applying academic research, analytical sciences and ... · • index return data on slides 5-14 are...

For Advisor Use Only1

Applying Academic Research,Analytical Sciences

and Practical Applications to theReal World of Investing

Lindner Capital Advisors, Inc.


Lindner Capital Advisors, Inc.

QUARTERLY REVIEW4th Quarter 2015

Scott WetheringtonSenior Portfolio Manager


LCA Disclosure

• This presentation is confidential and may not be disseminated or reproduced without LCA’s consent. This presentation is intended for informational purposes only and is not intended to constitute investment advice or recommendations by LCA or any other party.

• Lindner Capital Advisors, Inc. (“LCA”) is an SEC registered investment adviser. Past performance of LCA’s Portfolio Composites (the “Composites”) is no guarantee of future performance, and LCA’s strategies, like most investment strategies, involve the risk of loss. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Asset allocation and diversification strategies do not assure a profit or protect against a loss.

• The performance data shown represents the performance of the various Composites, each of which is based on the performance of client accounts managed in the identified strategy, subject to the qualifications set forth in the following paragraphs. LCA creates the Composites as of each month-end by calculating the performance returns for fully discretionary client accounts over $50,000, temporarily excluding client accounts whose inclusion LCA believes is not appropriate for one of the following reasons: (1) accounts with a significant cash flow of 30% or more in one month; (2) all outlier accounts, which are those accounts with a performance return that exceeds a z-score of 3.0; and (3) accounts that have changed management strategies at the request of the client or external relationship manager. Excluded accounts are removed as of the beginning of the month and re-enter their previous or enter a new Composite (as applicable) the first full month after the occurrence of the applicable exclusion reason.

• Index return data on slides 5-14 are sourced from Dimensional Fund Advisors. All index data obtained from third party sources are believed to be accurate, but not independently verified and made available on ‘as is’ basis without warranty.


Agenda

• Asset Class Overview for 4th Quarter

• Performance Review: LCA Traditional Models, Strategic Alternative/Blend, Defensive, Strategic Fixed Income and Tactical Economic Model

• DFA Relative Returns vs. Benchmarks

• Federal Reserve Update

• Fixed Income and Equity Thoughts for 2016


Market Summary

5

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index), US Bond Market (Barclays US Aggregate Bond Index), and Global Bond ex US Market (Citigroup WGBI ex USA 1−30 Years [Hedged to USD]). The S&P data are provided by Standard & Poor's Index Services Group. Russell data © Russell Investment Group 1995–2016, all rights reserved. MSCI data © MSCI 2016, all rights reserved. Barclays data provided by Barclays Bank PLC. Citigroup bond indices © 2016 by Citigroup.

Index Returns

US StockMarket

International Developed Stocks

EmergingMarketsStocks

GlobalReal Estate

US Bond Market

Global Bond Market ex US

4Q 2015 STOCKS BONDS

6.27% 3.91% 0.66% 4.89% -0.57% 0.58%

Since Jan. 2001

Avg. Quarterly Return 1.7% 1.4% 2.9% 2.8% 1.2% 1.1%

Best 16.8% 25.9% 34.7% 32.3% 4.6% 5.5%Quarter Q2 2009 Q2 2009 Q2 2009 Q3 2009 Q3 2001 Q4 2008

Worst -22.8% -21.2% -27.6% -36.1% -2.4% -3.2%Quarter Q4 2008 Q4 2008 Q4 2008 Q4 2008 Q2 2004 Q2 2015


World Stock Market Performance

6Graph Source: MSCI ACWI Index. MSCI data © MSCI 2016, all rights reserved.It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

MSCI All Country World Index with selected headlines from Q4 2015

These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view dailyevents from a long-term perspective and avoid making investment decisions based solely on the news.

