managed portfolios - for institutions - ncat.ppt

F E G /MAN AG E D P O R T F O L I O S

July 2011

W. Quincy BrownVi P id tVice President

FEG’s Mission

OUR INSIGHT / YOUR VISION

• Enabling clients to fulfill their missions and exceed their goals through superior investment performance

• Educating our clients on current investment strategies and trends, thereby assisting them in making informed decisionsg

• Serving as an extension of our clients’ staffs, allowing our clients to focus on their missions

Our Value Proposition:

Enhanced Fiduciary OversightExperienced Fiduciaries ‐ Institutional Focus

Track Record of Results

Higher Quality Investment Process

Track Record of ResultsDepth of Staff & Resources

Proactive CultureIndependent & Objective

Flexible DeliveryC t Eff ti S l ti

Results

Cost Effective SolutionsAdministrative Efficiencies

Confidential – Not for Redistribution1©2011 Fund Evaluation Group, LLC

History / Structure

FEG PROFILE

History / Structure• Over 23 years of client service since formation in

1988

• Approximately $33 billion* in client assets under FEG’s Clients – By Assets Under Advisement Size

(as of March31, 2011)advisement

• Employee owned, with broad equity ownership

• Monetary compensation derived solely from clients

(as of March31, 2011)

Higher

Religious7%

Charitable Organizations

7%

clients

• Offices in Cincinnati (HQ), Boston, Chicago, Detroit, Indianapolis

Services

Higher Education

34%Other10%

Services• FEG/Managed Portfolios• FEG/Consulting• FEG/Research

Community Foundations

10%

“Other” is comprised of Independent Schools, Insurance, Private Foundation, Public Fund and Taft Hartley

Corporations18%

Healthcare14%


*As of March 31, 2011

REPRESENTATIVE CLIENT LIST

FEG/Managed PortfoliosHIGHER EDUCATION RELIGIOUS ORGANIZATIONSAmerican Printing House for The Blind, Inc.Blue Grass Community FoundationCarePartners FoundationCommunity Hospital of Anderson and Madison CountyComposition Roofers Local No. 42 Pension FundCovenant WoodsElkhart County Community Foundation

Broward CollegeButler UniversityCentral Michigan UniversityDrew UniversityDuquesne UniversityEast Carolina UniversityEastern Michigan University

Archdiocese of IndianapolisArchdiocese of LouisvilleCatholic Diocese of ToledoCatholic Society of Religious and Literary EducationDominican Sisters of HopeJewish Federation of St. LouisEvangelical Covenant Church, The

Gaylord and Dorothy Donnelley FoundationGogebic CountyHenry County Community FoundationHospice of the Bluegrass, Inc.Indiana Institute of TechnologyLaborers' Local No. 265Legacy Foundation

C i H i l

Ferris State UniversityFranklin & Marshall CollegeGrand Valley State UniversityLoyola University Maryland, Inc.Millsaps CollegeMississippi State University FoundationNorthern Michigan UniversityS h Illi i U i i d i

New York Province of the Society of Jesus, TheRoman Catholic Church of the Archdiocese of New

Orleans, TheRoman Catholic Diocese of Phoenix, TheWisconsin Province of the Society of Jesus

Margaret Mary Community HospitalMount Carmel Health System FoundationPresbyterian Senior LivingRobert Morris UniversitySisters of St. Mary of OregonYork County Community Foundation

Southern Illinois University FoundationTexas A&M University System, The University of CincinnatiUniversity of Iowa Foundation, TheUniversity of Louisiana Lafayette FoundationUniversity of MississippiUniversity of Montana Foundation, TheUniversity of Puget Sound

CORPORATIONSCintas CorporationCommunity Foundation of Northwest Indiana, Inc.DLA Piper, LLP (US)HaworthIngram Industries

University of Puget SoundUniversity of South Carolina FoundationsUniversity of Tennessee, TheWabash CollegeWashburn University FoundationWestern Michigan University FoundationWichita State University FoundationWright State University

McCormick & Company, Inc.Meijer, Inc.Stryker CorporationW.E. Upjohn Institute

Multiple, related accounts or legal entities may be combined under one listing.

