fixed income management - garcia hamilton & associates · new york power authority ndt, ny...
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Fixed Income ManagementQuarter Ended June 30, 2016
5 Houston Center1401 McKinney, Suite 1600
Houston, TX 77010Tel: (713) 853-2359Fax: (713) 853-2300
Ruby@GarciaHamiltonAssociates.comwww.GarciaHamiltonAssociates.com Awards/rankings may not represent client experiences and are not indicative of future performance. Go to www.garciahamiltonassociates.com/awards/ for additional information on each award.
Presented By:
Gilbert A. Garcia, CFAManaging Partner
Organization
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Asset Breakdown
Founded in 1988. Firm is 100% employee-owned and certified as a MBE firm. Firm has 28 employees located in Houston, Texas. The 9 members of the fixed income investment team have 168 years combined investment experience and
over 77 years combined with the firm. In addition, 5 are Chartered Financial Analyst (CFA) charterholders. Firm manages almost $7.5 billion in fixed income assets for over 230 institutional clients. High quality fixed income strategies designed to prevent “negative surprises.” No litigation. No debt.
Data as of June 30, 2016
Other2%
Corp Retirement9%
Insurance3%
Corp Non-Erisa10%
Endowment/Foundation
5%
Jointly Trusteed4%
Public67%
By Client
Fixed Income Aggregate
68%
Fixed Income Short Duration
1%Fixed Income Intermediate Govt/Credit
13%
Fixed Income Enhanced Cash
5%
Fixed Income Intermediate Aggregate
5%Other Fixed
Income Products 6%Quality Growth
Equity 2%
By Type
Partners
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GILBERT ANDREW GARCIA, CFAManaging PartnerFixed Income Portfolio ManagerBA: Yale UniversityYear Hired: 2002Industry Experience: 31 yrsOwnership: 46%
JANNA HAMILTONPartnerMarketing and Client ServiceBA: Florida Atlantic UniversityAIMSE: Wharton School of BusinessYear Hired: 1994Industry Experience: 36 yrsOwnership: 23%
CURT ROHRMAN, CFAPartnerEquity Portfolio ManagerBBA: Texas Christian UniversityMBA: University of TexasYear Hired: 2006Industry Experience: 32 yrsOwnership: 7%
KEVIN LUNDAY, CPAPartnerChief Operating OfficerBBA: Texas Tech UniversityYear Hired: 2007Industry Experience: 15 yrsOwnership: 8%
BETH L. MCWILLIAMSPartnerChief Compliance OfficerPatricia Stevens Secretarial CollegeYear Hired: 1994Industry Experience: 35 yrsOwnership: 6%
STEPHANIE J. ROBERTSPartnerMarketing and Client Services/
Investments BBA: Texas Southern UniversityYear Hired: 2000Industry Experience: 20 yrsOwnership: 2%
RUBY MUÑOZ DANGPartnerDirector of Marketing and
Client ServicesBA: University of HoustonYear Hired: 1995Industry Experience: 23 yrsOwnership: 4%
NANCY RODRIGUEZPartnerFixed Income Portfolio ManagerBS: University of HoustonYear Hired: 1998Industry Experience: 29 yrsOwnership: 4%
Fixed Income Investment Team
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GILBERT ANDREW GARCIA, CFAManaging PartnerFixed Income Portfolio ManagerBA: Yale UniversityYear Hired: 2002Industry Experience: 31 yrs
NANCY RODRIGUEZPartnerFixed Income Portfolio ManagerBS: University of HoustonYear Hired: 1998Industry Experience: 29 yrsCoverage: Team Oversight
JEFFREY D. DETWILER, CFA, AAMSFixed Income Portfolio ManagerBS: University of South FloridaMS: University of HoustonYear Hired: 2007Industry Experience: 20 yrsCoverage: Short Term
KAREN H. TASS, CFAFixed Income Portfolio ManagerBA: Texas A&M UniversityMBA: University of HoustonYear Hired: 2010Industry Experience: 11 yrsCoverage: Corporates
DON ELSENBROCKFixed Income Portfolio ManagerBS: University of HoustonMA: University of HoustonYear Hired: 2014Industry Experience: 24 yrsCoverage: Cash Flows
BENJAMIN D. MONKIEWICZInvestment AnalystBA: Sam Houston State UniversityYear Hired: 2010Industry Experience: 5 yrsCoverage: MBS/Agencies
JOHN A. LOHMAN, CFAQuantitative StrategistBBA: Loyola UniversityMBA: University of TexasYear Hired: 1995Industry Experience: 23 yrsCoverage: Investment Tools
KELLY NILAND, CFA, CPAInvestment AnalystBBA: Texas A&M UniversityYear Hired: 2015Industry Experience: 31 yrsCoverage: Yield Curve
CONNIE FALCON DAVISInvestment AssociateBS: University of HoustonYear Hired: 2012Industry Experience: 4 yrsCoverage: Analytics
Garcia Hamilton & Associates Timeline
4Awards/rankings may not represent client experiences and are not indicative of future performance. Go to www.garciahamiltonassociates.com/awards/ for additional information on each award.
