Fund Descriptions
Transcription
Fund Descriptions
Fund Descriptions as of April 2015 355 lexington avenue, new york, ny 10017-6603 voice: (212) 681-1818 fax: (212) 681-9340 website: www.rpb.org email: [email protected] The Reform Pension Board offers its participants four strategically diversified funds from which to choose, each of which is designed with an investment goal in mind: • Capital Appreciation Fund • Appreciation and Income Fund • Income Focused Fund • Capital Preservation Fund The RPB investment structure is designed so that participants can choose one fund as their sole investment choice to implement a long-term savings strategy. However, participants can choose more than one fund to meet their retirement savings objectives if they wish. Volatility Scale LESS VOLATILITY MORE VOLATILITY Capital Preservation Fund Income Focused Fund Appreciation and Income Fund Focus on capital preservation Focus on generating income and maintaining purchasing power in retirement Focus on asset growth and income (60% Capital Appreciation Fund and 40% Income Focused Fund) Capital Appreciation Fund Focus on asset growth Capital Appreciation Fund Fund Objective CAPITAL APPRECIATION FUND The Capital Appreciation Fund consists of growth-oriented investments. These include stocks, real estate and certain kinds of fixed income instruments. While these instruments have historically provided a high rate of return, they are also more volatile than income-oriented investments. This volatility can result in significant gains and losses over shorter periods of time. Who Should Invest Growth investing is more appropriate for participants who have a longer time horizon, or those who are focused on capital appreciation and can tolerate significant short-term losses in their account. -1- Lower Return Higher Return Less Volatility More Volatility Capital Appreciation Fund continued... Asset Classes Asset Class Target Allocation Equity Domestic Equity Large Cap Passive 10.50% Large Cap Value 8.00% Large Cap Growth 8.00% Small Cap Active 5.25% Dividend Focus 2.50% Domestic Equity Total 34.25% International Equity Global Equity 10.50% International Large Cap Value 8.00% International Large Cap Growth 8.00% International Small Cap 5.25% Emerging Markets 13.00% International Equity Total 44.75% Equity Total 79.00% Fixed Income Convertible Bond 5.25% High Yield Bond 5.25% Fixed Income Total 10.50% Real Assets Public Real Estate 5.25% Master Limited Partnerships 5.25% Real Assets Total 10.50% Grand Total 100.00% Note: Fund composition and allocations may change over time. Domestic Equity Large-cap passive mandate (S&P Index fund) managed by The Vanguard Group Large-cap value mandate managed by Eagle Capital Management Large-cap growth mandate managed by Brown Investment Advisory Small/mid-cap mandate managed by Pinnacle Associates Ltd. • The objective of the S&P Index fund is to replicate the investment results of the S&P 500 Index by investing in all 500 stocks in the benchmark index. • The strategy invests in stock of companies that are undervalued with the expectation that the value will rise and translate into higher share prices in the future. • The portfolio generally holds 25 – 30 stocks. • The strategy invests in stock of companies with a high expectation of earnings growth. • The portfolio generally holds 30 – 45 stocks. • The strategy employs a bottom-up approach that favors companies with strong traditional valuation measures. • Pinnacle generally holds between 50 – 70 stocks. -2- Capital Appreciation Fund Asset Classes Domestic Equity continued... continued... continued... Dividend-focused mandate managed by Northern Trust Global Investments • The strategy seeks to invest in stock of companies across a broad range of domestic market capitalizations and styles with dividend yields in excess of 3.0%. • The fund employs a strict, rules-based quantitative approach to identify high quality companies that pay a dividend. • The higher returns of equities and the strong yield component to total return should serve as a longer-term inflation hedge. • The portfolio generally holds between 650 – 700 stocks. International/Global Equity Global equity fund managed by Walter Scott & Partners International value-oriented fund managed by Artisan Partners International growth-oriented fund managed by Gryphon International Investment Corporation International growth-oriented fund managed by Highclere International Advisors Emerging markets equity fund managed by Brandes Investment Partners • The strategy invests in the stock of companies across a range of market capitalizations domiciled both domestically and abroad. • Walter Scott utilizes bottom-up stock selection with a focus on growth and price sensitivity. • The fund generally holds between 40 – 60 stocks and has a relatively low level of turnover. • The strategy invests in the stock of companies across a range of market capitalizations. • Artisan invests in stocks of companies located in the developed markets of Western Europe, the Far East and the Pacific Basin. • Artisan may also invest a percentage of the portfolio in emerging markets. • The strategy is focused on identifying high quality, undervalued companies that offer the potential for superior risk/reward outcomes. • The fund typically holds between 40 – 60 stocks. • The strategy invests in the stock of companies across a range of market capitalizations in the developed markets of Western Europe, the Far East and the Pacific Basin. • The fund utilizes a bottom-up fundamental stock selection process to identify stocks that exhibit growth at a reasonable price (GARP) versus true momentum driven stocks with