It is not known whether the listed clients approve or disapprove of Fund Evaluation Group, LLC or the advisory services provided. Inclusion of a client on the list does not imply that the client endorses or recommends Fund Evaluation Group, LLC as an investment advisor. The 80 largest full‐service FEG/Consulting and 20 largest FEG/Managed Portfolios current clients with a continuing contract, are included here, based on client permission and March 31, 2011 assets under FEG advisement. Full‐service clients are clients that (1) are institutional [i.e., excludes third‐party research engagements, family offices, and natural persons] (2) receive services in addition to reporting and (3) have an asset size of $10 million or more for FEG/Consulting and annual fees of $25,000 or more for FEG/M d P tf li P f b d it i t d i d t i i hi h li t t i l d i th li t R i d J l 7 2011

Wright State University


FEG/Managed Portfolios. Performance based criteria were not used in determining which clients to include in the list. Revised July 7, 2011

REPRESENTATIVE CLIENT LIST

INDEPENDENT SCHOOLS PRIVATE FOUNDATIONSCOMMUNITY FOUNDATIONS INDEPENDENT SCHOOLSCFS, The School at Church Farm

CHARITABLE ORGANIZATIONSAmerican Legacy FoundationArtsWaveGerman Marshall Fund of the United States

PRIVATE FOUNDATIONSCH Foundation, TheHelen Jones Foundation

INSURANCE

COMMUNITY FOUNDATIONSCoastal Community Foundation of South CarolinaCommunity Foundation of AbileneCommunity Foundation of Greater Fort Wayne, Inc.Community Foundation of Greater GreensboroDayton Foundation, TheErie Community Foundation German Marshall Fund of the United States

Unidel Foundation, Inc.Michigan Professional Insurance CompanyUNIFI

yFoundation For The CarolinasFremont Area Community FoundationGreater Cincinnati FoundationSan Antonio Area Foundation

PUBLIC FUNDLaredo Firefighters

HEALTH CAREBlanchard Valley Health SystemKish Health SystemMcLaren Health Care Corporation

gMichigan Legislative Retirement SystemSan Antonio Fire & Police

Mount Nittany Medical CenterNew Lexington Clinic, P.S.C.Northern Arizona HealthcareNorthern Michigan Regional Health SystemSouthwestern Medical FoundationSpectrum Health

Multiple, related accounts or legal entities may be combined under one listing.

It is not known whether the listed clients approve or disapprove of Fund Evaluation Group, LLC or the advisory services provided. Inclusion of a client on the list does not imply that the client endorses or recommends Fund Evaluation Group, LLC as an investment advisor. The 80 largest full‐service FEG/Consulting and 20 largest FEG/Managed Portfolios current clients with a continuing contract, are included here, based on client permission and March 31, 2011 assets under FEG advisement. Full‐service clients are clients that (1) are institutional [i.e., excludes third‐party research engagements, family offices, and natural persons] (2) receive services in addition to reporting and (3) have an asset size of $10 million or more for FEG/Consulting and annual fees of $25,000 or more for FEG/Managed Portfolios. Performance based criteria were not used in determining which clients to include in the list. Revised July 7, 2011


THE OVERSIGHT STRUCTURE

I t t C itt• Mission/ObjectivesI t t P li i

• Spending PolicyC li

GOVERNING FIDUCIARIES

Accountability Impact on Portfolio

HIGHInvestment Committee • Investment Policies

• Asset Allocation Policy• Compliance• Defining Liquidity & Risk Tolerances

MANAGING FIDUCIARY

Chief Investment Officer and Staff

• Asset Allocation• Manager Selection• Risk Management

• Day‐to‐day Supervision

• Performance Analysis• Top Down Strategy

HIGH

Investment ManagersCustodianActuaries

• Security Selection• Trading• Data Management

• Strategy Research• Accounting• Reporting

OPERATING FIDUCIARIES

LOW TO MODERATE

Other Vendors

Source: “Pension Fund Excellence ” Authors Keith Ambachtsheer & Don Ezra


Source: Pension Fund Excellence, Authors Keith Ambachtsheer & Don Ezra

ENHANCING FIDUCIARY OVERSIGHT

Investment Committee

GOVERNING FIDUCIARIES

FEG/M d P f liMANAGING FIDUCIARY

FEG/Managed Portfolios• Outsourced Investment Department• Discretion to Manage & Implement• Predicated on Delivery of Best Ideas• Highly Responsive Process

