Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund INTRODUCTION INTRODUCTION INTRODUCTION QUANTITATIVE QUANTITATIVE W. P. Carey School of Business PROCESS FUNDAMENTAL PROCESS INVESTMENT SELECTION Undergraduate Fund FUND PERFORMANCE PERFORMANCE Semi-Annual Meeting ATTRIBUTION December 3rd, 2010 ANALYSIS CONCLUSION APPENDICES 1
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Today’s Agenda Today s Agenda INTRODUCTION INTRODUCTION INTRODUCTION • Team introduction & fund objectives j QUANTITATIVE QUANTITATIVE • Investment selection PROCESS • Fund performance FUNDAMENTAL PROCESS • Risk and return attribution INVESTMENT SELECTION • Lessons learned & conclusion FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES 2
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund T Team INTRODUCTION INTRODUCTION INTRODUCTION Fundamental Analysts y Fund Manager Fund Manager QUANTITATIVE QUANTITATIVE PROCESS Tyler Rives FUNDAMENTAL Tom Bochenko Jay Joshi PROCESS INVESTMENT Quantitative Analysts SELECTION Michael Cohn Vincent Mendez FUND Rob Hill R b Hill PERFORMANCE PERFORMANCE ATTRIBUTION Nate Irwin Dan Tram ANALYSIS Ryan Detlaff Ryan Detlaff CONCLUSION Cole Jackson Steven Kutos APPENDICES 3
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Investment Charter Investment Charter INTRODUCTION INTRODUCTION INTRODUCTION • Long term focus g QUANTITATIVE QUANTITATIVE • Portfolio constraints PROCESS FUNDAMENTAL PROCESS • ≤ 95% Equity (up to 25% in Foreign Equity) INVESTMENT SELECTION • ≤ 20% Fixed Income FUND • ≤ 10% Cash 0% C h PERFORMANCE PERFORMANCE ATTRIBUTION • ≤ 25% in a single sector ANALYSIS • ≤ 15% i i • ≤ 15% in a single non U.S. Gov. issuer l U S G i CONCLUSION APPENDICES 4
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Defining the Problem D fi i h P bl INTRODUCTION INTRODUCTION INTRODUCTION • Charter constraints Ch t t i t QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL • Quantitative and fundamental PROCESS analysis INVESTMENT SELECTION FUND • Optimization methods • Optimization methods PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION Our Solution: Asset Allocation APPENDICES 5
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE QUANTITATIVE Quantitative Process PROCESS PROCESS FUNDAMENTAL PROCESS INVESTMENT SELECTION MVO|Black-Litterman FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES 6
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE QUANTITATIVE PROCESS PROCESS Constrained Data FUNDAMENTAL MVO PROCESS INVESTMENT SELECTION FUND PERFORMANCE PERFORMANCE ATTRIBUTION FI Ex-US US ANALYSIS CONCLUSION APPENDICES 7
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Mean Variance Optimization Mean Variance Optimization Constraints/Inputs INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE QUANTITATIVE PROCESS PROCESS Asset Class Cash Fixed Ex-US US Equity FUNDAMENTAL Income Equity PROCESS INVESTMENT Constraint 1% 20% 25% 95% SELECTION (1 st ) FUND PERFORMANCE PERFORMANCE Inputs ATTRIBUTION ANALYSIS R Returns Risk CONCLUSION • Historical vs. Expected • Volatility • Rolling Betas • Correlations – 7 years APPENDICES 8
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Unconstrained Constraine d INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE QUANTITATIVE PROCESS PROCESS FUNDAMENTAL PROCESS rn Retur INVESTMENT SELECTION FUND Risk PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS Asset Allocation Weights Cash Fixed Income Ex-US US Equity CONCLUSION Equity 1.00% 16.35% 21.06% 61.59% APPENDICES 9
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund INTRODUCTION Current U.S. Equity Market Weights Constrained Data MVO QUANTITATIVE QUANTITATIVE QUANTITATIVE QUANTITATIVE PROCESS PROCESS FUNDAMENTAL PROCESS FI Ex-US US INVESTMENT SELECTION FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES 10 *as of 9/30/10
