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LGIP FY13Q1 pt1

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  • 1. LGIP QUARTERLY MEETING & CONFERENCE CALL 11.1.2012 OFFICE OF THE ARIZONA STATE TREASURER
  • 2. AGENDA LGIP Performance Endowment Performance Endowment Distribution Formula State Cash Flow Guest Presentation: Dr. Jim Paulsen, Chief Investment Strategist for Wells Capital Management Q&A ARIZONA STATE TREASURER DOUG DUCEY
  • 3. INVESTMENT PHILOSOPHY SAFETY before LIQUIDITY before YIELD ARIZONA STATE TREASURER DOUG DUCEY
  • 4. EARNINGS FOR FY 2013 YTD $29,673,076 ARIZONA STATE TREASURER DOUG DUCEY
  • 5. LGIP PERFORMANCE Q1 FY2013
  • 6. POOL 5 ARIZONA STATE TREASURER DOUG DUCEY
  • 7. POOL 7 ARIZONA STATE TREASURER DOUG DUCEY
  • 8. POOL 500 ARIZONA STATE TREASURER DOUG DUCEY
  • 9. POOL 700 ARIZONA STATE TREASURER DOUG DUCEY
  • 10. Separately Managed Accounts (SMAs) Designed for those seeking a customized investing solution based on your risk tolerance, liquidity needs and duration target. Monthly Liquidity Requires $100 million minimum deposit Pre-Meeting with Portfolio Manager to set up Account and determine investing needs. Costs: Standard 6 basis points, plus yearly accounting charges of $20,000 out of earnings (equivalent to 2 basis points.) Contact Deputy Treasurer Mark Swenson ARIZONA STATE TREASURER DOUG DUCEY
  • 11. OPERATING UPDATESNew key phone numbers: Main number 602-542-7800 LGIP Line 602-542-7834 Mark Swenson 602-542-7877 Dale Stomberg 602-542-7833 ARIZONA STATE TREASURER DOUG DUCEY
  • 12. ENDOWMENTPERFORMANCE Q1 FY2013 OFFICE OF THE ARIZONA STATE TREASURER
  • 13. Billions $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 December 2006 March 2007 June 2007 September 2007 December 2007 March 2008 June 2008ARIZONA STATE TREASURER DOUG DUCEY September 2008 December 2008 March 2009 June 2009 September 2009 December 2009 March 2010 Endowment Market Value June 2010 September 2010 December 2010 March 2011 June 2011 ENDOWMENT MARKET VALUE $3.7 September 2011 Billion December 2011 March 2012 June 2012 September 2012
  • 14. Billions -$0.20 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 December 2006 March 2007 June 2007 September 2007 December 2007 March 2008 June 2008ARIZONA STATE TREASURER DOUG DUCEY September 2008 December 2008 March 2009 June 2009 September 2009 December 2009 March 2010 June 2010 September 2010 December 2010 Total Endowment Unrealized gains/losses March 2011 June 2011 September 2011 ENDOWMENT UNREALIZED GAINS December 2011 March 2012 $1.05 June 2012 Billion September 2012
  • 15. ENDOWMENT ASSET ALLOCATION $3.7 Billion 8.7% $1,549.4 million Fixed Income $542.2 million 14.9% $1,600.04M $502.79M 40.4% S&P 500 S&P 400 35.9% $1,122.1 million $1,052.42M S&P 600 As of 9/30/2012 ARIZONA STATE TREASURER DOUG DUCEY
  • 16. PROPOSED ENDOWMENT DISTRIBUTION FORMULA OFFICE OF THE ARIZONA STATE TREASURER
  • 17. SMOOTHER, CONSISTENT DISTRIBUTIONS 5-Year Average Market Value X 2.5% Annual Distribution Takes 2.5% of the average monthly market value from each of the previous five years ARIZONA STATE TREASURER DOUG DUCEY
  • 18. STATE CASH FLOW OFFICE OF THE ARIZONA STATE TREASURER
  • 19. STATE CASH FLOW TOTAL OPERATING ACCOUNT AVERAGE MONTHLY BALANCE Up 70% in First Quarter YOY $3,000 Mar01-Nov 01 Dec07-June 09 Jul 90-Mar 91 Recession Recession Recession $1.42 billion $2,500 in September $2,000 $1,500 $1,000 $500 Millions $0 -$500 -$1,000 ARIZONA STATE TREASURER DOUG DUCEY
  • 20. -$1,000 -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08ARIZONA STATE TREASURER DOUG DUCEY Apr-08 Jul-08 Oct-08 Jan-09 STATE CASH FLOW Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 State Operating Balance Oct-10 FY 2007 - September 2012 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12
