2. WHY USE A DYNAMIC STRATEGY
Definition
– Dynamic (adjective) – marked by usually continuous and productive activity or change, energetic and forceful
Description
– The dynamic portfolios differ from traditional policy portfolios as they attempt to identify opportunities which offer
compelling potential within the current macroeconomic environment, while also incorporating investments that may
offer downside protection
– These strategies use Exchange Traded Products (ETPs)
Fully Managed Investment Policy
– We believe portfolios should be allocated properly among stocks bonds and cash but this allocation should change
We believe portfolios should be allocated properly among stocks, bonds and cash but this allocation should change
based upon market conditions, creating a dynamic fully managed investment policy as the framework for investing
Zero Downtime
– ETPs enable investors to gain
p
access to components of the
global marketplace like never before
Hybrid funds along with Strategic Income funds are
among the fastest growing type of mutual funds
Source: Investment Company Institute as of 12/31/2009
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS
3. TRADITIONAL POLICY PORTFOLIOS DON’T WORK ALL OF THE TIME
If the asset allocation decision makes up approximately 90% of a clients return*, shouldn’t it be actively managed?
– Should equities be purchased at historically high valuations (1999)?
– Should bonds be purchased when dividend yields from stocks are more attractive on a risk adjusted basis?
– We believe that bonds offer a certain degree of protection against volatility, but we also recognize that all assets
compete and we focus on owning those that appear to offer the most attractive risk reward potential during a full
market cycle
December 1949 – December 1955 December 1999 – December 2005
Overweight Equity Overweight Fixed Income
50 % ‐ Fixed 30 % ‐ Fixed Equity – 50 % Equity – 30 %
Equity – 50 % Equity – 70 % 50 % ‐ Fixed 70 % ‐ Fixed
1949 1‐yr 3‐yr** 5‐yr** 1999 1‐yr 3‐yr** 5‐yr**
50 % Equity / 50 % Fixed 16.9 % 14.0 % 15.1 % 50 % Equity / 50 % Fixed 0.1 % ‐0.1% 5.0 %
Income Portfolio Income Portfolio
70 % Equity / 30 % Fixed 22.8 % 18.5 % 19.0 % 30 % Equity / 70 % Fixed 3.7 % 4.7 % 7.4 %
Income Portfolio Income Portfolio
Equities 31.7 % 24.6 % 23.9 % Equities ‐9.1% ‐14.6 % ‐2.3 %
Fixed Income 2.1 % 1.0 % 2.3 % Fixed Income 9.2 % 10.6 % 11.1 %
* According to Brinson, Hood and Beebower study 1991
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS
4. HOW DO WE GET THERE
Investment Process
– Philosophy
• Attempt to deliver strong absolute and relative returns
• We focus on valuations, expected returns and correlation,
when developing an asset allocation that best fits within our
current global macro‐economic viewpoint
• Recognize that no asset class resides in a risk free environment
– Application
• Define opportunities across asset class, capitalization, style,
geography and industry sector
• Seek to include those asset classes where there appears to be
an asymmetrical opportunity for capital growth
• Hold approximately 10‐20 positions
• Apply techniques to mitigate exposure to areas of the market which
appear vulnerable
• Use enhanced trading strategies for ongoing real‐time management
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS
5. INTRODUCING DYNAMIC ASSET STRATEGY (DAS)
DAS seeks:
– Competitive total returns
– Lower volatility relative to the overall capital markets
– No predetermined asset mix
– Capital is allocated to areas offering the most compelling
risk/return characteristics
Portfolio characteristics
– Domestic and International Stocks
– Domestic and International Bonds
d l d
– Real Estate Investment Trusts
– Commodities
– Alternatives
– C h
Cash
– Typically hold 10 – 20 positions
Top 5 holdings As of 10/1/2010
– No single position greater than 25% of portfolio
Security Category Weight
– Inverse ETPs may be used as a protection strategy
iShares Lehman 3-7 Year Treasury ETF
y Government Bonds 12.4 %
SPDR S&P Emerging Asia ETF Emerging Market Equity 10.4 %
SPDR S&P 500 Technology Sector ETF Domestic Equity 7.8 %
SPDR S&P 500 Consumer Staples ETF Domestic Equity 7.4 %
iShares Trust IBOXX High Yield ETF
g High Yield
g 7.4 %
SPDR Gold Trust ETF Gold 6.4 %
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS
6. PORTFOLIO PROTECTOR OFFERED WITH DAS
Despite a fully managed investment policy, a portion of the portfolio is designed to offer downside protection
– The portfolio protector
• When traditional diversification doesn’t offer enough protection
• Portion of the account designed to offer downside protection
• Securities will consist of non‐correlated assets and inverse ETFs when applicable
S iti ill i t f l t d t d i ETF h li bl
• Varying percentage of account (0 – 75%)
• Works similar to a long/short fund’s short portion
– If the portfolio protector is 25% of the portfolio it is similar to being 75% net long in a hedge fund
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS
7. INTRODUCING DYNAMIC INCOME STRATEGY (DIS)
DIS seeks:
– Maximize current income
– Yield of CPI + 2%
– Minimum of 50% in traditional fixed income
– Capital is allocated to areas offering the most compelling
risk/return characteristics
Portfolio characteristics
– Domestic and International Stocks
– Domestic and International Bonds
d l d
– Real Estate Investment Trusts
– Commodities
– Alternatives
– C h
Cash
– Typically hold 10 – 20 positions
Top 5 holdings As of 10/1/2010
– No single position greater than 25% of portfolio
Security Category Weight
WisdomTree Emerging Market Debt ETF
g g Emerging Market Debt
g g 10.4 %
JP Morgan Alerian MLP index ETN MLPs 10.2 %
WisdomTree Dividend Appreciation ETF Domestic Equity 10.2 %
iShares S&P US Preferred Stock ETF Preferred Stock 9.8 %
iShares High Yield ETF
g High Yield
g 9.8 %
iShares DJ Utility Index ETF Domestic Equity 7.5 %
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS
8. HOW TO USE DYNAMIC PORTFOLIOS
Core characteristics:
– Diversification across multiple asset classes can help protect investors during market downturns
– Flexibility to shift investments based on market opportunities
– Implements a global strategy
Satellite characteristics:
– Concentration among best opportunities
– Tactical component as an overlay to a policy portfolio
– Non traditional assets to compliment conventional security holdings
DAS Core
or
Alpha
p
Strategy
DIS DIS
Satellite Alpha
DAS
Alpha Satellite Alpha
Satellite Satellite
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS
9. WHO IS PARKER/HUNTER ASSET MANAGEMENT
PHAM
– 1.5 billion in Assets under management, including 700 millions in asset allocation strategies
– Managing equity and fixed income strategies since 1994
• Including ETF products since June of 2001
– Janney‐selected sub‐advisor on ETF Advantage (2005) and Keystone (2010)
– Any questions please contact us 412‐562‐8100
PARKER/HUNTER ASSET MANAGEMENT DYNAMIC PORTFOLIOS