1. RESPONSE TO THE REQUEST FOR PROPOSAL
FOR INVESTMENT MANAGEMENT
Date of Response November 27, 2015
Name of School California State University, Long Beach
Faculty Advisor Peter Ammermann, Ph. D.
Address 1250 Bellflower Boulevard
City, State Zip Long Beach, CA 90840
Telephone (707) 333-3424
Fax (562) 985-1754
Email Peter.Ammermann@csulb.edu
Student Contact Devin Jett
Address 1146 Belmont Ave Apt C
City, State Zip Los Angeles, CA 90034
Telephone (818) 703-3702
Email
jettdevin1201@gmail.com

2. CFA SOCIETY OF ORANGE COUNTY
FOUNDATION
REQUEST FOR PROPOSAL
For
INVESTMENT MANAGEMENT
Any questions or requests for clarification should be directed to:
Jake Abbott at abbott.jake@gmail.com or
Tony Relvas at anthony_relvas@yahoo.com
DATES:
Friday, November 24
th, 2015 at 8:00 PM – Written Presentations
Friday, December 4th, 2014 at 1:00 PM – Oral Presentations
Oral Presentations to be held at:
California State University at Long Beach

3. TABLE OF CONTENTS
I. Introduction .................................................................................................................1
II. Specifications of the Request for Proposal..................................................................2
III. Manager Minimum Qualifications ..........................................................................4
IV. Search Timeline.......................................................................................................5
V. Required Forms ...........................................................................................................6
VI. Questionnaire...........................................................................................................7
A. Organization / People ..............................................................................................9
B. Investment Philosophy / Investment Process ........................................................14
APPENDIX I: STUDENT BIOGRAPHY39
APPENDIX II: FACULTY ADVISOR BIOGRAPHY39
APPENDIX III: ORGANIZATIONAL CHART39
APPENDIX IV: INVESTMENT PROCESS FLOW CHART39
APPENDIX A: CFAOCF Investment Policy Statement39
APPENDIX B: CFAOCF Portfolio Operations Manual39

4. 1
I. Introduction
The CFA Society of Orange County Foundation (“CFAOCF” or “Foundation”) is
requesting proposals from qualified student management teams for the management of a
portion of the CFAOCF’s investment fund. CFAOCF is a 501(c) (3) nonprofit public
benefit corporation. The CFAOCF is overseen by the Board of Directors of the CFA
Society of Orange County (CFAOC).
The purpose of this proposal is to identify and select a student team to provide investment
management services to assist the CFAOCF Board of Directors to meet its objective of
managing the Foundation’s funds in accordance with sound investment management
policies, practices and procedures and in compliance with State and Federal regulations.
In selecting the student investment management team, the Foundation will take into
consideration the team’s experience, depth of resources, and level of personal
commitment toward the investment management process. The selected team must
demonstrate capability in the areas of asset allocation, security selection, and compliance.
The portfolios to be managed pursuant to this RFP have the following characteristics:
Ø There are currently four portfolios managed under the supervision of the CFAOCF.
Ø All CFAOCF portfolios are benchmarked to a blended benchmark of 70% equity
and 30% fixed income. The benchmark is comprised of 50% Russell 3000, 20%
MSCI All Country World ex US Index and 30% Barclays Capital U.S. Aggregate
Bond Index. Please also see optional use of one “customized benchmark.”
Ø The management of all portfolios must follow the CFAOCF Investment Policy
Statement guidelines (see Appendices A and B).

5. 2
II. Specifications of the Request for Proposal
1.1 Response Deadlines:
8:00 PM on Friday, November 27th
, 2015 - SMIF Teams will e-mail in PDF
format a completed RFP to the Chair of the Investment Policy Committee
(abbott.jake@gmail.com) for subsequent distribution to the judges. Any RFP not
meeting this deadline will NOT be accepted.
12:00 AM on Friday, December 4th, 2015 - SMIF Teams will e-mail in PDF
format the completed presentation material to the Chair of the Investment Policy
Committee (abbott.jake@gmail.com).
1:00 PM on Friday, December 4th, 2015 - Eight printed RFP reports are due and
Oral presentations made to the Investment Policy Committee of the CFAOCF.
Any RFP not meeting this deadline will not be accepted.
NO AMENDMENTS WILL BE ACCEPTED AFTER THE CLOSING
DATE AND TIME.
The questions and/or requests made in this RFP should be duplicated in their
entirety in the Proposal, with each question and/or request repeated before the
associated answer or response.
1.2 Required Attachments and Enclosures. In addition to the responses to the RFP
questions, the forms referred to in Section V, below, must be attached to the
proposing team’s response.
1.3 Withdrawal/Irrevocability of Responses. A proposing team may withdraw and
resubmit a Proposal prior to the Proposal Deadline. No withdrawals or
resubmissions will be allowed after the Proposal Deadline.
1.4 Waiver/Cure of Minor Informalities, Errors and Omissions. The Board
reserves the right to waive or permit cure for minor informalities, errors, or
omissions prior to the selection of finalists, and to conduct discussion with any
qualified proposing teams and to take any other measures with respect to this RFP
in any manner necessary to serve the best interests of the Foundation and its
beneficiaries.

6. 3
1.5 Incurring Costs. Neither the Board of Directors nor the Foundation will be
liable for any costs incurred in the preparation of a proposal in response to this
request.
1.6 Rejection of Proposals. The Board reserves the right to reject any non-
qualifying Proposal. The Board also reserves the right to reject in part or in its
entirety any Proposal received in response to this RFP if it is in the best interests
of the Foundation to do so.
1.7 Award Subject to Approval. All proposing SMIF teams are hereby advised that
any Proposal that is selected will be subject to (1) the approval of the CFAOCF
Board of Directors and (2) the approval of the CFA Society of Orange County
Board of Directors. The CFAOC Board of Directors has the sole discretion of
final approval.
1.8 Cancellation of RFP. The Board of Directors reserves the right to cancel this
process or terminate the search at any time.

7. 4
III. Manager Minimum Qualifications
A proposing team must meet the following minimum criteria to be given further
consideration in the Board of Directors’ search for a student investment management
team pursuant to this RFP. Failure of a team to meet the minimum criteria will result in
the Proposal’s immediate rejection.
Ø The sponsoring college or university must be accredited and have a substantial
presence in Orange County;
Ø The proposing team must include a minimum of five (5) team members;
Ø Each of the team members must be a currently enrolled student;
Ø Each of the team members must be a junior or senior or a graduate student;
Ø Each of the team members must be interested in investment management and
must have completed or be currently enrolled in investments-related coursework;
Ø The team must have a committed faculty advisor; and
Ø Each team member and the faculty advisor must sign statements of commitment
to the term and the project.

8. 5
IV. Search Timeline
November 27th, 2015 - 8:00
PM
December 4th, 2015 -
1:00 PM to 5:00 PM at the
California State University at
Long Beach School of
Business (room location is
information forthcoming).
SMIF Teams e-mail in PDF format a completed RFP to
the Chair of the Investment Policy Committee
(abbott.jake@gmail.com) for distribution to the judges.
Eight printed RFP reports are due and Oral Presentations
will be made to the Investment Policy Committee of the
CFAOCF. Please also bring a Power Point of your RFP
to facilitate your Oral Presentation. Email a copy of the
Power Point to the Chair of the Investment Policy
Committee (abbott.jake@gmail.com) by midnight of the
night before the event. SMIF teams will have a
maximum of 35 minutes to make their Oral
Presentations to the Judges. Voting and selection of the
winning RFP and SMIF team will occur at the
conclusion of the event.
December 31st, 2015
January 1, 2016
Transfer of assets or accounts to SMIF teams (if
necessary). Completed by the CFAOCF after market
close.
SMIF teams will commence management of their
respective portfolios for the 2016 calendar year.

9. 6
V. Required Forms
The team must complete the following questionnaire (Section VI). In addition,
Appendices I, II, III, and IV must also be completed.
Each student team member is required to complete the biographical form found in
Appendix I: Student Biography.
The faculty advisor must complete the form found in Appendix II: Faculty Advisor
Biography.
The team as a whole must complete Appendix III – Organizational Chart and Appendix
IV – Investment Process Flow Chart.
RESPONSES MUST BE MADE ON THE ENCLOSED FORMS WITH NO
MODIFICATIONS. INCOMPLETE FORMS OR MISSING FORMS WILL
RESULT IN THE PROPOSAL BEING REJECTED.

10. 7
VI. Questionnaire
Date of Response:
Name of School:
Faculty Advisor:
Title of Advisor:
Address:
Address:
City, State Zip
Telephone:
Fax:
E-Mail:
Student Contact:
Address:
Address:
City, State Zip
Telephone:
Fax:
E-Mail:
Directions: To achieve a uniform review process and obtain the maximum degree of
comparability, it is required that the proposal be organized in the following manner:
1.1 Title Page: Please present the information requested in the above table on the title
page.
1.2 State the question in bold font with your answers stated in regular font. Responses
should be thorough and answer the specific question asked (including the issues
addressed in the bullet points).
1.3 Adhere to the same numbering scheme used in the questionnaire. Answer the
questions in the same order in which they were asked.
1.4 Adhere to the stated page limits. Answers should be thorough but concise. For the
purpose of adhering to the page limits, the questions should not be considered as
part of the response.

11. 8
1.5 Adhere to page and style formats. The responses must be submitted in Microsoft
Word compatible format, single-spaced with 1” page margins. Font should be 12
point, preferably Times New Roman.
1.6 Save the document and submit it electronically to CFAOCF. Save files with a
‘.doc’ extension and do not leave any blank spaces in the name. Responses
must be sent as attachments by e-mail to the CFAOCF Board of Directors.
Note that this questionnaire includes two subsections: (A) Organization / People; and
(B) Investment Philosophy / Investment Process.
Also note that many of these questions may be difficult to answer, especially in view of
the fact that you are students who have had a limited amount of experience and prior
academic preparation. If you are not sure how to answer a given question (or if you are
not sure what the question is asking in the first place), you are welcome to call on your
assigned CFAOCF representative for advice. Our goal is to enhance the educational
opportunities available to Orange County investment students, and we view this Request
for Proposal not only as a means for eliciting information from potential student
investment-management teams, but also as an educational instrument in its own right. As
such, the questions will challenge what you know (and what you think you know) about
the investment analysis and portfolio management process. So, do your best to answer
your questions to the best of your ability, and you may learn something before it is done!
Good luck, and we look forward to reading your response!