•Firm was founded and Fixed Income philosophy developed. 1988
•Became an affiliate of AMG (Affiliated Managers Group, Inc.).1998
•Gilbert Garcia joined and assumed portfolio management duties, and Nancy Rodriguez was reassigned to work with him. 2002
•Began transition from founders to next generation of partners. 2006
•Crossed $1 billion under Fixed Income management. •Internal partners acquired majority interest from AMG. 2008
•Firm was named Core Fixed Income Manager of the Year by Emerging Manager Monthly.•Internal partners acquired remaining interest from AMG. •Firm name changed to Garcia Hamilton & Associates.
2010
•Crossed $2 billion in Fixed Income assets under management. 2011
•Named 2014 Fixed Income Investment Grade Manager of the Year by Institutional Investor. •Crossed $4 billion in Fixed Income assets under management. 2014
•Named 2015 Intermediate-Term Fixed Income Manager of the Year by Institutional Investor. •Crossed $6 billion in Fixed Income assets under management. 2015
•Named 2016 Intermediate-Term Fixed Income Manager of the Year by Institutional Investor. •Crossed $7 billion in Fixed Income assets under management. •Launched mutual fund product with American Beacon Advisors.
2016
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Representative Client List
Clients who have retained GH&A for 10 years or more are noted in green. This representative client list is provided for informational purposes only and should not be construed as an endorsement of ourservices. These clients were chosen for name recognition and may be invested in products other than those included in the presentation.
Public Funds City of North Miami Beach Police & FF, FL City of Wilton Manors Police & GE, FL Endowments/FoundationsCity of Annapolis Police and Fire, MD Northern Marianas College, MP City of Winston-Salem, NC Arkansas State University Foundation, ARArkansas State Highway Employees, AR City of Oakland Park Police & FF, FL City of Winter Garden GE, FL Arkansas Tech University Foundation, ARArkansas Local Police & Fire, AR City of Ocoee Police & FF, FL City of Winter Garden Police & FF, FL Baptist Health Foundation of San Antonio, TXCity of Atlanta Police, GA Oklahoma FF, OK City of Winter Haven Police, FL Board of Higher Education and Ministry,City of Atlanta Fire, GA Town of Orange Park Police, FL Yap State Trust Fund, FM The United Methodist Church, TNTown of Bay Harbor Islands GE, FL City of Ormond Beach Police, GE & FF, FL Yorktown Independent School District, TX Briarwood-Brookwood, Inc., TXCity of Bloomington Police, IL City of Palm Beach Gardens FF, FL Caribbean Biodiversity Fund, UKCity of Boynton Beach GE, FL Palm Beach County FF, FL Corporate Non-ERISA Children's Home Foundation, TXCity of Cape Coral Municipal Firefighters, FL Village of Palm Springs GE, FL American Baptist Home Mission Society, PA Children’s Home Society of Florida, FLCity of Cape Coral Police, FL Village of Palm Springs Police, FL American Speech-Language-Hearing Association, MD Coast Guard Foundation, CTChicago Public Schools, IL City of Pembroke Pines OPEB Trust, FL American Quarter Horse Association, TX Dogwood Foundation, TXChicago Transit Authority, IL City of Pensacola FF, FL Archdiocese of Portland, OR E. Rhodes and Leona B. Carpenter Foundation, PACollege of Micronesia Land Grant, FM City of Pensacola GE, FL Attorney’s Liability Assurance Society, IL Embry Riddle Aeronautical University, FLCity of Coral Springs FF, FL City of Pinellas Park GE, FL Brazosport Regional Health System, TX Florida A&M University Foundation, FLCity of Coral Springs Police, FL City of Pinellas Park Police, FL Center for Hearing and Speech Foundation, TX Fort Hays State University, KSCity of Corpus Christi FF, TX City