City of Fort Walton Beach, Florida Beal Memorial Cemetery Perpetual Care Fund Investment Performance Review Investment Advisors Steven Alexander, CTP, CGFO, CPPT, Managing Director Khalid Yasin, CHP, Director D. Scott Stitcher, CFA, Director Richard Pengelly, CFA, CTP, Director Rebecca Geyer, CTP, Senior Analyst One Keystone Plaza, Suite 300 North Front & Market Streets Harrisburg, PA 17101-2044 717.232.2723 717.233.6073 fax PFM Asset Management LLC 300 South Orange Avenue Suite 1170 Orlando, FL 32801 407.648.2208 407.648.1323 fax
Financial Markets Review
QUARTERLY MARKET SUMMARY Multi-Asset Class Management Market Index Performance As of June 30, 2017 QTD YTD 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years DOMESTIC EQUITY S&P 500 Index 3.09% 9.34% 17.90% 10.73% 9.61% 14.63% 15.41% 7.18% Russell 3000 Index 3.02% 8.93% 18.51% 10.02% 9.10% 14.58% 15.34% 7.26% Russell 1000 Value Index 1.34% 4.66% 15.53% 9.01% 7.36% 13.94% 14.31% 5.57% Russell 1000 Growth Index 4.67% 13.99% 20.42% 11.38% 11.11% 15.30% 16.48% 8.91% Russell Midcap Index 2.70% 7.99% 16.48% 8.23% 7.69% 14.72% 15.28% 7.67% Russell 2500 Index 2.13% 5.97% 19.84% 7.44% 6.93% 14.04% 14.78% 7.42% Russell 2000 Index 2.46% 4.99% 24.60% 7.80% 7.36% 13.70% 14.35% 6.92% Russell 2000 Value Index 0.67% 0.54% 24.86% 10.29% 7.02% 13.39% 13.50% 5.92% Russell 2000 Growth Index 4.39% 9.97% 24.40% 5.37% 7.64% 13.98% 15.16% 7.82% INTERNATIONAL EQUITY MSCI EAFE Index (Net) 6.12% 13.81% 20.27% 3.94% 1.15% 8.69% 7.91% 1.03% MSCI AC World Index (Net) 4.27% 11.48% 18.78% 6.94% 4.82% 10.54% 10.48% 3.71% MSCI AC World ex USA Index (Net) 5.78% 14.10% 20.45% 3.98% 0.80% 7.22% 6.66% 1.13% MSCI AC World ex USA Small Cap (Net) 6.24% 15.56% 20.32% 6.65% 3.31% 10.02% 8.83% 2.91% MSCI EM Index (Net) 6.27% 18.43% 23.75% 4.32% 1.07% 3.96% 3.87% 1.92% ALTERNATIVES FTSE NAREIT Equity REIT Index 1.52% 2.70% -1.70% 10.42% 8.36% 9.52% 13.17% 6.00% FTSE EPRA/NAREIT Developed Index 3.01% 5.37% 1.14% 6.70% 4.56% 8.36% 10.72% 2.76% Bloomberg Commodity Index -3.00% -5.26% -6.50% -9.98% -14.81% -9.25% -5.68% -6.49% FIXED INCOME Blmbg. Barc. U.S. Aggregate 1.45% 2.27% -0.31% 2.79% 2.48% 2.21% 3.19% 4.48% Blmbg. Barc. U.S. Gov/Credit 1.69% 2.66% -0.41% 3.08% 2.62% 2.29% 3.39% 4.57% Blmbg. Barc. Intermed. U.S. Gov/Credit 0.94% 1.73% -0.21% 2.03% 1.92% 1.77% 2.57% 3.87% Blmbg. Barc. U.S. Treasury: 1-3 Year 0.19% 0.46% -0.11% 0.60% 0.70% 0.64% 0.76% 1.96% Blmbg. Barc. U.S. Corp: High Yield (HY) 2.17% 4.93% 12.70% 7.01% 4.48% 6.89% 8.15% 7.67% Credit Suisse Leveraged Loan 0.75% 1.96% 7.49% 4.16% 3.49% 4.83% 5.29% 4.16% BofA Merrill Lynch Global HY Constrained 3.15% 6.30% 12.40% 7.18% 3.34% 6.88% 8.02% 7.53% Blmbg. Barc. Global Aggregate Ex USD 3.55% 6.12% -3.80% 3.45% -2.42% -0.36% 1.75% 3.05% JPM EMBI Global Diversified 2.24% 6.19% 6.04% 7.90% 5.38% 5.72% 7.09% 7.44% CASH EQUIVALENT 90 Day U.S. Treasury Bill Index 0.20% 0.30% 0.44% 0.29% 0.20% 0.15% 0.13% 0.55% Source: Investment Metrics. Returns are expressed as percentages. Please refer to the last page of this document for important disclosures relating to this material. 1.1
QUARTERLY MARKET SUMMARY Multi-Asset Class Management THE ECONOMY At end of June, the final reading of the first quarter U.S. Gross Domestic Product (GDP) showed growth at an annualized rate of 1.4%. The rate was revised up from the initial reading of 1.2%, on the strength of positive surprises in consumer spending and exports. Relative to the fourth quarter, the rate did slow, but the slowing has been attributed to temporary factors. Unemployment moved further down to 4.4% overall, after slightly ticking up in June. Non-farm payrolls increased 581,000. However, one important contributor has been a declining labor force participation rate, which currently stands at 62.8%. The Federal Open Market Committee (FOMC) raised the Federal Funds target rate for the second quarter in a row during their June meeting. The target range now sits between 1.00% and 1.25%. Chairwoman Janet Yellen cited strengthening economic growth and