12. 9
Organization / People
1. Describe the background of your University and the investment-related education
it provides. Include in your description the following information:
Since founded on September 28, 1949, California State University Long Beach
(CSULB) has grown to be one of the largest California State Universities with over
31,000 students. CSULB’s mission is, “To provide its students with highly valued
undergraduate and graduate educational opportunities through superior teaching,
research, creative activity, and service.”
The College of Business Administration (CBA) strives to uphold this statement
through its vast selection of classes and driven faculty that foster the spirit of scholastic
achievement. The CBA offers eight undergraduate majors including: Accounting,
Information Systems Management, Human Resource Management, General
Management, Marketing, Operations Management, International Business, and of course
Finance.
Within the Finance major, students can choose amongst four concentrations:
Financial Management, Investments, Financial Institutions, and Financial Engineering.
The CBA prides itself on offering a wide variety of investment-related classes, at both the
graduate and undergraduate level.
Undergraduate Investment-related courses
Investment Principles (FIN 350)
Fixed-Income Analysis (FIN 485)
Financial Management (FIN 400)
Capital Markets (FIN 360)
International Finance (FIN 490)
Management in Financial Markets (FIN 460)
Applied Portfolio (FIN 499A and 499B)
Graduate level investment-related courses
Financial Management Concepts (FIN 501)
Seminar in Financial Management (FIN 630)
Seminar in Investments (FIN 650)
Seminar in International Finance (FIN 690)
Applied Portfolio Management (FIN 699A and 699B)

13. 10
Student-Managed Investment Fund
Through a rigorous selection process, graduate students and junior and senior
undergraduates are given the opportunity to be a part of the yearlong Student Managed
Investment Fund program (CSULB SMIF). Students in this CSULB honors program are
tasked with managing two separate portfolios: the Forty-Niner Shops Inc. and the
CSULB SMIF portfolio. Each portfolio exceeds $100,000.
The value of the CSULB SMIF experience is augmented by the professional
resources CSULB gives access to: ABI/Inform, Hoovers, Moody’s/Mergent, ValueLine,
and a Bloomberg Terminal.
The CSULB SMIF program also has an active alumni base that furthers the
educational experience. Alumni regularly meet with students, attend CSULB SMIF
classes, provide feedback and challenge students’ research, give guidance in
understanding technological resources, and help students prepare for the CFA exams.
CSULB SMIF places a large emphasis on students gaining their CFA designation.
At the undergraduate level, students are first introduced to the world of financial analysis
and the CFA exams in their Investment Principles course. Students then focus on the
CFA program material through class work in both Portfolio Analysis and Fixed-Income
Analysis. These courses dedicate a significant portion of their exam material to include
CFA exam based questions. Due to this CFA intensive preparation, students are prepared
and encouraged to pursue CFA Level I candidacy. Students are able to gain further
exposure to the CFA designation through the university’s Financial Management
Association (FMA), which was recognized as a Superior Chapter by the FMA
International headquarters. The FMA gives students a chance to attend Stalla seminars
and networking events, which allow students to peer through the glass door into the
various careers within the financial industry.
2. Describe the structure of your student investment-management team. In your
description, address the following issues:
The CSULB SMIF team is comprised of 2 MBA students and 19 undergraduate
students with varying levels of exposure to investment-management and the financial
markets. The class is organized into four multifunctional teams, each having a specific
focus: economics analysis, core equities analysis, fixed-income analysis, and quantitative
and tactical equity analysis. Teams conduct weekly research and present their findings to
the rest of the class in an effort to further the group’s collective knowledge. Through
collaborative efforts among teams, students establish a holistic view of the market in
order to make informed trade decisions for the portfolios with which they have been
entrusted.
CSULB SMIF officially meets every Tuesday from 4:00 to 6:45 PM. The week’s
“CEO” establishes the structure and agenda for CSULB SMIF meetings. The CEO is

14. 11
responsible for delegating tasks, facilitating class communication, and meeting with the
program director for the week’s agenda. The CEO position is rotated weekly so that all
students have the chance to take on the leadership role. The week before a student is
designated CEO they gain an opportunity to be the secretary. In this role, students are
responsible for taking minutes of class time, and distributing those minutes to the other
students via email. This rotational system is particularly effective as it allows each
student to develop their leadership abilities and communication skills and take ownership
of the CSULB SMIF project and objectives. Allowing everyone to be a CEO for the week
also exposes members to various ways of thinking and different types of leadership.
In class, students are able to discuss and debate issues ranging from
macroeconomic analysis and the effects of political maneuvering to the details of specific
sectors, industries, and securities. Mediation is provided by the CSULB SMIF program
director, which offers real-world experience and personal research to add more depth to
discussions.
*Further information regarding CSULB SMIF’s structure can be found in Appendix III.
3. Describe the benefits and incentives for students to participate in this program
The benefits of the CSULB SMIF program to its participants are significant. The
most obvious benefit is that students receive six semester credits and are able to apply the
course toward a concentration in finance. The practical knowledge of investment-
management garnered through this course far surpasses the potential for learning in any
other finance course offered at CSULB. The increased capacity for learning inherent in
the CSULB SMIF program has much to do with the team mentality, taking ownership of
one’s work, and the standards of excellence set forth by prior CSULB SMIF classes and
the program director.
Students also receive the unique opportunity to interact with real-world clients, as
well as build up their professional communication skills. Since different clients have
different goals, concerns, time horizons, and expectations, managing multiple portfolios
gives students exposure to identifying clients’ unique needs while learning to effectively
communicate research findings and performance results.
Networking and attending events hosted by the CFAOCF and CFALA are an
important part of the CSULB SMIF curriculum. Students benefit from the shared
experiences of professionals in their field of interest.
In its totality, the CSULB SMIF program provides a comprehensive learning
environment blending three important factors: the analytical discipline of learning about
markets, development of professionalism through working with clients and interacting
with other professionals, and communication and leadership development through
leading the class as CEO.

15. 12
IN ADDITION TO PROVIDING THE ABOVE ANSWERS, THE TEAM
MUST COMPLETE APPENDIX III – ORGANIZATIONAL CHART
4. Describe the background of the students and faculty advisor of the team.
Refer to Appendices I & II for detailed information regarding CSULB SMIF’s
management team and its faculty advisor.
IN ANSWERING THIS QUESTION, EACH STUDENT TEAM MEMBER
MUST COMPLETE APPENDIX I – STUDENT BIOGRAPHY, AND THE
FACULTY ADVISOR MUST COMPLETE APPENDIX II – FACULTY
ADVISOR BIOGRAPHY.
5. Why is your team uniquely qualified to manage the investment portfolio of the
CFAOC Foundation?
CSULB’s SMIF is uniquely qualified to manage the investment portfolio of the
CFAOC Foundation due to the levels of academic excellence exhibited by its members,
their interminable commitment to the program, and the passion exhibited by all members
to become successful professionals in the financial services industry. Also, CSULB SMIF
resources and support groups are unrivalled.
Acceptance into the CSULB SMIF is by invitation only to a select group of
Junior, Senior, and Graduate level students. The candidates are typically Finance majors,
but recently, Economics and Mathematics students who show interest have been
considered in order to evolve and promote diversity. Candidates submit a formal
application along with a personal statement in order to be eligible for the program.
Candidates are then expected to attend three sessions during the summer known as
“Summer Boot Camps”, with no guarantee of selection. The three summer sessions give
the Program Director the opportunity to gauge each candidate’s suitability to participate
in the program. The Program Director considers only candidates who demonstrate
academic aptitude, a high degree of motivation and enthusiasm, and the ability to work
cohesively within diverse groups. Ultimately, the Program Director seeks candidates who
will add value to the program.
The program prerequisites, in order to ensure candidates are adequately equipped
with relevant knowledge of financial concepts, are the completion of or current
enrollment in the following courses:
Undergraduate
Business Finance (FIN 300)
Investments Principles (FIN 350)
Graduate

16. 13
Seminar in Business Finance (FIN 600) Seminar in Investments (FIN 650)
Portfolio Analysis (FIN 485)
Fixed-Income Analysis (FIN 485)
After the “Summer Boot Camps”, applicants are further questioned by the
program director to gauge their commitment to the year-long program. The final result of
this grueling recruitment process is a class of 21 well-qualified and well-prepared
individuals ready to take on the many challenges that encompass the management of real-
dollar portfolios.
The best way to demonstrate the 21 individuals’ dedication is to quantify the time
dedicated to the program. Members meet 15 times per semester, with each class meeting
lasting three hours. The 45 hours of class time in each semester are dedicated mostly to
presentations, discussions, and debates regarding portfolio management. In order to
prepare for class activities, students typically spend a minimum of 20 hours of their
personal time each week conducting research. This equates to 300 hours per semester,
and 600 hours per year. Combined, the team spends a total 13,200 student-hours per year
focusing on research and management of the CSULB SMIF portfolios. This calculation
only takes into consideration the academic year and neglects to account for the time and
effort students spend during the summer and winter sessions. These numbers demonstrate
a level of profound dedication that elevates this program beyond the realm of hobby or
extra-curricular activity. The student members of CSULB SMIF treat this opportunity as
the beginning of their career in a highly competitive industry.
CSULB SMIF’s success can also be attributed to its access to premium
information resources and services at CSULB. The College of Business Administration
devotes $20,000 annually to provide students with a Bloomberg Terminal, which serves
as a main source of research, analysis, and guidance. Also, CSULB SMIF receives a
complimentary copy of Global Insight; a premium forecast service for the U.S. economy,
valued at $20,000 a year.
Close interaction with Alumni, CFALA, and CFAOC provides CSULB SMIF
with critical professional perspectives and insight that enables students to better
understand the nature of markets and how best to manage a successful portfolio.
In light of these factors, CSULB SMIF is exceptionally qualified to manage the
investment portfolio of the CFAOCF.

