AMEC. Homestead Funds. April 10 th, Brian Allen Institutional Sales Consultant

Transcription

1 AMEC Homestead Funds April 10 th, 2018 Brian Allen Institutional Sales Consultant

2 Business Development Brian Allen Institutional Sales Consultant YEARS IN THE INDUSTRY: Since 2000 Experience Brian has been providing investment guidance and client services to Homestead Funds shareholders for more than a decade. He holds FINRA Series 6 license (Investment Company and Variable Contracts), Series 63 (Uniform Securities Agent State Law) and Series 65 (Investment Advisor Representative). Education Brian is a graduate of King College, where he received a Bachelor s degree in business administration. He received his MBA from Marymount University. We d be pleased to provide more information about our strategies and welcome your call. v Our People homesteadfunds.com 2

3 Firm Overview

4 About Homestead Homestead Funds was established in 1990 by the National Rural Electric Cooperative Association (NRECA), a not-for-profit organization that serves and represents the nation s consumer-owned rural electric cooperatives. Based in Arlington, Virginia, we are a mutual fund company created to provide high-quality, affordable investment products and services to rural electric cooperatives. We serve financial advisors, retirement plans, institutional clients as well as individual investors. We currently make eight investment strategies available through our no-load mutual fund offering. RE Advisers (REA), a wholly owned subsidiary of NRECA, provides investment advisory and administrative services to Homestead Funds. For Institutional or Advisor Use Only Not for Public Distribution v Firm Overview homesteadfunds.com 4

5 Created by and for the Co-Op Community A series of eight no-load mutual funds. Established by NRECA in 1990 for member systems and their employees. Open to the public. Created for co-ops, but others can invest. If you are an employee of a member co-op, you can think of Homestead Funds as a local business supporting you and your community. Brian Allen Institutional Sales Consultant v Built for Cooperatives homesteadfunds.com 5

6 Assets Under Management More than $3.3 billion in assets as of 9/30/2017 Rollover, Traditional and Roth IRA accounts Education Savings and UGMA/UTMA accounts for minors Individual & joint accounts Corporate and trust accounts Cooperative benefit plan accounts, including deferred compensation plan assets Helping investors in the co-op community reach their dreams v Built for Cooperatives homesteadfunds.com 6

7 The Mutual Fund Company Built for Cooperatives

8 Our Funds Money Market Fund Short-Term: Investor s time horizon is typically less than one year Daily Income Fund Bond Funds Medium-Term: Investor s time horizon is typically less than five years Equity Funds Long-Term: Investor s time horizon is typically more than five years Short-Term Government Securities Fund Short-Term Bond Fund Stock Index Fund Value Fund Growth Fund Small-Company Stock Fund International Equity Fund v Investing in mutual funds involves risk, including the possible loss of principal. You could lose money by investing in the Daily Income Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. Built for Cooperatives homesteadfunds.com 8

9 How We Help Co-Ops Deferred Compensation Plan Accounts Homestead Funds may be used as the funding vehicles for these plans. Designed to help members attract, retain and compensate directors, CEOs and other highly compensated employees Welfare Benefit Plan Trust (FAS-106) Accounts An account for covering future retiree medical costs Corporate Accounts Regular investment accounts, which can be dedicated for specific purposes Trust Accounts Unclaimed capital credits or scholarship monies can be held in trust accounts v Built for Cooperatives homesteadfunds.com 9

10 Ways Investors Use Our Funds Build retirement savings Manage assets in retirement Accounts types and investment options for other goals Save for education costs Build wealth Put money aside for a major purchase, like a house v Built for Cooperatives homesteadfunds.com 10

11 Types of Retirement Accounts Roth IRA Traditional IRA Spousal IRA SEP IRA * Homestead Funds does not offer tax advice. Please consult an appropriate professional for your individual circumstance. v Built for Cooperatives homesteadfunds.com 11

12 Types of Non-Retirement Accounts Individual & Joint Accounts Can be used to build emergency funds, save for larger goals or establish a rainy day account. Trust Accounts Can be used as an estate planning tool. Accounts for Minors Education Savings Accounts can be used to save for a child s education. Uniform Gift/Transfer to Minor Accounts can be used to save for anything benefiting the minor (including education). v Built for Cooperatives homesteadfunds.com 12

