Fresno County Employees Retirement System Core Plus & MSFD

Transcription

1 Fresno County Employees Retirement System Core Plus & MSFD November 2, 2011 PRESENTED BY Stephanie S. Lord, CFA, CIC Vice President, Client Portfolio Manager One Financial Center Boston, Massachusetts BOSTON CHICAGO DETROIT SAN FRANCISCO WASHINGTON DC

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3 firm overview EXPERIENCED PROFESSIONALS AND DEEP RESOURCES Since 1926, Loomis Sayles has established one of the richest investment management traditions in the industry Serving institutional investors for more than 80 years $162 billion in assets under management Firm Overview $57 million committed to proprietary fixed income and equity research in 2011 Offering a broad and comprehensive range of domestic and global fixed income and equity products 540 employees: 205 investment professionals 115 CFA charterholders As of 6/30/ LEGREV0811

4 firm overview INSTITUTIONAL PRODUCT OFFERINGS Fixed Income Equity Broad Market Absolute Return Growth Value Firm Overview Short Term Intermediate Term Core Core Plus Multisector Absolute Strategies Credit Long/Short Multi Asset Real Return Small Cap Mid Cap All Cap Large Cap Small Cap Mid Cap Focused Value Large Cap Global Sector Specific Core Global Global Bond Global Credit Global High Yield Emerging Markets Debt Corporate Securitized High Yield Bank Loans Credit Asset Small/Mid Cap Equity Research Core Focused Research Global Equity Opportunities LDI Custom LDI Corporate Long Duration Long Duration As of 09/30/2011; Several Portfolio Managers participate in more than one Product Team 4

5 loomis sayles update Total Assets Under Management is $156.6 Billion Expansion and Enhancement of Investment Strategies Firm Overview Additional Strategies: Long Duration and LDI Strategies Loomis Sayles Senior Floating Rate and Fixed Income Fund Loomis Sayles opens offices in London and Singapore Loomis Sayles Credit Long/Short Strategy has exceeded $1 Billion in assets Loomis Sayles named Top Fixed Income Fund Family by Lipper two years running (2009,2010) Institutional Investor Magazine announced Loomis Sayles as the Top High Yield Fixed Income Manager As of 09/30/ LEGREV0811

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7 investment results- Core Plus CALENDAR YEAR RETURNS (%) AS OF 9/30/2011 Fresno County Employees Retirement Association Fresno County Employees Retirement Association (Gross) Benchmark (0.80) YTD Sep 11 3Q The current benchmark is Barclays Aggregate. (1) Barclays U.S. Universal from 7/31/2001 to 6/30/2003; and Barclays Aggregate from 6/30/2003 to 9/30/2011. Returns over one year are annualized. Information is reported on a trade date basis. Data Source: Barclays Capital 7

8 investment results Core Plus ANNUALIZED RETURNS (%) AS OF 9/30/2011 Fresno County Employees Retirement Association Fresno County Employees Retirement Association(Gross) Benchmark year 2 years 3 years 5 years 07/31/2001-9/30/2011 The current benchmark is Barclays Aggregate. (1) Barclays U.S. Universal from 7/31/2001 to 6/30/2003; and Barclays Aggregate from 6/30/2003 to 9/30/2011. Returns over one year are annualized. Information is reported on a trade date basis. Data Source: Barclays Capital 8

9 performance attribution Core Plus 12/31/2010 THROUGH 9/30/2011 (%) Fresno County Employees Retirement Association Total Returns Account Return 5.22 Benchmark Return 6.65 Excess Return (1.43) Excess Return Attribution Total Parallel Non-Parallel Yield Curve Allocation Selection Excess Return Attribution by Sector US Treasuries 1.10 US Agencies 0.16 Gov Related MBS Total 0.11 ABS CMBS US Invest Grade US High Yield Emerging Markets Non-US Dollar Preferreds Cash & Equivalents No Category The Attribution benchmark is Barclays Aggregate. Figures on bar charts may not add up to total excess return as they exclude impact of trading and pricing differences. Data Source: Barclays Capital 9

10 investment results Multi Sector CALENDAR YEAR RETURNS (%) AS OF 9/30/2011 Fresno County Employees Retirement System- MSFD Fresno County Employees Retirement System- MSFD (Gross) Benchmark (0.33) (3.88) (5.12) YTD Sep 11 3Q The current benchmark is Barclays Aggregate. Returns over one year are annualized. Information is reported on a trade date basis. Data Source: Barclays Capital 10

