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Attribution Report Returns by Industry, Sector and Asset Classes

Attribution Report Returns by Industry, Sector and Asset Classes. Prabhu Ramamoorthy Feb 21, 2010. Federated Total Return Bond Series. Benchmark – Barclays Capital US Aggregate Weighted Average Effective Maturity 6.1 Yrs Weighted Average Effective Duration 4.3 Yrs.

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Attribution Report Returns by Industry, Sector and Asset Classes

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  1. Attribution Report Returns by Industry, Sector and Asset Classes Prabhu Ramamoorthy Feb 21, 2010

  2. Federated Total Return Bond Series • Benchmark – Barclays Capital US Aggregate • Weighted Average Effective Maturity 6.1 Yrs • Weighted Average Effective Duration 4.3 Yrs. • Weighted Average Coupon 5.32% • Weighted Average YTM 4 .31% • Weighted Average Quality AA-, A2 Source:  http://www.nesteggu.com/common/FundSheets/FTRBX.pdf Source: http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser Can also be calculated from historical prices http://www.andreassteiner.net/performanceanalysis/?download=SingleIndexModelCalcs.xls Beta 9.7 R Square 0.77 Alpha 0.05

  3. Bond Market ReviewBond Index Returns 4Q09 vs. 1 Year 09 Source: https://www2.blackrock.com/webcore/litService/search/getDocument.seam?venue=PUB_INS&source=CONTENT&ServiceName=PublicServiceView&ContentID=44788 Source: http://feg-research.com/pdfs/December%20Research%20Review.pdf

  4. Bond Market ReviewSector Returns 4Q09 vs. 1 Year 09 High Yield> CMBS>Corporate IG >ABS>MBS>Agencies>Treasuries in 4Q 2009 High Yield> CMBS>ABS>Corporate IG> Municipals>MBS>Agencies>Treasuries in 1 year Source: http://www.loomissayles.com/internet/internet.nsf/($DocumentID)/E03D1D1D94B95D1B8525753600784A12/$FILE/BondMarketReview.pdf Source: https://www.deferralselect.com/System/exb/exb_includes/Q4'09%20Market%20Update.pdf

  5. Bond Market ReviewCredit Returns 4Q09 vs. 1 Year 09 Lower the Credit Rating, Higher the Returns. Increasing Risk appetite and stabilization High Yields most attractive, Less Default and tightening credit spreads Source: http://www.loomissayles.com/internet/internet.nsf/($DocumentID)/E03D1D1D94B95D1B8525753600784A12/$FILE/BondMarketReview.pdf Source: https://www.deferralselect.com/System/exb/exb_includes/Q4'09%20Market%20Update.pdf

  6. Bond Market ReviewIndustry – Investment Grade Option adjusted spreads As on Nov 9, 2009 Spreads started to tighten due to stabilization and economic recovery Note: Spreads highest during 2008Q4 during financial crisis Source: http://www.scribd.com/doc/24163763/S-P-Capital-IQ-s-Monthly-Market-Observations-December-2009 Source: http://feg-research.com/pdfs/December%20Research%20Review.pdf

  7. Bond Market Review Industry – Investment Grade Option adjusted spreads As on Nov 9, 2009 Source: http://www.scribd.com/doc/24163763/S-P-Capital-IQ-s-Monthly-Market-Observations-December-2009

  8. Bond Market Review Industry – Investment Grade Option adjusted spreads Sample Spread Time Plot for Select Industries Even though Spreads have started to tighten, Spreads as on Nov 9,2009 are still not at 2006 levels Source: http://www.scribd.com/doc/24163763/S-P-Capital-IQ-s-Monthly-Market-Observations-December-2009

  9. Yield CurveSteepening over 09 Yield Curve became steep due to Fed support. Fed discount and reserve rate kept low Once Fed pulls back and stops monetary easing, interest rates expected to rise Source: http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield_historical_2009.shtml

  10. FTRBComposition Sector Core Plus Strategy – In addition to Benchmark, FTRB has High Yield Securities in portfolio holdings Source:  http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser

  11. FTRBBarclays Aggregate Sector Composition No Municipal Bonds. BBB and lower - zero Source:  http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser Source: http://www.lordabbett.com/institutional/resources/pdfs/productpdfs/LA_PdtProfile_CoreFixedInc.pdf

  12. FTRBAllocation Sector FTBR vs. BCAB Treasuries, Agencies – Underweight, Corporate, High Yield - Overweight Source:  http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser Source: http://www.lordabbett.com/institutional/resources/pdfs/productpdfs/LA_PdtProfile_CoreFixedInc.pdf

  13. FTRBAllocation Credit FTBR vs. BCAB Treasuries, Agencies – Underweight, AA and Below - Overweight Source:  http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser Source: http://www.lordabbett.com/institutional/resources/pdfs/productpdfs/LA_PdtProfile_CoreFixedInc.pdf

  14. FTRBPerformance Attribution Factors • FTRB Return attribution white paper strategy at http://www.thefirma.org/2008_conference/aboutfederated/White%20Paper-%20Alpha%20Strategies.pdf • Return is attributed and split into • Sector Allocation –Treasuries, MBS, CMBS, ABS, Corporate High Yield • Security Selection – Bottom up analysis considering sector also • Duration – Interest Rate Risk • Yield Curve – Maturity, Barbell, Ladder, Bullet • Currency – Currency risk, Investing in dollar denominated foreign instruments Source:  http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser

  15. FTRBAllocation Impact on Returns • Active Returns due to Sector Allocation is significant Asset Allocation (a(i)p – a(i)b) Multiplied By Benchmark Sector Return r(i)b =Active Asset Allocation Return for Sector(i) Total Asset Allocation Return ∑iєS(a(i)-a(i)b)*r(i)b Explains most of the excess returns over benchmark Source:  http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser

  16. FTRBSplit up by Attribution Factors 4Q09 Asset Allocation by sector – Summation of ∑iєS(a(i)-a(i)b)*r(i)b almost explains 97 bp return Source:  http://www.federatedinvestors.com/daf/pdf/portfolio_attribution/41115.pdf Source:  Annual Report http://www.federatedinvestors.com/daf/pdf/sai/G01722-02.pdf

  17. FTRBAttribution Report Comment Source:  http://www.federatedinvestors.com/daf/pdf/portfolio_attribution/41115.pdf Source:  http://www.federatedinvestors.com/daf/pdf/sai/G01722-02.pdf

  18. FTRBAttribution Strategy and active bets in future Source: http://www.federatedinvestors.com/sc?cid=54385&link=commentary&templ=commentaryLeaf&ut=unregistered_webuser Source:  http://www.federatedinvestors.com/daf/pdf/sai/G01722-02.pdf

  19. Important Links, References • For all fixed income research material and outlook used for the analysis, go to http://www.raghavendraprabhu.com/node/73. The page has compiled the link to all materials and is very helpful for market outlook and review of past returns • For Attribution Strategy of FTBR go to http://www.thefirma.org/2008_conference/aboutfederated/White%20Paper-%20Alpha%20Strategies.pdf • For FTBR, go to http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser. The data from Annual reports and other public available information has been used. Approximate Portfolio holdings in Excel sheet • Other Web Sites -Yahoo finance, Treasury yield curve, References to data and reports from publicly available sources have been used • Benchmark data was collected from different sources including other prospectuses, fund reports. Detailed Benchmark data not available for extensive sector and security analysis Source:  http://www.federatedinvestors.com/ffw/funds/fundoverview.do?basketid=1022&fundshareid=1347&link=products&ut=unregistered_webuser

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