy
18.3%
6.0%
3.0%
Financial Services
Utilities/Telecom
10.3%
26.8%
15.2%
Fiduciary Management Associates
SMALL CAP VALUE EQUITY
MARCH 31, 2015
REPRESENTATIVE CLIENT LIST
Representative Public Fund Clients
Manager of Managers Platforms
»
Teachers’ Retirement System of Louisiana
»
Teachers’ Retirement System of the State of Illinois
»
State Universities Retirement System of Illinois
»
Illinois State Board of Investment
»
»
»
»
»
Cook County Employees’ Annuity & Benefit Fund
»
Employees’ Retirement System of the County of Milwaukee
»
Springfield Police Pension Fund
»
City of Elgin Firefighters Pension Fund
»
Wheaton Firefighters Pension Fund
Russell Investments
SEI Investments
Northern Trust Global Advisors, Inc.
Bivium Capital Partners, LLC
Other Representative Clients
»
»
»
»
Iron Workers’ Local 25 Pension Fund
McMaster University Investment Pool
UFCW Unions & Employers Midwest Pension Fund
UFCW Unions and Employers Pension Plan
The list of representative clients includes current FMA clients selected on the basis of diversity of client base and recent client additions. Performance
based criteria was not used in developing this list.
DISCLOSURES
2
As of 3/31/15. Performance is preliminary, stated gross of fees and includes reinvestment of all income. Performance for periods greater than one
year is annualized. Past performance is not indicative of future results. This is supplemental information only and complements the composite
presentation. Please see detailed performance disclosure statements at the end of this presentation, which are an integral part of this presentation.
3
Portfolio characteristics, sector weights and market cap weightings are calculated from a representative account invested in the FMA Small Cap
Value Equity strategy. This is supplemental information only and complements the composite presentation. Please see detailed performance
disclosure statements at the end of this presentation, which are an integral part of this presentation.
Fiduciary Management Associates, LLC ("FMA") is an independent employee-owned investment management firm and registered investment adviser
based in Chicago. FMA manages separate account portfolios for a client base that includes public funds, corporate pension funds, Taft-Hartley funds,
endowments, not-for-profit organizations and police and fire pension funds. FMA manages portfolios for the following strategies: small cap equity
and small-mid cap equity.
The performance presented herein represents past performance and is no guarantee of future results. Performance is measured against the primary
benchmark for the FMA Small Cap Value Strategy represented by the Russell 2000 Value Index. FMA and benchmark performance reflect the
reinvestment of dividends and interest income, expressed in U.S. dollars. Results are based on fully discretionary accounts under management,
including those accounts no longer with the firm. FMA’s small cap value accounts invest in stocks that are greater than $200 million in capitalization
and strive to maintain 80% of the total portfolio in the market capitalization range represented by the constituents of the Russell 2000 Value Index .
Fiduciary Management Associates, LLC
("FMA") claims compliance with the Global
Investment Performance Standards (GIPS®).
To receive a complete list and description of FMA composites and / or presentations that adhere
to the GIPS standards, contact Eric Welt at (312) 334-0253 ([email protected]) or Lisa Patel at
(312) 334-0239 ([email protected]) or write Fiduciary Management Associates, LLC., 55 West
Monroe Street Suite 2550, Chicago, IL 60603.
Please refer to the next page for full disclosures.
WITH QUESTIONS PLEASE CONTACT:
ERIC WELT, CFA
MANAGING DIRECTOR
312-334-0253
[email protected]
LISA PATEL
DIRECTOR
312-334-0239
[email protected]
FMA Small Cap Value Equity Composite & Disclosures
YEA R-END
No. of
Composite Assets
3YR A NNUA LIZED DISP ERISON
A NNUA L P ERFOM A NCE RESULTS
Russell 2000
Russell 2000
Return (%)
Return (%)
Value Index (%)
Index^ (%)
Dispersion
Composite (%)
Value Index (%)
Index^ (%)
1,172
6.38
5.55
4.71
4.55
0.1
----
----
----
244
1,521
21.96
21.00
23.48
18.37
N/A
----
----
----
9
250
1,369
2.11
1.31
-9.78
-1.57
N/A
----
----
----
2008
13
427
1,228
-27.00
-27.57
-28.92
-33.79
N/A
----
----
----
2009
17
613
1,459
25.78
24.78
20.58
27.17
0.1
----
----
----
2010
22
1,009
1,900
25.28
24.59
24.50
26.86
0.1
----
----
----
2011
23
1,043
1,445
-3.72
-4.27
-5.50
-4.18
0.1
23.01
26.05
24.99
2012
23
1,060
1,402
11.71
11.07
18.05
16.35
0
19.19
19.89
20.20
2013
20
1,243
1,677
36.27
35.54
34.52
38.82
0.04
15.62
15.82
16.45
2014
21
1,259
1,652
6.51
5.93
4.22
4.89
0.04
11.54
12.79
13.12
1,718
4.76
4.62
1.98
4.32
N/A
11.86
12.93
13.23
Year
Portfolios
2005
8
186
2006
9
2007
Total
End of Period ($mm) Firm Assets ($mm)
Gross Composite Net Composite
Russell 2000
Russell 2000
Composite
Gross
Current P erfo rmance Results - P relim
2015 YTD
20
1,327
^Additional information.
