Exchange Traded Fund Strategies

Transcription

1 Exchange Traded Fund Strategies 221 W. 6 th Street, Suite 1210 Austin, Texas Phone Fax Teresa Finney Senior Vice President, Investments Richard A. Funk, CFP First Vice President, Investments Jenny Davis, CFA Registered Sales Assistant

2 Overview Exchange Traded Fund (ETF) Management Seasoned investment team with 10+ years experience investing in ETFs Proprietary portfolios that are time-tested Equity & fixed income investing expertise Tactical ETF Portfolios Multiple Strategies to Meet Multiple Objectives Portfolio 1 Core Fixed Income Portfolio 2 Conservative Portfolio 3 Moderate Portfolio 4 Growth Portfolio 5 Enhanced Growth Portfolio 6 All Cap Equity 100% Fixed Income 20% 40% 80% 60% 40% 20% 60% 80% 100% Equity A series of globally diversified, tactical ETF portfolios Six target risk strategies (Portfolios 1-6) Includes risk-appropriate exposure to equity, taxable, and non-taxable fixed income markets One income portfolio with a flexible investment mandate in order to maximize yield Provide custom management within model portfolios Allows for client specific needs (liquidity, tax management, etc.) Fixed Income Equity 2

3 Philosophy Top Down, Forward Looking Global macroeconomic view Fundamental, technical and relative valuation analysis of markets Tactical Asset Allocation Add value through tactical allocation of broad/sub asset classes Meaningful tactical over-weights within client s stated risk profile Emphasis on Risk Management Strive for consistent benchmark outperformance Focus on reduced volatility and downside protection 3

4 The Advantages of ETFs Security Benefits Liquid Low cost Tax efficient Diversified Transparent Investment Merits Broad access to every major index, market segment Unique access to sub-asset classes and investment themes Ease of portfolio construction and tactical shifts Provides clarity of strategy Easy to assess attribution 4

5 The Advantages of ETFs (Continued) Long Term Performance: % of Active Managers Outperforming (15-yr period from 1/1/96 through 12/31/10) -For the 15-year period, the majority of active managers were not able to beat their corresponding index benchmark. Fixed Income Emerging Markets International 19.9% 42.0% 64.5% Small Value Small Growth Small Blend 38.5% 59.1% 54.1% Mid Value Mid Growth Mid Blend 24.2% 35.0% 41.0% Large Value Large Growth Large Blend 34.7% 43.0% 34.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of Outperforming Managers Source: Morningstar Direct, SSgA Strategy & Research Based on Morningstar data for the past 15 years, ending December 31, Chart shows the % of active strategies that outperform the corresponding benchmark and the average excess return of the outperforming managers. Mutual fund performance is net of fees; index performance is gross of fees. The following indexes were used as benchmarks: Dow Jones U.S. Total Stock Market Indexes for the respective domestic equities, the MSCI EAFE Index for international equities and the MSCI Emerging Markets Index for Emerging Market equities and the BarCap US Aggregate Bond Index for Fixed Income. For illustrative purposes only. Past performance is not indicative of future results.

6 Process Start with a Macro View of Global Markets Allocation decisions reflect forward looking tactical view, based on 1-2 quarter outlook Consistent review process allows for tactical adjustments as macroeconomic conditions and market fundamentals evolve MACRO VIEW FUNDAMENTAL VALUATION TECHNICAL ALLOCATION ANALYSIS PORTFOLIO CONSTRUCTION ONGOING REVIEW PROCESS Convergence of Macro View with fundamental, valuation and technical analysis of markets Built from ETF Universe across multiple asset classes and market segments 6

7 Economic & Market Analysis An exhaustive evaluation of macroeconomic conditions drives broad asset allocation decisions Target asset allocations in each Portfolio are constrained by shifts of +/- 20% Fundamental, technical, and valuation analysis drives tactical decisions for sub-asset classes Allows prudent under -or over-weighting of certain sub asset classes that, according to our analysis, have the most opportunities for growth Broad Asset Allocation Decisions Exposure to equity, fixed income, alternatives, and cash Tactical Decisions for Sub-Asset Classes Equity & Alternative Assets Fixed Income Large Cap vs. Small Cap Growth vs. Value International vs. Domestic Domestic Sector Evaluation Emerging Market vs. Developed Market Commodities REITs Duration / Yield Curve Positioning TIPs vs. Nominal Treasuries Credit vs. Treasuries High Yield Currency Exposure Emerging Market Debt 7