13 Low Costs No sales commissions (loads) Funds with a sales charges typically deduct the charge from the amount invested. Funds offered at no load, like Homestead Funds, do not deduct a sales charge from the amount invested. Low expense ratios All funds have expenses, which cover the costs for needed services, like portfolio management, accounting and recordkeeping. These costs are deducted from fund assets, effectively lowering investors returns. Funds with a relatively low expense ratio, allow investors to keep more of the fund s earnings. Homestead Fund expense ratios are in line with or below peers according to Morningstar Direct, based on each fund s Morningstar classification. The gross expense ratio shows the percentage of fund assets deducted annually to cover operating costs. For some funds, the investment advisor has agreed voluntarily or contractually (for at least the current fiscal year) to waive or reimburse a portion of expenses. The net expense ratio is the gross expense ratio minus the portion of expenses waived or reimbursed. Please see the current prospectus for additional details. v Built for Cooperatives homesteadfunds.com 13

14 Fund Fees And Operating Expenses For the year ended December 31, 2016 TRANSACTION FEES GROSS EXPENSE RATIO NET EXPENSE RATIO MEDIAN EXPENSE RATIO FOR PEER GROUP* Daily Income None 0.71% 0.37% 0.49 % Short-Term Government Securities None Short-Term Bond None Stock Index None Value None Growth None Small-Company Stock None International Equity None The expense ratio shows the percentage of fund assets deducted annually to cover operating costs. Fund expense ratios shown here do not include acquired fund fees and expenses. If applicable, these additional costs are disclosed in the prospectus. For some funds, the investment advisor has agreed voluntarily or contractually (for at least the current fiscal year) to waive or reimburse a portion of expenses. The net expense ratio is the expense ratio minus the portion of expenses waived or reimbursed. Please see the current prospectus for additional details. The peer ratio is according to Morningstar Direct, based on each fund s Morningstar classification. v Built for Cooperatives homesteadfunds.com 14

15 Effects of Fund Operating Costs Hypothetical $50,000 investment over 20 years at 8% return. $250,000 $200,000 $150,000 $160,357 $33,127 higher return than the more expensive fund in this example. $193,484 $52,036 higher return than the most expensive fund in this example. $212,393 $100,000 $50,000 $0 Expense of 2.0% Expense of 1.0% Expense of 0.5% This illustration is for educational purposes only and is used to demonstrate a mathematical principle. Expense numbers chosen for this illustration do not represent any particular investment/fund. v Built for Cooperatives homesteadfunds.com 15

16 Low Minimums Initial investment minimum $500 for a regular account $200 for an IRA $0 if making scheduled, automatic investments from paycheck or bank account Subsequent investment minimum Account service charges None add to your account with any amount $15 annual custodial fee for IRA and Education Savings Accounts $10 fee to send a federal funds wire No fee to send money by ACH transfer v Built for Cooperatives homesteadfunds.com 16

17 Financial Fragility and the $400 Question 47% of Americans could not come up with $400 in an emergency 62% of Americans could not cover a $1,000 ER visit or $500 car repair with savings 56% 55% of Americans worried about finances in the last year of households don t have enough liquid savings to replace a month s worth of income Source: Gabler, Neal. The Secret Shame of Middle-Class Americans. The Atlantic. May v Understanding Investing homesteadfunds.com 17

18 The Team Representatives have backgrounds in banking, brokerage and insurance. Each has passed FINRA Series 6 (Investment Company and Variable Contracts) and 63 (Uniform Securities State Law) securities exams. Daily interaction with shareholders via telephone, s and written correspondence. In-depth knowledge of different account structures and processing requirements. v Built for Cooperatives homesteadfunds.com 18

19 Business Development and Client Relations Brian Allen Institutional Sales Consultant Dim a Awam leh Senior Institutional Client Services Associate Will Cunningham, CFP Senior Client Relationship Advisor Kara Gardner Senior Operations Specialist Darry l Keeton, CIMA Head of Distribution Nancy Jacobs Senior Client Services Associate Megan McFarland, CFP Senior Client Relationship Advisor Alaina Schrager, CFP Senior Client Relationship Advisor John Scott Senior Client Services Associate Ray m ond Scott, CFP Client Relationship Advisor Makia T illm an Mutual Funds Operations Specialist v Our People homesteadfunds.com 19

20 How We Can Help Discuss your financial goals Provide personalized investment guidance Provide investment education Assist with opening and funding accounts v Built for Cooperatives homesteadfunds.com 20

21 How We Help Our Shareholders One-on-one financial planning help and account service Detailed assessment of your financial planning goals, budget, risk tolerance Guidance for structuring your portfolio for an appropriate risk/return trade off Help maintaining your target asset mix over time v Built for Cooperatives homesteadfunds.com 21