11 investment results Multi Sector ANNUALIZED RETURNS (%) AS OF 9/30/2011 Fresno County Employees Retirement System- MSFD Fresno County Employees Retirement System- MSFD(Gross) Benchmark year 2 years 05/18/2009-9/30/2011 The current benchmark is Barclays Aggregate. Returns over one year are annualized. Information is reported on a trade date basis. Data Source: Barclays Capital 11

12 performance attribution Multi Sector 12/31/2010 THROUGH 9/30/2011 (%) Fresno County Employees Retirement System- MSFD Total Returns Account Return (0.33) Benchmark Return 6.65 Excess Return (6.98) Excess Return Attribution Total Parallel Non-Parallel Yield Curve Allocation Selection Excess Return Attribution by Sector US Treasuries US Agencies 0.10 Gov Related MBS Total ABS 0.32 CMBS US Invest Grade US High Yield Emerging Markets Non-US Dollar Convertibles Preferreds Other 0.01 Cash & Equivalents No Category The Attribution benchmark is Barclays Aggregate. Figures on bar charts may not add up to total excess return as they exclude impact of trading and pricing differences. Data Source: Barclays Capital 12

13 historical characteristics- Core Plus Fresno County Employees Retirement Association Fresno County Employees Retirement Association 9/30/2010 Fresno County Employees Retirement Association 9/30/2011 Barclays Aggregate 9/30/2011 Yield to Maturity 4.19% 4.42% 2.34% Maturity 8.65 years 8.87 years 7.01 years Duration 5.75 years 5.94 years 4.89 years Coupon Rate 5.65% 5.77% 4.13% Average Price $ $ $ Average Quality A3 A2 Aa2 Duration used is Effective. Data Source: Barclays Capital 13

14 characteristics summary Core Plus SECTOR DISTRIBUTION (%) AS OF 9/30/2011 Fresno County Employees Retirement Association US Treasuries US Agencies Gov Related MBS Total MBS- 15 Year MBS- 30 Year MBS- Other ABS CMBS US Invest Grade IG- Financial IG- Industrial IG- Utility US High Yield Emerging (IG& HY) Non USD (IG& HY) Preferreds Cash & Equivalents No Category Fresno County Employees Retirement Association Barclays Aggregate Data Source: Barclays Capital 14

15 sector allocation change Core Plus 9/30/2010 TO 9/30/2011 (%) Fresno County Employees Retirement Association US Treasuries US Agencies Gov Related MBS Total MBS- 15 Year MBS- 30 Year MBS - Other ABS CMBS US Invest Grade IG- Financial IG- Industrial IG- Utility US High Yield Emerging (IG& HY) Non USD (IG& HY) Preferreds Cash & Equivalents No Category Account Final Weight US Treasuries US Agencies Gov Related 2.25 MBS Total MBS - 15 Year 1.28 MBS - 30 Year MBS - Other 0.32 ABS 3.05 CMBS US Invest Grade IG - Financial 7.88 IG - Industrial IG - Utility 2.19 US High Yield Emerging Markets 0.64 Non-US Dollar 4.28 Preferreds 0.16 Cash & Equivalents 0.19 No Category Data Source: Barclays Capital 15

16 characteristics summary Core Plus QUALITY DISTRIBUTION (%) AS OF 9/30/2011 Fresno County Employees Retirement Association Aaa Aa A Baa Ba B Caa & Lower Fresno County Employees Retirement Association Barclays Aggregate For split rated securities in the quality distribution, the higher of Moody and S&P is used. The account's split rating treatment is based on client guidelines. The benchmark follows the vendor's methodology. Cash, Government& Agencies, and Aaa rated positions are reflected in the Aaa category. Data Source: Barclays Capital 16

17 quality allocation change Core Plus 9/30/2010 TO 9/30/2011 (%) Fresno County Employees Retirement Association Aaa Aa A Baa Ba B Caa & Lower Other Account Final Weight Aaa Aa 5.33 A Baa Ba B 4.52 Caa & Lower Other No Rating No Rating For split rated securities in the quality distribution, the higher of Moody and S&P is used. The account's split rating treatment is based on client guidelines. The benchmark follows the vendor's methodology. Cash, Government& Agencies, and Aaa rated positions are reflected in the Aaa category. Data Source: Barclays Capital 17