weaker fundamentals. • The fund generally holds between 30 – 55 stocks. • The strategy invests in the stocks of “quality” small and mid-cap companies with sound business models and strong balance sheets. • Highclere typically invests in the developed markets of Western Europe, the Far East and the Pacific Basin. • Highclere may invest in emerging markets to capitalize on unusual value or niche sectors. • The fund holds between 40 – 80 stocks. • The strategy invests in the stock of companies across a range of market capitalizations. • Brandes invests in companies located in emerging economic areas around the world that it considers undervalued by utilizing a bottom-up, value-oriented approach. • The fund holds 45 – 75 stocks and experiences relatively high volatility. Fixed Income Convertible bond mandate managed by Shenkman Capital Management • The strategy invests in convertible bonds, which have historically provided the downside protection of bonds and the upside potential of equities. In addition, convertible bonds have a lower correlation to traditional fixed income securities. • Shenkman employs a conservative and defensive approach to managing convertible assets with a focus on disciplined credit research. -3- Capital Appreciation Fund Asset Classes Fixed Income continued... continued... continued... High yield bond mandate managed by Shenkman Capital Management • The strategy invests in higher quality non-investment grade rated U.S. corporate bonds. • Shenkman’s portfolio employs a bottom-up fundamental research process that maximizes capital preservation and yield while minimizing the risk of credit defaults. Real Assets REIT (Real Estate Investment Trust) Index fund managed by The Vanguard Group Energy master limited partnership (MLP) managed by Harvest Fund Advisors • The objective of the REIT Index fund is to replicate the investment results of the MSCI US REIT Index by investing in all 110 stocks in the index. • The strategy is actively managed and seeks to add value through individual stock selection. • The portfolio of approximately 40 securities focuses on energy infrastructure MLPs including pipeline, storage, gathering system and processing facilities. Appreciation and Income Fund Fund Objective The Appreciation and Income Fund was designed to offer participants a rate of return and volatility between that of the Capital Appreciation Fund and the Income Focused Fund. The portfolio consists of 60% of the Capital Appreciation Fund and 40% of the Income Focused Fund. APPRECIATION & INCOME FUND Who Should Invest The Appreciation and Income Fund is intended for participants who are still actively saving for, or may be in, retirement and desire growth of capital and income. For information on the asset classes and investment managers included within this fund, please refer to the fund descriptions of the Capital Appreciation Fund and the Income Focused Fund. -4- Lower Return Higher Return Less Volatility More Volatility Income Focused Fund Fund Objective The Income Focused Fund consists of income-oriented investments and those that have historically performed well during inflationary periods to help participants maintain their purchasing power. These include fixed income instruments (including inflation-linked bonds) and high dividend-paying stocks. Income investments have historically provided a lower rate of return with less volatility than growth investments. While the opportunity for loss is still a possibility, the frequency and magnitude of losses has historically been less than that of growth-oriented investments. Who Should Invest Income investing is more appropriate for participants with a shorter time horizon who have achieved their savings goals and are focused on maintaining a certain income level in retirement. Asset Classes Asset Class Target Allocation Equity Domestic Equity Dividend Focus Domestic Equity Total INCOME FOCUSED FUND 7.50% 7.50% Fixed Income TIPS 10.00% Core Bond 37.50% Unconstrained Bond 20.00% Global Bond (sovereign) 5.25% Global Bond (sovereign and credit) 9.75% Fixed Income Total 82.50% Real Assets Commodities 10.00% Real Assets Total 10.00% Grand Total 100.00% Lower Return Higher Return Less Volatility More Volatility Note: Fund composition and allocations may change over time. Domestic Equity Dividend-focused mandate managed by Northern Trust Global Investments • The strategy seeks to invest in stock of companies across a broad range of domestic market capitalizations and styles with dividend yields in excess of 3.0%. • The fund employs a strict, rules-based quantitative approach to identify high quality companies that pay a dividend. • The higher returns of equities and the strong yield component to total return should serve as a longer-term inflation hedge. • The portfolio generally holds between 650 – 700 stocks. Fixed Income Treasury Inflation Protected Securities (TIPS) mandate managed by Income Research + Management Core bond mandate managed by Income Research + Management • The TIPS mandate invests in inflation-linked bonds issued by the U.S. government. • TIPS feature an adjustment to principal based on the Consumer Price Index, resulting in a natural inflation hedge. • The strategy invests in U.S. Treasury and agency securities, high quality mortgage-backed and asset-backed securities and corporate debt. • IR&M’s approach is to add value through security selection and portfolio construction. -5- Income Focused Fund Asset Classes Fixed Income continued... continued... continued... Unconstrained bond mandate managed by Goldman Sachs Asset Management (GSAM) (50%) and BlackRock (50%) Global bond fund managed by Colchester Global