HomeMy WebLinkAbout2nd QuarterGraystone
Consulting
QUARTERLY PERFORMANCE
Scott Owens, CFA°, CIMA°
Associate Vice President
Institutional Consultant
SUMMARY
Prepared for:
As of June 30, 2018
Graystone Consulting Tampa
Charles H. Mulfinger, II, CIMA°
Managing Director, Wealth Management
Institutional Consulting Director David A. Wheeler, CFP°, CIMA°
Alternative Investment Director Senior Vice President
100 North Tampa Street, Suite 3000
Tampa, FL 33602
800-282-0655, ext. 2061 / 813-227-2061
Institutional Consulting Director
Institutional Consultant
Equity Market % Returns for
PeriodU.S.
the Ending June 30, 2018
Three Years
Five Years
Seven Years
Quarter
12 Months
(annualized)
(annualized)
(annualized)
S&P 500 Index
3.43
14.37
11.93
13.43
13.24
Dow Jones Industrial Average
1.26
16.31
14.07
12.95
12.85
Russell 1000 Index
3.57
14.54
11.64
13.37
13.12
Russell 1000 Growth Index
5.76
22.51
14.98
16.36
14.88
Russell 1000 Value Index
1.18
6.77
8.26
10.35
11.27
Russell 2000 Index
7.75
17.57
10.96
12.46
11.83
Russell 2000 Growth Index
7.23
21.86
10.60
13.65
12.50
Russell 2000 Value Index
8.30
13.10
11.22
11.18
11.10
Russell 3000 Index
3.89
14.78
11.58
13.29
13.02
Russell 3000 Growth Index
5.87
22.47
14.63
16.14
14.69
Russell 3000 Value Index
1.71
7.25
8.48
10.40
11.25
Russell Midcap Index
2.82
12.33
9.58
12.22
11.88
Russell Midcap Growth Index
3.16
18.52
10.73
13.37
12.16
Russell Midcap Value Index
2.41
7.60
8.79
11.27
11.69
Past Performance is not a guarantee of future
results. Indices are not available for direct investment.
Source: MAX
Quarter
Energy
13.50
Consumer Discretionary
8.20
Information Technology
7.10
Real Estate
6.10
Utilities
3.70
Health Care
3.10
Materials
2.60
Telecommunication Services
(0.90)
Consumer Staples
(1.50)
Industrials
(3.20)
Financials
(3.20)
Past Performance is not a guarantee of future results. Indices
are not available for direct investment.
Source: MAX
Page 1
U.S. Dollar
Local Currency
Quarter
12 Months
Quarter
12 Months
Regional and Other Multi Country Indices
MSCI EAFE
(1.24)
6.84
3.75
6.65
MSCI Europe
(1.27)
5.28
4.51
4.95
MSCI Far East
(2.83)
10.54
0.68
9.24
MSCI Pacific ex. Japan
1.78
8.68
4.54
15.88
MSCI The World
1.93
11.70
3.85
11.52
MSCI World ex. U.S.
(0.75)
7.04
4.04
7.05
National Indices
MSCI Hong Kong
(1.18)
9.18
(1.21)
9.69
MSCI Ireland
2.07
5.71
N/A
N/A
MSCI Japan
(2.80)
10.88
1.23
9.31
MSCI Singapore
(7.49)
7.94
(3.82)
6.92
Past Performance is not a guarantee of future results. Indices are not available for direct investment.
Source: MAX
Markets Equity % Returns for
PeriodEmerging
the Ending June
30, 2018
U.S. Dollar
Local Currency
Quarter
12 Months
Quarter
12 Months
Regional and Other Multi Country Indices
MSCI EM
(7.86)
8.59
(3.41)
10.86
National Indices
MSCI China (3.44) 21.42
(3.43)
21.92
MSCI Malaysia (11.44) 5.56
(3.43)
21.92
MSCI Taiwan (6.06) 4.72
(1.77)
4.96
MSCI Thailand (14.92) 12.35
(14.92)
12.35
Past Performance is not a guarantee of future results. Indices are not available for direct investment.