18 currency summary Core Plus AS OF 9/30/2011 (%) Fresno County Employees Retirement Association Fresno County Employees Retirement Association U S Dollars Mexican Peso 4.28 Mex Peso-4.3% U S Dollar-95.7% Data Source: Barclays Capital 18

19 currency summary Multi Sector AS OF 9/30/2011 (%) Fresno County Employees Retirement System- MSFD Fresno County Employees Retirement System - MSFD U S Dollars Canadian Dollar 8.26 Brazilian Real 1.80 Mexican Peso 1.54 New Zealand Dollar 1.51 Philippine Peso 1.49 Euro 1.27 Indonesian Rupiah 1.22 South Korean Won 1.21 Indian Rupee 0.81 Australian Dollar 0.42 Malaysian Ringgit 0.39 Colombian Peso 0.35 Chilean Peso 0.24 Japanese Yen 0.06 Euro-1.3% Phil Peso-1.5% N Z Dollar-1.5% Mex Peso-1.5% Brazil Real-1.8% Can Dollar-8.3% U SDollar-79.4% Data Source: Barclays Capital 19

20 sector allocation change Multi Sector 9/30/2010 TO 9/30/2011 (%) Fresno County Employees Retirement System- MSFD US Treasuries US Agencies Gov Related MBS Total ABS CMBS US Invest Grade IG- Financial IG- Industrial IG- Utility US High Yield HY - Financial HY - Industrial HY - Utility Emerging (IG& HY) Non USD (IG& HY) Converts (IG& HY) Preferreds Other Cash & Equivalents No Category Account Final Weight US Treasuries US Agencies 1.05 Gov Related 0.80 MBS Total 1.08 ABS 0.47 CMBS 0.84 US Invest Grade IG - Financial 5.55 IG - Industrial IG - Utility 3.54 US High Yield HY - Financial 1.83 HY - Industrial HY - Utility 1.00 Emerging Markets 0.32 Non-US Dollar Convertibles Preferreds 0.23 Other 0.61 Cash & Equivalents No Category Data Source: Barclays Capital 20

21 historical characteristics Multi Sector Fresno County Employees Retirement System- MSFD Fresno County Employees Retirement System - MSFD 9/30/2010 Fresno County Employees Retirement System - MSFD 9/30/2011 Barclays Aggregate 9/30/2011 Yield to Maturity 4.87% 5.05% 2.34% Maturity 9.78 years 8.29 years 7.01 years Duration 6.27 years 5.03 years 4.89 years Coupon Rate 5.85% 4.50% 4.13% Average Price $95.35 $88.78 $ Average Quality Baa2 Baa1 Aa2 Duration used is Effective. Data Source: Barclays Capital 21

22 quality allocation change Multi Sector 9/30/2010 TO 9/30/2011 (%) Fresno County Employees Retirement System- MSFD Aaa Aa A Baa Ba B Caa & Lower Other Account Final Weight Aaa 9.92 Aa A Baa Ba B 7.55 Caa & Lower 2.99 Other 0.61 No Rating No Rating For split rated securities in the quality distribution, the higher of Moody, and S&P is used. Unrated securities are rated by Loomis Sayles Research. The account's split rating treatment is based on client guidelines. The benchmark follows the vendor's methodology. Cash, Government& Agencies, and Aaa rated positions are reflected in the Aaa category. Data Source: Barclays Capital 22

23 bond market environment 10-YEAR US TREASURY YIELDS Jan-62 Jan-65 Jan-68 Jan-71 Jan-74 Jan-77 Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan Year Treasury Chart illustrates 10 Year Treasury Yields from 1/02/62 9/30/2011 Data source: Bloomberg 23

24 bond market environment PERIPHERAL EUROPEAN SOVEREIGN ANXIETY /1/07 1/1/08 3/1/08 5/1/08 7/1/08 9/1/08 11/1/08 1/1/09 3/1/09 5/1/09 7/1/09 9/1/09 11/1/09 1/1/10 3/1/10 5/1/10 7/1/10 9/1/10 11/1/10 1/1/11 3/1/11 5/1/11 7/1/11 9/1/11 Portugal Ireland Italy Greece Spain Germany Yield % Data source: Bloomberg. Sovereign 10yr Yields through 9/30/11 24