of Philadelphia GE, PA Century Insurance Company, Ltd., GU Guam Community College Foundation, GU Dallas Area Rapid Transit, TX Philadelphia Gas Works, PA CPS Energy, TX Hartford Foundation for Public Giving, CTCity of DeLand Police, FL City of Plantation Police, FL Crime Stoppers of Houston, TX Heartspring Methodist Foundation, TX Town of Davie Police, FL City of Pontiac Police & FF, MI District of Columbia Bar, DC International Retinal Research Foundation Inc., ALTown of Davie FF, FL Prince George’s County FF, MD John P. McGovern Museum of Health & Louisiana Baptist Foundation, LACity of Deerfield Beach Police, FL Prince George’s County Police, MD Medical Science, TX Marin Community Foundation, CADukes County, MA City of Punta Gorda GE, FL KEW Management Investor, NY Medical University of South Carolina Foundation, SC Employees of H.N.S. Management, CO., Inc., CT City of Punta Gorda Police, FL The Medical Foundation of North Carolina, Inc., NC Midwestern State University Foundation, TXEmployees' Retirement System of Republic of Palau Civil Service Micronesia Conservation Trust, FM Rio Grande Cancer Foundation, TX
Baltimore County, MD Republic of Palau COFA Trust Fund New York Power Authority NDT, NY Sarah Campbell Blaffer Foundation, TXEmployee’s Retirement Fund of the City of Dallas, TX City of Riviera Beach Police, FL FSM Development Bank, FM Shelby County Community Health Foundation, ALCity of Evanston Police, IL Road Commission for Oakland County Oregon Climate Trust, OR Silicon Valley Community Foundation, CAFairfax County Uniformed Retirement System, VA Retiree Health Care Trust, MI Rock Holdings, Inc., MI Southern Baptist Foundation, TNFSM Social Security Administration, FM City of Roanoke, VA Rollins, Inc., GA Tallahassee Memorial HealthCare Foundation, FLCity of Ft. Lauderdale GE, FL City of Rockledge FF, FL Roman Catholic Archdiocese of Atlanta, GA Trinity Episcopal Church, LACity of Ft. Lauderdale, FL City of Rockledge GE, FL Russell Hill Rogers Fund for the Arts, TX United Methodist Foundation, NCCity of Ft. Walton Beach GE, FL City of Rockledge Police, FL Specialty Equipment Market Association, CA University of Guam Endowment, GU City of Ft. Walton Beach Police, FL City of Sanford FF, FL Stetson University, Inc., FL White’s Residential & Family Services, IN City of Ft. Walton Beach Firefighters, FL City of Sanford Police, FL Takecare Insurance Risk Management Services, GU Wichita Falls Area Community Foundation, TXGovernment of Guam, GU City of Sebring Police, FL Terrapin Insurance Company, CICity of Hialeah FF, FL City of St. Cloud GE, FL United Regional Health Care System, TX Taft – Hartley & UnionCity of Hollywood FF, FL City of St. Cloud Police, FL The Walters Art Gallery, MD Bricklayers Gulf Coast, TX City of Hollywood Police, FL City of St. Louis FF, MO Bricklayers of Indiana, INIllinois State Board of Investments, IL South Walton Fire Control District FF, FL Corporate ERISA District 1199J New Jersey Healthcare Employers, NJJackson County GE, MI State Universities RS, IL AGL Resources, GA IBEW Local Union #129, OH City of Jacksonville Beach Employee RS, FL City of Sunrise Police, FL Baptist Health Retirement Plan, AR IBEW Local Union #351, NJCity of Lake Worth FF, FL City of Tamarac FF, FL D.W. McMillan Hospital/ Escambia County Healthcare, AL Indianapolis Bricklayers, IN City of Lakeland Employees’ Pension & RS, FL City of Tarpon Springs Police, FL Flowers Foods, Inc., GA MARTA/ATU Local 732, GALantana FF, FL Teachers’ Retirement System, IL Integris Health, Inc., OK Plumbers Local #68, TXLantana Police Relief, FL City of Temple Terrace Police & FF, FL International-Matex Tank Terminals, LA Sacramento Area Electrical Workers, CALemont Police, IL Village of Tequesta