Source: MAX
Page 2
U.S. Fixed Income
90-Day Treasury Bill
Barclays Capital Aggregate
Barclays Capital Credit
Barclays Capital Govt/Credit
Barclays Capital Government
Barclays Capital High Yield
Barclays Capital Intermediate Govt/Credit
Barclays Capital Long Govt/Credit
Barclays Capital Mortgage Backed
Barclays Capital Municipal
Three Years
Five Years
10 Years
Quarter
12 Months
(annualized)
(annualized)
(annualized)
0.44
1.32
0.64
0.40
0.28
(0.16)
(0.40)
1.72
2.27
3.72
(0.88)
(0.65)
2.18
2.96
4.94
(0.33)
(0.63)
1.83
2.28
3.77
0.10
(0.63)
1.02
1.48
2.91
1.03
2.62
4.68
5.00
6.89
0.01
(0.58)
1.16
1.60
3.08
(1.45)
(0.78)
4.34
5.09
6.78
0.24
0.15
1.46
2.32
3.86
0.87
1.56
2.85
3.53
4.43
Global Fixed Income
Merrill Lynch Global High Yield (1.29) 2.08
Barclays Global Treasury ex. U.S. (5.02) 2.71
Barclays Capital Majors ex. U.S. (4.81) 3.10
Past Performance is not a guarantee of future results. Indices are not available for direct investment.
Source: MAX
5.46
4.79
7.98
3.75
1.14
1.92
3.76
0.99
1.95
Page 3
City of Sebastian Police Officers' Retirement System
as of June 30, 2018
Quarterly Summary of Relevant Facts
Graystone
Consulting
Distribution of Assets:
Other Important Facts:
Equity
Total Portfolio
$14,570,622
-Large Cap. Value
$3,282,719
Total Gain/(Loss) - Gross -of -Fees
$240,805
-Large Cap. Growth
$2,788,388
Total Fees
($33,660)
-SMID Cap. Value
$712,242
Total Gain/(Loss) - Net -of -Fees
$207,145
-SMID Cap. Growth
$793,493
-International Value
$723,428
Highland - Large Cap Value
Highland - Large Cap Growth
-International Growth
$1,005,529
Total Assets
$3,282,719
Total Assets
$2,788,388
Total Equity
$9,305,799
Gain or (Loss) - Gross -of -Fees
$58,174
Gain or (Loss) - Gross -of -Fees
$144,097
Fixed
$3,550,598
Fees
($3,831)
Fees
($3,309)
MLPs
$608,456
Gain or (Loss) - Net -of -Fees
$54,343
Gain or (Loss) - Net -of -Fees
$140,788
Private Real Estate
$681,630
Cash
$424,139
Boston Partners - SMID Value
Fiera Capital - SMID Growth
Total Portfolio
$14,570,622
Total Assets
$712,242
Total Assets
$793,493
Gain or (Loss) - Gross -of -Fees
$18,344
Gain or (Loss) - Gross -of -Fees
$13,145
Distribution by Percentages:
Policy
Current
Range
Fees
($3,546)
Fees
($1,467)
Equity Breakdown
Gain or (Loss) - Net -of -Fees
$14,798
Gain or (Loss) - Net -of -Fees
$11,678
-Large Cap. Value
21.25%
22.53%
15.00 - 25.00%
-Large Cap. Growth
21.25%
19.14%
15.00 - 25.00%
Highland - Intl Value