140

160

180

200

220

Oct Nov Dec

“IMF Downgrades Global Economic Outlook Again”

“US Growth Cools in Third Quarter”

“US Trade Gap WidensSharply on Strong Dollar”

“Iran Nuclear Deal Formally Adopted”

“Number of First‐Time Home Buyers Falls to Lowest Levels in Three Decades”

“Eurozone Economy Slows as Exports Weaken”

“US Inflation Undershoots Fed’s 2% Target for 42ndMonth”

“Spot Gold Hits Six‐Year Low”

“Fed Raises Interest Rates, Citing Ongoing US Recovery”

“Oil Prices Skid to Seven‐Year Lows”

“Junk Bond Selloff Intensifies”

“US Factory Activity Hits Six‐Year Low”

“Worst Year for S&P, Dow since 2008”


World Asset Classes

7

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. The S&P data is provided by Standard & Poor's Index Services Group. Russell data © Russell Investment Group 1995–2016, all rights reserved. MSCI data © MSCI 2016, all rights reserved. Dow Jones data (formerly Dow Jones Wilshire) provided by Dow Jones Indexes. Barclays data provided by Barclays Bank PLC.

Looking at broad market indices, the US equity market again outperformed both developed ex US and emerging markets during the quarter. In a repeat from the third quarter, US REITs recorded the highest returns, outperforming equity markets.

The value effect was negative in the US, developed ex US, and emerging markets. Small caps outperformed large caps in both developed ex US and emerging markets but underperformed in the US.

Fourth Quarter 2015 Index Returns (%)

7.54

7.04

5.82

5.64

3.91

3.59

3.27

2.88

2.17

1.86

0.66

0.01

-0.57

-1.45

Dow Jones US Select REIT Index

S&P 500 Index

MSCI World ex USA Small Cap Index (net div.)

Russell 1000 Value Index

MSCI World ex USA Index (net div.)

Russell 2000 Index

MSCI Emerging Markets Small Cap Index (net div.)

Russell 2000 Value Index

MSCI World ex USA Value Index (net div.)

S&P Global ex US REIT Index (net div.)

MSCI Emerging Markets Index (net div.)

One-Month US Treasury Bills

Barclays US Aggregate Bond Index

MSCI Emerging Markets Value Index (net div.)


7.32

7.04

6.27

5.64

4.32

3.59

2.88

Large Cap Growth

Large Cap

Marketwide

Large Cap Value

Small Cap Growth

Small Cap

Small Cap Value

Ranked Returns for the Quarter (%)

US Stocks

8

Fourth Quarter 2015 Index Returns

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Marketwide (Russell 3000 Index), Large Cap (S&P 500 Index), Large Cap Value (Russell 1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth (Russell 2000 Growth Index). World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. Russell 3000 Index is used as the proxy for the US market. Russell data © Russell Investment Group 1995–2016, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group.

In a turnaround from the previous quarter, the US equity market recorded positive performance.

Small caps underperformed large caps, and value indices underperformed growth indices across all size ranges.

53%US Market $22.1 trillion

World Market Capitalization—USPeriod Returns (%) * Annualized

Asset Class 1 Year 3 Years** 5 Years** 10 Years**

Marketwide 0.48 14.74 12.18 7.35Large Cap 1.38 15.13 12.57 7.31Large Cap Value -3.83 13.08 11.27 6.16Large Cap Growth 5.67 16.83 13.53 8.53Small Cap -4.41 11.65 9.19 6.80Small Cap Value -7.47 9.06 7.67 5.57Small Cap Growth -1.38 14.28 10.67 7.95


International Developed Stocks

9


Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI World ex USA IMI Index used as the proxy for the International Developed market. MSCI data © MSCI 2016, all rights reserved.

In US dollar terms, developed markets outside the US underperformed the US equity market but outperformed emerging markets indices.

Small caps outperformed large caps in non‐US developed markets.

Value indices underperformed growth indices across all size ranges in non‐US developed markets.

5.82

5.61

3.91

2.17

7.35

7.46

5.68

3.85

Small Cap

Growth

Large Cap

Value

Ranked Returns (%) Local currency US currency

37%International Developed Market $15.4 trillion

World Market Capitalization—International Developed Period Returns (%) * Annualized


Large Cap -3.04 3.93 2.79 2.92Small Cap 5.46 7.82 4.39 4.09Value -7.68 1.99 1.90 1.95Growth 1.65 5.83 3.62 3.81


Emerging Market Stocks

10


Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI Emerging Markets Growth Index). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI Emerging Markets IMI Index used as the proxy for the emerging market portion of the market. MSCI data © MSCI 2016, all rights reserved.