Chief Investment Officer and Staff

ManagingFiduciary

Investment Managers

OPERATING FIDUCIARIES

Investment ManagersCustodianActuaries

Other Vendors


Source: “Pension Fund Excellence,” Authors Keith Ambachtsheer & Don Ezra

• Objective proactive advice and management

FEG'S CORE PHILOSOPHY

Objective, proactive advice and management

• Emphasize long‐term perspective

• Manage expectations– top‐down – setting realistic return assumptionstop down setting realistic return assumptions

– bottom‐up – appropriate manager evaluation

• Provide discipline and consistency

• Timely educational resourcesy– Monthly Research Reviews

– Quarterly Private Capital Research Reviews

– Quarterly Research Presentations

– Quarterly Capital Markets Overview


Modern Portfolio Theory (MPT)

EVOLUTION OF PORTFOLIO MANAGEMENT

Modern Portfolio Theory (MPT)

• Foundation of Asset Allocation Studies,* describes the benefits of diversification

• Limitations of the model:– Defines risk only as volatility (standard deviation)Defines risk only as volatility (standard deviation)

– Inputs into model are estimates

– Correlations between assets are held constant in model

• Several additional factors should be monitored and managed including:– Illiquidity

– Leverage

If MPT is used to determine the “optimal” target allocation to meet an expected rate ofIf MPT is used to determine the optimal target allocation to meet an expected rate of return, this approach will encourage more risk‐taking when risk premiums are low and less risk‐taking when risk premiums are high (the equivalent of buying high and selling low)


*Markowitz, Harry M. (1952). "Portfolio Selection". Journal of Finance 7 (1): 77–91.

EVOLUTION OF PORTFOLIO CONSTRUCTION

1980s 1990s Current2000s

Commodities . Diversifying

BondsU.S. Stocks

Absolute ReturnLarge Cap Value

Strategies

Real Assets

Global Equity

Int'l Small Cap .

Global Fixed Income/Credit


Source: FEG data

FEG seeks to add value by utilizing active and passive solutions for both asset

INVESTMENT OVERVIEW

FEG seeks to add value by utilizing active and passive solutions for both asset allocation and manager selection.

ALLOCATION POLICY

MANAGER SELECTION

Global Diversification

IndexStrategies

PASSIVE

Risk Management

Low Cost

IVE

Dynamic Active Outperformance

ACT

yAllocation Managers


GLOBAL DIVERSIFICATION

Four Broad Asset CategoriesFour Broad Asset Categories• Classify investments in broad categories, each with unique risk

premiums and roles

• Achieving goals requires taking riskDynamic Active

IndexStrategies


• Effective portfolios seek to mitigate these risks by diversifying among them

Dynamic Allocation

Active Managers

Asset Categories Risk Premia RoleGlobal Equity Equity Risk Premium Total Return (stocks, private equity, long/short hedge funds)

Global Fixed Income and Credit Interest Rates and Credit Equity Risk Mitigation (bonds, bank loans, credit hedge funds)

Real Assets Inflation Inflation Protection (real estate, natural resources, commodities)

Diversifying Strategies Active Management Diversification (absolute return hedge funds, trading strategies)


INDEX STRATEGIES

D i A ti


IndexStrategies

FEG’s philosophy incorporates passive and active strategies in different aspects of portfolio construction. We utilize passive solutions in the broad policy allocation to provide low‐cost global diversification while drawing upon activeDynamic

AllocationActive

Managerslow cost global diversification while drawing upon active strategies to dynamically allocate between asset classes.

Index strategies are used where:

• It can be difficult for active management to outperform over long periods of time

• There is a significant cost savings to gaining beta exposure

• ETFs or index funds can provide targeted asset classes/ styles


ACTIVE MANAGERS


IndexStrategies

D i Active

FEG seeks to identify managers with:• Experienced personnel• Sound investment philosophy

D t t d bilit t t fDynamic Allocation

Active Managers

• Demonstrated ability to outperform

Six‐Tenet Manager Review Process

Conviction strong belief in the investment philosophy / willing to put investment decisions ahead of business decisions

Consistencystability of organizational structure, composition of the investment professionals, and the investment philosophy and process

Pragmatism understand market efficiency and focus on areas with a competitive edge

Investment Culture passionate about investing / proper organizational and compensation structure

Risk Control not blind risk takers / acknowledge mistakes / implement appropriate controls

A ti R t bili id if d i li i i i / f l k d


Active Return ability to identify and capitalize on investment opportunities / successful track record

DYNAMIC ALLOCATION


IndexStrategies

Dynamic

FEG Portfolio Team seeks to add alpha through dynamic asset allocation decisions that overweight asset classes with an opportunity to out‐perform in

Active Managers

Dynamic Allocation the mid to long‐term time frame.

