first western trust bank paula hendrickson an integrated investment approach usa swimming september...
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First Western Trust BankPaula Hendrickson
An Integrated Investment Approach
USA Swimming
September 2010
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Foundations of our investment approach• Diversifying among asset classes is the
most prudent approach to managing risk• Investment styles move in and out of favor
withthe market
• Even the best investment managers do not stay on top for extended periods of time
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Bringing global investment expertise to you• Solid commitment to personalized service• Sophisticated investment management
approach• Similar expertise typically only available to
world’s largest investors
• Access to institutional money managers and truly diversified investment options
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Advising clients worldwide
Representative Client List
Alcoa
AT&T , Inc.
Barclays Bank
BHP Billiton
Bill and Melinda Gates Foundation Trust
Boeing
CHS Inc.
Caterpillar
Coca-Cola Bottling Co.
Mitsui Chemical Co., Ltd.
Public School & Educational Employee Retirement Systems of Missouri
Wilfrid Laurier University
Representative client list as of 02/2010. Clients may contract for a variety of services from Russell Investment Group. For more information on the selection criteria, please refer to the disclosure slide. While the manager selection process utilized for Russell Funds is similar to the guidance and institutional fund management discipline that Russell provides to the clients listed, those clients have not invested in Russell Funds.
Build investment strategies
Help meet financial goals and obligations
Implement disciplined approach
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What is the challenge?Achieving increased returns without increasing risk
RiskLow
High
High
Po
ten
tia
l R
etu
rn
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The goal of our investment process
The Heart of Russell’s difference: Institutional-quality money managers that are often not available to retail mutual fund investors
Multi-style:19 potential
investment styles
Multi-manager:Up to 49 independent
money managers
Russell’s goal is to deliver above-average returns with above-average consistency
Multi-asset:Up to 4 asset classes
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Which assets should you select?
SOURCE: Capital Markets History, Russell Investment Group. Stocks: S&P 500 Index. Bonds: S&P High Grade Bond Index (1959-1973), Barclays Long-Term High Quality Government/Corporate Bond Index (1974-1975), Barclays Capital US Aggregate™ Bond Index (1976-2009). Three-month T-Bills: Ibbotson US 30 day T-Bill Index (1959-1977), S&P/Citigroup Treasury Bill 3-Month Index (1978-2009). Inflation: Consumer Price Index. Past performance does not guarantee future results. Although stocks have historically outperformed bonds, they have historically been more volatile.
Which assets should you select?
Growth of a Dollar 1960–2009
STOCKS $9150-year annualizedreturn: 9.45%
BONDS $2550-year annualizedreturn: 6.65%
T-BILLS $1450-year annualizedreturn: 5.42%
INFLATION $750-year annualizedreturn: 3.93%
0.
20
40
60
80
100
120
140
200919991989197919691960
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Why does risk matter?
SOURCE: Stocks: S&P 500 Index*Standard deviation is a statistical measure of the degree to which an individual value in probability distribution tends to vary from the mean of the distribution. The greater the degree of dispersion, the greater the risk. Past performance is no guarantee of future results.
Ret
urn
%
Year
Market Risk* 1957–2009
-50-40-30-20-10
01020304050
1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
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How does mixing asset classes help manage your risk?
STOCKS9.45
17.17
BONDS6.657.17
60/40 MIX8.10
10.31Return*Risk†
STOCKS, BONDS, AND MIX OF 60% STOCKS/40% BONDSAnnual Returns: 1960-2009
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
SOURCE: Stocks: S&P 500 Index. Bonds: S&P High-Grade Bond Index (1959-1973), Barclays Capital Long-Term High Quality Government/Corporate Bond Index (1974-1975) Barclays Capital Aggregate Bond™ Index (1976-2009). Past performance does not guarantee future results.
*50-year annualized return. †Standard Deviation.
1960 1967 1974 1981 1988 1995 2002 2009
V207
BEST PERFORMANCE
WEAKEST PERFORMANCE
Value of diversification 1993-2009 (1 of 2)
Please note that this chart is based on past index performance and is not indicative of future results. Indexes are unmanaged and cannot be invested in directly. Index performance does not include fees and expenses an investor would normally incur when investing in a mutual fund. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets.