Fiduciary Management Associates, LLC (FMA) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in
compliance with the GIPS standards. FMA has been independently verified for the periods January 1, 1993 through December 31, 2014. The verification reports are available upon
request.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and
procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. *Performance and composite inception and creation date is July 1, 1994.
The Small Cap Value Composite includes all institutional portfolios that invest in the small capitalization strategy with a minimum initial account size of $1,000,000. The strategy
allows for investments in equity securities of companies with market capitalizations in a range representative of constituents in the Russell 2000 Index. The strategy aims to deliver
a total return primarily through long-term capital appreciation. The benchmarks for the strategy are the Russell 2000 Index and the Russell 2000 Value Index. The performance
presented herein represents past performance and is no guarantee of future results. FMA and benchmark performance reflect the reinvestment of dividends and interest income,
expressed in U.S. dollars. Results are based on fully discretionary accounts under management, including those accounts no longer with the firm.
The composite policy requires the temporary removal of any portfolio incurring a client-initiated significant inflow or outflow of 10% of portfolio assets. The firm maintains a complete list of composite descriptions which is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available
upon request.
Balanced portfolio segments were included in this composite prior to October 1, 1999 and cash was equally distributed among asset segments in their respective. On June 30, 2008,
FMA redefined the requirements for membership in the composite to exclude accounts or carve-out segments of accounts with client mandated cash allocations in excess of 5%.
The membership of this composite did not change as a result of this redefinition. On April 1, 2009, FMA redefined the requirements for membership in the composite to exclude all
carve-out accounts. The membership of this composite did not change as a result of this redefinition.
Dispersion of Annual Returns / 3Years
Composite dispersion presented is the asset-weighted standard deviation of the annual returns of portfolios in the composite for the entire year. Because it is not statistically
meaningful, FMA does not calculate the dispersion of annual returns for the years the composite held five or fewer accounts. Inclusion of the three-year annualized ex-post standard deviation of the composite and benchmark was added as a requirement effective December 31, 2011.
Net of Fee Disclosure
Net of fee performance is calculated using the actual monthly fee accrued to each account in the composite as of January 1, 2010. Prior to January 1, 2010, Net of fee performance was calculated using the highest actual management fee charged to a member of the composite during the calendar year, applied monthly.
In presentations shown prior to September 30, 2014, net of fee performance was calculated using the actual monthly fee accrued to each account in the composite as of April 1,
2014. Prior to April 1, 2014, net of fee performance was calculated using the highest actual management fee charged to a member of the composite during the calendar year, applied monthly.
October 1, 2011 - March 31, 2014 the annual fee rate used was 0.95% which was the highest fee.
June 1, 2011- September 30,2011 the annual fee rate used was 1.00%
January 1, 2010 - May 31, 2011 the annual fee rate used was 0.90%
January 1,2008 - December 31, 2009 the annual fee rate used was 0.80%
Prior to January 1, 2008 the annual fee rate used was 0.79%
Investment Fee Disclosure
FMA requests that any third party, including investment management consultants, provide our performance data only on a one-on-one basis. Performance results are presented
before management and custodial fees. As described in FMA’s Form ADV, Part 2, investment management fee for the small cap equity strategy is:
0.85% on the first $25 million
0.75% on the next $25 million
0.60% on the next $50 million
0.55% on the balance
on an annual basis and a client’s return will be reduced by these and other related expenses. An actual fee charged to an individual portfolio may vary by size and type of portfolio.
Actual investment advisory fees incurred by clients will vary.
Benchmark Definitions
The Russell 3000® Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable
U.S. equity market. The Russell 2000 Index® offers investors access to the small-cap segment of the U.S. equity universe. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap
opportunity set. The Russell 2000 includes the smallest 2000 securities in the Russell 3000. The Russell 2000 Value Index® offers investors access to the small-cap value segment of
the U.S. equity universe. The Russell 2000 Value is constructed to provide a comprehensive and unbiased barometer of the small-cap value market. Based on ongoing empirical
research of investment manager behavior, the methodology used to determine value probability approximates the aggregate small-cap value manager’s opportunity set. (Source:
Russell).