Download IBEW-NECA Stable Value Fund

IBEW-NECA Employee Benefits Conference 2014
IBEW-NECA Stable Value Fund
Dee Ross
Senior Client Portfolio Manager
Invesco Advisers, Inc. is an investment advisor; it provides investment advisory services to individual and institutional clients and does not sell securities.
All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This is not to be construed as an
offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision. As with all investments
there are associated inherent risks. Consider the investment objectives, risks, charges and expenses carefully before investing. Please read all financial
material carefully before investing. For this and more complete information about the strategy, contact your Invesco representative. Past performance is
not indicative of future results. This portfolio is actively managed. Portfolio holdings and characteristics are subject to change. This does not constitute a
recommendation of the suitability of any investment strategy for a particular investor. The opinions expressed herein are based on current market
conditions and are subject to change without notice.
FOR EXISTING CLIENT USE ONLY — NOT FOR USE WITH THE PUBLIC
01/14 1314
Invesco Advisers, Inc.
IBEW-NECA Stable Value Fund
Managed for the
Retirement Plans of
IBEW and NECA
As of Dec. 31, 2013.
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For existing client use only
IBEW-NECA Stable Value Fund
Serving Your Retirement Plans for 25 Years
 Proprietary to IBEW and NECA
 Trustee Directed Defined Contribution Plans
 Participant Directed Plans
 Daily Valued and Electronically Traded
 Custom pricing
 75 Plans Currently Invested
As of Dec. 31, 2013.
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For existing client use only
Stable Value Refresher
Q: What is a Stable Value Option?
A: A Bond Fund, with Built-in Volatility Protection:
 A short- to intermediate-term bond portfolio with attached “wrap
contracts”
 An investment option designed to provide stability of account
balances plus a “stable” rate of return
 An investment option that is expected to generate returns similar
to bond portfolios but with volatility similar to money market
funds
 An investment concept that has been around the DC world since
the early 1970s
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For existing client use only
Stable Value Refresher
Portfolio of
Fixed Income
Securities
— MV Accounting
— High credit quality
— Diversification
— Income generation
+
Wrap
Contract
— Benefit payment responsive
— Floor 0.0% crediting rate1
=
Wrapped
Stable
Value
Portfolio
— Book Value Accounting
— Payments = Principal + Interest
— Market volatility smoothed
— Returns track current rates
1 The floor crediting rate is subject to the creditworthiness of the wrap contract provider. Plan participants could experience negative returns
because of plan fees and expenses, or default by the traditional GIC or wrap contract provider.
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For existing client use only
IBEW-NECA
Stable
Value
Fund
Invesco’s stable
value
approach
Performance and Characteristics
2013 in Review
IBEW-NECA Stable Value Fund
Portfolio Characteristics
Fund Assets
$2,721,701,565
---------------------------------------------------Market to Book Ratio
102.09%
---------------------------------------------------Effective Duration (years)
2.80
---------------------------------------------------Crediting Rate
1.75%
---------------------------------------------------Average Quality (Highest)
Aaa
---------------------------------------------------Number of Securities
3,289
As of Dec. 31, 2013.
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For existing client use only
IBEW-NECA Stable Value Fund
Diversification through Asset Allocation
Core
4.6%
STIF
5.7%
Intermediate
25.7%
Short
Duration
63.9%
As of Dec. 31, 2013.
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For existing client use only
IBEW-NECA Stable Value Fund
Diversification through Issuers and Managers
Wrap Contracts/Issuer Exposure
Manager Diversification
ING Life & Annuity
18.9%
Babson
MassMutual
18.6%
BlackRock
Metropolitan Life
18.6%
Invesco
36.0%
Monumental
18.4%
Jennison
20.0%
Prudential Ins. Co.
19.7%
Metropolitan Life
94.2%
PIMCO
Total Wrapped Assets
Unwrapped Assets (cash)
5.8%
100.00%
As of Dec. 31, 2013.
