Download - LGIP FY13Q1 pt1
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LGIP QUARTERLY MEETING & CONFERENCE CALL
OFFICE OF THE ARIZONA STATE TREASURER
11.1.2012
CONFERENCE CALL
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AGENDA
� LGIP Performance
� Endowment Performance
� Endowment Distribution Formula
State Cash Flow
ARIZONA STATE TREASURER DOUG DUCEY
� State Cash Flow
� Guest Presentation: Dr. Jim Paulsen, Chief Investment Strategist for Wells Capital Management
� Q & A
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INVESTMENT PHILOSOPHY
SAFETYbefore
LIQUIDITY
ARIZONA STATE TREASURER DOUG DUCEY
LIQUIDITYbefore
YIELD
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EARNINGS FOR FY 2013 YTD
$29,673,076
ARIZONA STATE TREASURER DOUG DUCEY
$29,673,076
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LGIP PERFORMANCEQ1 FY2013Q1 FY2013
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POOL 5
ARIZONA STATE TREASURER DOUG DUCEY
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POOL 7
ARIZONA STATE TREASURER DOUG DUCEY
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POOL 500
ARIZONA STATE TREASURER DOUG DUCEY
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POOL 700
ARIZONA STATE TREASURER DOUG DUCEY
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Separately Managed Accounts (SMAs)
� Designed for those seeking a customized investing solution based on your risk tolerance, liquidity needs and duration target.
� Monthly Liquidity
� Requires $100 million minimum deposit
ARIZONA STATE TREASURER DOUG DUCEY
� Requires $100 million minimum deposit
� Pre-Meeting with Portfolio Manager to set up Account and determine investing needs.
� Costs: Standard 6 basis points, plus yearly accounting charges of $20,000 out of earnings (equivalent to 2 basis points.)
� Contact Deputy Treasurer Mark Swenson
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OPERATING UPDATES
New key phone numbers:
� Main number 602-542-7800� LGIP Line 602-542-7834
ARIZONA STATE TREASURER DOUG DUCEY
� Mark Swenson 602-542-7877� Dale Stomberg 602-542-7833
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ENDOWMENT PERFORMANCE
OFFICE OF THE ARIZONA STATE TREASURER
PERFORMANCEQ1 FY2013
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$2.00
$2.50
$3.00
$3.50
$4.00
Bil
lio
ns
Endowment Market Value
ENDOWMENT MARKET VALUE $3.7
Billion
ARIZONA STATE TREASURER DOUG DUCEY
$0.00
$0.50
$1.00
$1.50
De
cem
be
r 2
00
6
Ma
rch
20
07
Jun
e 2
00
7
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er
20
07
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7
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20
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0
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0
Ma
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20
11
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1
Se
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er
20
11
De
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1
Ma
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20
12
Jun
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2
Se
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20
12
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$0.60
$0.80
$1.00
$1.20
Bil
lio
ns
Total Endowment Unrealized gains/losses
ENDOWMENT UNREALIZED GAINS
$1.05 Billion
ARIZONA STATE TREASURER DOUG DUCEY
-$0.20
$0.00
$0.20
$0.40
De
cem
be
r 2
00
6
Ma
rch
20
07
Jun
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00
7
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20
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De
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7
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20
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8
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20
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9
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0
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1
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ENDOWMENT ASSET ALLOCATION
$1,600.04M $502.79M$1,549.4 million
$542.2 million
40.4%14.9%
8.7%Fixed Income
$3.7 Billion
ARIZONA STATE TREASURER DOUG DUCEY
$1,052.42M$1,122.1 million
40.4%
35.9%
14.9%S&P 500
S&P 400
S&P 600
As of 9/30/2012
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PROPOSED ENDOWMENT DISTRIBUTION
OFFICE OF THE ARIZONA STATE TREASURER
DISTRIBUTION FORMULA
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SMOOTHER, CONSISTENT DISTRIBUTIONS
5-YearAverage
Market Value
X
2.5%
ARIZONA STATE TREASURER DOUG DUCEY
Takes 2.5% of the average monthly market value from each of the previous five years
Annual Distribution
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STATE CASH FLOW
OFFICE OF THE ARIZONA STATE TREASURER
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$1,500
$2,000
$2,500
$3,000Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec'07-June '09
Recession
STATE CASH FLOWTOTAL OPERATING ACCOUNT AVERAGE MONTHLY BALANCE
Up 70% in First Quarter YOY
$1.42 billion in September
ARIZONA STATE TREASURER DOUG DUCEY
-$1,000
-$500
$0
$500
$1,000
$1,500
Millio
ns
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STATE CASH FLOW
$1,000
$1,500
$2,000
$2,500
$3,000State Operating BalanceFY 2007 - September 2012
ARIZONA STATE TREASURER DOUG DUCEY
-$1,000
-$500
$0
$500
$1,000
Ju
l-06
Oct-
06
Jan
-07
Ap
r-07
Ju
l-07
Oct-
07
Jan
-08
Ap
r-08
Ju
l-08
Oct-
08
Jan
-09
Ap
r-09
Ju
l-09
Oct-
09
Jan
-10
Ap
r-10
Ju
l-10
Oct-
10
Jan
-11
Ap
r-11
Ju
l-11
Oct-
11
Jan
-12
Ap
r-12
Ju
l-12
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STATE CASH FLOW
$1,500,000
$2,000,000
$2,500,000
$3,000,000
YTD FY 2013 Cash Flow vs. Last Two Fiscal Years
ARIZONA STATE TREASURER DOUG DUCEY
$-
$500,000
$1,000,000
$1,500,000
7/1 8/1 9/1 10/1 11/1 12/1 1/1 2/1 3/1 4/1 5/1 6/1
FY 2011 FY 2012 Actual FY 2013 Actual
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AZ NON-FARM EMPLOYMENT
1750
2000
2250
2500
2750
3000
Jul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec '07-Jun 09
Recession
AZ Job growth returning
ARIZONA STATE TREASURER DOUG DUCEY
750
1000
1250
1500
1750
Fe
b-8
2
Fe
b-8
3
Fe
b-8
4
Fe
b-8
5
Fe
b-8
6
Fe
b-8
7
Fe
b-8
8
Fe
b-8
9
Fe
b-9
0
Fe
b-9
1
Fe
b-9
2
Fe
b-9
3
Fe
b-9
4
Fe
b-9
5
Fe
b-9
6
Fe
b-9
7
Fe
b-9
8
Fe
b-9
9
Fe
b-0
0
Fe
b-0
1
Fe
b-0
2
Fe
b-0
3
Fe
b-0
4
Fe
b-0
5
Fe
b-0
6
Fe
b-0
7
Fe
b-0
8
Fe
b-0
9
Fe
b-1
0
Fe
b-1
1
Fe
b-1
2
Source:
