Metropolitan St. Louis Sewer District

Transcription

1 Metropolitan St. Louis Sewer District Fourth Quarter Deferred Compensation Plan Executive Summary Ms. Doris Ewing Partner February 2006 Mr. Ross Bremen, CFA Senior Consultant One Main Street, Cambridge, Massachusetts (617) ; F: (617)

2 Fourth Quarter 2005 Summary & Discussion As of quarter end, total Plan assets were $20.9 million, up from $20.3 million at the prior quarter end. The Plan experienced net contributions of $296 thousand for the quarter and return on investment of $361 thousand. During the quarter, the Life Strategy Moderate Growth Fund received the largest inflows equaling $137 thousand. For the year, the Vanguard Retirement Savings Trust received the largest inflows totaling $375 thousand. Investments experiencing withdrawals during the quarter included the Vanguard Balanced Fund (-$121 thousand), S&P 500 Index Fund (-$75 thousand), Vanguard US Growth Fund (-$27 thousand), Money Market Fund (-$20 thousand), and Vanguard Small Cap Fund (-$8 thousand). At quarter-end, the Plan s equity commitment, including international stock, was 76.1%. In comparison, the median plan s equity commitment was 61.7%. The Plan s higher-than-median equity commitment ranks in the 7 th percentile of the defined contribution plan universe which signifies that plan participants are taking on more equity risk than the median. The top four Plan options account for 64.8% of total Plan assets. The most prevalent Plan options include Vanguard Windsor II (28.6%), Vanguard S&P 500 Index (13.5%), Vanguard Balanced (12.7%), and Vanguard US Growth (10.0%). 1 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

3 Fourth Quarter 2005 Summary & Discussion Equity markets and bond markets rose slightly in the fourth quarter of For the year, stocks experienced robust earnings growth, yet concerns over inflation, oil prices and the deficit were some of the causes for the modest returns. The equity market, as represented by the S&P 500 Index, rose 2.1% during the quarter and 4.9% for the year. For the quarter, large stocks outperformed their smaller stock counterparts as the Russell 1000 Index gained 2.1% versus 1.1% for the Russell 2000 Index. Domestic growth stocks performed well versus value stocks during the quarter as measured by the Russell 3000 Growth and Russell 3000 Value Indexes which returned 2.9% and 1.2%, respectively. International stocks did very well this quarter, outperforming domestic names with the MSCI EAFE Index returning 4.1% and the MSCI Emerging Markets Free Index returning 7.2% The Fed increased interest rates twice this quarter, which also kept bond returns at bay. The bond market, as measured by the Lehman Aggregate Bond Index, returned 0.6%. All of the Plan s funds posted positive returns for the quarter (gross and net-offees). In a quarter in which growth stocks performed well, the Plan s top performing fund in absolute terms was the Vanguard US Growth Fund which returned 5.8% (net-of-fees). 2 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

4 Market Environment Overview (As of Fourth Quarter 2005) 3 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

5 Market Environment Economy (As of Fourth Quarter 2005) 4 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

6 Market Environment Interest Rates (As of Fourth Quarter 2005) 5 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

7 Market Environment Sector / Style Rotation (As of Fourth Quarter 2005) 6 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

8 Market Environment Domestic Equity (As of Fourth Quarter 2005) 7 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

9 Market Environment Fixed Income (As of Fourth Quarter 2005) 8 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

10 Market Environment International Equity (As of Fourth Quarter 2005) 9 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

11 Asset Allocation Fourth Quarter 2005 Vanguard Mid Cap Index 3.5% Vanguard S&P 500 Index 13.5% Life Strategy Conservative Growth 1.6% Vanguard US Growth 10.0% Vanguard Money Market 3.8% Vanguard International Growth 3.0% Vanguard Bond Index 6.3% Vanguard Small Cap 3.6% Vanguard Retirement Savings 6.1% Life Strategy Income 0.7% Life Stragety Moderate Growth 3.8% Vanguard Windsor II 28.6% Vanguard Balanced 12.7% Life Strategy Growth 2.8% 10 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