17. 14
Investment Philosophy / Investment Process
PHILOSOPHICAL AND ECONOMIC OVERVIEW:
In our investment approach, CSULB SMIF utilizes a unique combination of
quantitative analysis and a thorough top-down global economic analysis.
*Please see the first section of the Appendix IV for the Investment Philosophy /
Investment Process for this analysis.
1. What is your team’s investment philosophy?
The CSULB SMIF team’s investment approach can best be described as client-
focused, research-driven and education-oriented.
Client-focused
The team’s primary responsibility is a fiduciary duty to clients. This entails
steadfast dedication, consideration, and conservatism as well as a responsible and ethical
approach toward the management of all portfolios.
Research-driven
Every investment decision is carefully analyzed and driven by extensive research.
Before decisions are made, the group pools the findings made by each team through in-
depth discussion in order to ensure all relevant information is brought to the attention of
the class.
Education-oriented
Participation in the CSULB SMIF earns students a valuable educational
experience through managing real-world portfolios. A focus on education allows all
students to build their analytical and interpersonal communication skills, which are
highly valued in the financial services industry.
We believe the market is extremely competitive and difficult to beat; nonetheless,
we believe that following the three pillars of our approach will best enable us to structure
the portfolios we manage so that we have the greatest likelihood of generating the returns
our client’s need both to meet their financial goals while also best compensating them for
the risks they are accepting.
2. What market anomalies or inefficiencies are you trying to capture, if any?
We believe that the financial markets are very competitive but not necessarily
perfectly efficient. Potential inefficiencies in the market result in the overvaluation and
undervaluation of equities, which can manifest themselves as trends, momentum,

18. 15
bubbles, long-term reversals, and mean-reversion patterns. A traditional buy-and-hold
strategy could result in prolonged periods of portfolio losses, which are unacceptable.
The team’s strategic asset allocation model is designed to exploit trends in the equity
market. A tactical asset allocation model has also been developed and implemented,
which capitalizes on momentum effects to identify outperforming styles during
downward trending market. Talk more about what we do during down market signals.
3. Why do you believe this philosophy will be successful in the future? Provide
evidence or research in support of this belief.
We believe our philosophy will be successful in the future because our studies
have shown that our strategy is more likely to outperform a buy-and-hold strategy. Our
investment strategies are also based on an original research project by 2009 CSULB
SMIF alumnus Reuben Conceicao, that develops a composite strategy comprising two
components: a strategic asset allocation model and a tactical security selection model,
which is a style-rotation overlay on top of the strategic asset allocation model.
In applying this approach to historical data in a ten year period from September
30, 2003 (when AGG started trading), through September 30, 2013, we found that the
original strategy, as noted above, would have returned 216.41% versus the buy-and hold
return for the S&P 500 of 105.54% over the same period. Given the wide variety of
market conditions covered in this sample period, it is reasonable to assume that the
strategy as developed will continue to outperform the market in the future. The following
graph shows the historical return comparison between a portfolio following a SPY buy-
and-hold strategy and a portfolio following the technical indicator & ETF rotation
strategy:
4. Will your approach include passive strategies such as indexation?
Our approach will be focused primarily on active management. We believe
passive management does not require extensive analysis; therefore, we find that a
passive strategy would detract from the educational experience the CSULB SMIF
program provides. We understand that buying the index under the assumption that the
market is exceptionally efficient corresponds with the Modern Portfolio Theory and
the Efficient Market Hypothesis, but we do not agree with this and rather subscribe to
the growing body of research, which demonstrates the market is not perfectly
efficient and that inefficiencies may provide an opportunity for profit. Nonetheless, as
part of the active management approach, we may utilize such tools as the MSCI All
Country World Index, the Barclays Capital U.S. Aggregate Bond Index, and the S&P
500 in implementing the strategic and tactical asset allocation models.

19. 16
MARKET OVERVIEW AND ASSET ALLOCATION:
1. What is your capital market outlook for the coming year?
Domestic Economic Analysis and Forecast
After exhaustively assessing the economy, we believe the economy will continue
to grow, although somewhat slowly, and we project U.S. GDP growth to be within the
range of 2.4 and 2.7 in 2016. This is a blended range, which is derived from estimates
presented by Bloomberg, the IMF, and the OECD. Currently the United States economy
has been stabilizing and is expectant of a short-term interest rate hike. This hike is
imminent, assuming that U.S. growth is persistent, unemployment is stable, and inflation
continues to rise.
Bloomberg estimates that growth will be 2.6 in the Q4 of 2015. The
manufacturing PMI Index has been stable and consistently showing growth, for October
it posted a reading of 54, which is its best reading since April. Although, the October
reading was positive the November PMI came in at 52.6. This latest decline has been
consistent with the ISM manufacturing figures, as they have shown a slight persistent
decrease on a monthly basis. In October the ISM was 50.1 and depicts minimal growth,
if the trend of slightly and persistent decreases continue the report could show no growth
or began contracting in November. “Despite lackluster third quarter growth, the
economic outlook now appears to be improving. While the U.S. LEI’s six-month growth
rate has moderated, the U.S. economy remains on track for continued expansion heading
into 2016”, stated Ataman Ozyildirim, Director of Business Cycles and Growth Research
at The Conference Board. He supported this statement with the sharp rise of the U.S.
Leading Indicator Index in October, as the yield spread, stock prices, and building
permits drove the increase.
This view is further supported as contrary to dwindling manufacturing growth,
and the S&P Case-Shilller HPI has shown a year-on-year price increase 5.5 percent, 2
tenths better than expectations and the best showing since last summer. Employment has
also been a positive note throughout the year, as unemployment decreased from 5.7 in Q1
of 2015 to 5.0 and underemployment declined from 11.3 to 9.8 during this same time
period. Additionally, Barclay’s and Bloomberg project that by the end of 2016
unemployment in the U.S. will be 4.8. CPI came up from 0 to 0.2 in October, which is
still well below the FOMC’s 2 percent target. The substantial low inflation has been
largely due to low oil prices. Although, the CPI is currently low it is projected to
increment during 2016. In the following table you will find our SMIF teams year-end
projections for 2015 and 2016.

20. 17
Table 1 Domestic Forecast for remainder of 2015 and 2016
2015 2016
Real GDP (YoY%) 2.4 2.55
CPI (YoY%) 0.2 1.7
Unemployment (%) 5 4.8
Central Bank Rate
(%)
0.25 1
Our projections are derived from a variety of sources and were adjusted to meet
our expectations. For example, CPI was projected by Bloomberg to be 2.2 and the IMF
projected CPI below the Fed’s target of 2. We expect that CPI will increase as
commodities rebound, but we do not project that it will be higher than 2.2 so we adjusted
our predictions accordingly to resonate more closely with Barclay’s and the Federal
Reserve Board Members’ and Federal Reserve Bank Presidents’ projection of 1.8. We
also assessed other data in creating our projections, such as The University of Michigan
Consumer Confidence Index, which has shown upward increments since September. But,
the State Street investor confidence index eased in November to 106.8 from the revised
October evaluation of 114.0; the decline in North America was heightened by the
expectations for a December rate hike, which, while reflecting a stronger outlook in the
perspective of the Federal Reserve Board, would still put somewhat of a damper, at least
temporarily, on subsequent economic growth.
We believe the pending rise in interest rates has caused volatility not only in the
markets, but also in consumer and investor confidence, reflected, for example, by a recent
incremental increase in automobile sales in anticipation of an increase consumer interest
rates in conjunction with the Fed’s rate hike. Additionally, corporations such as Microsoft
and Apple issued new bonds in order to finance at a lower rate. The Fed has been very
cautious, to say the least, regarding raising short-term interest rates. Fed Chair Janet
Yellen and the FOMC have stated that they want to progressively increase interest rates
in order to better monitor the economy and decrease the risk of having to lower rates after
an initial raise in rates. Currently Bloomberg economists assign a 68% probability to an
increase in rates in December, but November’s soft data may contribute to pushing back
any increase from December 2015 until the following year.
Currently, Goldman Sachs and Barclay’s expect the FOMC to raise the Fed Funds
Rate by 100 basis points in 2016. Due to the Fed’s caution in raising rates and
incremental approach to slowly adjusting rates. We believe, based on the available data,
that during our one-year time horizon the most that rates will be increase is likely to be
100 basis points, and we are projecting a central bank rate of 1 percent by the end of
2016. This projection takes into account the negative impact that the U.S. Dollar
appreciation will have on exports. Furthermore, diminishing industrial production, an
increase in inventories, and other macroeconomic factors such as work force participation
and hourly wages could be a hindrance on growth.These factors are not the baseline

21. 18
scenario, though, as the IMF projects that the recovery in the U.S. will be supported by
lower energy prices, reduced fiscal drag, strengthening balance sheets, and an improved
housing market, they should be taken into consideration. We project that the greatest
challenge for the U.S. economy this upcoming year will be assimilating to a rising
interest rate environment, as a result of economic stability. This is a good challenge to
have, as the U.S. economy looks slow but promising going forward.
International Economic Analysis and Forecast
Internationally, economic growth has been less than stellar; commodity prices
have plummeted, and deflation has become a risk in advanced economies. The IMF
revised global growth downward by 0.2 percentage points below the July forecasts.
Growth projections from advanced and emerging economics as well as globally are as
shown in the table below. Relative to 2014, the recovery in advanced economies is
expected to pick up slightly, while activity in emerging market and developing
economies is projected to slow for the fifth year in a row. This primarily demonstrates the
weaker prospects for some large emerging market economies and oil-exporting countries.
Growth has been declining in China, and it is expected to decline to 6.8 percent
this year and 6.3 percent in 2016. This is due to China’s structural transformation toward
services, which are booming, and away from manufacturing, which is contracting.
China’s decline has hurt and continues to impact most its regional neighbors as well as
commodity exporters. This is due to their diminishing demand in commodities,
specifically metal demand. In China, fiscal measures have expanded infrastructure
spending to aid in their economy’s transition. India as a commodity exporter has
benefited from cheap imports, but it has a difficult external environment and exports are
suffering. Therefore, growth forecasts for India have declined.
Projected growth for 2016 reflects stronger performance in both emerging market
and advanced economies. For emerging market and developing economies, such as
Brazil, which struggled in 2015, growth is expected to remain weak or negative, although
it is projected to be higher than in 2015. The IMF projected the growth from the
emerging and developing economies to help offset the projected continuation of the
slowdown in China.
Table 2 International GDP growths Forecasted for remainder of 2015 and 2016
Advanced
Economies (IMF)
Emerging &
Developing
Economies
(IMF)
World
(IMF)
World
(OECD)
2015 2.0% 4.0% 3.1% 2.9%
2016 2.2% 4.5% 3.6% 3.314%