employment, while attributing decelerating inflation to transitory factors. Despite Yellen s relatively hawkish sentiment, as of the end of the quarter, markets were split on whether there will be an additional hike in 2017. Another significant move towards tighter monetary policy came when Yellen laid out a plan to reduce the balance sheet holdings by phasing out reinvestment of principal received from maturing Treasuries and mortgage-backed securities (MBS). In mid-april, British Prime Minister Theresa May called for a snap parliamentary election to capitalize on growing support for her party and her pursuit of a hard Brexit. At the time, May s Conservative Party held a large lead in polls but lost ground in the days leading up to the June 8 election. In the end, May failed to improve her leverage to negotiate her hard Brexit as her Conservative Party lost its parliamentary majority and was forced to establish a coalition government with another party. Official Brexit negotiations began during the latter weeks of June. France held both Presidential and Parliamentary elections in the first quarter, with the French electorate handing centrist Emmanuel Macron the presidency. Macron s newly-formed party, The Republic on the Move, and its allies garnered 350 of the 577 seats in the National Assembly. The victory is expected to give Macron flexibility in implementing fiscal policy. First quarter corporate earnings for stocks in the S&P 500 Index (S&P 500) grew 13.9% year-over-year (YoY) which topped estimates of 9.0% growth to begin the quarter. Almost all sectors posted positive earnings growth with the exception being Telecom, for which earnings fell 5.0% (FactSet as of 6/30/2017). QoQ% Change, SA, Annualized 6% 5% 4% 3% 2% 1% 0% -1% -2% U.S. Real GDP Growth (Seasonally Adjusted) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Blue bars indicate actual numbers; taupe bars indicate forecasted estimates. Chnage in Non-Farm Payrolls (Thousands) 1.4% 3.5% 2.1% 1.4% 2012 2013 2014 2015 2016 2017 Change in Non-Farm Payrolls 400 10% 9% 300 8% 7% 200 6% 5% 100 4% 3% 0 2% Unemployment Rate: 4.40% 1% -100 0% Jun '12 Dec '12 Jun '13 Dec '13 Jun '14 Dec '14 Jun '15 Dec '15 Jun '16 Dec '16 Jun '17 Change in Non-Farm Payrolls (left) Unemployment Rate (right) Unemployment Rate 1.2
QUARTERLY MARKET SUMMARY Multi-Asset Class Management WHAT WE RE WATCHING Federal Reserve (Fed) officials continue to signal another interest rate hike by the end of the year on the back of strong economic fundamentals. In making their case for gradual increases, the Fed has cited the labor market, business investment and housing sector activity, despite recent weakness in inflation. Forward-looking Purchasing Managers Index (PMI) indicators continue to show expansion in both manufacturing and services sectors. Current market sentiment based on the Fed Funds Futures contracts indicates that the market is still roughly split on the probability of another rate hike in 2017. The market will continue to pay particularly close attention to Fed speak and inflation indicators to assess the probability of another rate hike at the end of this quarter. Markets will be watching domestic political and economic developments as the Senate Republicans prepare the healthcare reform bill to repeal and replace the Affordable Care Act (ACA). The party continues to struggle to gather enough support as several Republican Senators remain opposed to the bill in its current form. The Congressional Budget Office estimates the bill would result in 49 million people uninsured, 22 million more than what is currently projected under the ACA, while decreasing the budget deficit by $321 billion through spending cuts, by the year 2026. The outcome of the vote will be important in the context of shaping market sentiment regarding the administration s ability to implement proposed reforms and move on to other issues including tax reform and infrastructure spending. Markets will also be monitoring Europe. Brexit negotiations kicked off on