Public Safety Officers, FL Millers Group, TX San Mateo HERE, CAMarianas Public Land Trust, MP City of Titusville Police & FF, FL Nissan Motor Co., Ltd., TN Southern California Sheet Metal Workers, CACity of Melbourne Police & FF, FL Utrik Atoll, Marshall Islands (MH) Roman Catholic Archdiocese of Atlanta, GA Teamsters Union Local NO. 35, NJCity of Miramar Police, FL City of Venice FF, FL RPC, Inc., GANC Association of County Commissioners, NC City of Vero Beach Police, FL St. Ignatius College Prep, IL OtherNC League of Municipalities, NC City of West Melbourne Police, FL STP Nuclear Operation Company, TX Monteagle Quality Growth FundCity of New Port Richey Police, FL City of West Palm Beach Police, FL Sulzer Pumps (US) Inc., TX Progress Investment Management, CACity of North Miami Beach GE, FL City of West Palm Beach GE, FL Woodlands Family Practice, TX
City of West Palm Beach FF, FL
Investment Philosophy
Investment Philosophy
• Fixed income anchors the asset allocation, allowing clients to take risk in other asset classes. It is not meant to be the significant alpha generator.
• Because individual credits, industry groups and broad sectors are highly correlated, credit research adds little long term value to high quality fixed income management. Thus, effective investment management utilizes a top-down management approach with a concentrated portfolio.
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Investment Goal
Investment Goal
Our goal is to outperform the benchmark, net of fees, over a full market cycle using a high quality strategy with less risk, lower volatility and low turnover. By setting realistic expectations, we avoid taking unnecessary risks.
Achieving our goal is centered around several core principles:
Preserve Principal
Maintain Liquidity
Provide High Current Income
Key Tools:
Sector Rotation
Controlled Interest Rate Anticipation
Yield Curve Positioning
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Investment Style
High QualityPortfolio Dominated by U.S. Treasuries, Agency Debentures and Agency15-Year MBS
Corporate Securities Rated A or BetterSpread Product Exclusively in the Short to Intermediate Maturities to Reduce Volatility
No Big SurprisesNo Foreign Bonds/Yankees
No BBB Rated SecuritiesNo Derivatives
No Leverage/ Dollar Rolls No Soft Dollars
FlexibilityActively Rotating Sectors
Actively Managing Yield CurveExploiting Smaller Markets
Risk ControlsPercentage Sector Allocation, Duration Contribution by Sector, Credit Reviews, Yield Curve,
Performance Attribution, and Peer Group Performance Monitoring
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Implementation
Fundamental Research and
Analysis
Qualitative
Model Review
Quantitative
Portfolio Construction
Risk Control
Review five factors (Sentiment, Monetary, Economic, Valuation,Inflation) and historical data.
Review liquidity versus GH&A’s qualitative findings.
Set target portfolio ranges for duration (±10% of the index), yield curve (barbell, ladder, bullet), sector exposure (treasuries, agencies, corporates, MBS), and sector duration contribution (overweight, underweight).
Continuously monitor portfolios for market exposure, guidelinechanges, cash needs, brokerage activity, compliance, attribution,and peer group performance.
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Fixed Income Aggregate Portfolio Characteristics
The characteristics shown are those of an actual portfolio that is representative of this strategy at a particular point in time. Individual portfolio characteristics may vary depending on the date shown as well as client-imposed restrictions, cash flows, etc. This information is supplemental to the Fixed Income Aggregate Composite Disclosure Statement in the Appendix.
