The FRS Select U.S. Large Value Stock Active Fund was developed for the FRS Investment Plan
and may use multiple institutional investment managers that serve in a fiduciary capacity.
Each manager has a target share, which may be periodically changed based on funding levels
and other considerations. Index managers are expected to be used as the primary liquidity
vehicle to facilitate initial funding, daily transfers and rebalancing.
The historical performance and fee data for the FRS Select Funds was derived using the
following approach. The FRS received historical monthly gross of fees return data for
the individual investment managers or bundled provider products (for the FRS Select Balanced Funds).
Historical monthly gross returns for the individual managers were adjusted for the fees applicable
to the FRS.
The fees used to calculate net returns were based on the highest fee tier,
representing the fees charged against the first dollar invested in the Fund. This "worst case"
fee scenario was also used in other fee presentations (e.g.
Fund Profile, Investment Funds Summary, etc.).
For the FRS Select Active Funds (i.e with multiple investment managers), the FRS calculated a weighted average
of the underlying managers' historical net returns according to the target manager allocations identified
in each
Detailed Fund Operations.
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Investment Manager:
Quantitative Management Associates (QMA)
2 Gateway Center
Newark, New Jersey 07102
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Targeted Share of Fund
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75% (actual share will vary)
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Asset Class and Objective
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Specialty U.S. stock fund
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Product Benchmark
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Russell 1000 Value Index
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Marketing Company
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None
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Restrictions on Transfers
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Investment funds in the FRS Investment Plan are subject
to excessive trading restrictions as detailed in the FRS Investment Plan
Summary Plan Description and FRS Excessive Fund Trading Policy.
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Fees and Expenses
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Fees and expenses are only one of several factors that should be considered when making investment decisions.For more information about fees and expenses see this
FAQ.
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Investment Philosophy
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QMA believes that they can generate attractive returns by investing in out-of-favor companies with low price/earnings
(P/E) ratios that have historically outperformed the broad stock market averages.
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Research Process
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QMA's proprietary quantitative model is the primary source of investment ideas and information.
The quantitative model assesses a database of historical reported earnings to obtain a clear picture of each company's
continuing operating earnings. These reported earnings are adjusted for non-recurring items, such as restructuring
charges and gains and losses from asset sales, which distort a company�s normal operating earnings.
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Security Selection
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The model calculates a "normalized" P/E ratio for each company in the database and ranks each stock from
lowest to highest adjusted P/E ratio. Stocks included in the top 20% of the model's P/E rankings (lowest P/E)
are considered for possible inclusion in the portfolio.
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Portfolio Construction
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Portfolio construction process encompasses technical screens and fundamental checks to refine the top 20% of the stock
candidates selected by the model. The portfolio is built by applying a modified equal weighting approach to the list of the
candidates. Position limits are generally 0.3%-1% above the benchmark weighting per individual stock holding.
Maximum industry and sector constraints are also applied. This approach seeks to reduce risk relative to the portfolio's benchmark.
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Sell Discipline
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QMA's model evaluates valuation and momentum factors to identify sale candidates.
Holdings that fall in the bottom 60% of the model's P/E rankings (highest P/Es) or are out of the top 20% for
52 consecutive weeks and exhibit positive price momentum are candidates for sale.
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Portfolio Manager(s) |
| Name |
Investment Experience |
Experience Last 5 Years |
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John Leib
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27 years
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Vice President, Portfolio Manager
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Deborah Woods
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29 years
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Vice President, Portfolio Manager
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Steve Bloom
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24 years
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Principal, Product Specialist
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Robert Leung
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12 years
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Associate, Quantitative Research
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Investment Manager:
Barclays Global Investors
45 Fremont Street
34th Floor
San Francisco, CA 94105
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Targeted Share of Fund
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25% (actual share will vary)
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Asset Class and Objective
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Specialty U.S. stock fund
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Product Benchmark
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Russell 1000 Value Index
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Marketing Company
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None
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Restrictions on Transfers
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Investment funds in the FRS Investment Plan are subject
to excessive trading restrictions as detailed in the FRS Investment Plan
Summary Plan Description and FRS Excessive Fund Trading Policy.
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Investment Philosophy
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Barclays Global Investors' (BGI) objective in managing the fund is to deliver a high quality and cost-effective index-based
portfolio to institutional investors.
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Research Process
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See Security Selection and Portfolio Construction
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Security Selection
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Full replication is used to invest in all of the index securities to minimize tracking error.
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Portfolio Construction
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The fund shall be invested and reinvested in a portfolio of equity securities with the objective of approximating as closely as
practicable the capitalization weighted total rate of return of the segment of the United States market for publicly traded equity
securities represented by the 1000 largest capitalized companies. The criterion for the selection of investments shall be the
Russell 1000 Index.
Futures and Options:
BGI does not use futures to add value; futures are used only to decrease tracking error. Futures contracts are employed
within the collective funds to "equitize" cash flows. These flows are generated from dividends and other cash flows
associated with securities in the portfolio. Futures contracts are purchased to provide immediate market exposure proportionate
to the size of both cash flows and residual cash within the portfolio. The goal is to reduce the overall portfolio tracking
error that would be incurred should cash remain unvested in the portfolio. Cash in excess of 0.15% would be equitized using
futures contracts.
Securities Lending:
Barclays' philosophy on borrower selection is to concentrate their lending to highest credit quality borrowers of
those who meet stringent capital, financial and risk requirements and who are able to meet their obligations within
the terms of the lending contract. Their risk management controls include:
-
Rigorous credit screening of borrowers to determine capital adequacy, liquidity and operations efficiency.
- Collateral requirements that govern receipt and monitoring of collateral received in lieu of securities borrowed. BGI accepts only cash, obligations of the US Government and irrevocable letters of credit.
- A minimum of 102% and 105% of the market value for domestic and international loans is required at the outset, respectively.
- A daily mark-to-market procedure.
- Investment policy controls applied to the investment of cash received as collateral.
- Record-keeping guidelines, written agreements and regulatory reporting managed in compliance with all applicable regulatory controls of the securities lending programs of financial institutions.
As a result of their risk controls, neither BGI nor their clients have ever experienced a loss due to collateral reinvestment, operational negligence or broker default.
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Sell Discipline
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Not applicable
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Portfolio Manager(s) |
| Name |
Investment Experience |
Experience Last 5 Years |
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Amy Schioldager
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18 years
|
Head, U.S. Indexing, GIMG, at BGI since 1989
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Ed Corallo
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18 years
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Head, Institutional Indexing, at BGI since 1997
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Jennifer Hsui
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8 years
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Senior Portfolio Manager, at BI since 2006
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IMPORTANT NOTE: The information on investment philosophy,
research process, security selection, portfolio construction,
sell discipline and personnel was provided to the FRS by product
marketing companies or investment managers. The FRS has taken
this information as given for the purposes of this document.
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