In US dollar terms, emerging markets indices underperformed developed markets, including the US, during the quarter.

Small cap indices outperformed large cap indices in emerging markets.

Value indices underperformed growth indices in emerging markets across all size ranges.

10%Emerging Markets$4.0 trillion

World Market Capitalization—Emerging Markets Period Returns (%) * Annualized


Large Cap -14.92 -6.76 -4.81 3.61Small Cap -6.85 -1.67 -3.29 6.11Value -18.57 -9.50 -6.74 3.39Growth -11.34 -4.10 -2.94 3.76


-0.68-0.91

-1.96-5.08

20.6912.72

10.219.619.27

7.847.49

6.966.586.155.795.69

4.723.763.47

2.772.422.12

0.97

New ZealandBelgium

AustraliaFinlandJapanIsrael

GermanyDenmark

IrelandUS

AustriaHong Kong

SwedenSingapore

NetherlandsPortugal

SwitzerlandFrance

UKNorway

ItalySpain

Canada

Ranked Developed Markets Returns (%)

Select Country Performance

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Country performance based on respective indices in the MSCI World ex US IMI Index (for developed markets), Russell 3000 Index (for US), and MSCI Emerging Markets IMI Index. All returns in USD and net of withholding tax on dividends. MSCI data © MSCI 2016, all rights reserved. Russell data © Russell Investment Group 1995–2016, all rights reserved. UAE and Qatar have been reclassified as emerging markets by MSCI, effective May 2014.

In US dollar terms, there was wide dispersion in country returns across both developed and emerging markets countries. New Zealand recorded the highest country performance in developed markets, while Spain and Canada returned the lowest performance for the quarter. In emerging markets, Indonesia and Hungary posted the highest country returns, while Poland and Greece posted the lowest. China, which had previously dominated news headlines, recorded one of the highest returns in emerging markets.



Real Estate Investment Trusts (REITs)

12


Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Number of REIT stocks and total value based on the two indices. All index returns are net of withholding tax on dividends. Total value of REIT stocks represented by Dow Jones US Select REIT Index and the S&P Global ex US REIT Index. Dow Jones US Select REIT Index used as proxy for the US market, and S&P Global ex US REIT Index used as proxy for the World ex US market. Dow Jones US Select REIT Index data provided by Dow Jones ©. S&P Global ex US REIT Index data provided by Standard and Poor's Index Services Group © 2016.

US REITs were one of the best‐performing asset classes during the quarter, outperforming equities. But REITs outside the US underperformed non‐US broad equity market indices.

60%US $601 billion97 REITs

40%World ex US $398 billion240 REITs(22 other …

Total Value of REIT Stocks

1.86

7.54

Global REITs (ex US)

US REITs

Ranked Returns (%)

Period Returns (%) * Annualized


US REITs 4.48 11.76 12.32 7.20 Global REITs (ex US) -3.54 3.08 5.72 3.32


Commodities

13


Past performance is not a guarantee of future results. Index is not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. All index returns are net of withholding tax on dividends. Securities and commodities data provided by Bloomberg.

Commodities had mostly negative performance in the fourth quarter. The Bloomberg Commodity Index Total Return fell 10.5%. The energy complex again led the decline with heating oil falling 31.1%. WTI crude oil declined 23.4%, while natural gas fell 22.0%.

Sugar was the strongest performer with an 18.3% increase. Soybean oil was also among the stronger performers, increasing by 10.6%.

The index declined 24.7% during 2015. Cotton was the only commodity to post positive returns for the year.

