fixed income presentation update q3 2014 final

20
Prepared for use by “Advisor Name” with “Client Name” FIXED INCOME PROPOSAL September 30, 2014 Prepared For:

Upload: capstone-asset-management-company

Post on 07-Apr-2016

218 views

Category:

Documents


4 download

DESCRIPTION

 

TRANSCRIPT

Page 1: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

FIXED INCOME PROPOSAL September 30, 2014

Prepared For:

Page 2: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Presented by:

Advisor Name

Advisor Title

Advisor Firm

Page 3: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 3 of 21

Founded in 1987, Capstone is in its 27th year of

providing investment management services.

Capstone is an independent investment advisor

headquartered in Houston, Texas.

Capstone manages $4.4 billion in equity, bond and

balanced accounts with clients nationwide.

Capstone provides proven disciplined investment

processes that have been in place since inception

of the firm.

Capstone employs a team approach to

management which results in consistency among

client accounts.

Profile Portfolio Solutions

Fixed Income

Balanced

Theta Growth (Income Oriented Equity)

Current Income Portfolio (Current Income Focus)

Global Equity Income

Large Cap Core Equity Growth

Non-Taxable Fixed Income

Clients Include:

• Corporations • Individuals

• Foundations • Health Care Organizations

• Pension Plans • Public Funds

• Unions • Insurance Companies

Page 4: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 4 of 20

Fixed Income Investment Team

EDWARD L. JAROSKI

President & Founder, CEO

Fixed Income Portfolio Manager

VICTORIA L. FERNANDEZ

Senior Vice President - Investments

Fixed Income Portfolio Manager

GINA M. GARCIA

Assistant Vice President - Investments

CLAUDE C. CODY IV, CFA

Senior Vice President - Investments

Fixed Income Portfolio Manager

PATRICK N. GARBODEN

Vice President - Investments

Fixed Income Portfolio Manager,

Municipal Bonds

Page 5: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 5 of 20

Separately Managed Account

Dedicated Team

Personalized Reporting

• Designated Portfolio Management Team

• Portfolio Manager Available for In-Person Meetings

& Conference Calls

• Dedicated Regional Vice President Representative

• Dedicated In House Partner Service Team

• Quarterly Economic Commentary

• Quarterly Portfolio & Performance Reports

Available

• Custom Reports as Needed

• Individual Portfolio Review & Analysis

Separately managed accounts offer an enhanced investment experience through direct ownership,

personalized performance and the flexibility to customize investment portfolios.

• Direct Ownership – portfolio consists of individual securities vs. units or shares of a fund and

assets are never pooled

• Performance – expenses and performance are not affected by the activities of other investors

• Flexibility – modifications to the current portfolio can be made or custom portfolios can be built

based on the investor’s needs

Page 6: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 6 of 20

Fixed Income Investment Management

We believe that fixed income investors fall into three distinct categories:

• Total Return Investors/asset allocators

• Absolute Return Investors/income-oriented investors

• Interest Rate Speculators/market timers

At Capstone, we have developed products and services to meet the needs of the “total return” and

“income-oriented” investors via the following products and services:

• Fixed Income

• Current Income Portfolio “CIP”

• Tax Exempt Fixed Income (National or State Specific Municipal Bonds)

Additional Customizations Available:

• We have the ability to apply restrictions based on portfolio characteristics such as sector, maturity and quality.

• For clients with social and cultural restrictions, we provide portfolios screens for these sectors, including but

not limited to, tobacco, alcohol, gambling and weapons industries.

Page 7: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 7 of 20

Fixed Income - Investment Profile

The Fixed Income strategy seeks to outperform the bond market over a market cycle while providing positive returns on

an annual basis. Our Philosophy is predicated on the belief that superior long-term results can be achieved with less

than market risk. To obtain those results, we focus our portfolios in high quality, primarily intermediate maturity

securities and add value through duration management and the selective rotation of market sectors and the securities

within those sectors.

Barclays Government/Credit Index Returns: 12/31/89 – 09/30/14

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

12/3

1/1

99

1

12/3

1/1

99

2

12/3

1/1

99

3

12/3

1/1

99

4

12/3

1/1

99

5

12/3

1/1

99

6

12/3

1/1

99

7

12/3

1/1

99

8

12/3

1/1

99

9

12/3

1/2

00

0

12/3

1/2

00

1

12/3

1/2

00

2

12/3

1/2

00

3

12/3

1/2

00

4

12/3

1/2

00

5

12/3

1/2

00

6

12/3

1/2

00

7

12/3

1/2

00

8

12/3

1/2

00

9

12/3

1/2

01

0

12/3

1/2

01

1

12/3

1/2

01

2

12/3

1/2

01

3

9/3

0/2

01

4

Price Appreciation Interest Total Return

Page 8: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 8 of 20

Fixed Income Investment Process

Capstone employs a disciplined 4 step process in the management of Fixed Income accounts.

This process has produced above market returns with lower than market risk for over 20 years, while

providing clients with reliable levels of current income.