June 19th with Prime Minister Theresa May s now weakened leverage. The European Union (E.U.) wants to settle three issues prior to moving on to negotiating a future trade partnership: United Kingdom (U.K.) payment to get out of E.U. commitments, a deal for citizens living in both regions, and border arrangements between Ireland and the U.K. In September, Germany will hold federal elections. While the implications may not be at the same level of recent U.K. and French elections, developments will certainly garner the markets attention. Other political events that could potentially carry impact include developments in North Korea s nuclear program and continuing leadership relations through events such as the annual G-20 Summit held in July. ISM Manufacturing & Services PMI 70 65 60 55 50 45 40 35 30 Jun '09 Jun '10 Jun '11 Jun '12 Jun '13 Jun '14 Jun '15 Jun '16 Jun '17 Manufacturing Services Fed Funds Target Rate 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Jun '08 Jun '09 Jun '10 Jun '11 Jun '12 Jun '13 Jun '14 Jun '15 Jun '16 Jun '17 Jun '18 Jun '19 Mid Fed Funds Fed Futures (Jun 30, 2017) Fed Futures (Mar 31, 2017) 1.3
QUARTERLY MARKET SUMMARY Multi-Asset Class Management U.S. EQUITY Domestic equity markets, as represented by the S&P 500, sustained rallies during the second quarter that date back to mid-february of last year. Markets rose 3.1% over the quarter, raising the year-to-date (YTD) return up to 9.3%, as optimism continued about proposed Trump administration policies and strong corporate earnings readings. After a relatively neutral March, markets rose steadily during each month of the quarter amid historically low volatility levels, as measured by the CBOE s Volatility Index (VIX). For the third quarter in a row, only two of the 11 S&P 500 sectors failed to finish the quarter in the black as the market storylines remained similar to the first quarter. Energy fell 6.4% after dropping 6.7% during the first quarter. Energy markets were impacted by falling oil prices which finished the quarter at $46 per barrel. Telecom remained the only other sector to finish in the red, falling 7.1%. Healthcare finished as the top performing sector of the quarter, rising 7.1%, as optimism about the Senate Health Care bill drove returns. After a weak 2016, the Healthcare sector sits as the second-best performing sector for 2017, rising 16.1% on the year. The Technology sector finished the quarter up 4.1% and is the only sector to top Healthcare for the year, having risen 17.2%. On a market-capitalization basis, large-caps (Russell 1000 Index) again finished the quarter on top, rising 3.1%. Mid-caps (Russell Mid Cap Index) finished slightly behind, gaining 2.7%, while small-caps (Russell 2000 Index) once again lagged, rising 2.5%. Though returns finished close across the market-cap spectrum for the quarter, performance varied on a month-by-month basis. Large and mid-caps roughly tracked each other over the course of the quarter while small-caps experienced slightly more volatility, ultimately outperforming in June to approach the larger-capitalization returns. Once again, growth-oriented indices outpaced value-oriented indices across all market capitalizations. Relative performance of growth over value among market capitalizations ranged around three percent for the quarter, similar to the 3.0 to 5.5% range from the first quarter. 40% 30% 20% 10% -10% -20% Consumer Consumer Disc. Staples 22 20 18 16 14 12 10 0% S&P 500 Index Performance by Sector Energy Periods Ended June 30, 2017 Financials Health Care Industrials Info. Tech Materials Real Estate Telecom Utilities QTD 2.35% 1.57% -6.36% 4.25% 7.10% 4.73% 4.14% 3.17% 2.76% -7.05% 2.21% YTD 11.00% 8.03% -12.61% 6.88% 16.07% 9.51% 17.23% 9.21% 6.40% -10.74% 8.75% 1 yr 16.90% 3.06% -4.14% 35.32% 12.47% 22.25% 33.89% 18.59% -1.01% -11.71% 2.47% 8 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 S&P 500 S&P 500 5-Year Average Russell 2000 P/E Ratios of Major Stock Indices* Russell 2000 5-Year Average *P/E ratios are calculated based on one-year forward estimates and adjusted to include only positive earnings results for consistency. 1.4
