Transcript MBA SIM Fund Board Presentation April 30, 2010 2009-2010 Student Managers Spencer Rands Himanshu Gupta W.P.

MBA SIM Fund
Board Presentation
April 30, 2010
2009-2010 Student Managers
Spencer Rands
Himanshu Gupta
W.P. Carey MBA
W.P. Carey MBA
Finance & Real Estate
Supply Chain Finance
Class of 2010
Class of 2010
Perrin Gayle
Andrew Harbut
W.P. Carey MBA
W.P. Carey MBA
Finance
Finance
Class of 2010
Class of 2010
Eric Dalbom
Matt Pendleton
W.P. Carey MBA
W.P. Carey MBA
Finance & Real Estate
Finance
Class of 2010
Class of 2010
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Agenda
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Overview
Portfolio Performance
Economic Climate & Outlook
Portfolio Highlights
Attribution Analysis
Takeaways
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Overview
4
Fund Guidelines
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Long-term investment strategy
Minimum 75% equities
Maximum 20% fixed income
Maximum 10% cash
$500MM minimum market cap
No short selling
Limits on derivatives
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Style Selection
 Style: Midcap Growth
 Market Cap: $2b - $10b
 Benchmark
 Russell Midcap Growth Index (RDG)
 Asset Allocation
 Equities: 92%
 Fixed Income: 5%
 Cash: 3%
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Portfolio Analysis
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Fund Characteristics
Market Cap ($B)
Dividend Yield
Trailing P/E
Forward P/E
ROA
ROE
SIM Fund
6,465.35
0.90
17.52
15.17
12.33
25.93
Russell Midcap
Growth
7,262.96
0.98
31.38
21.39
7.84
16.68
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Fund Performance
Spring Results: 11/20/09 – 4/16/10
4/16 Portfolio Value
$372,408 (17.52%)
20%
15%
4/16 RDG Value
$370,322 (16.86%)
10%
11/19 Portfolio Value
$316,902
5%
0%
Russell Midcap Growth
-5%
19-Nov-09
19-Dec-09
19-Jan-10
SIM Fund
19-Feb-10
19-Mar-10
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Fund Performance
Cumulative Return: 10/5/09 – 4/16/10
30%
4/16 RDG Value
$395,691 (22.65%)
25%
20%
15%
10/4 Portfolio Value
$322,608
10%
4/16 Portfolio Value
$372,408 (15.44%)
5%
0%
11/19 Portfolio Value
$316,902 (-1.77%)
-5%
Russell Midcap Growth
-10%
4-Oct-09
4-Nov-09
4-Dec-09
4-Jan-10
SIM FUND
4-Feb-10
4-Mar-10
4-Apr-10
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Fund Performance
Holding Period Returns by Security
11/20/09 – 4/16/10
50.0%
ARO
40.0%
AHGP
CHSI
30.0%
DPS
ALTR
KMX
DLTR DRQ
20.0%
RAH YUM
CEPH
RDG FLR
CEPH ADS
10.0%
FSLR
APOL
HCC
CSC WDC CSJ
0.0%
SOHU
-10.0%
FRX
-20.0%
TSRA
-30.0%
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Economic Climate & Outlook
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Economic Outlook
 In December, we thought…
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There would be a continuing recovery
Unemployment would remain high
Consumer confidence would increase
Housing prices would stabilize
 …and we were correct.
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Economic Climate
GDP (billions of $)
Retail Sales (billions of $)
14,600
305
14,400
300
14,200
295
14,000
13,800
290
Dec
Jan
Feb
March
Q2 2009
Q4 2009
US Median Home Prices
(thousands of $)
Continued Claims (millions)
5.2
185
5
4.8
180
4.6
175
4.4
170
4.2
December
Q3 2009
165
January
February
March
April
160
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
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Equity Sector Allocation
Information
Technology
21%
Consumer
Discretionary
25%
Industrials
11%
Consumer Staples
9%
Health Care
14%
Financial Services
6%
Energy
13%
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Looking Forward 6 Months
 Uncertainty around US$
 Continued domestic real GDP growth
 Exports
 PCE
 Economic risk in China
 Domestic Sectors
 Overweight: Healthcare, Consumer Discretionary
 Underweight: Financials, Utilities
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Decision Process
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Decision Process
Stock Reevaluations
 Fresh perspective from a different analyst
 Is the industry still poised to outperform the
market?