22. 19
The table below reflects the impact that low commodity prices have had on inflation
within advanced economies. The table also projects the inflation rate for 2015. In the
Euro zone expectations have grown for further easing in December as European Central
Bank President, Mario Draghi said, “policy makers will act to raise inflation as quickly as
possible."
Figure 3 Inflation by nation for 2015 (Bloomberg)
Country Headline
Inflation
Target Inflation Rate % Inflation
Forecasts
(%)
Rate
(%)
Target Actual (+)/(-) Annual
Forecast
(+)/(-)
U.S. 0.2 2.0 0.2 -1.8 0.2 -1.8
Euro Area 0.0 <2.0 0.0 In
Range
0.1 In Range
Japan 0.0 2.0 0.0 -2.0 0.8 -1.2
U.K. -0.1 2.0 -0.1 -2.1 0.1 -1.9
Canada 1.0 2.0(+/-
1)
1.0 In
Range
1.2 In Range
Australia 1.5 2.0-3.0 1.5 -0.5 1.6 -0.4
New
Zealand
0.4 1.0-3.0 0.4 -0.6 0.4 -0.6
Switzerland -1.4 <2.0P -1.4 In
Range
-1.1 In Range
Denmark 0.4 - - 0.4 - - 0.5 - -
Falling commodity prices, while keeping inflation low in developed economies,
has had a much more dramatic impact on the growth outlook for commodity-producing
emerging economies. As a result, many commodity producers saw renewed depreciation
of their exchange rates, which was intensified by the strengthening of the U.S. dollar.
(BIS Quarterly Review) Emerging markets’ dollar-denominated debt will place more of a
burden on these economies as a result of the appreciation of the dollar. Therefore, the
currency risk of investing abroad could damper potential gains. Our SMIF team believes
that current investments abroad wouldn’t compensate for the overall risks. Consequently,
we feel that it best if we focus our investments on the domestic markets. Nonetheless, if
an opportunity arises abroad we are open to global investments as long as their potential
returns are sufficient to compensate for the risks involved with such investments.

23. 20
Domestic and International Macroeconomic Methodology
When conducting our domestic economic forecasts, we first analyze the current
conditions of the economy using indicators such as real GDP, CPI, and the
unemployment rate, as well as potential government policy measures, both monetary and
fiscal. We assess what is the information telling us, and attempt to derive where may we
possibly be headed. This is done by identifying possible legislation, events, and potential
shocks that may greatly influence the economy and evaluate the effects they may have. In
addition, we compare existing forecasts, and combine them to construct what we believe
to be the more plausible predictions. We also track changes in productivity by watching
leading economic indicators and productivity measures, further adding to our outlooks for
inflation and for growth.
Similarly, in analyzing economic conditions outside the United States, we
examine broad indicators, such as real GDP, unemployment, interest rates, and CPI.
From our initial analysis, we filter out countries believed to have poor economic
environments, (higher inflation, high levels of government debt, relatively large amounts
of regulations, etc.), allowing us to focus on the more promising opportunities. Further
analysis includes infrastructure quality, government stability, and changes in trading
patterns. The focus of our ongoing analysis will be to narrow down potential investment
opportunities. These recommendations are then presented to the equity and the fixed-
income teams for deeper analysis.
2. What is your target asset allocation?
Our current portfolio will be composed of 30% fixed-income securities and 70%
equity securities. The composition will vary depending on the signals created by the
proprietary quantitative method used by the CSULB SMIF team. When an underweight
signal is generated, the portfolio will be comprised of 80% equity securities and 20%
fixed income securities. Conversely, when an overweight signal is generated, the
portfolio will be comprised of 40% fixed income securities, the maximum allowable
allocation for fixed income, and 60% equity securities, the minimum allowable allocation
for equities.
For the asset allocation, CSULB SMIF will continue to use the quantitative
process that incorporates the level of the S&P 500 and its 200-day simple moving
average. The initial signal to shift to maximum overweight equity (80% equity versus
20% fixed- income) is determined through the simple indicator of whether the most
recent close of the S&P 500 index is more than 5% above its 200-day simple moving
average (this signal will be checked against our macroeconomic forecast to assess the
reasonableness of the proposed change in asset allocation in light of the general market
environment we anticipated facing). Finally, if the S&P 500 index falls more than 5%
below its 200-day simple moving average, then we will shift the portfolio to a maximum
fixed-income position (60% equity versus 40% fixed-income).

24. 21
In addition to the general asset allocation of the portfolio, the allocation for
“tactical equity holdings” will also be determined based on the signal generated by the
quantitative process. When a tactical-buy signal is generated, the portfolio is shifted to be
overweight in equities and SMIF will execute a momentum-based strategy overlay to
determine our tactical equities. These tactical equity holdings will account for half of the
maximum allowable allocation for equities while the other half will be allocated for core
equities. When the 200- day moving average of the S&P 500 crosses the lower 5% band
of our model, all tactical equity holdings will be liquidated and reallocated accordingly to
attain a maximum fixed income position. This reallocation is warranted because during
the time periods for which momentum-based strategies are least likely to be effective, the
underlying moving-average strategy would signal to exit the equities markets altogether.
Graphical representations of maximum weight equity and maximum weight fixed income
positions are illustrated below.
3. What do you think are reasonable performance goals for the coming year?
Equity Market Forecast
The S&P 500 has been performing relatively well since its correction in late
August. Rebounding nicely from its August low of 1,867.61 to its current closing price of
2,086.59 on November 23, 2015. We believe the S&P 500 will continue its recovery and
anticipate the index to end the year with a target of 2100. CSULB SMIF expects the S&P
500 to return approximately 6% from November till the end of 2016, and have gave it an
ending target of 2200.
Equity Market Methodology
CSULB SMIF decided to first take a quantitative approach with analyzing the
markets. This is a table of the monthly SPX return since 1950-2014 in which we ranked
each month based on performance.
Month N Rank Average %Higher Avg if
Higher
Avg if
Lower
January 65 5 1.11% 62% 4.21% -3.85%
February 65 11 -0.04% 55% 2.39% -3.07%
March 65 4 1.21% 66% 3.00% -2.30%
April 65 3 1.50% 69% 3.45% -2.87%
May 65 8 0.19% 57% 2.78% -3.24%
June 65 9 0.01% 52% 2.64% -2.88%
July 65 6 0.96% 54% 4.05% -2.65%
August 65 10 0.00% 55% 3.20% -3.98%
September 65 12 -0.48% 45% 3.40% -3.61%
October 65 7 0.83% 60% 3.81% -3.64%

25. 22
November 65 2 1.53% 66% 3.87% -3.06%
December 65 1 1.67% 75% 2.89% -2.08%
Since 1950 to 2014 the S&P 500 has yielded an average return of 8% based on
our historical data. 2015 however has a well-below-average return YTD of 1.44% as of
November 24, 2015, and we believe the market will continue to generate below-average
yields for the near future. Similarly, and helping to reinforce these results, we believe the
United Sates’ growth will be slow, though still positive in the coming years.
Bond Market Forecast
In recent years, the Federal Reserve has kept the Federal Funds rate low to spur
business investment in attempt to lower unemployment. Currently, the Federal Funds rate
is at 0.25%. Because unemployment is at its all-time low of 5% we expect the Fed to
raise short term interest rates in early 2016. We believe the fed will raise short term
interest in small increments.
In line with a slow growth economy and market expectations of higher interest rates in
the future, we believe that the yield curve will steepen gradually in 2016.
Q1 2016 Q2 2016 Q3 2016 Q4 2016
FFR .50 .65 .85 1.05
3-Month .46 .68 .91 1.09
2-Year .92 1.14 1.34 1.53
10-Year 2.28 2.45 2.61 2.73
4. Apart from the blended benchmark, what would you view as the most
appropriate performance benchmark(s) for your portfolio?
Fixed Income:
For the fixed income portion, AGG (Barclay’s Capital U.S. Aggregate Bond
Index) seems to be the most appropriate performance benchmark. After considering other
benchmarks, AGG has consistently been performing better. AGG has been yielding
positive returns over a year. On the other hand, HYG (IBoxx $ Liquid Investment Grade
Index) has yielded negative returns over the year to date.
Equity:
For the equity portion of our portfolio, we will be utilizing the S&P 500 as the
current benchmark. We use this index because we are looking at large cap value stocks
which are constitute a majority of the S&P 500 Index therefore making it a appropriate
benchmark.

26. 23
5. What is your target sector/industry allocation? What is your methodology
for determining this allocation?
Our methodology for determining sector/industry allocation utilizes a top-down
approach. By developing an economic forecast, we are able to determine which sectors
and industries will likely perform well in the upcoming year.
Currently we are targeting the following sectors:
Consumer Discretionary: this sector is the best performer year-to-date and has had
positive returns over that time frame. Performance YTD for this sector is 5.08%. Within
this sector, YTD of Industry Retailing is 14.48% and Consumer Services is 3.98%.
Information Technology: our outlook for increased business capital spending is a
primary reason. M&A activity continues at a good pace. Higher levels of capital spending
in coming quarters should also benefit this sector. Performance YTD for this sector is
4.12%. In this sector, YTD of industry Software & Services is 13.15%
Health Care: Performance YTD for this sector is 3.65%. YTD of industry Health
Care Equipment and Services is 4.58% and Pharmaceuticals & Biotechnology 3.15%.
Consumer Staples: this sector is typically less sensitive to the ebb and flow of the
economy. Modest growth in developed economies and slower growth in emerging
economies have contributed to volume estimates for the sector. The strengthening U.S.
dollar is also creating headwinds. Performance YTD for this sector is -0.65%. YTD of
industry Food Beverage & Tobacco is 6.6%.
Financials: the financial sector is down year-to-date. Low interest rates have been
a headwind for banks. We expect interest rates to rise gradually next year. Performance
YTD for this sector is -2.05%. YTD of industry Insurance is 3.62% and Banks 1.89%.
Industrials: despite all the uncertainty in the markets surrounding a potential
slowdown in global economic growth, this sector has outperformed the S&P 500 Index
since mid-July. Better developed market and domestic growth prospects will benefit this
sector. Performance YTD for this sector is -4.14%. YTD of industry Commercial and
Professional Services is 0.31%.
FIXED-INCOME VALUATION AND SELECTION:
6. Which of the following instruments would you regard as appropriate for the
fixed-income portion of your portfolio?
Appropriate Inappropriate
Cash Equivalents (x) ( )
U.S. Treasury Notes and Bonds (x) ( )