QUARTERLY MARKET SUMMARY Multi-Asset Class Management NON-U.S. EQUITY Developed markets outside of North America, as measured by the MSCI EAFE Index, increased 6.1% during the second quarter, with a YTD return of 13.8%. Following a weak 2016, developed markets were bolstered by stronger-than-expected economic data, cheaper valuations, and the continuation of accommodative monetary policy. Austria was the strongest performer, posting a return of 21.8% as European economic growth improved and political risk began to subside. Denmark (15.3%) and Finland (13.4%) followed, with France posting a return of 9.1% as political concerns eased after Emmanuel Macron s victory in their presidential election. Australia was the biggest laggard (-1.9%). Following a robust 2016, emerging markets (EM) continue to outperform other regions, returning 18.4% YTD. EM equities have been helped by a weaker dollar, cheaper relative valuations and mitigated geopolitical concerns. Almost all individual EM country performance was positive. Greece was the top performer, rising 33.8% after the release of the next tranche of debt relief and tentative signs of fiscal and economic stability. Hungary, Turkey, Poland, China, and Korea posted returns ranging from 10% to 20% over the quarter. Russia, following poor performance in the first quarter, was the worst performer, falling more than 10% amidst declining energy prices and increased geopolitical concerns. Brazil (-6.7%) and Chile (-2.1%) were the only other countries with negative quarterly performance. Within the MSCI All Country World Index (ACWI) ex-u.s., which includes both developed and EM stocks, sector performance was mostly positive. Energy (-2.9%), continued to fall after oil entered a bear market with prices firmly below $50 per barrel. Information Technology saw the biggest gains with a 12.9% increase. In contrast to the domestic market where large-cap stocks outperformed small-caps, small-caps performed better internationally. In both developed markets and EM, growth outperformed value, continuing the first quarter trend. 50% 40% 30% 20% 10% -10% Consumer Disc. 17 16 15 14 13 12 11 10 9 0% Consumer Staples Energy MSCI ACWI ex-us Sectors Periods Ended June 30, 2017 Financials Health Care Industrials Info. Tech Materials Real Estate Telecom Utilities QTD 5.61% 7.05% -2.87% 5.68% 7.16% 6.78% 12.85% 1.66% 5.78% 4.01% 5.23% YTD 12.90% 16.25% -3.76% 13.64% 15.71% 16.91% 29.31% 10.16% 12.88% 10.23% 13.87% 1YR 23.72% 6.52% 6.46% 32.63% 4.28% 23.81% 41.91% 27.20% n/a 3.34% 5.89% 8 Jun '12 Jun '13 Jun '14 Jun '15 Jun '16 Jun '17 MSCI EAFE MSCI EAFE 5-Year Average MSCI Emerging Markets P/E Ratios of MSCI Equity Indices* MSCI Emerging Markets 5-Year Average *P/E ratios are calculated based on one-year forward estimates and adjusted to include only positive earnings results for consistency. 1.5
QUARTERLY MARKET SUMMARY Multi-Asset Class Management FIXED INCOME The U.S. Treasury yield curve continued to flatten over the second quarter, due to the decline in yields from intermediate to longer term maturities during the first quarter. Yields picked up once again on the short-end of the curve as the Fed increased the Fed Funds Rate target range by a quarter of a percentage point in June, with the target range now between 1.0 to 1.25%. However, yields stayed roughly flat on the intermediate portion and declined on the long-end, reflecting uncertainty about inflation and economic growth expectations. Maturities of one year and less all rose more than 20 basis points (bps), while the 10- and 30-year dropped 8 and 18 bps respectively. Investment grade fixed income returns were positive as intermediate to longer-term yields saw declines. The Bloomberg Barclays U.S. Aggregate index rose 1.5% on the quarter while the Bloomberg Barclays U.S. Universal Bond Index, which includes a small high yield allocation, also rose 1.5%. Investment-grade