 Is this firm the best in its industry?
 Are the fundamentals still strong?
 Qualitative factors
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Decision Process
Example: Aeropostale (ARO)
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Down 25% last time we met
Industry questionable, but…
Price-point fits economic conditions
Excellent inventory management
Avoidance of deep discounts
Poised to gain market share from competitors
Recommendation: HOLD
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Aeropostale (ARO)
Nov. 20 ($21.24)
Source: Google Finance
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Decision Process
Example: Apollo Group (APOL)
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Industry still strong
Strong revenue growth (domestic & int’l)
Underpriced (P/E)
But…
 concerns about patterns of ethical issues and
regulatory pressure keep the stock price low
 Recommendation: SELL
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Apollo Group (APOL)
Sold Feb. 5 @ $60.10
Source: Google Finance
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Decision Process
Example: Tessera (TSRA)
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Missed Q4 earnings
Litigation Risk
Volatility Concerns
Recommendation: SELL
Sold Jan 21 @ $18.44
Source: Google Finance
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Decision Process
Example: Forest Laboratories (FRX)
& Cephalon (CEPH)
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Attractive industry
Healthcare Bill
Cephalon nearing price target
Forest Labs undervalued
Reduced holding in CEPH, bought FRX
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Forest Labs (FRX) & Cephalon (CEPH)
 4/7: FDA panel votes against Forest Lab’s
Daxas drug
Source: Google Finance
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Performance Attribution
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Performance Attribution
 Equity return: 18.2%
 Benchmark return: 17.1%
 Alpha: 1.1%
What contributed to the positive alpha?
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Performance Attribution
2.00%
1.50%
1.1%
1.00%
0.50%
0.00%
-0.50%
-1.00%
-1.50%
Allocation Effect
Selection Effect
Interaction Effect
Data Source: Fifth Third Asset Management
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Allocation Effect
0.40%
Utilities*
0.30%
Consumer
Discretionary
Materials*
0.20%
0.10%
IT
Financials
Telecom.
Services*
0.00%
Health Care
-0.10%
Industrials
Consumer Staples
-0.20%
-0.30%
Data Source: Fifth Third Asset Management
Energy
* Fund was not invested in sector
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Selection Effect
Consumer Staples
1.50%
Consumer Discretionary
Energy
0.50%
Health Care
-0.50%
Industrials
Financials
-1.50%
-2.50%
-3.50%
Information Technology
Data Source: Fifth Third Asset Management
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Risk-adjusted Performance
How did the Fund perform on a risk-adjusted basis?
20%
Russell Midcap Growth
SIM Fund
S&P 500
15%
10%
5%
0%
-5%
19-Nov-09
19-Dec-09
Annualized return
Standard deviation
Sharpe Ratio
SIM Fund
41.96%
12.96%
3.21
19-Jan-10
Russell
Midcap
Growth
40.51%
14.52%
2.76
19-Feb-10
S&P 500
21.57%
13.23%
1.60
19-Mar-10
Higher return
+
Lower volatility
=
Higher risk-adjusted
performance
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Takeaways
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Learning Points
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Start with an economic outlook
Importance of style selection & allocation
Value of strong fundamentals
Look beyond the numbers
Long-term perspective
ADR reporting issues
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Thank You
 Thank you to:
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Board of Directors
Keith Wirtz, Justin Dammel, and Fifth Third
Jeanne Elliott
Herb Kaufman
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2010-2011 Student Managers
Amol Agarwal
Praveen Gujar
Jonathan Kielmeyer
W.P. Carey MBA
W.P. Carey MBA
W.P. Carey MBA
Finance
Finance
Finance & Marketing
Class of 2011
Class of 2011
Class of 2011
Jameson Bennett
Andrew Harper
Andre Shearer
W.P. Carey MBA
W.P. Carey MBA
W.P. Carey MBA/MSIM
Finance & Real Estate
Finance
Finance
Class of 2011
Class of 2011
Class of 2011
Joe Downs
Benjamin Hawthorne
W.P. Carey MBA
W.P. Carey MBA
Finance
Finance
Class of 2011
Class of 2011
2
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