Key Considerations

• Valuation – main criteria we focus on when making a portfolio change.

• Sentiment – measures the pulse of market participants; their level of fear and greed. It comprises the stories that investors tell themselves.

• Fundamentals – raw materials that lead to changes in valuation and sentiment. Fundamentals are what is happening now, which we then compare to the past and use to speculate about the future.


PRIMARY SOURCES OF RISK AND RETURN

Asset Category Risk Premium Role

Equity Market

GLOBAL EQUITYU.S. and International

Market Cap and Style Total Return

Asset Category Risk Premium Role

Interest Rates

Private and Public

Equity Hedge Funds

GLOBAL FIXED INCOME/CREDITInvestment Grade Equity Risk MitigationInterest Rates

Credit

TIPS

High Yield

Bank Loans

Private Debt (Distressed and Mezzanine)Total Return

Equity Risk Mitigation

Inflation

Credit Hedge Funds

REAL ASSETSReal Estate (Public and Private)

Natural Resources (Timber and Energy)Inflation Protection (along with TIPS)

UnconstrainedA i M

( gy)

Commodities

DIVERSIFYING STRATEGIESAbsolute Return Hedge Funds

T di St t i

(along with TIPS)

Diversification


Active ManagementTrading Strategies

Alpha Engines

Diversification

• The evolution of portfolio construction has led to a wide‐ranging category called

INTEGRATED ASSET ALLOCATION

The evolution of portfolio construction has led to a wide ranging category called “alternatives” to include strategies not easily categorized by traditional conventions

• “Alternative Investments” span every asset class and tell us little of the underlying risks

– Private equity is highly dependent on the public equity markets

– A “hedge fund” is an investment vehicle, not an asset categoryLong/short equity hedge funds invest in equities, both long and short

Credit‐oriented hedge funds invest in fixed income securities

– Private real estate managers and publicly traded REITs both invest in real estate

Old Way New Way

Traditional Alternative Investments

The most important consideration is how the investment is expected to behave


The most important consideration is how the investment is expected to behave, not its legal structure.

The Ingredients Need To Be Diverse Dynamic and Assembled To Meet Specific Client

BUILDING A FIDUCIARY‐QUALITY PROGRAM

The Ingredients Need To Be Diverse, Dynamic, and Assembled To Meet Specific Client Needs

• Broad Opportunity Set• Build to Perform Across All Economic E i t

• Responsive Strategic Overlay– Top Down Risk ManagementOpportunistic ElementsEnvironments

• Customized To Fit Investment Horizon & Preferences Of The Institution

– Opportunistic Elements– Incorporates Proprietary Mix Of Valuation, Sentiment, and Fundamentals

Global Equity Global Fixed Income & CreditStructured Index Strategies: Investment‐Grade Core Bond Strategies ‐ US

Core Diversified Beta Exposure Strategies High Yield Strategies ‐ USFocused Beta Exposure (eg., market cap) Opportunistic Strategies (e.g., CMBS)Growth & Value Style Exposure Bank Loan Strategies ‐ USCountry/Region Exposure Sovereign & Emerging Market Debt Strategies ‐ Non USCurrency Exposure Credit Hedge Fund Strategies

Enhanced Index Strategies: Inflation HedgedEnhanced Index Strategies: Inflation HedgedFundamental Indexing TIPSStock Selection‐Based Enhancements

Portfolio Alpha Real AssetsActive Alpha Seeking Strategies: Diversified Commodity Index Exposure

Traditional (Long Only) ‐ Fundamental Stock Selection Enhanced Commodity Index ExposureSystematic/Quantitative Energy ‐ Oil & GasSyste at c/Qua t tat e e gy O & GasLong/Short Equity Alternative Energies/ Renewable ResourcesEquity Hedge Private Commercial & Residential Real EstateEvent‐Driven Public Real Estate Investment Trusts (REITs)Macro