27. 24
Investment Grade Corp. Bonds (x) ( )
Mortgage-Backed Securities (x) ( )
Non-investment Grade Corp. Bonds (x) ( )
Developed International Debt (x) ( )
Emerging Market Debt ( ) (x)
Preferred Stock (x) ( )
Cash Equivalents
This investment vehicle does not generate any returns for investors but it promises
good chances in future investments. The domestic outlook in the U.S. is upbeat and U.S.
economy continues to grow in the positive way. Based on our research, SMIF is
anticipating that in the coming year, the Federal Reserve will raise short-term interest
rates at a gradual pace for the first time in nearly a decade. Beyond secure levels, cash
equivalents bring higher returns in future investments. Therefore, we find cash
equivalents are appropriate for our portfolio.
U.S. Treasury Notes and Bonds
This investment vehicle is one of the safest securities, providing risk-free yields.
U.S. Treasury securities remain attractive relative to sovereign bonds in many developed
markets. Moreover, the volatility in security markets and uncertainties in the U.S.
economy will lead investors to hold treasuries. Moreover, in event of raising short-term
interest rates in the coming year, current bondholders with short-term and long-term
maturity will experience losses due to the decrease in bond prices. However, new
bondholders will earn higher yields. U.S. Treasury Notes and Bonds will be appropriate
for our portfolio.
Investment Grade Corp. Bonds
The credit risk of bonds is assessed by various bond-rating agencies. Investment
grade corporate bonds are bonds with at least a BBB rating. Although this investment
vehicle is riskier than Treasuries, investment grade corporate bonds offer higher yields
and credit risks are controlled by big three credit rating agencies: Moody’s, Standard &
Poor’s (S&P), Fitch Group. Strong credit fundamentals and outlook for continued U.S.
economic expansion are supportive. Investment grade corporate bonds will be
appropriate for our portfolio.
Mortgage-Backed Securities - MBS
The housing market has positive signals. First, sales of newly built homes reached
the highest level since early 2008. From a year earlier, sales were up 21.6%. Secondly,
home-builder sentiment is at its highest level in nearly a decade, according to a survey
from the National Association of Home Builders. The group reports increased buyer
traffic and improving sales conditions. Third, new construction of single-family homes
has increased 8.7% from a year ago. Fourth, existing-home sales climbed up to 5.55

28. 25
million homes as of Jan 2015, compared to 4.67 million homes a year earlier. Lastly, the
percentage of mortgages entering foreclosure is at its lowest level since 2005. About
0.38% of loans went into the foreclosure process during the third quarter, according to a
report by the Mortgage Bankers Association; the lowest rate since the second quarter of
2005. About 3.57% of loans were at least 90 days past due, the lowest rate since the third
quarter of 2007. Based on these positive signals, we believe MBS is an appropriate
investment vehicle for our portfolio.
Non-investment Grade Corp. Bonds
Non-investment Grade Corp. Bonds are junk bonds with a rating below BBB.
This investment vehicle is riskier than an Investment grade corporate bond. Potential
illiquidity is a concern, especially during periods of higher volatility. If we limit our
selection of junk bonds, high-yield fixed-income securities can provide us with higher
returns on a risk-adjusted basis. Since we feel that the economy will continue to grow, we
find non-investment grade corp. bonds to be an appropriate investment vehicle for our
portfolio.
Developed International Debt
Economic conditions in developed markets continued to improve despite global
growth uncertainties. With the purpose of diversifying our fixed income portfolio, we
consider developed international debt as an appropriate investment vehicle.
Emerging Market Debt
We do not think this investment vehicle is a good choice because of the high
volatility in emerging markets such the slowdown in China, the strong U.S. dollar, weak
commodities markets, and negative GDP in Brazil and Russia. Therefore, it is not an
appropriate investment for our portfolio.
Preferred Stock
This investment vehicle is described as hybrid securities, a mix of bonds and
stocks. However, if the firm may be viewed as a high credit risk or experienced financial
distress, its preferred stocks will decline in value regardless of the general level of
interest rates. Thus, if we invest in preferred stocks in selected firms, we will receive a
steady stream of dividends quarterly as bondholders and the difference in trading price as
stock traders. With a positive forecast for a stronger U.S. economy, we believe preferred
stock is an appropriate investment for consideration within our portfolio.

29. 26
7. What are the target maximum, minimum, and average maturities and
durations for the fixed-income portion of the portfolio?
Maximum Minimum Average
Maturity 25 Years 2 Months 7 Years
Duration 24 Years 2 Months 5.5 Years
(Note that these figures are subject to change)
Given the wide range of possible outcomes in the economy for the coming year
and increased uncertainty regarding the Fed’s actions and their possible impact and
concomitantly the wide variety of possible fixed income ETFs we are considering, this
range is given as the widest possible to incorporate all of these potential ETFs, such as
the following, which define the short-end, long-end, and mid-point of our target ranges.
- Maximum = Vanguard Extended Duration Treasury (EDV)
- Minimum = SPDR Barclays 1-3 Month T-Bill (BIL)
- Average = iShares Core US Treasury Bond (GOVT)
Nonetheless, we believe that the most likely outcome is for the Fed to raise short-
term rates, for the yield curve as a whole to shift upward but also flatten somewhat, with
intermediate- and long-term rates increasing by less than short-term rates, and for the
economy as a whole to continue to improve, albeit slowly, and, as a result, for credit
spreads to hold steady or even narrow somewhat. Thus, the most likely position for the
fixed-income portion of the portfolio will be intermediate-term in terms of maturity and
duration and shifted toward corporates and away from Treasuries. We believe that this is
the risk posture for the portfolio that will provide the best returns relative to the risks that
are taken on
8. What is the target sector/industry allocation for the fixed-income portion of
the portfolio?
Because there is relatively few fixed income ETFs that are structured to focus on
specific industries or sectors, sector and industry analysis has played a significant role in
our fixed income analysis. Instead, we focus on determining appropriate bond ETFs
through risk assessment and our general economic forecast, and our bond ETFs has a
broad exposure to a number of different sectors. Overall, the fixed-income portion of the
CSULB SMIF portfolio will likely be invested in intermediate term investment-grade
corporate bond ETFs, high-yield bond ETFs, with AGG as the core.
The current European economic situation has worsened, and Japan is in its fourth
recession in five years. China’s economy is anticipated to fall further in 2016, negatively
affecting the global economy. As a result, our fixed-income portion will likely focus
primarily on the domestic market. Our analysis predicts a higher chance of the Federal
Reserve raising short-term interest rates, particularly in the second half of 2016. As a
result, to protect against the interest risk, we will invest in moderate and short-term bond

30. 27
ETFs. Finally, a lower anticipated default risk as a result of an improved U.S economy
also allows us to invest more in high-yield bond ETFs.
EQUITY VALUATION AND SELECTION:
9. Describe your general equity selection and valuation approach. Discuss
where your approach would line up along the following dimensions:
CSULB’s SMIF team actively manages all the equity portions of the portfolio.
Our team goes through the SRI equity allocation process and uses corporate governance
when selecting an investment within our portfolio. Research is conducted on a weekly
basis where changes within the portfolio can be requested and then voted on by the class.
When selecting equities, we use the top-down approach by analyzing the world’s
economy, examining the current trends, selecting our industries, and then based on our
quantitative research, choose stocks to be voted into the portfolio.
Value-oriented stocks are the main emphasis of the core equity portion of our portfolio.
We believe that value stocks carry concrete fundamentals based on our evaluations of the
equity’s price/earnings ratio, historic yield, and other factors. When selecting value
stocks, we prefer to analyze those securities that have a market capitalization greater than
$10 billion to reduce the risk compared to the market during an equity underweight
period, which we are currently in. Since our research tells us that the U.S. economy will
be more stable than international ones by growing at a slow but constant rate, we will
direct most of our attention toward U.S. companies to include in the equity portion of the
portfolio.
As for the rotation of equities in and out of our portfolio, we choose stocks that will do
well in the long run; we are not interested in trading stocks for quick profit. CSULB
SMIF emphasizes the long-term preservation of capital. We realize that there are varying
optimal investment horizons contained within our long-term strategy, and will position an
exit strategy, if applicable, that aligns with those forecast optimal holding periods.
10. Describe your equity security selection and valuation process.
Tactical Equity Holdings
In determining the tactical equity holdings for our portfolio, we first analyze
current market conditions. Through the use of a technical indicator, we are able to find
whether the market is exhibiting upward or downward momentum. After quantitative
analysis of historic returns found at Kenneth French’s website:
http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html, we are able to
determine which industries generate better historic returns during each of these types of
markets. Once the industries are selected, our base screening criteria will be used to filter

31. 28
out securities unsuited for our portfolio. All investments must meet market capitalization
equal to or greater than $10 billion as well as a daily trading volume of at least 1 million.
Core Equity Holdings
Currently, our key core equity holdings are Berkshire Hathaway (BRK.B) and
SPLV. The former was chosen to benefit from the value effect, from the expertise of
Warren Buffet’s management team, and from the implied protective put that Berkshire’s
equity repurchase policy creates for the stock. SPLV, a low volatitlity S&P 500 ETF, was
chosen to capitalize on the above-average long-term returns that have long been
associated with low-volatility and low-beta stocks.
In addition to analyzing individual equities for potential inclusion among our core
equity holdings, we incorporated Joseph Piotroski’s F-score, to identify the healthiest
companies among a selection of value stocks by screening them with nine accounting-
based criteria. We then combined the results with Fisher-inspired criteria to narrow down
the initial basket of stocks. We set the minimal requirement of market capitalization as
$500 million and the minimal daily trading volume as 150,000 shares. We utilized P/B
and D/E as fundamental factors in selecting the securities. Low price-to-book is
important in identifying companies that are undervalued by the market, and low debt-to-
equity will screen out companies with high debt obligations as well as high interest
expenses.
We plan to follow this security selection and valuation process as diligently as
possible. Nonetheless, certain economic forecasts and Fed policies may cause economic
conditions to change and result in our deviating from this strategy. We will alter our
portfolio construction in order to align our proposed asset allocation with existing market
conditions.
Since we believe the market is semi-efficient, we will be looking for potentially
undervalued stocks by comparing company-based common measures of price, cash
flows, and leverage ratios to their respective industry peers and the industry averages.
The Bloomberg Terminal will be used to apply a customized search tool that filters out
overvalued securities.
11. What are the target characteristics for the equity portion of your portfolio,
relative to the equity portion of the blended benchmark, along the following
dimensions?
Less
than
Approx.
Equal to
Greater
than
Varies
Widely
Market Capitalization ( ) ( ) ( ) ( )
Portfolio Beta (x) (x) ( ) ( )
P/E Ratio (x) (x) ( ) ( )