credit continued a strong first quarter with a 2.4% gain during the second quarter. Within the non-investment grade credit spectrum, high yield as represented by the Bloomberg Barclays U.S. High-Yield Corporate Index rose 2.2% as credit spreads ended the quarter slightly lower. Spreads continued their downward trend that dates back to February of last year. After the spike in yields towards the end of the first quarter in March, high-yield corporate spreads resumed their decline, falling almost 20 bps over the second quarter. The fixed-rate mortgage market, as measured by the Bloomberg Barclays U.S. Mortgage-Backed Securities (MBS) Index, rose 0.9% while the Bloomberg Barclays U.S. CMBS Index (measuring commercial MBS) gained 1.3%. U.S. Dollar (USD)-denominated EM debt rose 2.1% on the quarter, as measured by the Bloomberg Barclays EM USD Aggregate Index. 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% 1.38% Barclays U.S. Aggregate 1.89% Returns for Fixed-Income Segments Periods Ended June 30, 2017 Barclays U.S. Treasury U.S. Treasury Yield Curve 2.31% Barclays U.S. MBS Barclays U.S. Corporate 6/30/2016 3/31/2017 6/30/2017 Barclays U.S. High Yield QTR 1.45% 1.19% 0.87% 2.54% 2.17% YTD 2.27% 1.87% 1.35% 3.80% 4.93% 1YR -0.31% -2.32% -0.06% 2.28% 12.70% 2.84% 3mo 2yr 5yr 10yr 30yr 1.6
QUARTERLY MARKET SUMMARY Multi-Asset Class Management ALTERNATIVES U.S. Real Estate Investment Trusts (REITs), as measured by the FTSE NAREIT Equity REIT Index, built off of modest performance in the first quarter, rising 1.5% during the second quarter. REITs have been fluctuating throughout all of 2017 without making any significant progress in either direction and still remain below their 2016 highs. Industrial REITs (12%) and Data Center REITs (9.2%) were the quarter s top performers. Healthcare and Apartmentfocused REITs contributed to overall performance, advancing 5.3% and 5.7% respectively. Retail REITs continued their downward spiral, losing 7.6% on the quarter and 23.5% over a one-year trailing-period. Private real estate, as measured by the NCREIF Index of 7,139 commercial properties nationwide, increased 1.55% during the first quarter (second quarter data is not yet available). This first quarter return consisted of 1.15% income return and 0.40% appreciation. While income return has remained stable over the past three quarters, this quarter marks the fourth consecutive quarter of appreciation below 1%. Oil prices rallied in late April after the Saudi-Russian led coalition s decision to continue supply cuts through 2018. Since then, crude oil has retreated based off higher inventories in developed nations, ending the quarter around $46 per barrel. Commodities doubled down on their 2017 losses, with the Bloomberg Commodity Index of 19 raw materials futures declining 3.2% on the quarter. Commodity-related equities, as measured by the S&P North American Natural Resources Sector Index, also fell 7.1% during the quarter, building off the quarter loss of 4.3%. Hedge funds rose 1.1% during the second quarter. The HFRI Fund Weighted Composite Index, a global index of over 2,000 hedge funds, has increased 8.0% in the trailing one year. Private equity fundraising continues to be strong this year. According to Preqin, 206 funds closed during the quarter, raising a combined $121 billion in investor commitments. This is a third consecutive quarter with funds raised in excess of $100 billion. 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% FTSE NAREIT Sectors Periods Ended June 30, 2017 Apartments Diversified Healthcare Hotels Industrial Office Retail Storage QTD 5.74% 0.72% 5.25% 0.86% 12.00% 0.99% -7.62% -2.68% YTD 6.03% 0.50% 12.54% -1.05% 11.21% 2.61% -12.01% -4.06% 1 yr 6.50% 0.60% 2.99% 19.29% 18.31% 6.56% -23.51% -15.63% 15% 10% 5% 0% -5% -10% -15% Returns for Alternative Assets Periods Ended June 30, 2017 U.S. REITS International REITS Commodity Futures Commodities HFRI Fund Weighted Comp. QTR 1.52% 4.97% -3.22% -7.09% 1.14% YTD 2.70% 10.09% -5.61% -11.04% 3.68% 1YR -1.70% 6.00% -7.02% -2.62% 8.02% Sources: Bloomberg and Hedge Fund Research, Inc. 1.7