REAL ESTATE
-37.73
LARGE CAPGROWTH
-38.44
SMALL CAPGROWTH
-38.54
INT’L
-43.06
LARGE CAPVALUE
-36.85
LARGE CAP
-37.60
SMALL CAPVALUE
-28.92
BONDS
5.24
SMALL CAP
-33.79
INT’L
11.63
INT’L
8.06
LARGE CAPGROWTH
38.71
SMALL CAP GROWTH
43.09
BONDS
10.26
SMALL CAP GROWTH
48.54
LARGE CAPGROWTH
23.12
LARGE CAPGROWTH
33.16
LARGE CAPGROWTH
2.66
LARGE CAPGROWTH
37.19
INT’L
20.33
INT’L
27.30
BONDS
11.63
BONDS
8.44
SMALL CAP VALUE
46.03
INT’L
20.70
SMALL CAP GROWTH
31.04
LARGE CAPGROWTH
30.49
INT’L
39.17
BONDS
8.69
INT’L
-15.66
SMALL CAP GROWTH
1.23
SMALL CAP GROWTH
-9.23
SMALL CAP GROWTH
14.31
BONDS
18.47
SMALL CAP GROWTH
11.26
SMALL CAP GROWTH
12.95
INT’L
-13.96
SMALL CAP GROWTH
-2.43
INT’L
6.36
LARGE CAPGROWTH
-22.42
LARGE CAPGROWTH
-20.42
LARGE CAPGROWTH
-27.89
LARGE CAPGROWTH
29.75
LARGE CAPGROWTH
6.30
BONDS
-2.92
INT’L
11.55
BONDS
3.63
INT’L
2.06
SMALL CAP GROWTH
-22.43
INT’L
-21.21
SMALL CAP GROWTH
-30.26
BONDS
4.10
BONDS
4.34
20081994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
SMALL CAP VALUE
4.71
INT’L
14.02
LARGE CAPGROWTH
5.26
BONDS
2.43
2005
SMALL CAPGROWTH
4.15
LARGE CAPVALUE
38.35
LARGE CAPVALUE
35.18
LARGE CAPVALUE
21.64
LARGE CAPVALUE
15.63
LARGE CAPVALUE
7.01
LARGE CAPVALUE
-15.52
LARGE CAPVALUE
-5.59
LARGE CAPVALUE
16.49
LARGE CAPVALUE
7.35
LARGE CAPVALUE
30.03
LARGE CAPVALUE
-1.99
LARGE CAPVALUE
7.05
LARGE CAPVALUE
22.25
SMALL CAP GROWTH
13.35
2006
BONDS
4.33
LARGE CAPGROWTH
9.07
LARGE CAP
37.77
LARGE CAP
32.85
LARGE CAP
27.02
LARGE CAP
22.45
LARGE CAP
0.38
LARGE CAP
20.91
LARGE CAP
-7.79
LARGE CAP
-12.45
LARGE CAP
-21.65
LARGE CAP
29.89
LARGE CAP
11.40
LARGE CAP
6.27
LARGE CAP
15.46
SMALL CAP
47.25
SMALL CAP
21.26
SMALL CAP
2.49
SMALL CAP
18.33
SMALL CAP
28.44
SMALL CAP
22.36
SMALL CAP
-3.02
SMALL CAP
-1.82
SMALL CAP
16.49
SMALL CAP
-20.49
SMALL CAP
-2.55
SMALL CAP
4.55
SMALL CAP
18.37
SMALL CAP VALUE
14.03
SMALL CAP VALUE
22.83
SMALL CAP VALUE
22.25
SMALL CAP VALUE
31.78
SMALL CAP VALUE
-11.43
SMALL CAP VALUE
-1.55
SMALL CAP VALUE
21.37
SMALL CAP VALUE
25.75
BONDS
-0.82
BONDS
9.65
SMALL CAP VALUE
-6.45
SMALL CAP VALUE
-1.49
SMALL CAP VALUE
23.48
INT’L
26.86
REAL ESTATE
35.26
REAL ESTATE
26.35
REAL ESTATE
31.57
REAL ESTATE
3.17
REAL ESTATE
13.93
REAL ESTATE
3.81
REAL ESTATE
37.14
REAL ESTATE
20.29
REAL ESTATE
15.25
REAL ESTATE
-17.51
REAL ESTATE
-4.62
REAL ESTATE
12.15
REAL ESTATE
35.06
LARGE CAPVALUE
-0.17
SMALL CAP GROWTH
7.05
2007
BONDS
6.97
LARGE CAPGROWTH
11.81
LARGE CAP
5.77
SMALL CAP
-1.57
SMALL CAP VALUE
-9.78
REAL ESTATE
-15.69
INT’L
32.46
SMALL CAP GROWTH
34.47
BONDS
5.93
LARGE CAPGROWTH
37.21
2009
LARGE CAPVALUE
19.69
LARGE CAP
28.43
SMALL CAP
27.17
SMALL CAP VALUE
20.58
REAL ESTATE
27.99
V207
Value of diversification 1993-2009 (2 of 2)
SOURCES:
Small Cap ValueRussell 2000®
Value Index
Measures the performance of those Russell 2000® Index securities with lower price-to-book ratios and lower forecasted growth values, representative of US securities exhibiting value characteristics.