8 Portfolio 1 Core Fixed Income Tactical ETF Portfolios Portfolio 3 Portfolio 4 Moderate Growth Portfolio 2 Conservative 80% 20% 40% 40% 60% 60% Portfolio 5 Enhanced Growth Portfolio 6 All Cap Equity 100% Income 100% Equity 20% 80% Asset Class Target Allocation: Portfolio 1 Core Fixed Income 100% Fixed Portfolio 2 Conservative 20/80 Portfolio 3 Moderate 40/60 Portfolio 4 Growth 60/40 Portfolio 5 Enhanced Growth 80/20 Portfolio 6 All Cap Equity 100% Equity Portfolio Income Fixed Income & Cash Equity Securities International Equity & Emerging Markets Alternative Investments & Other Equity Target Allocation for all Models + / - 20% Maximum 10% 15% 40% 60% 80% 100% Maximum 10% 15% 35% 40% 50% 50% Flexible Investment mandate to maximize yield 8

9 Disclosures Investors should consider the investment objectives, risks, and charges and expenses of an exchange-traded product carefully before investing. A prospectus which contains this and other information about these funds can be obtained by contacting (FA name). Please read the prospectus carefully before investing. Although the statements of fact, analysis and data in this Report have been obtained from, and are based upon, sources the Texas Capitol Group of Raymond James believes to be reliable, we do not guarantee their accuracy, and any such information and results may be incomplete or condensed. All opinions and results included in this report constitute the Texas Capitol Group's judgment as of the date of this Report and are subject to change due to market conditions and without notice. Forecasts and back tested tactical models are based on proprietary research and are not intended as an offer or solicitation with respect to the purchase or sale of any security, strategy or investment product. Past performance is not a guarantee of future results. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest tor the long-term especially during periods of downturn in the market. These materials contain statements and analyses that are "forward-looking statements." These include, among other things, projections, hypothetical analysis of income, yield or return, future performance targets. Sample or pro forma portfolio structures or portfolio composition, scenario analysis, specific investment strategies and proposed or pro forma levels of diversification or sector investment These forward-looking statements are based upon certain assumptions. Actual events are difficult to predict and are beyond the preparer's control. Actual events may differ materially from those assumed. All forward-looking statements included are based on information available on the date hereof and the Texas Capitol Group or their respective affiliates assume any duty to update any forward-looking statements. Changes in tax laws may occur at any time and could have a substantial impact upon each person s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James & Associates we are not qualified to render advice on tax or legal matters. The Dow Jones Industrial Average is an unmanaged index of 30 widely held securities. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. These international securities involve additional risks such as currency fluctuations, iffering financial accounting standards, and possible political and economic instability. 9

10 Disclosures The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. Barclays Capital U.S. Aggregate Bond Index is made up of the Barclays Capital U.S. Government / Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Based Securities Index, including securities that are of investment grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million. It is not possible to invest directly in an index. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. Actual securities used in model portfolios and allocation to each security may be different for each client, depending on suitability and risk tolerance and when the models were created. Due to these differences, your results may vary from the model. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Alternative investment strategies involve greater risks and are only appropriate for the most sophisticated, knowledgeable and wealthiest of investors. Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only form a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices overall are rising. Technical Analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. High-yield bonds are not suitable for all investors. The risk of default may increase due to changes in the issuer s credit quality. Price changes may occur due to changes in interest rates and the liquidity of the bond. When appropriate, these bonds should only comprise a modest portion of your portfolio. Treasury Inflation- Protected Securities (TIPS) provide protection against inflation. The principal increases with inflation and decreases with deflation, as measured by the Consumer Price Index. At maturity you are paid the adjusted principal or original principal, whichever is greater. Increases in TIPS principal value as a result of inflation adjustments are taxed as capital gains in the year they occur, even though these increases are not realized until the TIPS are sold or mature. 10

11 Disclosures Conversely, decreases in the principal amount due to deflation can be used to offset taxable interest income. REITs are financial vehicles that pool investors capital to purchase or finance real estate. REITs involve risks such as refinancing, economic conditions in the real estate industry, changes in property values and dependency on real estate management. Relative Strength is a measure of price trend that indicates how a stock is performing relative to other stocks in its industry. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP, CERTIFIED FINANCIAL PLANNER and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board s initial and ongoing certification requirements. Raymond James & Associates, Inc., Member New York Stock Exchange/SIPC. 11