32. 29
P/B Ratio (x) (x) ( ) ( )
Dividend Yield ( ) (x) (x) ( )
Earnings Growth Rate ( ) (x) (x) ( )
Market Capitalization
We currently anticipate that each stock included in the portfolio will have a
market capitalization of at least $10 billion. This signifies a large cap stock, which will
provide more stability and less volatility during the underweight / benchmark-weight
period.
Portfolio Beta
Since our economic analysis forecasts are currently slightly to moderately bullish
through 2016, we have decided to set our current range for the beta to be between 0 and
1.25. This range will eliminate stocks that move inversely to the market and will limit
volatility within the portfolio by filtering out assets deemed as “too risky.
P/E Ratio
As part of the value rather than growth-orientation for the portfolio corresponds to
an emphasis on stocks with a low P/E ratios. Stocks with a P/E ratio less than or equal to
the S&P 500 will allow us to pay less for a dollar of earnings per share of the stock,
presumably eliminating much of the speculation that inflates the stock’s price over its
intrinsic value.
P/B Ratio
As a continued reflection of our value-oriented approach, we anticipate investing
in stocks with relatively low P/B ratios. Low P/B stocks have a market price more
comparable with the book value of the company.
Dividend Yield
Similarly, as part of our value-oriented approach, we anticipate our holdings will
have dividend yields greater than or equal to the S&P 500 index average.
Earnings Growth Rate
Similar to Buffets approach, within our value orientation, we will also search for
stocks with an earnings growth rate equal to or greater than the S&P 500 to maximize the
possible growth for the portfolio relative to the benchmark.
12. Discuss your equity diversification guidelines, and describe your targets for the
equity portion of the portfolio in terms of the following characteristics. Briefly
describe how these targets were chosen.
As required by the CFAOCF Investment Policy Statement, we will invest no more
than 5% in any one specific stock, no more than 10% in any one specific industry and no
more than 30% in any one specific sector. We may invest up to 30% of the portfolio’s

33. 30
equity portion in any one international ETF, but no more than 10% in any one non-
diversified ETF. The exact allocation will be determined by our economic forecast and
subsequent analysis of investments we believe will outperform our benchmark.
CSULB SMIF’s technical indicator signaled an equity underweight period
beginning August 21, 2015. Accordingly, we have reduced our current TARGET asset
allocation to the benchmark allocation with 70% of the total portfolio to be placed in
equities while the remaining will be allocated to fixed-income. We will invest up to 5%
of the equity portion in any one individual stock, a maximum of 10% in any non-
diversified ETF, and a maximum of 30% in any diversified international ETF.
Before equities are recommended for the portfolio, they are subjected to a
thorough analysis. We will realistically hold no more than six individual stocks in our
portfolio. This decision is determined through a two-part reasoning (1) Since individual
stocks tend to be more volatile, we will select ETFs to minimize risk of being stopped out
of a position and (2) The time requirement and commitment dedicated to each security
makes the decision to hold fewer stocks a more manageable task.
We will use carefully selected ETFs to gain exposure to particular sectors based
off of thorough economic analysis. The ETF selection process will emphasize the
following:
• The data should be readily accessible online through Bloomberg or Morningstar.
• The analysis of expense fees present in the ETF compared to other possible
selections. PBJ, an ETF we selected, has an expense ratio of 0.61%, which is less
than the average of similar funds’ expense ratios of 1.21% (Vanguard).
• The analysis of top holdings in relation to industries and sectors.
• The investment policy located in the appendix A
13. Describe your sell discipline for individual equities.
Since the portfolio will be actively managed, we will be following and evaluating
the movements within the S&P 500. We will work accordingly to deliver the correct asset
allocation, stock selection, and target prices for our securities. A technical indicator will
be used to track the S&P 500 within +/- 5% of its 200-day simple moving average. The
indicator will provide us with buy and sell signals as a way to appropriately allocate the
equities within our portfolio. In addition, we will also reassess any position that suffers
15% decline in value to determine whether we want to keep that position in the portfolio.
Our portfolio will be composed of at least 60% equities at all times as required by the
portfolio guidelines. We believe our sell discipline policy outlined in the previous section

34. 31
is comprehensive and would not deviate from this discipline unless extreme
circumstances arise.
MUTUAL FUND and/or ETF VALUATION AND SELECTION:
14. What is your selection process for Mutual Funds and/or ETFs (fixed-income,
balanced, or equity)?
We will not be including mutual funds as part of our investment selection process.
With regard to ETFs, our equity ETF selection will be chosen to capture the dynamics of
a specific segment of the market, such as the style ETFs utilized for our momentum-
based style-rotation strategy, or a specific strategy or approach to investing, such as the
low volatility stocks of SPLV. As part of this approach, though, we will seek to avoid
ETFs with excessively high expense ratios or excessively low liquidity.
15. What is your sell discipline for mutual funds and/or ETFs?
The CSULB SMIF team will employ a technical indicator to signal when the
portfolio should be moved to underweight equity. This indicator will be the same as that
used for the individual equities as discussed in question 13. In addiction, if a strategy on
which an ETFs holdings are based is found no longer to be an effective approach, then
we will obviously reconsider investing in such ETFs.
GENERAL ISSUES IN PORTFOLIO MANAGEMENT AND CONSTRUCTION:
16. Describe your portfolio construction process. Include in your answer the
following information:
In accordance with the Investment Policy Statement, we will select our equity
securities from the New York Stock Exchange, the American Stock Exchange, the
NASDAQ, and regional exchanges as we discover opportunities. We will then filter out
any securities where the market cap is below the required $500 million. Exchange traded
funds, which may be used for fixed-income, international, style/sector rotation as well as
broad market exposure, will be biased towards highly liquid ETFs. We are currently
focused on U.S based companies and ETFs due to the complications of analyzing
international companies, the poor performance in the international market, and the
volatility those international markets contain. However, we remain open to and are still
researching international investment opportunities.
The portfolio will focus on two types of securities that will satisfy the equity
portfolio; common stocks and exchange traded funds. International equities will solely
be purchased through ETFs. Our tactical asset allocation strategy incorporates both ETFs
and individual stocks. Additionally, ETFs will be used for the fixed-income portion of the
portfolio as they allow for diversification and are more liquid than traditional bonds. As

35. 32
specified in the Investment Policy Statement, we will not invest in derivatives, options, or
futures contracts.
A well-diversified portfolio depends on two factors, the optimal number of
securities and the actual securities. According to Markowitz’s diminishing utility theory,
the additional benefit of diversification diminishes after 20 securities. With consideration
of the Investment Policy Statement, we will include no more than 20 equity-related
securities, including ETFs and individual stocks. In addition, bond index ETFs will be
included to protect against systematic risk.
The Exchange Traded Funds portion of the portfolio will be subject to the limit of
10% and the equity portion of the portfolio will be subject to the limit of 5%.
Once we have the allocation established for our strategies, we will use both
quantitative and qualitative analysis taken from internal and external sources.We will use
a wide array of quantitative processes at all levels of construction. On the top level of our
top-down approach, we will use our technical asset allocation model (discussed
elsewhere) to determine what percentage of our portfolio will be allocated to the equities
market. For our tactical security selection model, we will use relative return calculations
to find the equity styles that are outperforming the broad market as measured currently by
the benchmark. On the bottom level, we will use equity valuation methods such as
dividend discount and free cash flow valuation models to isolate the best equities within
the style universes.
In keeping in line with CSULB SMIF’s investment philosophy, educational
explorations into optimization techniques are wholly encouraged, regardless of whether
or not they are used. We will be working on developing a series of in-house optimization
programs. We would like to incorporate Markowitz portfolio optimization into our asset
allocation decision and possibly use a security allocation decision process to work toward
achieving the best risk-return profile for the portfolio.
Benchmark-tracking error is an important component to consider in an actively
managed portfolio and its construction. Managed portfolios require benchmark-tracking
to ensure that the goals and objectives of the portfolio are being met. Therefore, as the
CFAOCF portfolio is actively managed, the benchmarking-tracking error is an important
consideration for us. We will provide the Investment Policy Committee with quarterly
written updates to measure the portfolio’s performance against the benchmark.
We find team-oriented approach extremely important in managing the portfolio.
We utilize a horizontal management structure to encourage each manager to participate
and take charge in the team environment. The leadership of the team rotates on a weekly
basis as each manager takes on the role of CEO, allowing each manager the chance to
plan and lead the meeting. We also believe that each manager should have an active voice
and be responsible for the decisions made. Each manager is accountable for conducting
their own research and presenting their findings.
17. What is your team’s definition of risk with respect to this portfolio?