Renaissance - International Growth
-SMID Cap. Value
5.00%
4.89%
2.50 - 7.50%
Total Assets
$723,428
Total Assets
$1,005,529
-SMID Cap. Growth
5.00%
5.45%
2.50 - 7.50%
Gain or (Loss) - Gross -of -Fees
($7,799)
Gain or (Loss) - Gross -of -Fees
($57,419)
-International Value
5.00%
4.96%
2.50 - 7.50%
Fees
($914)
Fees
($1,702)
-International Growth
7.50%
6.90%
5.00 - 10.00%
Gain or (Loss) - Net -of -Fees
($8,712)
Gain or (Loss) - Net -of -Fees
($59,121)
Total Equity
65.00%
63.87%
40.00 - 70.00%
Fixed
25.00%
24.37%
20.00 - 35.00%
Highland - Fixed Income
Center Coast - MLP
MLPs
5.00%
4.18%
0.00 - 10.00%
Total Assets
$3,550,598
Total Assets
$608,456
Private Real Estate
5.00%
4.68%
0.00 - 10.00%
Gain or (Loss) - Gross -of -Fees
($5,478)
Gain or (Loss) - Gross -of -Fees
$53,783
Cash
0.00%
2.91%
Fees
($4,456)
Fees
($685)
Total Portfolio
100.00%
100.00%
Gain or (Loss) - Net -of -Fees
($9,934)
Gain or (Loss) - Net -of -Fees
$53,098
Receipt & Disbursement
Intercontinental - Private Real Estate
Total Assets
$424,139
Total Assets
$681,630
Gain or (Loss) - Gross -of -Fees
$1,504
Gain or (Loss) - Gross -of -Fees
$22,454
Fees
($11,967)
Fees
($1,783)
Gain or (Loss) - Net -of -Fees
($10,464)
Gain or (Loss) - Net -of -Fees
$20,671
The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of
future results.
Page 4
City of Sebastian Police Officers' Retirement System Graystone
as of June 30, 2018 Consulting
Breakdown of Returns
Quarter
1.80
1.68
1.18
1.81
Fiscal Year to Date
4.64
3.99
3.55
5.41
Since 8/31/2017
7.65
6.98
5.37
NA
Highland - Large Cap Growth
Russell 000 Growth PSN Money
Managers
Quarter
5.45
5.32
5.76
4.17
Fiscal Year to Date
13.97
13.54
15.69
12.84
Since 8/31/2017
17.73
17.29
19.34
NA
:.
Quarter
2.65
2.12
00 Value PSN Money
5.80
Managers
3.35
Fiscal Year to Date
5.47
4.45
7.37
7.72
Since 8/31/2017
8.06
7.01
10.63
NA
00 Growth
Quarter
1.69
1.49
5.53
4.56
Fiscal Year to Date
15.88
15.29
14.90
16.94
Since 8/31/2017
19.48
18.87
19.94
NA
EQUITYINTERNATIONAL
Highland - Intl Value
Quarter
(1.07)
(1.19)
MSCI EAFE (net)
(1.24)
Fiscal Year to Date
2.64
2.07
1.36
Since 8/31/2017
3.79
3.22
3.85
Quarter
(5.40)
(5.55)
(2.61)
Fiscal Year to Date
(1.69)
(2.13)
1.05
Quarter (0.15) (0.28) (0.16)
Fiscal Year to Date (1.15) (1.66) (1.24)
Quarter 9.69 9.56 11.80
Fiscal Year to Date (6.09) (6.43) (1.58)
Since 8/31/2017 (8.90) (9.23) (5.79)
The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of
future results.