  • 21. STATE CASH FLOW $3,000,000 YTD FY 2013 Cash Flow vs. Last Two Fiscal Years $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 FY 2011 FY 2012 Actual FY 2013 Actual $- 7/1 8/1 9/1 10/1 11/1 12/1 1/1 2/1 3/1 4/1 5/1 6/1 ARIZONA STATE TREASURER DOUG DUCEY
  • 22. AZ NON-FARM EMPLOYMENT3000 Dec 07-Jun 09 Recession2750 Mar01-Nov 01 Recession25002250 AZ Job growth returning Jul 90-Mar 912000 Recession1750 Jul 81-Nov 82 Recession150012501000 750 Feb-82 Feb-83 Feb-84 Feb-85 Feb-86 Feb-87 Feb-88 Feb-89 Feb-90 Feb-91 Feb-92 Feb-93 Feb-94 Feb-95 Feb-96 Feb-97 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12Source:Bloomberg2012 L.P. ARIZONA STATE TREASURER DOUG DUCEY
  • 23. AZ UNEMPLOYMENT AT 8.2%12% Jul 81-Nov 82 Jul 90-Mar 91 Mar01-Nov 01 Dec07-June 09 Recession Recession Recession Recession11% Jan 80-Jul 80 AZ Rate at 8.2%10% Recession 9% National rate of 7.8% 8% 7% 6% 5% 4% 3% 2% Feb-76 Feb-77 Feb-78 Feb-79 Feb-80 Feb-81 Feb-82 Feb-83 Feb-84 Feb-85 Feb-86 Feb-87 Feb-88 Feb-89 Feb-90 Feb-91 Feb-92 Feb-93 Feb-94 Feb-95 Feb-96 Feb-97 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12Source:Bloomberg2012 L.P. ARIZONA STATE TREASURER DOUG DUCEY
  • 24. AZ HOUSING PRICES S & P/Case Schiller Housing Price Index for Phoenix 250 200 150 100 50 Source: Bloomberg 2012 L.P. 0 ARIZONA STATE TREASURER DOUG DUCEY
  • 25. Guest Presentation:Dr. Jim Paulsen, Chief Investment Strategist for Wells Capital Management OFFICE OF THE ARIZONA STATE TREASURER
  • 26. Economic & Financial Market Update www.wellscap.comNovember 2012 James W. Paulsen, Ph.D., Chief Investment Strategist
  • 27. Older Demographics Have Altered EconomicRecoveries in Three Major Ways!!! 1. Slower SPEED LIMIT! 2. Delayed Recoveries!! “Slow Starters… But, Long FINISHERS” 3. YEAR “4” GEARING!!? Economic and Financial Market Update – November 2012
  • 28. “New-Normal” Working-Age Population Growth!??! U.S. Working Age Population Shown on a natural log scale Annual Growth in U.S. Real GDP Economic and Financial Market Update – November 2012
  • 29. Contemporary Recovery Weaker, But Similar to1991/2001 Pattern!? Cumulative Percent Recovery Gain in Real GDP Cumulative Percent Recovery Gain in Real GDI Current Recovery vs. 1990/2001 Average Current Recovery vs. 1990/2001 Average Private Cumulative Percent Job Creation TOTAL Cumulative Percent Job Creation Current Recovery vs. 1990/2001 Average Current Recovery vs. 1990/2001 Economic and Financial Market Update – November 2012
  • 30. Jobs & Confidence Recoveries Delayed!?! Consumer Confidence Index* & Recoveries U.S. Unemployment Rate & Recoveries *Conference Boards Consumer Confidence Index. Shown on a natural log scale. Shaded areas represent recessions. Economic and Financial Market Update – November 2012
  • 31. “DELAYED” WAGE/GAINS WILL SOON END?!?? Economic and Financial Market Update – November 2012
  • 32. Federal Reserve Following Playbook of LastTwo Recoveries!?! Federal Reserve Policy Response Federal Reserve Policy Response Fed Funds Rate Fed Funds Rate 1991 Recovery 2001 Recovery Economic and Financial Market Update – November 2012
  • 33. How to GEAR?? Jobs & Confidence!!! Consumer Confidence vs. U.S. Unemployment Rate Economic and Financial Market Update – November 2012
  • 34. ECONOMY is GEARING: #1 JOB MARKET!! Total U.S. Household Employment Total U.S. Labor Force In Millions In Millions U.S Labor Unemployment Rate Economic and Financial Market Update – November 2012
  • 35. ECONOMY is GEARING: #2 CONFIDENCE!! Conference Board Consumer Confidence Present Situation Index Economic and Financial Market Update – November 2012
  • 36. ECONOMY IS GEARING: #3 Net WORTHS &#4 Debt BURDENS!! Total Household Net Worth U.S. Household Financial Obligations In Trillions of U.S. Dollars Ratio Economic and Financial Market Update – November 2012
  • 37. ECONOMY is GEARING: #5 Housing Activity &#6 Home Prices!! National Association of Homebuilders FHFA U.S. House Price Index Market Survey Index Economic and Financial Market Update – November 2012