36. 33
Risk is broadly defined as the possibility of loss or injury. Even with such
a simplistic definition, the process of measuring and managing the multitude of risks that
exist in the market is far more challenging. We understand risk is a multi-faceted issue,
and conclude that there is no one all-encompassing definition or measure of risk that we
believe is adequate or sufficient.
Nonetheless, four key definitions of risk to which we pay close attention are:
1. Standard deviation of portfolio’s returns: a traditional and widely accepted
measure of risk that we also believe is important, and we seek to control this risk
component through, e.g., adequate diversification across asset classes, expected
return factors, and individual securities. We will be able to calculate the standard
deviation of our portfolio. We will also use the quantitative measure, beta as a
benchmark because it is a much more accessible metric to find (and we believe
that our diversification efforts would remove much of the diversifiable risk that
we might otherwise face, so that beta is a more relevant proxy of the total risk our
portfolio faces).
2. Another measure of risk is the possibility of absolute and/or permanent losses in
portfolio’s value. We seek to control this risk, at least partially, through our use of
the 200-day moving average asset allocation process, which creates a protective
put position for a portion of the portfolio.
3. A third facet of risk, originally supported by Benjamin Graham, is more
subjective -the risk of being wrong in our analysis and the risk of overpaying for a
position. Information via research is the most effective tool in combating this
form of risk. We will make the final decision to invest in a considered position
only after diligent and thorough research of relevant risk and expected return
factors.
4. Finally, Fama and French have identified five key risk factors within the equity
and fixed-income markets, including (i) the value vs. growth factor, (ii) the size
(small-cap vs. large-cap) factor, (iii) the market risk premium factor, (iv) the
maturity risk factor and (v) the default risk factor. We will strive to ensure that the
portfolio is best positioned to benefit from those among these risk factors whose
returns are anticipated to be the best compensated.
18. Please answer the following questions, if applicable:
Do you intend to use cash reserves as a method of risk control?
We intend to use cash reserves as a defensive strategy during extreme
circumstances in the domestic environment. These circumstances will be identified
through economic analysis as well as quantitative analysis by the economic and

37. 34
quantitative team respectively, as well as external sources such as Value Line and
Morningstar.
Describe how you monitor and manage:
• Residual Risk versus the benchmark
We will diversify the portfolio to reduce the risk that any individual equity has.
• Common factor risks
The requirement set by the CFAOCF protects the portfolio from any
overexposure to risk. Our approach to tactical equity is a style rotation strategy that will
keep us from being overly exposed to a given style.
• Security and industry weightings, and Value at risk
Bloomberg Terminal has tools to help us increase the understanding of portfolio
risks. CSULB SMIF will review the portfolio weightings and risk on a monthly
basis. CSULB SMIF will use the tools available on Bloomberg to help find those
answers.
• Describe any risk measurement models (e.g., Wilshire Atlas, MSCI/Standard
& Poor’s, etc.) that are used and how this analysis is incorporated into the
portfolio management process.
We incorporate MSCI Barra index data in our analysis of sectors as well as
international markets. We will also utilize the sophisticated risk management modules
that are available in the Bloomberg Terminal.
19. How will the portfolio be monitored?
We will confirm that each order has been successfully executed and that the
position has been added. Once positions have been added to the portfolio, we will
monitor them using portfolio-tracking software such as StockTrack to make sure each
position is performing up to the portfolio standards. Stop loss pricing alerts will also be
programmed into our StockTrack account to signify if our position declines 15% from the
original purchase price.
20. How will you monitor the portfolio’s adherence to its investment guidelines?
Specify who is responsible for compliance. What checks and balances do you
have in place?

38. 35
All CSULB SMIF members were given the investment guidelines at the
beginning of the semester to study thoroughly before proceeding with the voting on the
investment decisions. Professor Dr. Ammermann gave the presentation on the investment
guidelines to have the same understanding with every member on the SMIF team. Each
and every suggested investment decision made follows the prior criteria to select
securities. Nonetheless, the Program Professor has right to veto any decision if it does not
meet the investment guidelines. All portfolios will be dedicatedly reviewed every month.
We analyzed the economy as a whole to find the sectors and industries that we believed
had the greatest potential over the coming year and continue to analyze the economy
every month. SMIF also regularly reevaluates the intrinsic value of the stock and to
recalculates it, if deemed necessary, once the stock has reached its target price.
21. Describe your policy on rebalancing your portfolio.
Rebalancing of our portfolio occurs at the end of each month when six-month
returns are recalculated for each of our tactical holdings. During a buy signal, when the
S&P 500 is performing above its 200-day moving-average upper 5% band, we
overweight equities up to the maximum allowance of 80% of the portfolio. Following a
sell signal, when the S&P 500 is performing below its 200 day moving-average lower 5%
band, we overweight Fixed Income with a maximum of 40% of the portfolio and the
remaining 20% of the portfolio will be shifted from tactical equities into our core
equities. As per the investment guidelines, if any individual stock should rise to 10% of
the equity portion of the portfolio, the security will be sold down to 5% of the equity
portfolio
22. Describe the sources of information used to select securities and how this
information will be processed.
The Bloomberg Terminal is the main source used to extract and analyze
information. We researched and experimented with the Bloomberg’s weighted stock
screen to filter out securities with desirable fundamentals. We then performed further
analysis using the Discounted Cash Flow model and corporate valuation model to
estimate intrinsic value of the companies. Companies that fit the criteria best, along with
most promising growth opportunity from company analysis will be selected as candidates
of the CSULB SMIF portfolios.
CSULB SMIF utilizes unique sources of information such as Bloomberg, a
premium financial service, AAII, IBIS World, and Value Line for information services.
We also use reliable sources of that give market data.
CSULB SMIF team will be using unique approaches to process the information
by using an asset-allocation model with a security-selection model, which is described as
a long-flat equity strategy with a momentum-based style-rotation overlay. We narrow

39. 36
down the equity research by performing economic research, forming an in-depth analysis
and market forecast by using a stock screener.
The top-down (macro-economic) approach is the main approach for the CSULB
SMIF team in selecting its equities compared to the bottom-up (security selection)
approach. The SMIF analysts first studied the economic factors that affect the stock
market and then selected the favorable sectors that were expected to perform best under
the projected economic conditions. Then SMIF analysts developed an equity asset
allocation with economic and industry forecasts along with our investment philosophy.
23. How much involvement would the team require/like to have with CFAOCF?
CFAOCF members are always welcome to visit the CSULB SMIF team during
the class sessions. SMIF team is expected to give presentations to the CFAOCF about the
performance and management of the portfolio. It is understandable that CFAOCF
members are occupied with demanding careers. Therefore, CSULB SMIF team would be
happy to host members once a semester.
CSULB SMIF team is honored to have any advice from the CFAOCF. CSULB
SMIF students attend the Host-A-Student events regularly, which are quite beneficial for
the students’ careers overview and give a chance to network with professional CFA
charter members. CSULB would be gratefully honored to have a CFA member as a
speaker to SMIF team at least once a semester. CSULB SMIF team would like to keep in
contact with CFAOCF regularly as possible.
We are happy to have any critiques from any CFAOCF member to improve our
portfolio management and presentation skills.

40. 37
24. Attach any additional information to describe your investment process that you
would like the CFAOCF to consider.
Investment Process Flow Chart
Process for Selecting Core Equity and Fixed-Income
Holdings

41. 38
COMPLETE APPENDIX IV - INVESTMENT PROCESS FLOW CHART

42. 39
APPENDIX III: ORGANIZATIONAL CHART
Provide an organizational chart that diagrams the different functions (research, trading,
portfolio management, etc.). Each team member should be identified along with his or
her area of responsibility.

43. 40
APPENDIX IV: INVESTMENT PROCESS FLOW CHART
Illustrate the investment process in a flow chart identifying the decision making steps,
decision makers and outcomes.

44. 41
APPENDIX A: CFAOCF Investment Policy Statement
The purpose of this Statement is to provide a clear understanding of the investment
objectives, policies, and guidelines for the CFAOCF. This Statement will outline an
overall philosophy that is specific enough to allow the Student Investment Management
Team to know what is expected, while at the same time giving flexibility for changing
economic conditions.
Return Objective: The CFAOCF’s total annual return objective is equal to the spending
rate plus the expected tuition inflation rate, thus maintaining the real value of the
scholarships and the fund.
Ø To guide the Student Investment Management Team, it is directed that this long-
term objective be achieved by adhering to a benchmark composed of 50% Russell
3000, 20% MSCI All Country World ex US Index and 30% Barclays Capital U.S.
Aggregate Bond Index. Rebalancing to this benchmark is to occur regularly by the
SMIF teams.
Definitions:
Total annual return equals the sum of dividends, interest, and other current income, plus
the net impact of price change, time-adjusted for capital additions and withdrawals, all
after transaction costs and management fees, for a given fiscal year.
Spending rate, set as a percentage of the previous year’s ending market value, includes
annual scholarships and all management expenses, and is initially targeted at 6% (5% for
scholarships and 1% for operating expenses).
Tuition inflation rate is the average rise in tuition cost at the 6 major Orange
County/Long Beach Universities offering business programs in Orange County,
California (Chapman, CSULB, CSUF, Pepperdine, UCI, and USC) over the academic
year.
Risk Tolerance: The need to pay out annual scholarships and to maintain the real value of
those scholarships; the inexperienced and annually rotating management team; and the
expectations of the learning process, all dictate moderate risk for the fund.
Time Horizon: Infinite foundation horizon, short-term management horizon.
Liquidity Requirements: Due to the long-term life of the foundation minimum liquidity is
required to meet the periodic distributions described by the spending rate. As a public
foundation, the initial targeted spending rate is 6%, with that rate being set annually by
the IPC. 1% is targeted for operating expenses throughout the year. These liquidity needs
are typically satisfied via Foundation funds that are separate from the student-managed
portfolios. Thus, although the Foundation’s Investment Policy Statement establishes
target asset allocation guidelines for these portfolios (see below), there are no specific
liquidity requirements imposed on the operations of the student investment-management
teams.

45. 42
Tax Considerations:
Public foundations unlike private foundations are not subject to excise taxes.
Regulatory Issues:
In general foundations are subject to little in the way of federal regulation. The
fund would be subject to California State regulation of foundations.
Unique Circumstances:
The CFAOCF faces a unique challenge in that its fund assets are overseen by the
volunteer Investment Policy Committee and managed by the Student Investment
Management Team, both with changing memberships each year. Both of these groups
will consist of members with varying levels of investment skill, experience, and
understanding. They will have a wide range of personal preferences, prejudices, and
investment styles.
ii. Portfolio Guidelines
Permissible Investments
• All assets must have readily ascertainable market value and be easily
marketable.
• Any proposed position requires the submission to the IPC of concrete
evidence of due diligence conducted on the proposed investment. In
practice - a one to three page summary of the recommendation with
discussion of investment valuation, price target and risk(s) is sufficient.
• Equity
o Equity investments may be chosen from the NYSE, the AMEX,
the NASDAQ, and regional exchanges.
o The portfolio will be generally fully invested with minimal
emphasis on market timing and broadly diversified, with no
individual equity exceeding 5%, no industry exceeding 10%, and
no sector exceeding 30% of the equity portfolio at time of
purchase. If any individual stock should rise to 10% of the equity
portion of the portfolio, the security must be sold down to at least
5% of the equity portfolio.
o Market capitalization restrictions:
§ Investment in stocks of firms with a total market
capitalization of less than $500 million is prohibited.
§ No more than 50% of the equity allocation of the portfolio
may be invested in small-cap stocks (market capitalization
of between $500 million and $2 billion).