Page 5
City of Sebastian Police Officers' Retirement System
as of June 30, 2018
Breakdown of Returns
Quarter
1.66
1.43
2.41
2.41
Fiscal Year to Date
4.33
3.69
5.21
5.21
1 Year
7.10
6.45
8.66
8.66
3 Year
6.67
5.97
7.55
7.99
5 Year
7.78
7.15
8.51
9.03
Since 1/31/2011
7.23
6.63
8.31
8.97
15 1 /2 Years
6.21
5.54
6.90
-% --�E
Quarter
1.43
Actuary Rate
1.86
CP1 +4
1.54
Fiscal Year to Date
3.72
5.58
4.90
1 Year
6.48
7.45
7.05
3 Year
5.99
7.45
5.87
5 Year
7.13
7.45
5.53
Since 1/31/2011
6.69
7.45
5.74
Graystone
Consulting
Policy Index (1) Composition
- 21.25% Russell 1000 Value / 21.25% Russell 1000 Growth / 5% Russell 2500 Value / 5% Russell 2500 Growth / 5% MSCI EAFE (net) / 7.5% MSCI AC Wd
x US (net) / 25% BC Aggregate / 5% Alerian MLP / 5% NCREIF for periods since 7/31/2017
- 50% S&P 500 / 10% MSCI EAFE (net) / 40% BC Aggregate for periods since 12/31/2015
- 50% S&P 500 / 10% MSCI EAFE (net) / 40% BC Aggregate for periods since 6/30/2011
- 48% S&P 500 / 49% BC Gov/Credit / 3% Citi 3 Month T-Bill for periods prior to 6/30/2011
Policy Index (2) Composition
- 21.25% Russell 1000 Value / 21.25% Russell 1000 Growth / 5% Russell 2500 Value / 5% Russell 2500 Growth / 5% MSCI EAFE (net) / 7.5% MSCI AC Wd
x US (net) / 25% BC Aggregate / 5% Alerian MLP / 5% NCREIF for periods since 7/31/2017
- 60% S&P 500 / 40% BC Aggregate for periods since 12/31/2015
- 60% S&P 500 / 40% BC Aggregate for periods since 6/30/2011
- 48% S&P 500 / 49% BC Gov/Credit / 3% Citi 3 Month T-Bill for periods prior to 6/30/2011
The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of
future results.
Page 6
City of Sebastian Police Officers' Retirement System
as of June 30, 2018
Trailing Returns
Manager vs Benchmark: Return through June 2018
(not annualized if less than 1 year)
Graystone
Consulting
10
8— — — — — — — — — — — — — — — — — — — — — — — — — — — — — -
- - - - - - - - - - - - - - - - - - - - - - - - - -
C: 6— — — — — — — — — — — — -
- - - - - - - - - ■ Sebastian Police (Gross)
N - - - - - - - - - ■ Sebastian Police (Net)
a ■Sebastian Police Policy Index
2
0-
1 quarter 1 year 3 years 5 years 10 years 15 years 2 quarters
Manager vs Benchmark: Return through June 2018
(not annualized If less than 1 year)
Sebastian Police (Gross)
Sebastian Police (Net)
1.66% 7.09% 6.66% 7.78% 6.14% 6.21 %
1.43%
Sebastian Police Policy Index 2.41 %
6.41 %
5.95%
7.55%
7.14%
8.51%
5.50%
7.37%
5.54%
6.90%
The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of
future results.
Page 7
City of Sebastian Police Officers' Retirement System
as of June 30, 2018
Risk/Return - 5 Year Analysis
150
140
130
120
110
100
Q2 2D13
Manager Performance
20-Quarter Moving Windows, Computed Quarterly
July 2013 - June 2018
Q4 2014 Q4 2015 Q4 2016 Q2 20'18
Sebastian Police (Gross)
—Sebastian Police (cross)
—Sebastian Police Policy d..
Manager Risk/Return
Single Computation
July 2013 - June 2018
10%
8%- •
E
K
4%-
2°/ -
°
1 °/ 2% 3% 4% 5%
Standard Deviation
Return & Risk Measurements
• Sebastian Police (Gross
Market Benchmark:
Sebastian Police Policy Index
0 Cash Equivalent:
Citigroup 3-month T-bill
7.78% -0.73% 4.76% 1.00 -5.61 % 95.39% 123.61 % -0.68% 1.55 85.69%
Sebastian Police Policy Index 8.51% 0.00% 4.40% 1.00 -4.22% 100.00% 100.00% 0.00% 1.84 100.00%
The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of
future results.