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For existing client use only
Short Term/Cash
18.5%
.6%
2.8%
16.3%
5.8%
100.00%
IBEW-NECA Stable Value Fund
Multiple Managers Add Diverse Expertise
Invesco
Short Duration + Intermediate + Core
Babson
Short Duration + Intermediate
BlackRock
Core
Jennison
Short Duration + Intermediate
MetLife
Core
PIMCO
Short Duration + Intermediate + Core
As of Dec. 31, 2013.
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For existing client use only
IBEW-NECA Stable Value Fund
Performance
5.00
4.02
4.00
3.14
3.00
2.00
2.66
1.95
1.71
1.00
0.10
0.14
0.11
0.00
1 Year
3 Years
5 Years
10 Years
IBEW-NECA Stable Value Fund (gross)
Barclays US Treasury Bellwether 3-Month Index
Sources: Invesco, Barclays; as of Dec. 31, 2013. Gross of fees returns are before deduction of management and custodial fees but after
trading commissions. Net returns will be lower. Past performance is not a guarantee of future results. Returns less than one year are not
annualized.
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For existing client use only
IBEW-NECA Stable Value Fund
What does performance really mean?
160.00
$146.76
140.00
Growth of $100
120.00
100.00
$101.86
$107.91
$116.17
80.00
60.00
40.00
20.00
0.00
1 Year
3 Years
Net returns
Sources: Invesco; as of Dec. 31, 2013. Past performance is not a guarantee of future results.
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For existing client use only
5 Years
10 Years
IBEW-NECA Stable Value Fund
Basic Class Fund Fees
Management Fee
0.09%
Client Service Fee
0.00%
*Annual Fund Operating Expenses
0.00%
*Acquired Fund Expenses
(external managers)
*Wrap Expenses
0.21%
Total Annual Expense Ratio
0.37%
*
These expenses are netted from the Fund prior to calculation of Gross Performance
As of Dec. 31, 2013.
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0.07%
For existing client use only
IBEW-NECA Stable Value Fund
Premier Class Fund Fees
Management Fee
0.09%
Client Service Fee – payable to TPA
0.25%
*Annual Fund Operating Expenses
0.00%
*Acquired Fund Expenses
(external managers)
*Wrap Expenses
0.21%
Total Annual Expense Ratio
0.62%
*
These expenses are netted from the Fund prior to calculation of Gross Performance
As of Dec. 31, 2013.
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0.07%
For existing client use only
IBEW-NECA Stable Value Fund
What a difference a year can make…
Then
Now
Wrap issuers leaving the business
must be replaced
Done, and in process: Prudential, Mass
Mutual, MetLife and more to come
Pooled Funds problematic in issuers’
view
• 12-month put
• Large plan concentrations
Resolved
• Expanded put provision: 24 months
• Added provisions for large plan
payouts
Investment portfolio strategy
limitations
Invesco maintaining strategy
Pooled Funds in “soft close” until
adequate wrap capacity is available
• No new plans may enter the
funds
Wrap capacity achieved
• Fund opened to new investors in
April, 2013
• New plans are entering the Fund
As of Dec. 31, 2013.
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For existing client use only