Period Returns (%)

Asset Class Q4 1 Year 3 Years** 5 Years** 10 Years**

Commodities -10.52 -24.66 -17.29 -13.47 -6.43

* Annualized

‐3.95

‐5.00

‐5.21

‐5.48

‐5.80

‐8.70

‐8.91

‐9.20

‐9.58

‐13.76

‐15.56

‐22.03

‐23.43

‐26.48

‐31.11

18.32

10.58

4.43

2.87

1.42

Sugar

Soybean Oil

Cotton

Live Cattle

Coffee

Soybeans

Gold

Silver

Aluminum

Zinc

Unleaded Gas

Wheat

Copper

Corn

Lean Hogs

Nickel

Natural Gas

WTI Crude Oil

Brent Oil

Heating Oil

Ranked Returns for Individual Commodities (%)


2.27

3.572.82

3.82

10-Year USTreasury

State andLocal

Municipals

AAA-AACorporates

A-BBBCorporates

Bond Yields across Issuers (%)

Fixed Income

14

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. 1. Barclays Short and Intermediate US Corporate Bond Indices. 2. Barclays Short and Intermediate Municipal Bond Indices. Yield curve data from Federal Reserve. State and local bonds are from the Bond Buyer Index, general obligation, 20 years to maturity, mixed quality. AAA-AA Corporates represent the Bank of America Merrill Lynch US Corporates, AA-AAA rated. A-BBB Corporates represent the Bank of America Merrill Lynch US Corporates, BBB-A rated. Barclays data provided by Barclays Bank PLC. US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Citigroup bond indices © 2016 by Citigroup. The BofA Merrill Lynch Indices are used with permission; © 2016 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly owned subsidiary of Bank of America Corporation.

Fourth Quarter 2015 Index Returns• Interest rates across the US fixed

income markets increased in the fourth quarter. The yield on the 5‐year Treasury note gained 39 basis points to end the quarter at 1.77%. The yield on the 10‐year Treasury note increased 22 bps to 2.27%. The 30‐year Treasury bond added 14 bps points to finish with a yield of 3.01%.

• The short end of the yield curve experienced the largest increase in yields during 2015.

• Short‐term corporate bonds declined 0.14% during the quarter but gained 1.01% for the year. Intermediate‐term corporates fell by 0.42% during the quarter but climbed 1.08% in 2015.1

• Short‐term municipal bonds returned 0.08% for the quarter and 1.21% for the year. Intermediate‐term municipal bonds returned 1.26% for the quarter and 3.28% for the year.2

Period Returns (%)


BofA Merrill Lynch Three-Month US Treasury Bill Index 0.05 0.05 0.07 1.24BofA Merrill Lynch 1-Year US Treasury Note Index 0.15 0.20 0.28 1.78Citigroup WGBI 1−5 Years (hedged to USD) 1.00 1.17 1.58 2.90Barclays Long US Government Bond Index -1.16 2.55 7.65 6.67Barclays US Aggregate Bond Index 0.55 1.44 3.25 4.51Barclays US Corporate High Yield Index -4.47 1.69 5.04 6.96Barclays Municipal Bond Index 3.30 3.16 5.35 4.72Barclays US TIPS Index -1.44 -2.27 2.55 3.94

* Annualized

-1

0

1

2

3

4

US Treasury Yield Curve (%)

1Yr

5Yr

10Yr

30Yr

12/31/15

12/31/149/30/15


LCA Q4 2015 Model Performance

Performance Update for LCA ModelPortfolios


LCA Traditional Portfolio Benchmarks

Past performance is not an indication of future performance. Investors cannot invest directly in an index. For informative and illustrative purposes only. Please see important disclosures regarding LCA's Composite Performance at the end of this presentation. Performance is presented net of fees. Source: LCA Composites.