46. 43
§ Up to 100% of the equity allocation of the portfolio may be
invested in mid- to large-cap stocks (market capitalization
of greater than $2 billion).
o Foreign equities are limited to ADRs, U.S. listed foreign stocks,
and ETFs and should not exceed 30% of the equity portfolio at
time of purchase.
• Fixed Income
o Investments in fixed income securities should be limited to mutual
funds, exchange traded funds (ETFs), and or preferred stock until
such time as the Fund grows to $500,000 in assets. All Non-
Investment Grade debt not to exceed 25% of the entire Fixed
Income allocation.
o The maximum allocation of Preferred Stock is capped at a
maximum of 10% of the entire portfolio.
• Exchange-Traded Funds (ETFs)
o The use of ETFs must be consistent with the guidelines of the IPS.
o The holdings of any proposed ETF position must conform to the
restrictions and diversification guidelines of the IPS.
o The trading techniques utilized by the proposed ETF must also
conform with the trading techniques allowed by the IPS.
o Equity ETFs:
§ One or more broad market ETFs (e.g., SPY, NYC) can
comprise a total of no more than 50% of the equity
allocation of the portfolio.
§ No non-broad-based equity ETFs can comprise more than
10% of the equity allocation of the portfolio.
o Fixed Income ETFs:
§ Up to 100% of the fixed income allocation of the portfolio
may be invested in one or more well-diversified fixed
income ETFs.
• Other Assets
o The Manager may not purchase assets other than those previously
mentioned without a written permission from the CFAOC Board of
Directors.
Prohibited Transactions and Types
• Buying on margin
• Short selling
o Any ETFs utilizing leverage, short positions, or the equivalent are
also prohibited.
• Options, Futures, and Commodities.
• Private Placements

47. 44
Asset Allocation
It is understood that changing market cycles require that some flexibility in asset
allocation be permissible. With this in mind, minimum and maximum asset allocation
restrictions are given to allow movement of capital within the asset classes as deemed
appropriate by the Managers for the purpose of increasing investment returns and/or
reducing risk. Accordingly, the allowable asset mix ranges are as follows:
Asset Type Acceptable Target Range
Cash 0-20%
Equities 60-80%
Fixed Income 20-40%
Turnover
Due to the uniqueness of the annually changing management of the fund and the likely
desire for each new management team to invoke its own style, annual portfolio turnover
is limited to 125% if the portfolio is held in cash at the start of the year (to enable the
team to fully invest the portfolio and then still have some leeway to sell “losing”
positions during this initial year) and 75% if the portfolio is fully invested (in accordance
with the above asset allocation guidelines) at the start of the year.
Review Procedures
The Investment Policy Committee will review all objectives, policies, and guidelines for
appropriateness and adherence, on at least an annual basis.
Evaluating Performance
Ø The IPC will evaluate the performance of the fund against a benchmark consisting
of 50% Russell 3000, 20% MSCI All Country World ex US Index and 30%
Barclays Capital U.S. Aggregate Bond Index. However, should the SMIF team feel
that a customized benchmark better reflects their specific strategy – one customized
benchmark (with sufficient explanation) is permitted. Thus the mandated 70/30
benchmark, and an optional customized benchmark, will be provided by the
respective SMIF teams in their Proposals.

48. 45
APPENDIX B: CFAOCF Portfolio Operations Manual
i. Defined terms:
PORTFOLIO = the CFAOCF portfolio.
TEAM = The Management Team for the PORTFOLIO.
IPS = The Investment Policy Statement for the PORTFOLIO.
IPC = The CFAOCF Investment Policy Committee, charged with oversight of the
PORTFOLIO.
ii. CFA Institute Code & Standards
Each member of the TEAM (including the faculty advisor(s)) will affirm, in writing, their
adherence to CFA Institute’s Code of Ethics and Standards of Professional Conduct in
conjunction with the management of the PORTFOLIO. CFAOCF will provide copies of
the CFA Institute Code of Ethics and Standards of Professional Conduct to each TEAM
member and to the faculty advisor(s).
iii. TEAM Structure
The TEAM will consist of a group of at least five undergraduate or graduate students and
at least one faculty advisor. Eligible students will have at least junior or graduate student
status and intend to graduate no sooner than the end of the portfolio management term.
There will be a standard calendar for each year’s activities. The 20XX TEAM will (1)
apply to manage the PORTFOLIO during the Fall 20(XX-1) semester; (2) be selected no
later than December 15, 20(XX-1); (3) begin its management activities on January 1,
20XX; (4) manage the PORTFOLIO through December 31, 20XX, providing quarterly
reports to the IPC; (5) prepare an annual report covering the activities and outcomes of
the PORTFOLIO from January 1, 20XX through December 31, 20XX; and (5) make a
formal presentation regarding the PORTFOLIO’s performance during the 20XX calendar
year at a special CFAOC event. Therefore, eligible students for the 20XX TEAM must
plan to graduate no sooner than December 20XX.
The faculty advisor can be any business school professor (or other instructor officially
recognized by the university); however, the application process will make note of the
professor’s (1) educational background within the investments area; (2) professional
background, qualifications, and certifications within the investments area; (3) teaching
experience within the investments area; and (4) willingness to design, obtain approval
for, and teach an appropriate course to the TEAM in conjunction with their management
of the PORTFOLIO (note: this course may be open to non-team members, allowing for
smaller schools or those whose state funding makes teaching of small classes difficult.)
Nothing precludes the possibility of multiple faculty advisors. It is anticipated that the
team advisor (or one of the advisors, in the case of multiple advisors) will serve as an ex-
officio, non-voting member of the CFAOCF’s Investment Policy Committee.

49. 46
iv. Investment Process
TEAM Meetings
The TEAM is expected to hold formal meetings on a regular basis. Attendance at these
meetings is one of the primary responsibilities of TEAM members. Meetings should be
scheduled weekly while school is in session, and at least monthly during the summer
recess. TEAM member attendance should be noted in the minutes of each meeting. A
TEAM member who misses more than one third of the weekly meetings during any
semester should be removed from the program (i.e., a TEAM member who misses more
than five weekly meetings during the Spring semester will not be permitted to participate
during the following Fall semester and will be stricken from the TEAM’s roster and a
TEAM member who misses more than five weekly meetings during the Fall semester
will be stricken from the TEAM’s roster.) More latitude is permitted during summer
months, particularly if a TEAM member is employed at a geographic distance. Latitude
is, of course, also permitted in cases of adverse personal circumstances, at the discretion
of the Faculty Advisor.
Minutes should be taken at each formal meeting of the TEAM, to include a list of those
attending, a review of all performance results presented or discussed, a summary of the
specific securities discussed, recommendations made, votes taken, and decisions made,
and a copy of all reports or other written materials reviewed. A journal or log should be
constructed to compile these meeting minutes. At the end of the year, one copy of this
journal (and copies of previous year’s journals) will be provided to the new TEAM.
Another copy of the journal will be provided to the IPC for safekeeping.
It is recommended that one TEAM member be responsible for chairing each meeting and
another be responsible for taking, transcribing, and distributing minutes and that these
duties rotate among the TEAM members. The duty for compiling the annual journal or
log should rest with one person, either a selected TEAM member or the faculty advisor.
IPC members are welcome and encouraged to attend all TEAM meetings. The faculty
advisor is responsible for informing the IPC of the time and place of all team meetings.
Portfolio Goals and the IPS
All actions taken by the TEAM should reflect the IPS and the fiduciary obligations owed
to the CFAOCF and future scholarship recipients. The TEAM must remain mindful of
this core responsibility and guard against placing their own desires for experience,
activity, and excitement ahead of their clients’ wishes and needs. The composition of the
PORTFOLIO should at no time violate the guidelines on asset class, asset allocation,
liquidity, diversification, concentration, or other matters defined in the IPS. All additions

50. 47
to or deletions from the PORTFOLIO should be judged first by these criteria. Within
these constraints, the goal of the TEAM is to select securities that will create a
PORTFOLIO that (1) has a permissible level of tracking error (defined as the standard
deviation of monthly returns against the defined benchmark) and (2) earns positive excess
returns relative to the benchmark, in that order of importance.
Oversight of PORTFOLIO Performance
On at least a monthly basis, the TEAM should analyze the performance of the
PORTFOLIO, including return performance against the benchmark, cumulative tracking
error, and individual security performance. Correction of deviations from IPS guidelines
(e.g., concentration limits, asset allocation requirements, tracking error constraints, etc.)
should receive first priority. Poorly performing individual holdings should be the target
of further investigation and analysis. The TEAM is encouraged to develop a clear “sell”
discipline and apply it rigorously. This discipline should be applied both to securities
that have met their growth expectations and to significant underperformers.
Research and Analysis Process
The purpose of research and analysis of individual securities by TEAM members is to
identify potential additions to, deletions from, or replacements for the PORTFOLIO.
Potential additions, deletions, or replacements with particular securities should be
analyzed from four perspectives: (1) the effect the proposed action will have on the
composition of the PORTFOLIO; (2) the current pricing of and anticipated return on the
individual security; (3) the current condition and future prospects of the issuer of the
security; and (4) the downside risks associated with the security (the events that could
trigger significant underperformance.) TEAM members are reminded that a strong issuer
does not necessarily imply a good investment, as the security’s price may already reflect
that strength and more.
The TEAM is encouraged to develop a standardized research report form to be completed
for each security under consideration for addition to, deletion from, or replacement in the
PORTFOLIO. This report should include (1) the date of preparation; (2) the potential
action to be taken (e.g., add, remove, replace and the volume recommended); (3) a
checklist to insure that the potential action would leave the PORTFOLIO in compliance
with IPS constraints; (4) indicators of current market pricing and investment desirability
(e.g., P/E and PEG ratios, analyst opinions, past and projected pricing); (5) information
regarding the health and future prospects of the issuer (including key accounting ratios
(trend and comparison to industry), discussion of industry/issuer growth prospects, recent
news, etc.); and (6) specific risks associated with the security and its issuer.
During regular meetings, TEAM members will make investment recommendations, using
their research and analysis to support the recommendation. A copy of each research and
analysis report should be included in the minutes of the meeting at which it is presented.