12 Asset Growth - Fourth Quarter 2005 Beginning Net Income Gain Ending Vanguard Fund Name Value Contributions Received (Loss) Value Composite $20,287 $296 $354 $7 $20,944 Balanced Fund 2,732 (121) $2,659 Windsor II Fund 5, (212) $5,991 US Growth Fund 1,997 (27) $2,088 S&P 500 Index Fund 2,852 (75) 8 48 $2,833 Mid Cap Index Fund $735 Small Cap Fund 761 (8) 8 2 $762 International Growth Fund $632 Money Market Fund 806 (20) 7 1 $794 Bond Index Fund 1, (6) $1,313 Retirement Savings Fund 1, $1,272 Life Strategy Growth $584 Life Strategy Moderate Growth $796 Life Strategy Conservative Growth $342 Life Strategy Income $147 The net contributions column includes NEPC s calculation of implied fees in the Plan. Although the Plan invests in mutual funds where the fees are taken from the funds net asset values, the fees exist and are subtracted from the beginning values each period. (Dollars in 000 s) 11 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

13 Account Market Values Fourth Quarter 2005 Domestic Int'l Domestic Cash & Stable Balanced Equity Equity Fixed Equiv. Value Funds Composite Composite $12,409 $631 $1,313 $793 $1,272 $4,526 $20,944 Balanced Fund 2,658 $2,658 Windsor II Fund 5,991 $5,991 US Growth Fund 2,088 $2,088 S&P 500 Index Fund 2,833 $2,833 Mid Cap Index Fund 734 $734 Small Cap Fund 763 $763 International Growth Fund 631 $631 Money Market Fund 793 $793 Bond Index Fund 1,313 $1,313 Retirement Savings Fund 1,272 $1,272 Life Strategy Growth 583 $583 Life Strategy Moderate Growth 795 $795 Life Strategy Conservative Growth 343 $343 Life Strategy Income 147 $ L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

14 Domestic Equity Style Analysis Windsor II 500 Index Fund S&P 500 Index LS Income LS Conservative Growth LS Growth Composite Balanced LS Mod Growth US Growth Mid Cap Index Fund Small Cap Index Fund Russell 2000 Index 13 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

15 Fourth Quarter Performance Category Specific Gross-of of-fee Returns for Comparative Purposes Quarter Rank 1 Year Rank 3 Years Rank 5 Years Rank Federal Money Market (vs. Cash Equivalents) 1.0% % % % day T-Bills 0.9% % % % 50 Retirement Savings Trust (vs. Stable Value Funds) 1.1% % % % 94 BT 3-Year GIC Rate 0.8% % % % 65 Total Bond Market Index (vs. Core Bond Funds) 0.7% % % % 88 LB Aggregate Bond Index 0.6% % % % 63 Median bond manager 0.6% 2.6% 4.2% 6.3% Balanced Index Fund (vs. Balanced Funds) 1.6% % % % 31 60% S&P 500/ 40% LB Aggregate Index 1.5% % % % 79 Median balanced fund 2.0% 6.2% 11.8% 4.0% Life Strategy Income (vs. Balanced Funds) 1.2% % % % 25 Life Strategy Conservative Growth (vs. Balanced Funds 1.6% % % % 27 Life Strategy Moderate Growth (vs. Balanced Funds) 2.0% % % % 33 Life Strategy Growth (vs. Balanced Funds) 2.4% % % % 58 The gross of fee investment performance of each of the Plan s investments is calculated by NEPC by grossing up the net of fee mutual fund returns by the respective expense ratios. NEPC grosses up fund performance in order to measure each fund s performance within the ICC universe. The ICC provides the largest performance universe in the industry and is a gross of fee universe. 14 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