Investors, Ltd. Global bond fund managed by Loomis Sayles & Company, L.P. • Both of the firms utilized by the RPB in the asset class, GSAM and BlackRock, employ similar and complementary strategies. • Unconstrained bond is an opportunistic investment strategy that allows the managers to add value by tactically shifting allocations to different fixed income sectors based on their relative value. • Sectors include investment grade credit, non-dollar debt, high yield, bank loans, emerging market debt, treasuries and currencies, among others. • Each firm can also manage the risk of rising interest rates by lowering the duration of their portfolios. • The strategy applies a value-oriented approach focusing on high quality global sovereign bonds with attractive real yields. • The process uses both bottom-up and top-down considerations in building the portfolio. • The strategy applies a long-term value approach concentrating on specific security selection within the sovereign and credit sectors with a focus on non-U.S. issuers. Real Assets Commodities mandate managed by Gresham Investment Management • Gresham manages a portfolio of commodity futures with sector allocations consistent with the DJ-UBS Commodity Index benchmark. • The diversified portfolio has exposure to energy, precious metals, industrial metals, livestock and agriculture. The nature of the strategy does not allow Gresham to make a substantial bet on any particular sector. • The manager adds value through holding contract(s) along the futures curve to take advantage of perceived mispricing based on supply and demand variables. Capital Preservation Fund Fund Objective The Capital Preservation Fund is structured to preserve the principal balance of its assets. The fund has a relatively low rate of return and corresponding level of risk. CAPITAL PRESERVATION FUND Who Should Invest The Capital Preservation Fund is appropriate for participants who are seeking to only maintain their principal balance and may have a shorter time horizon. Asset Class Asset Class Target Allocation Principal Preservation/ Cash Equivalent Stable Value (403(b) only) Grand Total 100.00% 100.00% Note: Fund composition and allocations may change over time. Lower Return Higher Return Less Volatility More Volatility Participants under age 60 are not permitted to invest more than 80% of their account balance in the Capital Preservation Fund. -6- Capital Preservation Fund Asset Class continued... continued... Principal Preservation / Cash Equivalent Stable Value fund managed by Goldman Sachs Asset Management (GSAM) Stable Value • GSAM invests in high quality bonds combined with insurance contracts that are structured to maintain a stable value. • The fund’s investment strategy seeks to preserve capital. • This option provides a low level of risk and return volatility. Rabbi Trust Only Within the Rabbi Trust, the Capital Preservation Fund consists of the Northern Institutional U.S. Government Select Portfolio, a money market fund managed by Northern Trust. The money market fund pertains only to Capital Preservation funds invested in the Rabbi Trust and is not available to participants for investment in the 403(b) Plan. Money Market fund managed by Northern Trust Global Investments Asset Class Target Allocation Principal Preservation/ Cash Equivalent Money Market (Rabbi Trust only) Grand Total 100.00% 100.00% Note: Fund composition and allocations may change over time. • The strategy seeks to maximize current income to the extent consistent with the preservation of capital and maintenance of liquidity. • The fund invests substantially (at least 80%) in securities issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities. -7- RPB Investment Managers by Asset Class April 2015 Asset Class Manager Capital Appreciation Fund Appreciation & Income Fund* Income Focused Fund Capital Preservation Fund Equity Domestic Equity Large Cap Passive The Vanguard Group 10.50% 6.30% Large Cap Value Eagle Capital Management 8.00% 4.80% Large Cap Growth Brown Investment Advisory 8.00% 4.80% Small Cap Active Pinnacle Associated Ltd. 5.25% 3.15% Dividend Focus Northern Trust Global Investments Domestic Equity Total 2.50% 4.50% 7.50% 34.25% 23.55% 7.50% International Equity Global Equity Walter Scott 10.50% 6.30% International Large Cap Value Artisan Partners 8.00% 4.80% International Large Cap Growth Gryphon International 8.00% 4.80% International Small Cap Highclere International Investors 5.25% 3.15% Emerging Markets Brandes Investment Partners 13.00% 7.80% International Equity Total 44.75% 26.85% 0.00% Equity Total 79.00% 50.40% 7.50% Fixed Income Convertible Bond Shenkman Capital Managment TIPS Income Research + Management 5.25% 4.00% 10.00% Core Bond Income Research + Management 15.00% 37.50% High Yield Bond Shenkman Capital Management Unconstrained Bond Goldman Sachs Asset Management (50%) and BlackRock (50%) 8.00% 20.00% Global Bond (sovereign) Colchester 2.10% 5.25% Global Bond (sovereign and credit) Loomis Sayles 3.90% 9.75% 10.50% 39.30% 82.50% 5.25% Fixed Income Total 3.15% 3.15% Real Assets Public Real Estate The Vanguard Group 5.25% 3.15% Master Limited Partnerships Harvest Fund Advisors 5.25% 3.15% Commodities Gresham Investment Management Real Assets Total 10.50% 4.00% 10.00% 10.30% 10.00% Principal Preservation/Cash Equivalent Stable Value (403(b) only) GSAM Stable Value Money Market (Rabbi Trust only) Northern Trust Global Investments 100.0% 100.0% Grand Total 100.0% *The Appreciation & Income Fund is comprised of 60% of the Capital Appreciation Fund and 40% of the Income Focused Fund. Note: Fund composition and allocations may change over time. -8- 100.0% 100.0% 100.0%