Duration Selection

•Step I

•Interest Rate Outlook

•Risk/Return Analysis

Yield Curve Selection

•Step II

•Identify Optimal Position Along Yield Curve

Sector Selection

•Step III

•Measure Current vs. Historical Sector Spreads

Issue Selection

•Step IV

•Credit/Quality

•Security Structure

CLIENT PORTFOLIO

CLIENT OBJECTIVES

Page 9: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 9 of 20

Step I – Duration Selection

Analyze Current and Projected Economic and Market conditions

• Economic Indicators

• Monetary Policy Indicators

• Fiscal Policy Indicates

• Geo-Political Events

Establish Portfolio Duration

• Identify Market Duration

• Establish Variation Range from Market

• Establish Target Portfolio Duration

Page 10: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 10 of 20

Step II – Yield Curve Selection

Analyze Current Yield Curve vs. Expected Yield Curve Structure and Identify Opportunities Along the Yield Curve

%

1 Year 30 Years

Upward Sloping Yield Curve Flat Yield Curve

1 Year 30 Years

%

%

Modified Ladder

1 Year 30 Years Maturity

Inverted Yield Curve

1 Year 30 Years

%

%

Barbell Structure

1 Year 30 Years

Maturity

%

Bullet Structure

1 Year 30 Years Maturity

Page 11: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 11 of 20

Step III – Sector Selection

Sectors:

• U.S. Treasuries

• U.S. Government Agencies

• Mortgage Backed Securities

• U.S. Corporate Bonds

• Banks

• Finance

• Electric Utilities

• Gas Utilities

• Consumer Products

• Industrial

• Manufacturing

• Energy

• Transportation

• Retail

• Healthcare

• Automobile Manufacturing

• Telephones/Communication Systems

Corporate Spreads - as of 9/30/14

Rating Current* Qtr Ago Year Ago

AA +70 +70 +83

A +98 +94 +113

BBB +148 +137 +181

BB +314 +267 +333

B +384 +323 +402

• For optimal diversification, invest in minimum of 5 different sectors.

• Maximum sector allocation double that of index, not including Government sectors.

• Achieve diversification by allocating amongst multiple industries in the corporate sector.

0

100

200

300

400

500

AA A BBB BBB B

Current*

Qtr Ago

Year Ago

Page 12: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 12 of 20

Step III – Sector Selection

Source: Bloomberg

Page 13: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 13 of 20

Step IV – Issue Selection

Credit analysis

• Quality Guidelines

• Monitor Existing Holdings

• Identify Potential Upgrade Candidates

Issue Size and Trading Activity

• Maintain Adequate Liquidity

Special Features

• Call Provisions

• Step-Up Provisions

• Floating Rate Features

• Put Provisions

Page 14: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 14 of 20

Fixed Income Model Portfolio Characteristics – 9/30/2014

Portfolio Characteristics Sector Distribution

• Yield to Effective Maturity ** Yield to Worst

This information is supplemental to a full disclosure presentation found on page 18 & 19.

Fixed Income Barclays Capital

Gov/Credit

Yield To Maturity 1.89%* 2.14%**

Duration 4.04 5.94

Years To Maturity 5.15 8.11

Current Yield 3.45% 2.90%

Average Coupon 3.79% 3.04%

Portfolio Quality AA GOVS

Average Price $107.39 $104.85

# of holdings 32 6,856

3%

21% 18%

27% 28%

3%

0% 0%

11%

52%

5%

20%

3%

9%

0%

10%

20%

30%

40%

50%

60%

Fixed Income Barclays Capital Gov/Credit

Page 15: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 15 of 20

Fixed Income Model Portfolio Characteristics – 9/30/2014

Maturity Distribution Quality Distribution

This information is supplemental to a full disclosure presentation found on page 18 & 19.

3%

66%

18% 13%

0%

55%

26%

19%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Less than 1 Year 1 - 5 Years 5 - 10 Years Over 10 Years

Fixed Income Barclays Capital Gov/Credit

18%

27%

0%

8%

22% 25%

52%

5% 4%

5%

17% 17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

U.S.Treasuries

Agencies AAA AA A BAA

Fixed Income Barclays Capital Gov/Credit

Page 16: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 16 of 20

Fixed Income Wrap Composite Performance – 9/30/2014

Growth of $1 Million – 10 Year(a)(b)

Trailing Returns(a)(b)

(a) Source: Zephyr StyleADVISOR.

(b) The current quarter’s returns are preliminary

(c) Annualized

This information is supplemental to a full disclosure presentation found on page 18 & 19

$1,566,989 $1,570,553

-0.0

3%

3.9

6%

3.1

0%

4.2

9%

5.1

0%

4.6

2%

0.1

7%

4.0

8%

2.5

4%

4.2

7%

5.0

0%

4.5

9%

-4%

-2%

0%

2%

4%

6%

8%

Q3 2014 1 Year 3 Years (c) 5 Years (c) 7 Years (c) 10 Years (c)

Fixed Income Barclays Capital Gov/Credit

Page 17: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 17 of 20

Fixed Income Wrap Composite Performance – 9/30/2014

Risk vs. Return – 10 Year(a)(b)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

Annual R

etu

rn

Risk (Standard Deviation)

Barclays Capital Gov/Credit

Fixed Income

(a) Source: Zephyr StyleADVISOR.