16 Fourth Quarter Performance Category Specific Gross-of of-fee Returns for Comparative Purposes Quarter Rank 1 Year Rank 3 Years Rank 5 Years Rank S&P 500 Index Fund (vs. Large Cap Core) 2.1% % % % 69 S&P 500 Index 2.1% % % % 69 Windsor II Fund (vs. Large Cap Value) 0.2% % % % 47 Russell 1000 Value Index 1.3% % % % 58 U.S. Growth (vs. Large Cap Growth) 5.9% % % % 99 Russell 1000 Growth Index 3.0% % % % 87 Mid Cap Index (vs. Mid Cap Core) 3.1% % % % 65 Russell Mid Cap Index 2.4% % % % 84 Small Cap Index (vs. Small Cap Core) 1.2% % % % 88 Russell 2000 Index 1.1% % % % 93 Median domestic equity manager 2.1% 7.5% 18.3% 4.6% International Growth (vs. Intl Developed Mkt) 4.9% % % % 82 Citigroup PMI EPAC Index 4.5% % % % 62 MSCI EAFE Index 4.1% % % % 65 Median international equity manager 4.3% 15.3% 25.0% 8.7% The gross of fee investment performance of each of the Plan s investments is calculated by NEPC by grossing up the net of fee mutual fund returns by the respective expense ratios. NEPC grosses up fund performance in order to measure each fund s performance within the ICC universe. The ICC provides the largest performance universe in the industry and is a gross of fee universe. 15 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

17 Fourth Quarter Performance Category Specific Net-of of-fee Returns Expense Ratio Quarter 1 Year 3 Years 5 Years Federal Money Market 0.30% * 0.9% 3.0% 1.6% 2.2% Retirement Savings Trust 0.30% ** 1.0% 4.0% 4.2% 3.1% 90-day T-Bills 0.9% 3.1% 1.8% 2.3% BT 3-Year GIC Rate 0.8% 3.2% 4.0% 4.9% Total Bond Market Index 0.20% 0.6% 2.4% 3.3% 5.3% LB Aggregate Bond Index 0.6% 2.4% 3.6% 5.9% Median bond manager -0.5% 3.2% 4.9% 7.2% Balanced Index Fund 0.20% 1.5% 4.6% 12.4% 4.5% 60% S&P 500/ 40% LB Aggregate Index 1.5% 4.0% 10.1% 3.0% Median balanced fund 3.5% 12.3% 13.9% 2.6% Life Strategy Income 0.25% 1.1% 3.2% 6.6% 4.8% Life Strategy Conservative Growth 0.25% 1.5% 4.4% 9.8% 4.6% Life Strategy Moderate Growth 0.26% 1.9% 5.7% 12.7% 4.2% Life Strategy Growth 0.26% 2.3% 6.8% 15.6% 3.5% * As of 8/31/2005 ** As of 9/30/2005 The performance shown above is net of fees, as reported by the managers. 16 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

18 Fourth Quarter Performance Category Specific Net-of of-fee Returns Expense Ratio Quarter 1 Year 3 Years 5 Years S&P 500 Index Fund 0.18% 2.0% 4.8% 14.2% 0.4% S&P 500 Index 2.1% 4.9% 14.4% 0.6% Windsor II Fund 0.37% 0.1% 7.0% 18.1% 5.7% Russell 1000 Value Index 1.3% 7.1% 17.5% 5.3% U.S. Growth 0.53% 5.8% 11.1% 14.4% -8.1% Russell 1000 Growth Index 3.0% 5.3% 13.2% -3.6% Mid Cap Index 0.22% 3.1% 13.9% 22.3% 9.2% Russell Mid Cap Index 2.4% 12.7% 23.8% 8.5% Small Cap Index 0.23% 1.2% 7.3% 22.9% 8.9% Russell 2000 Index 1.1% 4.6% 22.1% 8.2% Median domestic equity manager 2.1% 7.5% 18.3% 4.6% International Growth 0.63% 4.7% 14.9% 22.6% 4.2% Citigroup PMI EPAC Index 4.5% 15.2% 24.3% 5.0% MSCI EAFE Index 4.1% 13.5% 23.7% 4.6% Median international equity growth manager 6.5% 18.8% 24.1% 6.4% The performance shown above is net of fees, as reported by the managers. 17 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA

19 Information Disclosure New England Pension Consultants, Inc. (NEPC) uses, as its data source, the plan s custodian bank or fund service company, and NEPC relies on those sources for security pricing, calculation of accruals, and all transactions, including income payments, splits, and distributions. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within. The Investment Performance Analysis (IPA) is provided as a management aid for the client s internal use only. The IPA does not constitute a recommendation by NEPC. Information in this report on market indices and security characteristics is received from sources external to NEPC. While efforts are made to ensure that this external data is accurate, NEPC cannot accept responsibility for errors that may occur. 18 L:/Client/St. Louis Sewer/ 457 Plan/ IPA/ Exec IPA