Small CapRussell 2000® Index
Measures the performance of the 2,000 smallest companies in the Russell 3000® Index, representative of the US small capitalization securities market.
Small Cap GrowthRussell 2000®
Growth Index
Measures the performance of those Russell 2000® Index securities with higher price-to-book ratios and higher forecasted growth values, representative of US securities exhibiting growth characteristics.
Large CapRussell 1000® Index
Measures the performance of the 1,000 largest companies in the Russell 3000® Index, representative of the US large capitalization securities market.
Large Cap ValueRussell 1000®
Value Index
Measures the performance of those Russell 1000® Index securities with lower price-to-book ratios and lower forecasted growth values, representative of US securities exhibiting value characteristics.
Large Cap GrowthRussell 1000® Index
Measures the performance of those Russell 1000® Index securities with higher price-to-book ratios and higher forecasted growth values, representative of US securities exhibiting growth characteristics.
An index, with income reinvested, generally representative of intermediate-term government bonds, investment-grade corporate debt securities, and mortgage-backed securities.
BondsBarclays Capital U.S.
Aggregate Bond Index
InternationalMSCI® EAFE Index
An index, with dividends reinvested, representative of the securities markets of twenty developed market countries in Europe, Australasia, and the Far East.
Real EstateNARIET Equity
Reit Index
An index, with dividends reinvested, representative of tax-qualified REITS listed on the New York Stock Exchange, American Stock Exchange, and the NASDAQ National Market System.
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The Russell DifferenceQualitative and quantitative methodology
Process FactorsStrength of PhilosophyTechnological SuperiorityImplementation SkillRisk-management Techniques
People FactorsLeadershipQuality of PersonnelContinuity of TeamCompetitive Drive
Performance Characteristics Excess Returns vs. Indexes Peer Group Comparisons Information Ratios Source of Excess Returns
Portfolio StructureValidation of StyleAdherence to PhilosophyRole in FundsScenario Risks
Expectations
Confirmation
Qualitative 75%
Quantitative 25%
Validation
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The Russell Difference Russell’s manager selection
process
200
500
5,200
8,000 Total Manager Products Monitored By Russell
Investment Products Continually Monitored and Researched
Managers With A Primary ‘Hire’ Rating
Manager Products Used in Russell Funds
FINANCIAL PROFESSIONAL USE ONLYV308
Russell sample portfolioBalanced Model Strategy for Russell funds
14
4 asset categories
28% U.S. Equity 25% International and Global Equity 7% Real Assets40% Fixed
Income
9 Russell Funds
Russell U.S. Core Equity 12%
Russell U.S.