Distressed Securities Diversifying StrategiesEmerging Markets Equity Market Neutral


g g q yShort Sell ing Fixed Income Arbitrage

Convertible ArbitrageRelative Value ArbitrageMerger Arbitrage

SOURCE OF RISK AND RETURN

• The shaded areas depict the economic environments in which each category typically performs well

• A diversified portfolio should have investments that can perform well in all economic environments


GLOBAL VIEW

• A global approach increases the opportunity setA global approach increases the opportunity set

• When building equity portfolios, consider the global market as the starting point, rather than the U.S. market and then adding international markets

• The equity risk premium is the primary driver of performance in all equity markets

• Focus on valuations and specific risks, rather than limits on exposure by region

MSCI All C t W ld M k t C it li ti P t

42%

40%

50%

MSCI All-Country World Market Capitalization PercentageDecember 2010

25%

20%

30%

40%

14%

9%5% 5%

0%

10%

20%


USA EUROPE EMERGING JAPAN PACIFIC ex JAPAN

CANADA

Source: MSCI

EXPLOIT OPPORTUNITIES

High potential value added (also potential for larger losses) categories are less transparent and require more thorough due diligence

Potential V l$ Invested Value Added

I d F dLong‐Only

l dVenture Capital

Index FundsFixed Income

Developed Public Equity

“Hedge Funds”

Emerging Markets Real Assets


Source: What Investors Can Learn From Successful Endowment Strategies, 2008 Annual CFA Conference, Bob Boldt

BUILDING A FIDUCIARY ‐ QUALITY PROGRAM

With FEG/Managed Portfolios, we construct a globally diversified portfolio invested across 15‐25 i t t t t i d i d t hi th l t i t t bj ti ithi d tinvestment strategies designed to achieve the long‐term investment objectives within a prudent level of risk.

Global Equityi Shares

Global Fixed Income & CreditPIMCO

10%

PIMCO/Research Affi latesDimens iona l Fund AdvisorsAQR

Vanguard GatewayLazard

Loomis SaylesTempletonVanguard

Real AssetsDeutsche Bank

10%TFS Capita lAs ian Century Quest Capita l LLCClovis Capita l Management LPConatus Capita l Management LPFine Parnters LPHighs ide Capita l Management LP

Diversifying StrategiesAQRDriehausPIMCOAngelo Gordon & Co.Black River Asset Management LLC

60%20%Hopl i te Partners LPHunter Global Investors LPIndus Capita l Partners LLCIvory Investment Management LPKingdon Capita l Management LLCMoon Capita l Management LP

d

Black River Asset Management LLCCanyon Capita l Advisors LLCCarVal InvestorsDavidson Kempner Capita l Management LLCDiamondback Capita l Management LLCEl l iott Investments LLCEton Park Capita l Management LP

Partner Fund Management LPTiger Consumer Partners LPScout Capita lDiscovery Equity Partners

p gFaral lon Capita l Management LLCGraham Capita l Management LPGSO Capita l Partners LPHBK Capita l Management LPHighfields Capita l Management LPStrategic Value Partners


The investment managers listed are as of June 30, 2011, and are subject to change.

gTaconic Investment Partners LLC

ADDITIONAL CONSIDERATIONS

Transparency Active Management

Unconstrained Mandates

Value OrientedContrarian

Mi i i

Mandates

PortfolioConstruction

LeverageMinimizeFees

Construction

Static vs. DynamicAllocations

Illiquidity


OPPORTUNISTIC RECOMMENDATIONS

• FEG has historicall pro ided clients ith “Opportunistic Recommendations”• FEG has historically provided clients with “Opportunistic Recommendations”

• Opportunistic recommendations are designed to reduce risk and/or enhance performance

• Our historical and current opportunistic recommendations to clients include:

Historical

2005 Decrease REITs and recommended bank loans Equity• Favor long/short hedge funds over long only active

2011

2006 Recommended international real estate securities

2007 Reduce high yield

2008 Recommended credit‐focused hedge funds and

managers• Commit to private equity

Credit• “Idiosyncratic over Systematic” – reduce broad based credit

h hi h i ld b d f i h t t i2008 Recommended credit focused hedge funds and distressed partnerships to take advantage of opportunities due to the credit crisis