Page 8
City of Sebastian Police Officers' Retirement System
as of June 30, 2018
Risk/Return - 15 1/2 Year Analysis
Manager Performance
20-Quarter Moving Windows, Computed Quarterly
January 2003 - June 2018
300
250
200
150
100
Q4 2002 Q4 2005 Q4 2007 Q4 2009 Q4 2011 Q4 2013 Q4 2015 Q2 2M 8
Sebastian Police (Gross)
Manager Risk/Return
Single Computation
January 2003 - June 2018
7% -
6%- •
5%-
` 4%-
-Sebastian Pohce (Gross)
—Sebastian Pohce Policy lnd-
3%-
2%-
1%
06% .. 1 j. Zo/, .. 30/. 40/, .. 50/. 60/, 70/. so/
Standard Deviation
Return & Risk Measurements
• Sebastian Police (Gross
Market Benchmark:
Sebastian Police Policy Index
0 Cash Equivalent:
Citigroup 3-month T-bill
6.21 % -0.68% 7.36% 1.02-22.97% 96.89% 111.42% -0.76% 0.68 94.90%
Sebastian Police Policy Index 6.90% 0.00% 7.03% 1.00-21.59% 100.00% 100.00% 0.00% 0.81 100.00%
The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of
future results.
Page 9
City of Sebastian Police Officers' Retirement System
as of June 30, 2018
Equity Portfolio
Listed on recognized exchange
Single issue not to exceed 5% at market value for
each equity in each separately managed portfolio
Total equity portfolio < 70.00% & > 40.00% of total fund
at market
Highland Capital Large Cap Value
Larae Capitalization Value Eauitv Portfolio
Market Value < 25.00% & > 15.00% of total fund
Performance (Since 8/31/2017)
Rank in the Top 50% of manager universe
Return > Russell 1000 Value
Highland Capital Larae Cap Growth
Larae Capitalization Growth Eauitv Portfolio
Market Value < 25.00% & > 15.00% of total fund
Performance (Since 8/31/2017)
Rank in the Top 50% of manager universe
Return > Russell 1000 Growth
Boston Partners SMID Cap Value
SMID Capitalization Value Eauitv Portfolio
Market Value < 7.50% & > 2.50% of total fund
Performance (Since 8/31/2017)
Rank in the Top 50% of manager universe
Return > Russell Mid Value
Fiera Capital SMID Cat) Growth
SMID Capitalization Growth Eauitv Portfolio
Market Value < 7.50% & > 2.50% of total fund
Performance (Since 8/31/2017)
Rank in the Top 50% of manager universe
Return > Russell Mid Growth
Highland Capital International Value
International Value Eauitv Portfolio
Market Value < 7.50% & > 2.50% of total fund
Performance (Since 8/31/2017)
Return > MSCI EAFE (Net)
Graystone
Consulting
IPS Compliance Check List
OBJECTIVES
Total Portfolio
5 years
Since Inceotion
Yes
Exceed Target Index
No
No
Yes
Exceed Target Rate of Return (7.45%)*
No
No
Exceed CPI + 4% *
Yes
Yes
Yes
*Performance compared to dollar -weighted net returns
Renaissance International Growth
International Growth Portfolio
Yes
Market Value < 10.00% & > 5.00% of total fund
Yes
3 years
Since Inception
Performance (Since 8/31/2017)
5 years
Since Inception
N/A
Yes
Return > MSCI World Ex US (Net)
N/A
No
N/A
Yes
Highland Fixed Income
Fixed Income Portfolio
Yes
Market Value < 35.00% & > 20.00% of total fund
Yes
3 years
Since Inception
Performance (Since 3/31/2014)
3 years
Since Inception
N/A
No
Return > BC Agg
N/A
Yes
N/A
No
U.S. Government / Agency or U.S. Corporations
Yes
Bonds rated "A" or better
Yes
Single corporate issuer not exceed 10% of bond portfolio
Yes
(except U.S. Government/Agency)
Yes
3 years
Since Inception
Center Coast MLPs
N/A
No
Master Limited Partnerships
N/A
No
Market Value < 10.00% & > 0.00% of total fund
Yes
Performance (Since 8/31/2017)
5 years
Since Inception
Return > Alerian MLP
N/A
No
Yes
Intercontinental
5 years
Since Inception
Core Private Real Estate
N/A
No
Market Value < 10.00% & > 0.00% of total fund
Yes
N/A
No
Performance (Inception 10/31/2017)
3 years
Since Inception
Return > NCREIF Property Index
N/A
Yes
Return > NCREIF ODCE Index
N/A
Yes
Return > BC Agg Index
N/A
Yes
Yes
3 years
Since Inception
N/A
No
The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of
future results.