Benchmark Name S&P 500MSCI AC

World Index Ex USA

Barclays Capital US Treasury: 1‐3 Year

LCA Retirement 20.80 Very Conservative 14.0% 6.0% 80.0%

LCA Retirement 35.65 Conservative Growth 22.0% 13.0% 65.0%

LCA Retirement 50.50 Balanced 33.5% 16.5% 50.0%

LCA Retirement 65.35 Moderate Growth 42.0% 23.0% 35.0%

LCA Retirement 80.20 Growth 53.5% 26.5% 20.0%

LCA Retirement 95.5 Aggressive Growth 62.0% 33.0% 5.0%


LCA Traditional QTD ReturnsAs Of 12/31/15: Q4 Only

Past performance is not an indication of future performance. Investors cannot invest directly in an index. For informative and illustrative purposes only. Please see important disclosures regarding LCA's Composite Performance at the end of this presentation. Performance is presented net of fees. Source: LCA Composites. NOTE: Previous slide has the benchmark weights

0.11%

0.65%

1.23%

1.89%

2.46%

3.15%

0.76%

1.59%

2.57%

3.46%

4.49%

5.42%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

LCA Retirement20.80 Portfolio






Very Conservative Conservative Growth Balanced Moderate Growth Growth Aggressive Growth

LCA Traditional Portfolios vs. Benchmark Returns QTD 2015LCA QTD Return Benchmark QTD Return


LCA Traditional YTD ReturnsAs Of 12/31/15:


-1.52%-1.73%

-2.20%

-2.66%

-3.77%-3.95%

0.30%

-0.07% -0.19%-0.53% -0.65%

-0.98%

-4.50%

-4.00%

-3.50%

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

LCA Retirement 20.80Portfolio






Very Conservative Conservative Growth Balanced Moderate Growth Growth Aggressive

LCA Traditional vs. Benchmark Returns YTD

LCA YTD Return Benchmark YTD Return


Benchmark Name S&P 500 MSCI AC Barclays US Barclays US DJ Credit Suisse World Ex USA Treasury: 1‐3 Yr Aggregate Managed

FuturesDefensive Benchmark 0.00% 0.00% 100.00% 0.00% 0.00%Strategic Fixed Income Benchmark 0.00% 0.00% 0.00% 100 0.00%Strategic Alternative Benchmark 35.00% 18.00% 22.00% 0.00% 25.00%Strategic Alternative Blend Benchmark 38.00% 7.00% 16.00% 14.00% 25.00%Tactical Economic Benchmark 50.00% 0.00% 0.00% 50.00% 0.00%


Defensive, Strategic Fixed Inc., Strategic Alt’s & Tactical Benchmarks


Defensive, Strategic Fixed Inc., Strategic Alt’s & Tactical As Of 12/31/15: YTD Only

Past performance is not an indication of future performance. Investors cannot invest directly in an index. For informative and illustrative purposes only. NOTE: Previous slide has the benchmark weights. Please see important disclosures regarding LCA's Composite Performance at the end of this presentation. Performance is presented net of fees. Source: LCA Composites.

-0.87%

-3.20%

-2.71%

-1.77%-1.52%

0.56% 0.55%

-0.26%

0.47%

0.97%

-3.50%

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

DefensiveDefensive Benchmark

Strategic Fixed IncomeStrategic Fixed

Benchmark

Strategic AlternativeStrategic AltBenchmark

Strategic AlternativeBlend

Strategic Alt BlendBenchmark

Tactical EconomicTactical Benchmark

LCA Portfolios vs. Benchmark Returns YTD 2015 YTD Benchmark YTD Return


DFA Q4 2015 Fund Performance

Performance Update for DFA Mutual Funds


DFA Equity Fund PerformanceAs Of 12/31/15: Q4 Only

Past performance is not an indication of future performance. Investors cannot invest directly in an index. For informative and illustrative purposes only. Please see important disclosures regarding LCA's Composite Performance at the end of this presentation. Source: Morningstar