2009 Recommended overweight to credit and inflationsensitive assets (TIPS, natural resources), and

d i ht t i l T i

exposure such as high yield bonds; favor niche strategies• European Distressed Debt and older vintage Commercial Mortgage Backed Securities (CMBS) are attractive

Interest Rates• Favor TIPS over nominal Treasuriesunderweight to nominal Treasuries Favor TIPS over nominal Treasuries• Consider global diversification for exposure to sovereign debt of countries with sound fiscal and monetary policies

Real Assets• Consider natural resources for inflation protection

2010 Recommended CMBS, private equity commitments, hedged equity, and emerging markets, and underweight to nominal Treasuries


• Underweight public REITs• Commit to distressed private real estate

CURRENT POSITIONING

De‐Emphasize Emphasize

• Small‐Mid Cap • Emerging Markets

• US Treasuries • High Yield

• US Dollar • Large Cap Growth

• European Equity • Hedged Equity

The FEG/M d P tf li Instit tional Composite asset classes are represented abo e as of J ne 30 2011 and are s bject to change


The FEG/Managed Portfolios Institutional Composite asset classes are represented above as of June 30, 2011, and are subject to change.

PERFORMANCE

A f J 30 2011As of June 30, 2011FEG/Managed Portfolios Institutional Composite – (70/30)

Latest Period Returns QTR YTD 1 Yr 3 Yr 5 Yr 7 Yr Inc.

FEG/Managed Portfolios 0.4% 4.0% 22.0% 4.6% 4.7% 6.6% 8.8%Policy Benchmark 0.7% 4.9% 23.1% 4.7% 4.8% 6.0% 7.9%

Over / Under Benchmark ‐0.3% ‐0.9% ‐1.0% ‐0.1% ‐0.1% 0.6% 0.9%

Performance greater than one year is annualized. Inception date is January 1, 2003

Calendar Year Returns 2010 2009 2008 2007 2006 2005 2004 2003

FEG/Managed Portfolios 12.6% 28.2% ‐29.6% 7.0% 15.5% 7.9% 14.8% 26.8%Policy Benchmark 13.4% 23.6% ‐27.6% 7.5% 13.8% 6.6% 11.0% 23.9%

Over / Under Benchmark ‐0.8% 4.6% ‐1.9% ‐0.5% 1.7% 1.3% 3.8% 2.9%

Investment performance is rounded to the nearest tenth of one percent and may, consequently, effect benchmark comparisons.

StatisticsAnnual ROR

Std. Dev.

Sharpe Ratio Alpha Beta R R2

Act. Premium

Tracking Error

Info. Ratio

FEG/Managed Portfolios 8.8% 12.1% 0.36 0.4% 1.07 0.99 0.99 0.9% 1.6% 0.58Policy Benchmark 7.9% 11.2% 0.30 0.0% 1.00 1.00 1.00 ‐ ‐ ‐

Statistics are measured since inception.


Returns are presented net of management fees and include the reinvestment of all income. Net results are based on actual client net performance calculations and after fees from management, custody, and trading expenses have been deducted.

TEAM APPROACH

Holistic ApproachHolistic ApproachOne research team balances a macro view with asset class specializations – Manager Research, Portfolio Modeling and Construction, Capital Markets, and Asset Class Research

Investment Policy CommitteeIntensive Research Effort Investment Policy CommitteeIntensive Research Effort

• 21 team members10 CFA charterholders

• 5‐person team with average experience of 18 years– 10 CFA charterholders

– 5 CAIA charterholders – 11 MBAs

• Conducts 900+ manager meetings/year

experience of 18 years• Set FEG’s Investment Philosophy• Approve investment manager

recommendations• Establish capital marketg /y

• Monitor investment managers• Conduct independent research• Produce:

– Research studies

• Establish capital market assumptions

• Manage model portfolio


– Research Reviews

RESEARCH TEAM

Investment Policy Committee

Christopher M. Meyer, CFA (MBA)Managing Principal / Chief Investment Officer

J. David Stein (MBA) Managing Principal / Chief Investment Strategist

Susan Mahan Fasig, CFAM i P i i l / Di f P i C i lManaging Principal / Director of Private Capital

