May 30, 2013 - Public Employees Retirement Association of New ...
May 30, 2013 - Public Employees Retirement Association of New ...
May 30, 2013 - Public Employees Retirement Association of New ...
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Overview <strong>of</strong> Investment Process<br />
Kleinwort Benson’s investment philosophy is that global investment markets are inefficient. Rather than<br />
focusing solely on dividends, KBI believes that investors should focus on quality, sustainability, and<br />
growth <strong>of</strong> those dividends. KBI’s investment process is systematic and rules based. The firm uses<br />
quantitative methods to execute their investment ideas. The team uses three steps to create a portfolio<br />
with their preferred financial characteristics. Firstly, to achieve a diversified dividend framework, the team<br />
divides the MSCI World into its Regional Industry Groups and calculates a yield hurdle for each. Stocks<br />
that achieve this yield hurdle are selected for further consideration. Next the team searches for<br />
companies with the financial strength to maintain and grow their payout commitments (and avoid dividend<br />
cuts and rights issues). KBI’s screening factors normally include a combination <strong>of</strong> free cash flow,<br />
dividend coverage, dividend growth and total payout measures. Finally, the portfolio is optimized using<br />
BARRA to create a portfolio with KBI’s preferred characteristics and financial “style”. These include better<br />
total return, better quality and governance and better value.<br />
Performance<br />
Relative performance against the benchmark has been positive. According to PERA’s custodian, KBI has<br />
outperformed its benchmark (MSCI EAFE Value - GD Index) by 1.67% since inception in April 2010.<br />
Since inception, Kleinwort Benson has delivered a +5.75% rate <strong>of</strong> return, compared to +4.09% for the<br />
benchmark MSCI EAFE Value - GD Index. Over longer periods <strong>of</strong> time, the strategy has delivered good<br />
absolute returns and modest returns relative to its benchmark and peer group.<br />
Performance Notes: Please note that the PERA-specific performance comes from PERA’s custodian. All<br />
other performance data is shown gross <strong>of</strong> fees and comes from eVestment Alliance and/or the investment<br />
manager.<br />
Exhibit 1<br />
Kleinwort Benson Performance for <strong>New</strong> Mexico PERA<br />
As <strong>of</strong> March 31, <strong>2013</strong><br />
Portfolio Name Market Value<br />
% <strong>of</strong> Total<br />
Plan MTD 3 Mo FYTD YTD 1 Year 3 Year<br />
Since<br />
Incep. Inception Date<br />
KBC 111,288,644 0.86 0.65 4.66 20.65 4.66 13.77 5.75 5.75 01-Apr-2010<br />
MSCI EAFE Value 0.17 3.63 19.75 3.63 11.73 4.09 4.09<br />
Excess Return 0.48 1.02 0.89 1.02 2.04 1.67 1.67<br />
Exhibit 2<br />
Kleinwort Benson Dividend Plus EAFE Developed Strategy (gross <strong>of</strong> fees)<br />
Annualized Performance<br />
As <strong>of</strong> March 31, <strong>2013</strong><br />
Annualized Returns<br />
1 Yr 3 Yr 5 Yr 7 Yr 10 Yr 15 Yr Apr '98<br />
KBI Dividend Plus EAFE Developed 14.43% 5.95% -0.02% 2.27% 11.77% 7.79% 7.79%<br />
MSCI EAFE Value - GD Index 11.72% 4.09% -1.09% 1.20% 10.52% 5.09% 5.09%<br />
Difference 2.71% 1.87% 1.07% 1.07% 1.25% 2.70% 2.70%<br />
Manager Update Memorandum Page 2 <strong>of</strong> 7<br />
© <strong>2013</strong> Cliffwater LLC. All rights reserved.
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