4.91%

2.01%

5.15%

7.14%

3.98%

5.28%

2.85%

0.60%

-0.20%

6.27%

2.88%

5.64%

7.54%

3.91%

5.82%

3.91%

1.86%

0.66%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

US CoreEquity 1Portfolio

US TargetValue

(small/mid)Portfolio

US Large CapValue Portfolio

Real EstateSecuritiesPortfolio

Intl. CoreEquity Portfolio

Intl. Small Co.Portfolio

Intl. ValuePortfolio

Intl. RealEstate

SecuritiesPortfolio

EmergingMarkets Core

Portfolio

Russell 3000 Russell 2000Value

Russell 1000Value

DOW JonesUS Select

REIT

MSCI WorldexUS

MSCI EAFESmall Cap

MSCI WorldexUS

S&P Global exUS REIT

MSCI EM

DFA QTD Return Benchmark QTD Return


DFA Equity Fund PerformanceAs Of 12/31/15: YTD

Past performance is not an indication of future performance. Investors cannot invest directly in an index. For informative and illustrative purposes only. Please see important disclosures regarding LCA's Composite Performance at the end of this presentation. Source : Morningstar

-1.35%

-5.72%

-3.49%

3.24%

-0.21%

5.91%

-6.31%

-3.62%

-14.86%

0.48%

-7.47%

-3.83%

4.48%

-3.04%

5.46%

-3.04%-3.54%

-14.92%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

US CoreEquity 1Portfolio

US TargetValue

(small/mid)Portfolio

US Large CapValue Portfolio

Real EstateSecuritiesPortfolio

Intl. CoreEquity Portfolio

Intl. Small Co.Portfolio

Intl. ValuePortfolio

Intl. RealEstate

SecuritiesPortfolio

EmergingMarkets Core

Portfolio

Russell 3000 Russell 2000Value

Russell 1000Value

DOW JonesUS Select

REIT

MSCI WorldexUS

MSCI EAFESmall Cap

MSCI WorldexUS

S&P Global exUS REIT

MSCI EM

DFA YTD Return Benchmark YTD Return


DFA Fixed Income Fund PerformanceAs of 12/31/15: YTD

Past performance is not an indication of future performance. Investors cannot invest directly in an index. For informative and illustrative purposes only. Please see important disclosures regarding LCA's Composite Performance at the end of this presentation. Source: Morningstar

1.45%

0.46%

1.28%1.15%

-1.22%

1.00%

-0.15%

-0.77%

0.76%

-1.44%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

Five Year Global Portfolio Short Duration Real ReturnPortfolio

Intermed Extended Quality Short Term Muni Portfolio Inflation Protected Portfolio

Citi World 1-5 Year Barclays US Tips 1-5 Year Barclays US Credit BofA 1-3 Yr Muni Barclays US TIPS

DFA YTD Return Benchmark YTD Return


LCA Viewpoints and Outlook 2016

Federal Reserve Update and Global QE


• In line with market expectations on December 16 the Federal Open Market Committee (“FOMC”) unanimously approved a 25 basis point increase in its target fund rate. The decision marks the first time since June 29, 2006 that the Federal Reserve raised rates.

• Although the decision was well-telegraphed and the magnitude of the increase was small, the FOMC declared several dovish comments.

• “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

• Slow and gradual pace of rate increases. Market expectations are for 1-3 rate increases f0r 2016. (25-75 bps).

FOMC Outlook

Source: Federal Reserve Policy minutes


• The Fed's mandate is to keep the economy growing at a rate that doesn't produce inflation. In the FOMC's minutes, the Fed said that labor conditions had improved, but that the unemployment rate was little changed.- FED targeting 2%-2.5% long term inflation.

FOMC Outlook on Inflation

Source: advisorperspectives/Dshort.com and Bureau of Labor Statistics and Bureau of Economic AnalysisFor informative and illustrative purposes only. Please see important disclosures at the end of this presentation.


FOMC Outlook on Employment

Source: advisorperspectives/Dshort.com and Bureau of Labor Statistics and Bureau of Economic AnalysisFor informative and illustrative purposes only. Please see important disclosures at the end of this presentation.

The Fed's mandate is to keep the economy growing to achieve low unemployment


• Rate increases show signs of an improving economy. Absent inflation the Fed STILL may move away from ZIRP. Low Unemployment rate.

• Fed has raised rates 118 times since 1948. Rate increases are part of the business cycle. (source: Bloomberg).

• The Avg Nominal GDP at the time of those rate increases was 8.6% and current GDP is around 3.7%.