Bloomberg
2012 L.P.
Jul '81-Nov '82
Recession
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AZ UNEMPLOYMENT AT 8.2%
7%
8%
9%
10%
11%
12%
Jan '80-Jul '80
Recession
Jul '81-Nov '82
RecessionJul '90-Mar '91
Recession
Mar'01-Nov '01
Recession
Dec'07-June 09
Recession
National rate of 7.8%
AZ Rate at 8.2%
ARIZONA STATE TREASURER DOUG DUCEY
2%
3%
4%
5%
6%
7%
Fe
b-7
6F
eb
-77
Fe
b-7
8F
eb
-79
Fe
b-8
0F
eb
-81
Fe
b-8
2F
eb
-83
Fe
b-8
4F
eb
-85
Fe
b-8
6F
eb
-87
Fe
b-8
8F
eb
-89
Fe
b-9
0F
eb
-91
Fe
b-9
2F
eb
-93
Fe
b-9
4F
eb
-95
Fe
b-9
6F
eb
-97
Fe
b-9
8F
eb
-99
Fe
b-0
0F
eb
-01
Fe
b-0
2F
eb
-03
Fe
b-0
4F
eb
-05
Fe
b-0
6F
eb
-07
Fe
b-0
8F
eb
-09
Fe
b-1
0F
eb
-11
Fe
b-1
2
Source:Bloomberg2012 L.P.
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AZ HOUSING PRICES
150
200
250
S & P/Case Schiller Housing Price Index for Phoenix
ARIZONA STATE TREASURER DOUG DUCEY
0
50
100
Source: Bloomberg 2012 L.P.
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Guest Presentation:
Dr. Jim Paulsen, Chief Investment Strategist for
OFFICE OF THE ARIZONA STATE TREASURER
Dr. Jim Paulsen, Chief Investment Strategist for Wells Capital Management
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November 2012www.wellscap.com
Economic & Financial Market Update
James W. Paulsen, Ph.D., Chief Investment Strategist
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Older Demographics Have Altered EconomicRecoveries in Three Major Ways!!!
1. Slower SPEED LIMIT!
2. Delayed Recoveries!!
“Slow Starters… But, Long FINISHERS”
Economic and Financial Market Update – November 2012
“Slow Starters… But, Long FINISHERS”
3. YEAR “4” GEARING!!?
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“New-Normal” Working-Age PopulationGrowth!??!
U.S. Working Age PopulationShown on a natural log scale
Economic and Financial Market Update – November 2012
Annual Growth in U.S. Real GDP
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Contemporary Recovery Weaker, But Similar to 1991/2001 Pattern!?
Cumulative Percent Recovery Gain in Real GDP Current Recovery vs. 1990/2001 Average
Cumulative Percent Recovery Gain in Real GDI Current Recovery vs. 1990/2001 Average
Economic and Financial Market Update – November 2012
TOTAL Cumulative Percent Job Creation Current Recovery vs. 1990/2001
Private Cumulative Percent Job Creation Current Recovery vs. 1990/2001 Average
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Jobs & Confidence Recoveries Delayed!?!
U.S. Unemployment Rate & RecoveriesConsumer Confidence Index* & Recoveries
*Conference Boards Consumer Confidence Index. Shown on a natural log scale.
Shaded areas represent recessions.
Economic and Financial Market Update – November 2012
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“DELAYED” WAGE/GAINS WILL SOON END?!??
Economic and Financial Market Update – November 2012
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Federal Reserve Following Playbook of Last Two Recoveries!?!
Federal Reserve Policy ResponseFed Funds Rate2001 Recovery
Federal Reserve Policy ResponseFed Funds Rate1991 Recovery
Economic and Financial Market Update – November 2012
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How to GEAR?? Jobs & Confidence!!!
Consumer Confidence vs. U.S. Unemployment Rate
Economic and Financial Market Update – November 2012
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ECONOMY is GEARING: #1 JOB MARKET!!
Total U.S. Household Employment In Millions
Total U.S. Labor ForceIn Millions
Economic and Financial Market Update – November 2012
U.S Labor Unemployment Rate
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ECONOMY is GEARING: #2 CONFIDENCE!!
Conference Board Consumer ConfidencePresent Situation Index
Economic and Financial Market Update – November 2012
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ECONOMY IS GEARING: #3 Net WORTHS & #4 Debt BURDENS!!
U.S. Household Financial Obligations Ratio
Total Household Net Worth In Trillions of U.S. Dollars
Economic and Financial Market Update – November 2012
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ECONOMY is GEARING: #5 Housing Activity & #6 Home Prices!!
FHFA U.S. House Price IndexNational Association of Homebuilders Market Survey Index
Economic and Financial Market Update – November 2012