PortfolioBarclays Capital Aggregate
June 30, 2016
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Treasuries19%
Corporates15%
Agencies33%
Mortgages33%
Cash<1%
Average YTM Average Coupon Average Duration
Portfolio 1.6 3.0 5.4
Barclays Capital Aggregate 1.9 3.1 5.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Treasuries37%
Corporates25%
Agencies8%
Mortgages28%
Asset-Backed
2%
Average YTM Average Coupon Average Duration
Portfolio 1.5 2.9 3.8
Barclays Capital Int. Govt./Credit 1.4 2.5 4.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Fixed Income Intermediate Govt./Credit Portfolio Characteristics
Treasuries57%
Corporates32%
Agencies11% Treasuries
23%
Corporates18%Agencies
28%
Mortgages30%
Cash1%
The characteristics shown are those of an actual portfolio that is representative of this strategy at a particular point in time. Individual portfolio characteristics may vary depending on the date shown as well as client-imposed restrictions, cash flows, etc. This information is supplemental to the Fixed Income Intermediate Composite Disclosure Statement in the Appendix.
Barclays Capital Int. Govt./Credit Portfolio
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June 30, 2016
Average YTM Average Coupon Average Duration
Portfolio 0.7 0.8 1.4
Barclays Capital 1-3 Year Govt. 0.6 1.5 1.8
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Fixed Income Short Duration Govt. Portfolio Characteristics
Treasuries89%
Agencies11% Treasuries
24%
Agencies76%
Cash<1%
The characteristics shown are those of an actual portfolio that is representative of this strategy at a particular point in time. Individual portfolio characteristics may vary depending on the date shown as well as client-imposed restrictions, cash flows, etc. This information is supplemental to the Fixed Income Short Duration Government Composite Disclosure Statement in the Appendix.
Barclays Capital 1-3 Year Govt. Portfolio
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June 30, 2016
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Diversity
Our firm directly supports numerous minority organizations in the community
•Our Managing Partner, Gilbert Garcia, served as Chairman of the Board for six years•Our Partner and Director of Marketing and Client Services, Ruby Muñoz Dang, serves as Trustee for the METRO Texas Non-Union Pension Plan
Metropolitan Transit Authority of Harris County
•National Association of Securities Professionals is a non-profit association of professionals that brings together minorities and women in the fields of asset management, public finance, investment banking, and other finance professions
•Our Partner, Stephanie Roberts, is highly involved with the organization and recently started the Texas chapter
NASP
•Sponsors for Educational Opportunity is a non-profit organization that mentors young women and minority individuals in the development of careers in investment banking, corporate law, and other leading global companies
•Mr. Garcia is the longest serving board member (since 1988) and conducts interviews for candidates in our offices for placement within investment companies in New York
•Mr. Garcia was awarded the SEO Alumni Leadership Award at the 2015 Awards Dinner in New York City; Other honorees included Michael R. Bloomberg, three-term Mayor of New York City and Founder of Bloomberg LP & Bloomberg Philanthropies, and David M. Rubenstein, Co-Founder & Co-CEO of The Carlyle Group
SEO
•The League of United Latin American Citizens is a non-profit organization created to advance the economic condition, educational attainment, political influence, housing, health and civil rights of the Hispanic population of the United States
LULAC
Diversity is a central theme throughout the entire firm • Certified as a MBE in several states • Almost 85% of the firm owned by minority and female partners• 53% owned by Hispanic partners and 55% owned by minority partners• 70% of employees are ethnic minorities and women• Execute over 35% of brokerage volume with MBE/MWBE veteran firms• We also work with many minority and women-owned vendors in the areas of:
• Office Supplies, Temporary Staffing Services, Travel, Accounting, Auditors• Mr. Garcia was the 2012 Houston Area Urban League Gala Honorary Chair & a Co-Chair of the 103rd NAACP National Convention • Mr. Garcia served as a trustee on the Houston Municipal Employees Pension System Board of Trustees
Why Hire Garcia Hamilton & Associates?
100% Employee Owned
High Quality Focus
No Big Surprises
Flexibility
Proven Investment Process Over Time
Risk Controls
Strong Focus on Client Service
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