• During past hiking cycles, CPI headline inflation has typically been around 3%, with core personal consumption expenditures (PCE) inflation usually above 2% — well above the current levels.

• The Fed can be patient given GDP and inflation outlook.

FOMC Outlook

Source: Bloomberg



Equities 2016 Outlook


US Equity Markets; Economy slow/moderate growth, strong housing, and labormarkets. S&P 500 Index~ 15x forward 12 month earnings. Historically fair value.

• Valuations appear fair by historical standards and slightly rich relative to othermarkets but may be appropriate for the highest return on equity of any region.Though US dollar strength and renewed wage pressures could threaten earningsand the secular uptrend in profit margins, lower costs for energy and other inputswould benefit US consumer and capital spending.

European Equity Markets; Economy stronger. Easy monetary policy. Fundamentalscheaper than US.

• Earnings growth has accelerated on a stronger economy and a weaker euro, helping large multinationals source revenues abroad. For equity markets outside the Eurozone, the currency tailwind does not apply. Despite a dramatic re-rating that pushed multiples above long-term averages, valuations remain relatively attractive and mergers & acquisitions activity has picked up.



Japan Equity Markets; Economy slow/moderate growth.

• The yen’s depreciation has boosted earnings but not export volumes and profitability, so Japanese equities continue to trade at a discount to most other developed markets. While Bank of Japan has yet to engineer inflation and wage gains, ongoing governance reform to focus on return can help to sustain better earnings growth than can be found elsewhere.

Emerging Equity Markets;

• Each country has its own dynamics, but many face the headwinds of slower Chinese growth, feeble commodity prices, increasing leverage and rising US rates, while currency corrections have been a tailwind for exporters. Asian markets have reasonable valuations, moderating earnings downgrades and the benefit of low energy prices over oil-related markets in Latin America and Eastern Europe.




Fixed Income Update


US Yield Curve

Past performance is not an indication of future performance. All information is qualified by the disclosures set forth on the accompanying pages, which must be read in conjunction with this information. Source: US Treasury

Chart as of 01.13.2016


Fixed Income Expectations

• Set fixed income expectations ahead of timeDiscuss with the client the fact that their fixed income allocation will decline in market value with a rise in interest rates.

• Discuss the role of fixed income in client allocationsa) Equity investors can use bonds to dampen the volatility of their

portfolio. Fixed income will continue to play this role through interest rate swings.

b)Fixed income investors use the coupon payments as current income.Even though there’s an initial unrealized loss in market value,

bond funds will continue to pay dividends while having access to higher yielding fixed income products.

• Low Duration fixed incomeLCA designs the fixed income side of each portfolio with a low average duration, which lessens the interest rate risk borne on the portfolio


Summary Conclusions• Negative returns on Traditional Portfolios. US Small Caps and International Equities

negative for the year and Fixed Income slight positive for the year.

• Returns on Traditional Portfolios underperformed vs benchmarks on Q4 and YTD 2015 as US Small Caps underperformed Large Caps and Growth outperformed Value.

• Slight negative returns for Defensive and Strategic Income returns for YTD 2015.

• Strategic Alternative/Blend and Tactical Models slight negative returns, and in line with performance vs benchmarks YTD%. Strategic Alternative weak returns YTD% with negative global equities returns offsetting positive results of managed futures.

• Absent any notable increase in inflationary pressures, the Fed will embrace “lower for longer” when it comes to rates in an effort to solidify economic growth.

• Increase in short term rates may not necessarily be detrimental to bond holders. Gradually rising interest rates would reflect an economy that is growing without much risk of overheating.

• Market fundamentals and earnings will need to be strong for equities to rebound. Fed rate hike may have positive market reactions, removing uncertainty.

Stay diversified and focus on the long term.


Focus on Long Term Investing

• Riskalyze – captures a quantitative measurement of client risk tolerance

• Babe Ruth article – uses a baseball analogy to help explain expectations of returns

• DFA videos

• Quarterly Review – talking points and summary written by portfolio management


Updates and Announcements

10 Steps to a Killer Positioning Statement

Presented by: Stephen Wershing, CFP®The Client Driven Practice

Thursday, February 11th

11:00am ET

Business Building Ideas

Presented by: Kendall Borchardt VP of Sales & Marketing

Thursday, March 17th

11:00am ET

Feb and March upcoming webinars

Edge – Quarterly sales and marketing ideas


Q & A

Any Questions?!