QUARTERLY MARKET SUMMARY Multi-Asset Class Management Investment Strategy Overview For the Third Quarter 2017 Asset Class Our Investment Preferences Comments U.S. EQUITIES Large-Caps Small-Caps NON- U.S. EQUITIES Developed Markets Non-US Small-Caps Emerging Markets FIXED INCOME Long Duration, Interest- Rate-Sensitive Sectors Credit-Sensitive Sectors REAL ESTATE ALTERNATIVES Hedge Funds Private Equity Strengthening earnings growth and the current administration s pro-corporate policy proposals should continue to provide a favorable environment for domestic equity markets. Small cap companies are more insulated from international events and should benefit from domestic growth. Expensive valuations continue to remain a headwind along with a relatively hawkish Fed. International valuations remain cheap relative to domestic markets while central banks still appear relatively accommodative. While political risks remain, they have begun to ease during the past quarter. While emerging markets equities still face risks, cheaper valuations relative to both domestic and developed international markets may help alleviate some of this. Interest rates remain low and potentially may pick up in the coming months. The Fed appears to be becoming more hawkish. The gradual roll-off of the balance sheet may push yields higher. In a strong economy, credit-sensitive instruments remain an area where there is an opportunity to capture extra yield. Real estate returns face headwinds from rising interest rates. Still, a healthy economy and modest fundamentals should support moderate net operating income (NOI) growth. Due to rising assets under management and the proliferation of hedge funds and private equity funds, the relative performance from alternatives is unlikely to significantly outperform publicly traded markets. Current outlook Outlook one year ago 1.8
QUARTERLY MARKET SUMMARY Multi-Asset Class Management DISCLOSURES PFM is the marketing name for a group of affiliated companies providing a range of services. Investment advisory services are provided by PFM Asset Management LLC which is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Additional applicable regulatory information is available upon request. The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC at the time of distribution and are subject to change. Any forecast, projection, or prediction of the market, the economy, economic trends, and equity or fixed-income markets are based upon current opinion as of the date of issue, and are also subject to change. Opinions and data presented are not necessarily indicative of future events or expected performance. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable. No representation is made as to its accuracy or completeness. This material is intended for informational purposes only and should not be relied upon to make an investment decision, as it was prepared without regard to any specific objectives or financial circumstances. It should not be construed as an offer to purchase/sell any investment. References to particular issuers are for illustrative purposes only, and are not intended to be recommendations or advice regarding such issuers. It is not possible to invest directly in an index. The index returns shown throughout this material do not represent the results of actual trading of investor assets. Third-party providers maintain the indices shown and calculate the index levels and performance shown or discussed. Index returns do not reflect payment of any sales charges or fees an investor would pay to purchase the securities they represent. The imposition of these fees and charges would cause investment performance to be lower than the performance shown. For more information regarding PFM s services or entities, please visit www.pfm.com. 2017 PFM Asset Management LLC. Further distribution is not permitted without prior written consent. 1.9
Plan Performance Summary