Invesco’s
What
to expect
stablefrom
value
stable
approach
value
Stable Value Asset Class
Stable value continues to be one of the more popular
investment options in defined contribution plans with more
than 15% of 401(k) assets.1
Asset Class
Large US Equity
Lifestyle/Pre-Mix
Stable Value
Company Stock
Bond
International
Small US Equity
Mid US Equity
Balanced
Window
Money Market
Emerging Market
Specialty/Sector
1 Aon Hewitt 401(k) IndexTM, Dec. 31, 2013.
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For existing client use only
Percent of DC Assets (%)
22.68
19.12
15.38
10.96
7.94
6.87
5.04
4.55
2.48
2.05
1.77
0.60
0.56
Stable Value Has Kept Pace
Historical Perspective
Long-Term Performance
6%
4%
4.09%
4.01%
4.55%
2.91%
1.88%
2%
0%
Return Since 12/31/03 (Annualized)
IBEW-NECA Stable Value Trust (gross)
Money Market
Barclays 1-3 G/C
Barclays Int. G/C
Barclays Aggregate
 In this environment, performance of stable value has significantly exceeded
money market and has kept pace with intermediate and longer duration fixed
income
Source for data: US Treasury, Invesco, iMoneyNet, Barclays; Dec. 31, 2013. Chart prepared using internal Invesco system. Returns for the IBEW-NECA Stable
Value Trust are presented gross of management fees, but net wrap, subadvisor and other expenses. Past performance is not a guarantee of future results.
1 iMoneyNet Money Fund Report Average/ Taxable (All)
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For existing client use only
Stable Value Has Kept Pace
Historical Perspective
Monthly Performance Statistics Since 1/1/2004
% Months with
Negative
Return
IBEW-NECA Stable Value Trust
Money Market1
0.00%
0.00%
Barclays 1-3 GC Index
24.17%
Barclays Intermediate GC Index
30.83%
Barclays Aggregate index
30.36%
Source for data: US Treasury, Invesco, iMoneyNet, Barclays. Chart prepared using internal Invesco system. Returns for the IBEW-NECA Stable Value Trust are
presented gross of management fees, but net wrap, subadvisor and other expenses. Past performance is not a guarantee of future results.
1 iMoneyNet Money Fund Report Average/ Taxable (All)
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For existing client use only
IBEW-NECA Stable Value Fund
In a Rising Rate Environment
2.00
1.50
1.00
2013
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
0.00
1990
0.50
1988
Quarterly Gross Returns (%)
2.50
IBEW / NECA Stable Value Investment Fund
iMoneyNet MFR AveragesTM/Taxable(ALL) (Gross)
Sources: Invesco, from Sept. 1, 1988, through Dec. 31, 2013. Gross of fees returns are before deduction of management and custodial fees but after trading
commissions. Net returns will be lower. Past performance is not a guarantee of future results. Returns less than one year are not annualized.
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For existing client use only
Stable Value in a Rising Rate Environment
What Could the Future Bring?
Hypothetical Annualized Total Return
4%
2%
2.0%
1.8%
0.4%
2.1%
1.4% 1.4% 1.2%
1.4%
0.0%
0%
-2%
2.4%
-0.8%
-1.0%
-1.5%
-1.8%
-2.4%
-4%
Modeled 1
Year Return
IBEW-NECA Stable Value Trust (gross)
Barclays 1-3 G/C
Barclays Aggregate
Modeled 3
Year Return
Modeled 5
Year Return
Money Market
Barclays Int. G/C
 Market expectation is for rates to increase in the near term; this increase could be
significant
 Hypothetical model assumes incremental increases in rates totaling 3% over 3 years
 Returns on stable value would exceed intermediate and longer duration fixed income in
this environment; stable value will also outpace money market
Source for data: US Treasury, Invesco. Starting values as of 12/31/13 are used for the IBEW-NECA Stable Value Trust; however, these are not return projections
for a particular portfolio, but rather an illustration of how a stable value fund’s credited rate would respond to changes in interest rates assuming a parallel shift in
the yield curve, no change in duration, and rates increasing 0.25% per quarter for 36 quarters, for a total increase of 3% in three years. Other variables such as
cash flows, security selection and yield curve positioning could further influence a stable value fund’s future performance. There are no investment management
fees applied to any of the series, but the stable value return is 0.20% in wrap fees. There is no guarantee the results will be realized. Positive returns require the
portfolio to remain wrapped; loss of wrap coverage could result in a write-down of participant balances.
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For existing client use only
Why IBEW-NECA Stable Value?
Preservation of Principal
Liquidity for Participant
Withdrawals
Competitive, Stable Returns
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For existing client use only
Thank
Thank you
you