25 Economic and Macro Environment Outlook Year-end Forecast U.S. Domestic Global Western Europe Asia Pacific Latin America GDP Growth 3.0% 1.6% 2.1% 4.2% 3.1% 3.5% 1.7% 1.7% 1.4% 7.8% 6.5% 6.0% 6.2% 4.9% 4.0% CPI Inflation 1.6% 3.2% 2.2% 2.8% 3.8% 3.1% 1.8% 2.7% 2.0% 2.6% 3.6% 3.0% 7.3% 7.6% 7.1% Current Account Balance(Billions $) (471) (480) (433) (56.5) (71.3) (101.5) InterestRates(10-Year);endofyear 3.40% 2.00% 2.75% MACRO ENVIRONMENT Credit Cycle SlowerbutcontinuedeconomicgrowthintheUSandEuropewhich aggravates pressure on European fiscal budgets. The resulting fall in bond yields and the escalating European crisis have pushed credit spreads wider. Europe is still expected to muddle through but more extreme volatility may be needed in order to achieve meaningful resolution, politically. Very strong US corporate and bank balance sheets should limit default ratesifarecessionweretooccur.spreadsarelikelytocompensatefor future defaults. Fiscal Uncertainty Across Advanced Economies Europe has been enduring tight fiscal policy, particularly in the peripheryandintheuk.thedebtceilingdebatestartedtheus down a similar path although it continues to avoid addressing its long-term structural issues. US tax rates and government spending programs will be changed dramatically at some point(health care, defense, agriculture, oil sector, personal tax rates). As gridlock dominates the legislature, long-term planning is difficult if not impossible. US Economy Theriskofasecondhalfgrowthrecoverymaterializingis diminishing as confidence falters, wealth has deteriorated and surveys of capital expenditures are fading Exports are likely to slow depending on outcomes of Chinese tightening and the European debt crisis. Companies have strong profits and cash flow while labor faces weak job and wage growth. The unemployment rate will remain high and inflation low. Fiscaltighteningwillbeadragongrowthin2012and/or2013. TheFedisonholdatleastthroughQ3:2012 Global Rebalancing Will Support US Growth Over the Long Run Monetary policy in advanced economies will remain loose for a long time. Emerging markets may soon ease, eventually leading to a new tightening cycleperhapsassoonasnextyear. US trade balance will improve, supported by stronger exports and a weaker dollar Many foreign central banks continue to fight currency appreciation with capital controls and managed exchange rates. The opinions expressed are based upon subjective judgments and will evolve as future events unfold. Data source: Loomis Sayles Economics, Bloomberg, Moody s Investors Services, Consensus Economics As of 9/20/

26 bond market environment CONSENSUS FORECASTED 2011 CPI Brazil Indonesia China Australia United States Euro Zone Japan 26 Source: Bloomberg; Consensus data as of 09/30/2011

27 bond market environment US DOLLAR INDEX Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 DXY Index Source: Bloomberg; data through 9/30/

28 bond market environment US HIGH GRADE CORPORATE SPREADS OAS (bps) 700 US Corp IG 10yr avg 15yr avg Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 9/30/ Yr Average 15 Yr Average Current Spread to 10 Yr Avg Current Spread to 15 Yr Avg US Corp IG Aaa (6) 2 Aa A Baa Data source: Barclays Capital. Averages computed by Loomis Sayles. Data through 09/30/

29 bond market environment US HIGH YIELD CORPORATE SPREADS Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Basis Points US CORP HY 10yr Avg 15yr Avg 10 Yr 9/30/2011 Average 15 Yr Average Current Spread to 10 Yr Avg Current Spread to 15 Yr Avg US Corp HY Ba B Caa Data source: Barclays Capital. Averages computed by Loomis Sayles. Data through 09/30/

30 bond market environment US HIGH YIELD NEW ISSUANCE USE OF PROCEEDS Refinancing Acquisition Finance General Corp Other High Yield New Issuance ($billions) For Institutional Client Use Only Not For Further Distribution. Data Source: JP Morgan 09/30/

31 contacts Fresno County Employees Retirement System- MSFD RELATIONSHIP MANAGEMENT Stephanie S. Lord, CFA, CIC Client Portfolio Manager Dante Cunningham Portfolio Analyst Risa Y. Sampson Portfolio Assistant INVESTMENT MANAGEMENT Matthew J. Eagan, CFA Portfolio Manager Brian Kennedy Product Manager Laurie Gallagher Client Administration Manager This report is a service provided to customers of Loomis Sayles for informational purposes and is not a recommendation to purchase or sell securities. The performance shown is gross of management fees. Past performance is not a guarantee of future results. Loomis Sayles believes the information contained in this report is reliable but we do not guarantee its accuracy. 31