City of Fort Walton Beach Beal Memorial Cemetery Perpetual Care Fund As of June 30, 2017 Asset Allocation & Performance Allocation Performance(%) Market Year Jan-2017 1 1 3 5 Since Inception Value % To To Quarter Year Years Years Inception Date ($) Date Jun-2017 Total Fund 2,634,274 100.00 3.15 7.61 7.61 10.54 N/A N/A 6.04 02/01/2015 Blended Benchmark 2.96 7.29 7.29 11.09 N/A N/A 5.39 02/01/2015 Domestic Equity Vanguard Total Stock Market Index 901,500 34.22 3.03 8.99 8.99 18.47 9.05 14.54 10.32 02/01/2015 Russell 3000 Index 3.02 8.93 8.93 18.51 9.10 14.58 10.37 02/01/2015 T. Rowe Price Dividend Growth 89,904 3.41 4.21 9.42 9.42 14.35 10.01 14.24 10.82 12/01/2016 S&P 500 3.09 9.34 9.34 17.90 9.61 14.63 11.50 12/01/2016 Vanguard Small Cap Index 94,186 3.58 1.95 5.76 5.76 19.14 6.78 14.13 12.22 10/01/2016 Russell 2000 Index 2.46 4.99 4.99 24.60 7.36 13.70 14.26 10/01/2016 International Equity Vanguard Total International Stock Index 186,235 7.07 5.82 14.79 14.79 20.05 1.35 7.68 12.57 10/01/2016 MSCI AC World ex USA (Net) 5.78 14.10 14.10 20.45 0.80 7.22 12.67 10/01/2016 Vanguard International Value 143,901 5.46 5.77 14.30 14.30 19.86-0.23 8.13 14.45 05/01/2016 MSCI AC World ex USA (Net) 5.78 14.10 14.10 20.45 0.80 7.22 14.08 05/01/2016 J. O. Hambro International Select 168,156 6.38 3.55 11.69 11.69 12.49 3.99 12.99 11.35 01/01/2016 MSCI AC World ex USA (Net) 5.78 14.10 14.10 20.45 0.80 7.22 12.44 01/01/2016 Oppenheimer International Small-Mid Company 91,622 3.48 11.80 22.30 22.30 24.39 9.95 19.03 13.09 04/01/2015 MSCI AC World ex USA Smid Cap Index (Net) 6.32 15.38 15.38 19.88 2.86 9.32 6.56 04/01/2015 Fixed Income Metropolitan West Total Return 235,798 8.95 1.29 2.21 2.21 0.25 2.28 3.49 1.27 02/01/2015 Baird Core Plus 314,527 11.94 1.78 2.99 2.99 1.65 3.18 3.38 2.37 02/01/2015 Blmbg. Barc. U.S. Aggregate 1.45 2.27 2.27-0.31 2.48 2.21 1.39 02/01/2015 Vanguard Interm-Term Invest. Grade 315,653 11.98 1.56 2.92 2.92 0.79 3.26 3.47 2.42 02/01/2015 Blmbg. Barc. U.S. Credit 5-10 Year Index 2.13 3.66 3.66 1.50 3.62 4.02 2.73 02/01/2015 Vanguard High Yield Corporate 86,490 3.28 2.57 4.87 4.87 10.33 4.72 6.27 11.12 04/01/2016 Blmbg. Barc. U.S. Corp: High Yield 2.17 4.93 4.93 12.70 4.48 6.89 14.87 04/01/2016 Cash Equivalent First American Gov't Obligation - Z 6,303 0.24 0.17 0.29 0.29 0.42 0.18 0.11 0.38 09/01/2016 2.1 Returns are net of fees. Returns are expressed as percentages. Blended Benchmark: See historical hybrid composition page for details.
City of Fort Walton Beach Beal Memorial Cemetery Perpetual Care Fund As of June 30, 2017 Comparative Performance 2016 2015 2014 2013 2012 Total Fund 6.46 N/A N/A N/A N/A Blended Benchmark 7.10 N/A N/A N/A N/A Domestic Equity Vanguard Total Stock Market Index 12.66 0.39 12.56 33.52 16.38 Russell 3000 Index 12.74 0.48 12.56 33.55 16.42 T. Rowe Price Dividend Growth 11.62 2.36 12.34 30.35 14.85 S&P 500 11.96 1.38 13.69 32.39 16.00 Vanguard Small Cap Index 18.30-3.64 7.50 37.81 18.24 Russell 2000 Index 21.31-4.41 4.89 38.82 16.35 International Equity Vanguard Total International Stock Index 4.67-4.26-4.17 15.14 18.21 Vanguard International Value 4.46-6.44-6.69 22.15 20.18 J. O. Hambro International Select 5.20-4.05 5.35 38.21 15.48 MSCI AC World ex USA (Net) 4.50-5.66-3.87 15.29 16.83 Oppenheimer International Small-Mid Company -0.24 15.15 0.38 45.26 23.17 MSCI AC World ex USA Smid Cap Index (Net) 3.57 0.44-3.05 17.79 17.98 Fixed Income Metropolitan West Total Return 2.46 0.29 5.99 0.50 11.55 Baird Core Plus 4.73 0.14 6.59-1.32 7.95 Blmbg. Barc. U.S. Aggregate 2.65 0.55 5.97-2.02 4.21 Vanguard Interm-Term Invest. Grade 3.93 1.63 5.91-1.27 9.25 Blmbg. Barc. U.S. Credit 5-10 Year Index 5.23 0.69 7.38-2.05 11.26 Vanguard High Yield Corporate 11.30-1.30 4.69 4.64 14.47 Blmbg. Barc. U.S. Corp: High Yield 17.13-4.47 2.45 7.44 15.81 Cash Equivalent First American Gov't Obligation - Z 0.23 0.01 0.01 0.01 0.01 2.2 Returns are net of fees. Returns are expressed as percentages. Blended Benchmark: See historical hybrid composition page for details.
