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