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Investment Process Presentation

Investment Process Presentation. December 8, 2009. Overview. Economic Analysis Compliance, The Delphi Process Social Responsibility Security Analysis Portfolio Optimization Portfolio Management Marketing, Exit Strategy EAFE Inverse Fund Performance. Our Funds. Haley Large Cap

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Investment Process Presentation

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  1. Investment Process Presentation December 8, 2009

  2. Overview • Economic Analysis • Compliance, The Delphi Process • Social Responsibility • Security Analysis • Portfolio Optimization • Portfolio Management • Marketing, Exit Strategy • EAFE Inverse • Fund Performance

  3. Our Funds • Haley Large Cap • Domestic • Coleman ETF • Domestic and International

  4. Top Down Investment Process • Economic Analysis • Compliance Screen • Social Responsibility Screen • Security Analysis • Portfolio Optimization

  5. Organizational Chart

  6. Anthony DeAngelis Economic analysis

  7. Top Down Approach • Business Cycle Analysis • Industry picked off of current analysis • Sectors based off of selected industries • Best of breed individual securities selected • Continual monitoring to economic indicators in order to track ongoing economic cycle

  8. 5 Phases of Economic Cycle

  9. Early Revival • The revitalization of business and consumer activity that follows a recessionary phase • GNP turns positive after falling sharply in the preceding recession • Businesses continue to clear unwanted inventory • Late Revival • GNP increases significantly • Growth puts upward pressure on credit demands and prices • Interest rates and inflation begin to rise (irregularly) • Housing activity picks up speed • Businesses build inventories and spend more on plant and equipment

  10. Acceleration Stage • Consumers put off purchases, spend less • Interest rates and inflation begin to rise • Housing and auto sales decline • Businesses continue to build inventories and spend • Ease-off Stage • Business continue to remain optimistic • Economic indicators turn pessimistic • GNP turns negative • Inflation and interest rates may continue to rise • Housing and big-ticket item sales decline severely

  11. Plunge • Businesses liquidate inventories • Employment drops sharply • Corporate profits plummet • Interest rates peak • Final Analysis: Early Revival • GNP – Turning positive • Improving employment picture

  12. Selected Indicators • ISM Data • Fed Funds • Monetary Base • Manufacturing Work Week • GNP • Case Schiller • Money Supply • M1 • M2 • M3 (Shadow Statistics) • Employment Data • Initial Unemployment • Continuing Claims • Productivity Figures • Hours Worked

  13. One Year Fed Funds Rate

  14. * Above 50 Indicates Expansion

  15. 2009

  16. Resources • Bill Carter (Qinsight) Conference Call • Lacy Hunt • Jeremy Siegel weekly newsletter • St. Louis Fed • Bloomberg • Wall Street Journal • The Economist • Morningstar • Industry Specific News

  17. Brendan Kearney The delphi process

  18. Overview • Maintains objectivity • Increases accuracy of industry forecasts • Process • 2 rounds • Analysts conduct industry research and rank top 10 choices • Re-evaluation after 1st round results

  19. Results • Round 1 • Started with 40 industries • Eliminated 8 • Round 2 • Analysts re-evaluated industries • Top 20 industries selected

  20. Final Cut

  21. compliance

  22. George Coleman ETF • 50% International • 50% Domestic

  23. Haley Group Large Cap • Market Cap: $5 billion and greater • Minimum average daily volume of 250,000 shares • Minimum share price of $10.00

  24. Sumedha Verma Social responsibility

  25. Socially Responsible Investing • As an Augustinian University, continue the rich tradition of Catholic Social Teaching and the guidance it provides • Avoid companies that ignore social responsibility • Recognize and incorporate companies that reflect Catholic stewardship • Lecture on social responsibility by Dr. Doh

  26. Steps 1.) Evaluate the Catholic Bishop’s Statement 2.) Choose and rank our criteria based on past evaluations and our own additions 3.) Run IWFinancial for Social Responsibility rankings

  27. IW Financial • Proprietary research and leading independent third party services • Specific data sources vary by product and data element • A company’s rating based on “Comparative Universe” • Ratings based on hard data

  28. SRI Profile • High sensitivity on issues such as: • Bioethics • Environment • Life/Choice • Tobacco • Human Rights • Military • Adult Entertainment • Passing score: 66

  29. Michael Feron Security analysis

  30. Haley Large-Cap • Financial Health • DCF Valuation • Analyst Input and Recommendation

  31. Financial Health • Altman Z-Score • Bankruptcy Risk • DuPont Ratios • ROE, ROA, Profit Margin, Asset Turnover, Equity Multiplier • Profitability • Balance Sheet Analysis • Current Ratio, Long Term Debt/Equity • Credit Rating

  32. Altman Z-Score

  33. Balance Sheet Analysis

  34. DCF Valuation • 10 Year Growth Projections • Future growth rates based on analyst research • Invested Capital-ROIC Calculations • WACC • Cost of Debt • Operating Lease Commitments

  35. WACC

  36. Enterprise Valuation

  37. Analyst Input and Recommendation • Results of Financial Health Analysis • Altman Z Score & Credit Rating • Enterprise Value • Upside Return Potential • S&P Market Insight Reports • Other Independent Research

  38. Coleman ETF Analysis • Domestic • Industries similar to Haley • S&P Market Insight • International • Economist Intelligence Unit (EIU) • Powershares, iShares, Vanguard and Morningstar

  39. Vincent Fea Portfolio optimization

  40. Portfolio Optimization • PMSP Software • Stein Estimators • Allocation constraints • Iterative scaling and re-optimizing process • Haley Fund – 48 35 stocks • Coleman Fund – 26 25 ETFs

  41. Haley Fund GICS Sector Allocations

  42. Coleman Fund Domestic Allocations

  43. Coleman Fund International Allocations

  44. Paul Iezzi Portfolio management

  45. Process of Selecting a Security • Analyst does research • Analyst presents research to Investment Committee with a recommendation • Investment Committee votes on each security • A majority vote is required to invest • After optimization, the weights of each security are voted on

  46. Orders • Example: Investment Committee votes a 5% allocation of IBM • Calculate number of shares • Current Price of $125 • Weight of 5% • Portfolio Value of $100,000 • 5% * $100,000 = $5,000 • $5,000 / $125 = 40 Shares

  47. Orders Sheet Example Thursday, November 12, 2009 To: Dr. Nawrocki From: Paul Iezzi and Bob Goslin Re: Coleman ETF Orders

  48. The Haley Group Large Cap Fund Invested on November 6, 2009 $102,482.82

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