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund US FI Ex-US INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE QUANTITATIVE PROCESS PROCESS FUNDAMENTAL PROCESS INVESTMENT SELECTION Black- Fundamental Data Data FUND Analysis Analysis PERFORMANCE PERFORMANCE Litterman Litt ATTRIBUTION ANALYSIS CONCLUSION Sector Weights APPENDICES 11
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Black-Litterman Results Black-Litterman Results INTRODUCTION QUANTITATIVE QUANTITATIVE QUANTITATIVE QUANTITATIVE 20% PROCESS PROCESS FUNDAMENTAL PROCESS 15% INVESTMENT SELECTION 10% FUND PERFORMANCE PERFORMANCE 5% ATTRIBUTION ANALYSIS 0% CONCLUSION APPENDICES Market Weights B-L Weights 12
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund INTRODUCTION QUANTITATIVE QUANTITATIVE Fundamental Process PROCESS FUNDAMENTAL FUNDAMENTAL PROCESS PROCESS INVESTMENT SELECTION Industry Analysis FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES 13
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Industry Analysis Industry Analysis INTRODUCTION Industry overview y QUANTITATIVE QUANTITATIVE ─ Current position of each sector PROCESS ─ Composition FUNDAMENTAL FUNDAMENTAL PROCESS PROCESS Fundamental analysis INVESTMENT SELECTION ─ Historical returns and volatility FUND ─ Macroeconomic events M i t PERFORMANCE PERFORMANCE ─ Sector drivers ATTRIBUTION ANALYSIS CONCLUSION APPENDICES 14
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Fundamental Example Financials Fundamental Example – Financials INTRODUCTION • Macro events: regulation, banking restrictions • Macro events: regulation banking restrictions QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL FUNDAMENTAL PROCESS PROCESS • Drivers: rate of recovery, unemployment, real • Drivers: rate of recovery unemployment real INVESTMENT estate prices, vacancies and supply SELECTION FUND PERFORMANCE PERFORMANCE • Decision: underweight relative to market ATTRIBUTION ANALYSIS – 9/30/10 Market holds 16.00% 9/30/10 Market holds 16.00% CONCLUSION – SIMF target weight 5.96% APPENDICES 15
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund INTRODUCTION QUANTITATIVE QUANTITATIVE Investment Selection PROCESS FUNDAMENTAL PROCESS INVESTMENT INVESTMENT SELECTION SELECTION FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS CONCLUSION APPENDICES 16
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund ETF Selection ETF S l i INTRODUCTION Sector Ticker General Considerations General Considerations QUANTITATIVE QUANTITATIVE Consumer Discretionary XLY PROCESS • Holdings overlap Con Staples VDC FUNDAMENTAL PROCESS • Expense ratio Expense ratio Energy Energy VDE VDE INVESTMENT INVESTMENT • Tracking error Financials XLF SELECTION SELECTION • Composition Healthcare VHT FUND • Liquidity Li idi PERFORMANCE PERFORMANCE Industrials VIS ATTRIBUTION ANALYSIS Technology XLK Utilities XLU CONCLUSION Ex-Us VFWIX APPENDICES Fi Fixed Income d I IPE IPE 17
Undergraduate Undergraduate SIM F SIM F SIM Fund SIM Fund d d Student Investment Management Student Investment Management Fund Fund Fixed Income Fixed Income INTRODUCTION • Charter restrictions Ch t t i ti QUANTITATIVE QUANTITATIVE PROCESS FUNDAMENTAL PROCESS • Breakeven inflation from TIPS • Breakeven inflation from TIPS INVESTMENT INVESTMENT SELECTION SELECTION • Long-term inflation → TIPS Long term inflation → TIPS FUND PERFORMANCE PERFORMANCE ATTRIBUTION ANALYSIS • TIPS negative yield g y CONCLUSION • IPE in lieu of TIP APPENDICES 18
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