Michael J. Oyster, CFAManaging Principal

Nolan M. Bean, CFA, CAIA (MBA)Senior Vice President

Jay R. JohnstonResearch Analyst (Real Assets) J. Alan Lenahan, CFA, CAIA

James W. Angelica (MBA) Senior Research Analyst (Private Capital – Buyouts)Keith M. Berlin (MBA)

Research Team

J. Alan Lenahan, CFA, CAIA Managing Principal / Director of Hedged Strategies David L. MasonSenior Research Analyst (Hedged Strategies)Michael J. O’ConnorResearch Analyst (Fixed Income and Credit) Jason A Raiti CFA CAIA

Keith M. Berlin (MBA) Senior Vice President/Director of Global Fixed Income and CreditChristian S. Busken (MBA) Senior Vice President/Director of Real Assets Kevin J. Conroy, CFAResearch Analyst (Hedged Strategies)Sarah L Cooper Jason A. Raiti, CFA, CAIA

Senior Research Analyst (Hedged Strategies)Christina M. Sunderman (MBA) Research Analyst (Global Equities)Nathan C. Werner, CFA (MBA) Vice President (Private Capital ‐ Venture Capital)R an S Wheeler CAIA (MFE)

Sarah L. Cooper Database Administrator Gregory M. Dowling, CFA, CAIA (MBA)Managing Principal / Director of Hedged Strategies Brian A. HooperResearch Analyst (Global Equities)Gregor D Ho ser CFA (MBA)


Ryan S. Wheeler, CAIA (MFE) Director of Operations – Hedged Strategies

Gregory D. Houser, CFA (MBA) Vice President

FEG’s Client Service Team averages more than 10 years experience in the financial

DEDICATED CLIENT SERVICE TEAM

FEG s Client Service Team averages more than 10 years experience in the financial services industry.

Di t ib ti J l

Contributions

Distributions Journals

Client Service“Always a Person” Capital Calls

Client Service

TransitionManagement

Donor Gifts


SUPPORTING MATERIALS

Quarterly Portfolio Commentary – FEG/Managed Portfolios posts a portfolio and market commentary every quarter. This report reviews drivers of recent performance, our current outlook as well as any portfolio shifts that occur during theoutlook as well as any portfolio shifts that occur during the quarter.

Q l bi G/ d f li h lQuarterly Webinars ‐ FEG/Managed Portfolios hosts quarterly webinars with its Chief Investment Strategist. FEG’s goal is to provide a clear perspective of the portfolio allocation, strategy, and implementation. The discussion features the current

k di i ll h h f li i i i dmarket conditions as well as how the portfolio is positioned relative to future market impact.



Portfolio Spotlight – This report provides details of significant shift(s) made in the FEG/Managed Portfoliosportfolios, and documents the rationale for portfolio trades.

Fact Sheet – This piece outlines the strategy overview, portfolio diversification, and provides performance details.



Research Review (i.e., Monthly Newsletter) – Its purpose is to provide our economic and market commentary. We also look to provide education about strategies, including alternative investments, and current investment topics and trends.

Investment Forum – FEG’s 2011 Investment Forum for clients, advisors, and invited guests was held on March 22‐23 in Cincinnati, Ohio. Our Forum featured Howard Marks, Michael M b i G W Si l d S Z ll k FEGMauboussin, George W. Siguler, and Sam Zell as speakers. FEG also sponsors and participates in various conferences and events during the year.


FEE STRUCTURE

The FEG/Managed Portfolios asset‐based retainer fee schedule outlined below includes:

• Investment and spending policy development

• FEG manages asset allocation and portfolio construction within policy range

• FEG’s recommended investment managers

• Ongoing due diligence and performance reporting

• Access to top tier private capital/hedge fund investments

• Staff and Board education

• Attendance and counsel at committee meetings

• Accountability for investment manager selection

The annual fee is calculated as a percentage of total assets.

First $25 million 0.40%

Next $75 million 0.30%

Over $100 million 0.20%

Minimum annual fee: $25,000

Travel expenses and out‐of‐pocket expenses are not included and will be billed as incurred.


TRANSITION TIMELINE

S t ti h T i ll 4 6 kSystematic approach ‐ Typically 4‐6 weeks

Step Description Responsibility Timing

1 Signing of investment advisory agreement Client Varies

2 Review of current portfolio to determine best transition Client / FEG Within one week*

3Review of current investment manager contracts to terminate managers

Client Within one week*

4 Establish account at custodian Client Within one week*

5 If new custodian, FEG will establish trade procedures FEG Within two weeks*

6If new custodian, new custodial account number provided to FEG by client. FEG establishes data link.