(b) The current quarter’s returns are preliminary

This information is supplemental to a full disclosure presentation found on page 18 & 19

Page 18: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 18 of 20

Capstone Asset Management Company

Fixed Income Wrap Composite

Full Disclosure Presentation (continued on page 19) Year

Firm Assets (millions)

Composite Assets Performance Results

USD

(millions)

Number of Portfolios

Composite Gross Net

Barclays Capital

Gov/Credit

Composite Dispersion

Composite 3 Yr St. Dev.

Benchmark 3 Yr St. Dev.

YTD 9/30/2014* 4,312 161 420 3.15% 0.87% 4.12% 0.32% n/a n/a

3Q14* 4,312 161 420 -0.03% -0.78% 0.17% 0.06% n/a n/a

2Q14 4,372 161 421 1.75% 1.00% 1.92% 0.18% n/a n/a

1Q14 4,519 167 441 1.41% 0.66% 1.98% 0.15% n/a n/a

2013 4,764 166 431 -0.87% -3.81% -2.35% 0.31% 2.85% 3.17%

2012 5,041 194 494 5.92% 2.83% 4.82% 0.68% 2.60% 2.96%

2011 3,502 186 482 6.58% 3.46% 8.74% 0.61% 2.98% 3.42%

2010 3,702 184 452 6.80% 3.69% 6.59% 0.51%

2009 3,280 144 348 7.67% 4.54% 4.52% 1.33%

2008 2,725 146 305 3.69% 0.64% 5.70% 1.80%

2007 2,894 145 333 6.44% 3.33% 7.23% 0.56%

2006 2,734 178 383 4.25% 1.19% 3.78% 0.24%

2005 2,629 200 456 1.95% -1.06% 2.37% 0.38%

2004 2,595 187 424 3.85% 0.79% 4.20% 0.29%

2003 2,754 163 402 4.41% 1.35% 4.67% 0.39%

2002 2,245 146 296 12.09% 8.85% 11.04% 1.10%

2001 2,756 96 168 9.03% 5.86% 8.50% 0.77%

* The current quarter’s returns are preliminary.

Capstone Fixed Income Wrap Composite contains fully discretionary wrap fixed income accounts. Fixed Income portfolios are invested in bonds of primarily intermediate maturity to provide high income

and preservation of capital. For comparison purpose the composite is measured against Barclays Capital Government/Credit Index.

Page 19: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Page 19 of 20

Capstone Asset Management Company

Fixed Income Wrap Composite

Full Disclosure Presentation

Capstone Asset Management Company claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards.

Capstone Asset Management Company has been independently verified for the periods January 1, 1995 through June 30, 2014.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed

to calculate and present performance in compliance with the GIPS standards. The Fixed Income Wrap composite has been examined for the periods January 1, 1998 through June 30, 2014. The

verification and performance examination reports are available upon request.

Capstone Asset Management Company is an investment advisor registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The firm maintains a complete list

and description of composites, which is available upon request. Effective December 31, 2012, all contracts for CF Solutions and Roger H. Jenswold and Company were transferred to Capstone Asset

Management Company. Firm assets beginning on 12/31/12 include the transferred contracts. Prior to 12/31/12, the Firm did not include any RHJ or CF Solutions assets. Roger H. Jenswold and CF

Solutions are no longer operating companies.

Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Past performance is not indicative of future results.

The U.S. Dollar is the currency used to express performance. Returns include the reinvestment of all income. Gross returns are shown as supplemental information and are stated as gross of all fees and

have not been reduced by transaction costs. Net performance was calculated using the highest annual all inclusive wrap fee of 3.00% applied quarterly. Wrap accounts make up 100% of the composite for

all periods shown. Wrap fees include Capstone’s portfolio management as well as all charges for trading costs, custody, and other administrative fees. The composite dispersion presented is an asset

weighted standard deviation calculated for the accounts in the composite for the entire period shown. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are

available upon request. The three year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36 month period. The 3 year standard

deviation was not required for periods prior to 2011.

The management fee schedule is as follows: 1.00% maximum on all assets. Wrap fee schedules are provided by independent wrap sponsors and are available upon request from the respective wrap

sponsor. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. Investment advisory fees incurred by clients may vary. For

information on management fees, Capstone Asset Management Company’s Form ADV Part 2 is available upon request.

The Capstone Fixed Income Wrap Composite was created January 1, 1998.

Page 20: Fixed income presentation update q3 2014 final

Prepared for use by “Advisor Name” with “Client Name”

Capstone Asset Management Company

3700 West Sam Houston Parkway South #250

Houston, Texas 77042

Phone: 713.260.9000 Toll Free: 800.262.6631

Fax: 713.260.9050

E-mail: [email protected]

www.capstonefinancial.com