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MBA Student Managed Fund

MBA Student Managed Fund. Manager Presentation March 11 th 2010. MBA Mangers. Presenting Today Dominick Galletti Tim Gilmore Deon Goosen. Joseph Adomakoh Richard Bodio Udaya Cheetti Jennifer Gorman Matthew Gyurko Charlie Murrin Xiuyun (Claudia) Shi. Agenda.

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MBA Student Managed Fund

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  1. MBA Student Managed Fund

    Manager Presentation March 11th 2010
  2. MBA Mangers Presenting Today Dominick Galletti Tim Gilmore Deon Goosen Joseph Adomakoh Richard Bodio Udaya Cheetti Jennifer Gorman Matthew Gyurko Charlie Murrin Xiuyun (Claudia) Shi
  3. Agenda Investment Philosophy Portfolio Composition and Allocation Performance Returns and Efficiency Statistics Attribution Analysis Historical Performance Analysis Risk Management Future Expectations Questions
  4. Investment Philosophy and Process
  5. Investment Philosophy Top down value focus Sector based approach Benchmark: S&P 500 Timeline: 3-5years
  6. Investment Process Investment decisions made after: Economic Analysis Sector Analysis Individual Security Analysis Qualitative and Quantitative analysis Intrinsic Value Target: 15% discount Stocks revisited at: 10% up, 8% down Fundamental Changes in The Firm Reaches Intrinsic Value
  7. Portfolio Composition and Performance
  8. Portfolio Composition All data covers holding period of OCT 26 – FEB 24 87% Invested in US Equities Sector ETFs Take advantage of allocation decisions Allocation of Funds
  9. Why Not Bonds? Bond ETFs Low investment-grade spreads HY spreads attractive, but still overpriced Equities Dividend Yields Free Cash Flow Yields
  10. Sector Allocation SMF Fall Allocation SMF Spring Allocation Staples Technology Technology Energy Discretionary Green – Overweight Red – Underweight Black – Neutral Weight
  11. Portfolio Performance 124 bp Negative excess return Key Drivers Early stops – CVS, NE (106 bps) Other Factors – XOM, Cash, Timing
  12. Sector Returns Sector Total Returns: SMF v. S&P 500 Sector weights re-allocated 2/2 Highlights Stock Selection Decisions Sector Allocation Decisions
  13. Portfolio Holdings Current SMF Holdings Goal of 25 Stocks Heaviest Weighted Best Performer Worst Performer
  14. Performance Attribution Analysis shows: Early stops Effects of targeted changes in allocation Recent outperformance of current holdings Adjustments for: Cash Floating weights SMF Portfolio Performance Attribution
  15. Portfolio Update Currently Trail the S&P 500 by 119 bps SMF – 6.18% S&P – 7.37%
  16. Hypothetical Portfolio Portfolio of current holdings at current weights Held from Jan 2005 to Dec 2009 Stock Correlations H: .68 (ORCL-HPQ) L: .00 (NFLX-ORCL) Average: .32 Comparison of Efficiency Statistics
  17. Risk Management
  18. Risk Management Investment Risk vs. Undue Risk Limit downside of Portfolio S&P 500 Risk Benchmark What we used to manage Risk Beta and Standard deviation Value-at-Risk and Stop Loss
  19. Beta and Standard Deviation Used Beta and Standard Deviation to benchmark against S&P 500 Not to exceed risk of benchmark Beta of SMF portfolio Lower than benchmark
  20. Value-At-Risk Rebalancing Tool Level of loss tolerance 5% weekly portfolio loss Value-at-Risk < $45,775 Expected downside Greatest loss at 95% confidence: $ 35,845
  21. Stop Loss Limit downside risk Dramatic events Stop Loss level – 11% Capital preservation focus Value-at-Risk and stop loss level Trailing stops
  22. Future Expectations
  23. Future Expectations Unemployment GDP Growth Monetary Policy Inflation Regulation Healthcare Reform Financial Reform
  24. Future Expectations Unemployment Slow decline in 2010 GDP Growth Relative decline Slow growth until unemployment normalizes
  25. Future Expectations Monetary Policy Rates at Historic lows Inflation Likely to stay in check
  26. Future Expectations Regulation Healthcare Reform Financial Reform More regulation is likely Consolidation of regulators
  27. Conclusion Portfolio going forward Lessons learned Stop loss Allocation
  28. Acknowledgements The University of Connecticut Foundation, Inc. Investment Advisory Board IAB Mentors Dr. Chinmoy Ghosh
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