City of Fort Walton Beach Beal Memorial Cemetery Perpetual Care Fund As of June 30, 2017 Account Reconciliation QTR Market Value Market Value Return On As of Net Flows As of Investment 04/01/2017 06/30/2017 Total Fund 2,553,873-80,401 2,634,274 YTD Market Value Market Value Return On As of Net Flows As of Investment 01/01/2017 06/30/2017 Total Fund 2,448,055-186,219 2,634,274 1 Year Market Value Market Value Return On As of Net Flows As of Investment 07/01/2016 06/30/2017 Total Fund 2,383,188 (6,746) 257,832 2,634,274 2.3
City of Fort Walton Beach Beal Memorial Cemetery Perpetual Care Fund As of June 30, 2017 Asset Allocation Summary Asset Allocation (%) Target Allocation (%) Minimum Allocation (%) Maximum Allocation (%) Differences (%) Total Fund 100.0 100.0 N/A N/A 0.0 Domestic Equity 41.2 39.0 19.0 59.0 2.2 International Equity 22.4 21.0 1.0 41.0 1.4 Real Estate Investment Trusts 0.0 0.0 0.0 10.0 0.0 Fixed Income 36.2 40.0 20.0 60.0-3.8 Inflation Hedge 0.0 0.0 0.0 10.0 0.0 Cash Equivalent 0.2 0.0 0.0 5.0 0.2 Domestic Equity $1,085,589.2 International Equity $589,914.5 Real Estate Investment Trusts $0.0 Fixed Income $952,467.9 Inflation Hedge $0.0 Cash Equivalent $6,302.6-3.8 % 2.2% 1.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.2% 21.0% 22.4% 39.0% 41.2% 40.0% 36.2% -30.0 % -15.0 % 0.0% 15.0% 30.0% 45.0% 60.0% Target Allocation Actual Allocation Allocation Differences 2.4
City of Fort Walton Beach Beal Memorial Cemetery Perpetual Care Fund As of June 30, 2017 Historical Hybrid Composition - Blended Benchmark Allocation Mandate Weight (%) Feb-2015 Russell 3000 Index 42.0 MSCI AC World ex USA (Net) 8.0 FTSE NAREIT Equity REIT Index 5.0 Bloomberg Commodity Index Total Return 3.0 Blmbg. Barc. U.S. Aggregate 40.0 90 Day U.S. Treasury Bill 2.0 Jul-2015 Russell 3000 Index 39.0 MSCI AC World ex USA (Net) 21.0 Blmbg. Barc. U.S. Aggregate 40.0 2.5
PERFORMANCE EVALUATION AND REPORTING SERVICES INFORMATION DISCLAIMER PFM Asset Management LLC has exercised reasonable professional care in the preparation of this performance report. However, information in this report on market indices and security characteristics, as well as information incorporated in the Market Commentary section, is received from sources external to PFM Asset Management LLC. PFM Asset Management LLC relies on the client's custodian for security holdings and market values. Transaction dates reported by the custodian may differ from money manager statements. While efforts are made to ensure the data contained herein is accurate and complete, we disclaim all responsibility for any errors that may occur.