22 Investing by Life Stage: Early Career Start saving now for a more secure financial future. Investor Profile - Age Investment Considerations - Build an emergency fund Investment Goals - Provide for family - Pay off student loans - Buy a home - Save for retirement v1 Economy and Markets homesteadfunds.com 22

23 Investing by Life Stage: Mid Career Reassess your investment goals and consider rebalancing, if necessary. Investor Profile - Age Investment Considerations - Continue growing emergency fund - Prioritizing financial goals - Continue investing for retirement - Make catch-up contributions, if necessary Investment Goals - Save for a child s education - Pay off mortgage - Taking care of elderly parents - Save for retirement Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy. v1 Economy and Markets homesteadfunds.com 23

24 Investing by Life Stage: Late Career Plan your retirement income strategy. Investor Profile - Age Investment Considerations - Estimate your retirement income needs - Evaluate your portfolio - Continue investing for retirement - Make catch-up contributions, if necessary Investment Goals - Eliminate debt - Save for retirement v1 Economy and Markets homesteadfunds.com 24

25 Investing by Life Stage: Retirement Optimize your retirement experience. Investor Profile - Age 65+ Investment Considerations - Make a decision about Social Security benefits - Transition asset allocations - Learn about Required Minimum Distributions (RMDs) Investment Goals - Financial security - Leaving money to heirs v1 Economy and Markets homesteadfunds.com 25

26 homesteadfunds.com Find out more about our funds Open an account Check your account balance Make transactions v Built for Cooperatives homesteadfunds.com 26

27 Others Can Invest Homestead Funds was created for the rural electric cooperative community, but you don t have to be a co-op employee or director to invest. Family and friends of NRECA member system employees and the general public can open accounts. v Built for Cooperatives homesteadfunds.com 27

28 Summary We re part of the NRECA family! A range of fund choices Experienced portfolio managers An affordable way to invest No loads, low account minimums Personalized shareholder service and investment guidance Questions? Just call v Built for Cooperatives homesteadfunds.com 28

29 Awards and Recognition Lipper named the Small-Company Stock Fund the top fund in the small-cap core category for the 10-year period. * Small-Company Stock Fund June 2015 Value Fund Jan/Feb 2016 Small-Company Stock Fund April 2017 v *For the second year in a row, Lipper named Homestead s Small-Company Stock Fund the top fund in the small-cap core category for the 10-year period ending November The Lipper Fund Awards are based on the Lipper Leader ratings for Consistent Return; which are calculated using a utility function based on the effective return over multiple non-overlapping periods: three-, five-, and ten-year horizons. The calculations over multiple periods ensure that all periods in which a fund underperforms the average of its peer group are identified. Then Lipper uses a utility function based on behavioral finance theory to penalize periods of under performance against the peer group average, with more significant weightings being given to excess negative returns. In determining the universe of funds considered for an award, Lipper includes those registered for sale in the respective country as of the end of the calendar year that have at least 36 months of performance history. 168 funds were evaluated for this award. The calculation periods end November 30 of the respective evaluation year. Past performance does not guarantee future results. Share prices of small-capitalization stock funds may be more volatile than those of large-capitalization stock funds. Smaller companies may have limited product lines, markets or financial resources, or their management teams may have less depth and expertise, compared with large-capitalization companies. Firm Overview homesteadfunds.com 29