Page 10
Tactical Asset Allocation Reasoning
Global Equities Relative Weights
US Equal Weight US equities have done exceptionally well since the global financial crisis, but they are now in the latter stages of a cyclical bull market. While the acceleration of the
Trump/Republican progrowth agenda has created a booming economy and earnings outlook, it may also be sowing the seeds for the end of the cycle as the Fed is
forced to raise rates and tighten policy in a more deliberate manner.
International Equities (Developed
Overweight
Markets) We maintain a positive bias for Japanese and European equity markets. The populist movements around the world are now spreading to Italy which may spur
further fiscal support from Germany and France. This would be a potential positive catalyst but not likely to develop until September.
Emerging market (EM) equities have been the best region over the past 24 months but are underperforming so far in 2018. Some of this is simply the result of a
Emerging Markets Overweight market that needs to consolidate spectacular gains the past few years. However, it is also directly related to the Fed's tightening campaign. We expect EM to find
support not far from current levels and have a strong finish to the year.
Global Fixed Income
US Investment Grade Underweight We have recommended shorter -duration (maturities) since March 2013 given the extremely low yields and potential capital losses associated with rising interest
rates from such low levels. While interest rates have remained exceptionally low, US economic data have been very strong recently and the Fed is now raising rates
at an accelerating pace. Adding some longer duration when 10-year US Treasury yield is above 3% makes sense.
International Investment Grade Underweight Yields are even lower outside the US, leaving very little value in international fixed income, particularly as the global economy begins to recover more broadly.
While interest rates are likely to stay low, the offsetting diversification benefits do not warrant much, if any, position, in our view.
With deflationary fears having become extreme in 2015 and early 2016, these securities still offer relative value in the context of our forecasted acceleration in
Inflation -Protected Securities Overweight global growth and our expectations for oil prices and the US dollar's year -over- year rate of change to revert back toward 0%. That view played out in 2016 and
2017 but has not yet run its course.
High yield has performed exceptionally well since early 2016 with the stabilization in oil prices and retrenchment by the weaker players. We recently took our
High Yield Underweight remaining high yield positions to zero as we prepare for deterioration in quality of earnings in the US led by lower operating margins. Credit spreads have likely
reached a low for this cycle.
Alternative Investments
Real estate investment trusts (REITs) have underperformed global equities since mid-2016 when interest rates bottomed. We think it is still too early to reconsider
Real Estate/REITS Underweight our underweight zero allocation given the further rise in rates we expect and deteriorating fundamentals for the industry. Non -US REITs should be favored relative
to domestic REITs.
Master Limited Partnerships/Energy
Overweight
Infrastructure Master limited partnerships (MLPs) have traded better since their capitulation in March around the FERC regulatory announcement. With oil prices much more
stable and on an upward path, MLPs have garnered more interest given their 8%-to-10% yields.
Hedged Strategies (Hedge Funds and Equal Weight
Managed Futures) This asset category can provide uncorrelated exposure to traditional risk -asset markets. It tends to outperform when traditional asset categories are challenged by
growth scares and/or interest rate volatility spikes. As volatility becomes more persistent in 2018, these strategies should do better than in recent years.
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