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.
Details for Investment Manager #1 | ||
Investment Manager |
Quantitative Management Associates (QMA)2 Gateway CenterNewark, New Jersey 07102 |
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Targeted Share of Fund | 75% (actual share will vary) |
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Asset Class and Objective | Specialty U.S. stock fund |
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Fund Benchmark | Russell 1000 Value Index |
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Management Type | Actively Managed |
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Marketing Company | None |
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Restrictions on Transfers | 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. | |
Fees and Expenses | Fees and expenses are only one of several factors that should be considered when making investment decisions. More information on fees and expenses can be found in the FAQs on the MyFRS.com website. |
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Investment Philosophy | 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 | 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 | 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 | 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 | 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 |
John Leib | 28 years | Vice President, Portfolio Manager |
Deborah Woods | 30 years | Vice President, Portfolio Manager |
Steve Bloom | 25 years | Principal, Product Specialist |
Robert Leung | 13 years | Associate, Quantitative Research |
Details for Investment Manager #2 | ||
Investment Manager |
BlackRock45 Fremont Street, 34th FloorSan Francisco, CA 94105 |
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Targeted Share of Fund | 25% (actual share will vary) |
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Asset Class and Objective | Specialty U.S. stock fund |
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Fund Benchmark | Russell 1000 Value Index |
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Management Type | Passively Managed |
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Marketing Company | None |
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Restrictions on Transfers | 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. | |
Fees and Expenses | Fees and expenses are only one of several factors that should be considered when making investment decisions. More information on fees and expenses can be found in the FAQs on the MyFRS.com website. |
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Investment Philosophy | BlackRock' (BTC) 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 | See Security Selection and Portfolio Construction |
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Security Selection | Full replication is used to invest in all of the index securities to minimize tracking error. |
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Portfolio Construction | 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: BTC 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: BlackRock' 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:
As a result of their risk controls, neither BTC nor their clients have ever experienced a loss due to collateral reinvestment, operational negligence or broker default. |
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Sell Discipline | Not applicable |
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Portfolio Manager(s) | ||
Name | Investment Experience | Experience Last 5 Years |
Amy Schioldager | 19 years | Head, U.S. Indexing, GIMG, at BTC since 1989 |
Ed Corallo | 19 years | Head, Institutional Indexing, at BTC since 1997 |
Jennifer Hsui | 9 years | Senior Portfolio Manager, at BI since 2006 |