30 Fund Company Media Mentions Kiplinger, April 2018 "25 Best Mutual Funds for Low Fees" Investor's Business Daily, February 2018: "Top Value Funds (Six Month Leaders)" Money, January/February 2018: "Investor's Guide 2018" Investor's Business Daily, January 2018: "Top Value Funds (Six Month Leaders)" Kiplinger, November 2017: "5 Unloved Value Funds to Consider Buying Now" Wall Street Journal, November 2017: "Category Kings" Wall Street Journal, July 2017: "Category Kings" Kiplinger, April 2017: "25 Best Mutual Funds for Low Fees" Seeking Alpha, May 2016: "3 Strong Buy All-Cap Value Mutual Funds" Money, January 2016: Top Picks from Top Pros Kiplinger s Personal Finance, January 2016: This Small-Company Stock Fund Finds Gems in Surprising Places Investor s Business Daily, October 2015: Small-Cap Mutual Funds Hang Tough; Homestead Among Leaders Forbes, June 2015: Mutual Fund Honor Roll Kiplinger s Personal Finance, May 2015: How to Beat Index Funds Bloomberg Markets, April 2015: Small-Cap US Equities Investor s Business Daily, April 2015: Are Small-Cap Stock Mutual Funds Helping Build Your Wealth? Wall Street Journal, March 2015: How to Pick a Stock Picker Kiplinger s Personal Finance, February 2015: Oldies but Goodies Barron s, December 2014: The Artistry of Investing Forbes, August 2014: Mutual Funds Honor Roll Kiplinger s Personal Finance, April 2014: The Top Small-Cap Funds Bloomberg Markets, May 2013: The Best Performing Mutual Funds S&P Fund Awards, November 2011: Gold Award for SmallCompany Consumer Reports, February 2007: 60 Funds You Can Count On Smart Money, December 2006: Fund Watch: Good Gifts Kiplinger s Personal Finance, November 2006: Thrills without Spills Motley Fool Champion Funds, November 2006: Fund of the Month Consumer Reports, March 2005: 70 All-weather Winners Louis Rukeyser s Mutual Funds, November 2004: Open Arms Kiplinger s Personal Finance, April 2002: Take Heart: Low Minimums Business Week, February 2002: That Old Bond Magic May Not Last Money, Fall 2001: 10 Best Funds Money, December 1998: Picking Funds for Retirement Money, June 1998: The World s Best Mutual Funds Reuters, February 1998: Fund Risk is as Important as Return Reuters, January 1998: The Value of Value Barron s, November 1997: For Warm Fuzzies, Try Homestead Money, November 1997: Lift Your Returns with Five Funds that Don t Seek the Spotlight Consumer Reports, September 1997: Who Needs a Bond Fund? Fortune, August 1997: The Best Mutual Funds for Your Retirement Wall Street Journal, April 1997: Hope Springs Eternal Smart Money, October 1996: Where to Stash Your Savings Firm Overview homesteadfunds.com 30 v1-2018

31 Index Definitions The BofA Merrill Lynch 1 5 Year U.S. Treasury Index measures the performance of short-term U.S. Treasury securities. The BofA Merrill Lynch 1 5 Year Corp./Gov. Index measures the performance of U.S. government and investment-grade corporate debt. The BofA Merrill Lynch 7-10 Year US Treasury Index is a subset of the BofA Merrill Lynch Treasury Index including all securities with a remaining term to final maturity greater than or equal to 7 years and less than 10 years. Barclays Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The Standard & Poor s 500 Stock Index is a broad-based measure of U.S. stock market performance and includes 500 widely held common stocks. The Standard & Poor s 500 Value Index measures the performance of the large-capitalization value sector in the US equity market. It is a subset of the S&P 500 Index and consists of those stocks in the S&P 500 Index exhibiting the strongest value characteristics. The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that Index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The MSCI EAFE Index is an equity index which captures large and mid-cap representation across developed markets countries around the world, excluding the U.S. and Canada. Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices does not account for any fees, commissions or other expenses that would be incurred. Returns for the equity indices include reinvested dividends. v Glossary homesteadfunds.com

32 Past performance is no guarantee of future results. Investors are advised to consider fund objectives, risks, charges and expenses before investing. The prospectus contains this and other information and should be read carefully before you invest. To obtain a prospectus, call or download a PDF at homesteadfunds.com. Investing in mutual funds involves risk, including the possible loss of principal. You could lose money by investing in the Daily Income Fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. Investments in fixed-income funds are subject to interest rate, credit and inflation risk. Interest rate risk is risk that a change in rates will negatively affect the value of the securities in the fund s portfolio. Equity funds, in general, are subject to style risk, the chance that returns on stocks within the style category in which the fund invests will trail returns of stocks representing other styles or the market overall. Share prices of small-capitalization stock funds may be more volatile than those of large-capitalization stock funds. Smaller companies may have limited product lines, markets, financial resources or their management teams may have less depth and expertise compared with largecapitalization companies. International investing involves special risks such as currency fluctuation and political instability. Index funds are subject to tracking risk, the risk that the fund s return will not closely track the return of the index. The preceding document is designed to be presented in its entirety to the intended audience. Please do not distribute without permission. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. The information provided herein is not directed at any investor or category of investors and is provided solely as general information about our products and services and to otherwise provide general investment education. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Homestead Funds, RE Advisers, nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. Homestead Funds investment advisor, RE Advisers Corporation, and distributor, RE Investment Corporation, are indirect wholly-owned subsidiaries of NRECA. 05/17 v3-2017