LCA Composite Disclosure

• Composite returns including periods prior to June 2008 may include return information from client accounts that were not managed in the identified strategy for the entirety of the periods. LCA implemented the portfolio accounting system used to create the Composites in June 2008. LCA applied the system’s methodologies to its existing historical data. Such data did not support adjusting the accounts that appeared in each Composite based on historical changes in such accounts’ management strategies. LCA believes the effect of the inclusion of such accounts in the Composites is immaterial, however, based on its policy of excluding outlier accounts as described above and its belief that the number of accounts that changed management strategies over the period was minimal. Please contact LCA if there are questions concerning Composite returns.

• The z-score is defined as how far a performance return deviates from the average performance return of all accounts in the composite list. A z-score of 3.0 indicates three standard deviations that an account’s performance return is above or below the mean.

• Previously, LCA published hypothetical model returns for its strategies. LCA now presents the Composites, each of which is based on actual performance of client accounts. As a result, the returns presented are slightly different than those previously published.


LCA Composite Disclosure

• Returns are presented net of LCA fees and account transaction expenses and include the reinvestment of dividends and other earnings. LCA management fees have ranged from 0.40% -2.10% during the periods presented. Management fees incurred by clients may vary. LCA’s current fee schedule is described in its Form ADV Part 2A, which is available upon request. Each strategy’s underlying investments include commingled investment vehicles such as mutual funds that pay investment advisory and other fees and expenses. Mutual fund and exchange traded fund fees are disclosed in the funds prospectus.

• Inclusion of market index information is for informational purposes only and does not imply that a strategy will achieve similar returns. Index performance does not reflect the deduction of transaction costs, management fees, or other costs which would reduce returns. An investor cannot invest directly in an index. The composition of an index does not reflect the manner in which a strategy is constructed in relation to expected or achieved returns, investment guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which may change over time.

• The S&P 500 Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the U.S. economy and is widely used as indicative of the performance of the U.S. stock market. The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that covers the U.S. dollar denominated, investment-grade, fixed-rate, taxable bond market securities, The index includes bonds from the Treasury, government-related, corporate, mortgage backed securities (MBS), asset backed securities (ABS), and commercial mortgage backed securities (CMBS) sectors. The Blended Benchmark Indices were created by LCA to reflect the performance of a benchmark comprised of the stated percentages of the S&P 500 and Barclays Capital U.S. Aggregate Bond Index.


LCA Disclosure

• Actual client performance in the strategies and the periods depicted may be materially different and possibly lower than the performance data presented, due to various factors including: different rebalancing frequency and implementation, investment cash flows, cash balances, different management fees, varying custodian fees and transaction costs, different timing of fee deduction and other factors. Clients must refer to their individualized performance evaluation for information concerning their actual account’s performance.

• Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment strategy will be profitable. Each asset class has inherent risks associated with that asset class. Understanding these risks is critical to making reasonable risk/return comparisons and sound investment decisions. Each of LCA’s strategies may make small and micro-cap investments, which are subject to greater volatility than those in other asset categories. Each of LCA’s strategies may invest in sector funds, which may involve a greater degree of risk than an investment in other funds with greater diversification. Each of LCA’s strategies may invest in fixed-income investments, which are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, corporate events, tax ramifications, and other factors. Each of LCA’s strategies may make international investments, which are subject to additional risks, such as currency fluctuation, confiscatory policy, political instability, or potential illiquidity. Investing in emerging markets may accentuate these risks.

• Since no one manager is suitable for all types of investors, it is important to review investment objectives, risk tolerance, liquidity needs, tax consequences and any other considerations with a financial professional before choosing an investment style or manager.

applying academic research, analytical sciences and ... · • index return data on slides 5-14 are...

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