Client / FEG Within four weeks*

7FEG implement new portfolio as agreed upon during the portfolio review

FEG Within four weeks*

* From date of contract inception


DEDICATED TRANSITION TEAM

ANDREW C. BOEDECKERVice President – Trading and Operations

• B.S. in Business Management in Finance, U i i f Wi i P k id

ANDREA M. DOEPKERClient Service

• B.A. in Economics and International Affairs, U i i f Ci i iUniversity of Wisconsin‐Parkside

• Investment professional since 1996• FEG team member since 1999‐2005, 2006‐PresentS i 65 li d

University of Cincinnati• Investment professional since 1996• FEG team member since 2007• Series 65 licensedC did t f C tifi d Fi i l Pl (CFP)• Series 65 licensed

• Prior experience:–Olde Discount Stockbrokers– SunAmerica Securities

• Candidate for Certified Financial Planner (CFP) designation

• Prior experience:–Retirement Capital Advisors, Inc. – Director, Client CareCare


The FEG/Managed Portfolios team is responsible for daily oversight of the investment

PORTFOLIO MANAGEMENT TEAM SUMMARY

g f p y gstrategies, including active asset allocation, manager selection and managing all necessary cash flows.

• 4‐person team consisting of senior investment professionals and managing principals

• Worked together with no turnover since inception of portfolios

Anthony L. Festa, CFAManaging Principal Chief Operating Officer FEG/Managed Portfolios

Christopher M. Meyer, CFAManaging Principal Chief Investment Officer

Gary R. PriceM i P i i l

J. David SteinM i P i i lManaging Principal

Director of FEG/Managed PortfoliosManaging Principal Chief Investment Strategist


This report was prepared by Fund Evaluation Group, LLC (FEG) − an investment adviser registered under the Investment Advisers Act of 1940, as amended − providing non discretionary and discretionary investment advice to its clients on an individual basis

DISCLOSURES

amended − providing non‐discretionary and discretionary investment advice to its clients on an individual basis.

The information herein was obtained from various sources. FEG does not guarantee the accuracy or completeness of such information provided by third parties. The information in this report is given as of the date indicated and believed to be reliable. FEG assumes no obligation to update this information, or to advise on further developments relating to it.

FEG, its affiliates, directors, officers, employees, employee benefit programs and client accounts may have a long position in any securities of issuers discussed in this report.

Index performance results do not represent any managed portfolio returns. An investor cannot invest directly in a presented index, as an investment vehicle replicating an index would be required. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shownexpenses were deducted from the performance shown.

Neither the information nor any opinion expressed in this report constitutes an offer, or an invitation to make an offer, to buy or sell any securities.

Past performance is not indicative of future results.

The Institutional Composite is designed for institutional investors seeking the opportunity to maintain purchasing power over long time horizons with a focus on total return. It contains fully discretionary predominantly‐institutional portfolios that are globally diversified with a target exposure of 70% equities and 30% fixed income. For comparison purposes, the institutional composite is measured against a Policy Benchmark comprised of 55% Russell 3000 Index, 15% MSCI ACWI (All Country World Index) ex‐US, & 30% Barclays Capital Aggregate Bond Index. It is rebalanced monthly and contains diversified investments across equities and fixed income domestically and internationally. The Policy Benchmark is intended to be fairly representative of institutional asset mixes designed to balance long‐term total return with the preservation of capital The Russell 3000 Indexrepresentative of institutional asset mixes designed to balance long term total return with the preservation of capital. The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The MSCI ACWI ex. US is a free float‐adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets, excluding the United States. The Barclays Capital Aggregate Bond Index is a benchmark index made up of the Barclays Capital Government/Corporate Bond Index, Mortgage‐Backed Securities Index, and Asset‐Backed Securities Index, including securities that are of investment‐grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million.


$100 million.

This report is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person.

FIRM CONTACT INFORMATION

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Cincinnati, OH 45202Phone 513 977 4400Phone: 513.977.4400Fax: 513.977.4430

[email protected] feg comwww.feg.com

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