Quant Eq 12%
Russell U.S. Small & Mid Cap 4%
Russell Global Equity8%
Russell International Developed Markets 14%
Russell Emerging Markets 3%
Russell Real Estate Securities 3%
Russell Commodity Strategies
4%
Russell Strategic Bond 40%
22 investment styles
GrowthMarket-oriented
ValueMarket-oriented
GrowthMarket-oriented
Value GrowthMarket-oriented
Value GrowthMarket-oriented
Value GrowthMarket-oriented
ValueGlobal Market-oriented
U.S.Market-oriented
ValueGlobal Market-oriented
Fully discre-tionary
Sector rotation
55 manager products
BlackRockFirst
Eagle
Institu- tional
CapitalAJO
Next Century Growth
Clarivest Delphi Gartmore MFSHarris
AssociatesAxiom
AQR Capital
Alliance Bernstein
T. Rowe Price
Arrow-street
Capital
Alliance Bernstein
Cohen & Steers
Cohen & Steers
AEWCredit Suisse
Goldman Sachs
Brookfield
Columbus Circle
Lazard MFS INTECH RangerDePrince,
Race & Zollo
T. Rowe Price
Trade-winds
Marsico MFS Mondrian UBS Genesis INVESCOGoldman
SachsPIMCO
Logan Circle
Montag & Caldwell
RIMCo† SchneiderJacobs Levy
Tygh Capital
Jacobs Levy
UBS PzenaHarding Loevner
MetWest
Suffolk SnowNumeric Investors
Signia Capital
William Blair & Co.
RIMCo†
† This represents the role of the Funds’ investment advisor, Russell Investment Management Company (“RIMCo”), in exercising investment discretion over a portion of the Fund’s assets RIMCo has determined not to assign to a money manager pursuant to a proprietary “select holdings” investment strategy as more fully described in the Funds’ prospectuses. This does not represent the other aspects of RIMCo’s role as investment advisor of the Funds.
Model Strategies represent target allocations of Russell funds; these models are not managed and cannot be invested in directly. You and your financial advisor may work to combine selected funds that differ from the illustrated combinations depending upon individual investment options.
Managers Current as of July 1, 2010.
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A Quick Look at the Portfolio
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Performance Highlights
•Portfolio down 7% in the past year
•Fixed Income portion up 8% over that year
•Since “bottom” on March 9, portfolio up over 35%
•International Emerging Markets best performer YTD (+60%)
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Investment Solutions ImplementationInvestment Solution
Management Solution
Reason
Investment Portfolio - $100,000 - $250,000 Single Style-Allocation Fund Frank Russell Company Lower cost LifePoints Funds Greater diversification
Investment Portfolio - $250,000 - $750,000US Swim Asset Allocation Frank Russell Company Master IPS – lower cost
Institutional Funds
Investment Portfolio – Over $750,000Customized Asset Allocation Frank Russell Company Customized IPS
Funds Institutional pricing
Investment Portfolio < $100,000Bank Deposits, CDs
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First Western Fee Structure
LSC Investment Size Solution Fee Structure Fees IPS
$100-$250,000 Investment Mgmt Fee .50% Stand aloneAverage LifePoints Fund 1.03%Total Approx. Fee 1.53%
$250-$750,000 Investment Mgmt Fee .75% MasterAverage Fund Expense .77%Total Approx. Fee 1.52%
Over $750,000 Investment Mgmt Fee .75% Stand aloneAverage Fund Expense .77%Total Approx. Fee 1.52%
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Together with Russell, we bring you…• Investments designed to address your
objectives• Asset allocation• Manager selection and monitoring• Research and development• Investment education
Questions
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DISCLOSURE INFORMATIONThe information provided in this presentation is for illustrative purposes only. Actual individual account results may differ from any performance shown herein.All performance is shown gross of fees.Past performance is not a guarantee of future results.“Risk” as used in this presentation is presented on the historic volatility of returns, generally measured as a function of standard deviation from the mean investment return. Clients should note, however, that there is substantial risk of a permanent loss of capital in most, if not all, asset classes presented herein.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE