Presentation to 2006 Diocesan Convention


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Presentation to 2006 Diocesan Convention

  1. 1. Investment Fund of the Diocese of Long Island Presentation to the 140th Annual Convention November 10-11, 2006 John H. Andren, Jr. Treasurer Trustees of the Estate Belonging to the Diocese of Long Island
  2. 3. Objectives of the Fund <ul><li>Provide professional investment management to any institution of the Episcopal Diocese of Long Island </li></ul><ul><li>Maximize total long-term rate of return with reasonable risk by seeking capital appreciation and current income. </li></ul>
  3. 4. Brief History <ul><li>2006 marks the 60 th anniversary of the Fund </li></ul><ul><li>Authorized by 1940 Diocesan Convention </li></ul><ul><li>Necessary legislation not passed by Albany until 1946 </li></ul>
  4. 5. The “Why’s” of the Present Structure <ul><li>The stock market debacle of 2000-2002 (dotcom implosion, Enron and friends) pointed out weaknesses in our controls, procedures and allocations </li></ul><ul><li>Investment Committee undertook a zero-based review of our policies and our managers, leading to significant changes and to hiring an advisory firm </li></ul>
  5. 6. Responsibility of the Trustees <ul><li>Approval of Allocations </li></ul><ul><li>Approval of Managers </li></ul><ul><li>Approval of Dividend Rates </li></ul><ul><li>“Where the buck stops” </li></ul>
  6. 7. Advised by Investment Committee <ul><li>Composed of Trustees and other business professionals </li></ul><ul><li>Monitors the performance of the managers </li></ul><ul><li>Recommends changes, when appropriate, for approval by the Trustees. </li></ul>
  7. 8. Using an Outside Consultant <ul><li>Consultant, with extensive databases </li></ul><ul><li>Tracks performance of many managers </li></ul><ul><li>Is alert to management changes </li></ul><ul><li>Is alert to market trends </li></ul>
  8. 9. Fund Characteristics <ul><li>Quality professional management of the portfolio </li></ul><ul><li>Fiduciary oversight </li></ul><ul><li>Independent of General Funds of the Diocese </li></ul><ul><li>Diversification among various asset classes and strategies </li></ul><ul><li>Enhanced investment structure fully implemented as of 2005 </li></ul><ul><li>Difference between Total Return and Dividend Payout - Total Return is intended to accomplish two goals: provide income and preserve buying power by accounting for inflation. Hence a portion of the total return (currently 3%) is retained in the fund. </li></ul>
  9. 10. Financial Highlights as of September 30, 2006 $610.06 Value per Share 178,054 Number of Shares $108,623,180 Shareholders’ Equity 805,200 Total Liabilities $109,428,380 Total Assets
  10. 11. More Financial Highlights as of September 30, 2006 =$8,257,876 Total Increase in Net Assets +2,486,972 Capital Transactions =5,770,904 Net Increase from operations -3,190,161 Dividends +5063,762 Change in Unrealized Gains +2,633,027 Realized Gains -312,730 Expenses $1,577,006 Interest & Dividend Income
  11. 12. Performance <ul><li>Historical </li></ul><ul><li>Current </li></ul><ul><li>Projected </li></ul>
  12. 13. Fund Performance <ul><li>The Total Fund posted a gain of 11.7% for the one-year period ended September 30, 2006, surpassing both the S&P 500 Index and the average balanced manager by a notable margin. </li></ul><ul><li>The portfolio exhibits strong, relative long-term performance with a five-year return of 9.1% compared to the S&P 500 Index return of 7.0% and the 6.6% return of the median balanced manager. </li></ul>*Returns are reported net of all fees.
  13. 14. Historical Share Price
  14. 15. 2006 Share Price
  15. 17. Future Performance ? ? ?
  16. 18. Asset Allocation <ul><li>Goals of the allocation process: </li></ul><ul><li>Maximum return consistent with prudent trust management </li></ul><ul><li>Reduced dependence on equities </li></ul><ul><li>Broadened international scope </li></ul><ul><li>Lowered volatility </li></ul><ul><li>Consistent returns </li></ul>
  17. 19. Asset Allocation <ul><li>International equity managers have outpaced international benchmarks and domestic equity returns </li></ul><ul><li>The real estate securities portfolio increases both diversification and yield </li></ul><ul><li>The fixed income allocation is maintained within the Fund to minimize volatility </li></ul><ul><li>Hedge fund of funds are used to add further diversification and provide a low-volatility return enhancement to the fixed income allocation. </li></ul><ul><li>The fund comprises a wide variety of domestic equity managers covering both large cap value and growth as well as small cap core </li></ul>
  18. 20. Russell/Mellon Trust Fund Endowment Universe Asset Allocation Comparison Source: Russell/Mellon Endowment Universe, June 30, 2006 As of June 30, 2006 Diocese of Long Island Current Allocation
  19. 22. Returns The return to investors has two elements: the amount credited to the accounts and the increase in the value of the shares. This is the total return. It includes all fees and expenses.
  20. 23. Inflation effect <ul><li>Why is it a concern? </li></ul><ul><li>Need to maintain purchasing power </li></ul><ul><li>Mandatory consideration in managing trust funds </li></ul><ul><li>Common sense says it’s the right thing </li></ul>
  21. 24. Inflation – how do we deal with it <ul><li>We estimate total return, e.g, 8% </li></ul><ul><li>We subtract an inflation factor, using Consumer Price Index as a guide, currently 3% </li></ul><ul><li>Expenses historically average .5% </li></ul><ul><li>Making the dividend rate 4.5% </li></ul>
  22. 25. Amount Credited vs. Total Return $19,000 -$6,060 Difference $577,000 $577 $25,020 4.50% $556 2005 $558,000 $558 $31,080 6.00% $518 2004 Total Share Value Year-end Share Price Cash Paid Out Payout Rate Average share Price Year
  23. 26. Dividend History
  24. 29. Subscribing to the Fund <ul><li>Participation in the Fund is open to all Parishes and Diocesan Organizations. </li></ul><ul><li>Our charter does not allow us to accept accounts from individuals </li></ul><ul><li>Contact the Diocesan Office. Details are in your handouts. </li></ul>