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Part 1 Plans, Programs, and the Board of Pensions Balanced Investment Portfolio. 2011 Multiple Investment Programs. Independent plans/programs Diverse funding sources Distinct portfolios Separate accounting. Dues-Based Programs. 31.5% Dues. Pension, Death and Disability. Medical.

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Part 1 plans programs and the board of pensions balanced investment portfolio l.jpg
Part 1Plans, Programs, and the Board of Pensions Balanced Investment Portfolio


2011 multiple investment programs l.jpg
2011 Multiple Investment Programs

  • Independent plans/programs

  • Diverse funding sources

  • Distinct portfolios

  • Separate accounting


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Dues-Based Programs

31.5% Dues

Pension, Death

and Disability

Medical

Board of Pensions

19.5% Dues

12% Dues

Benefit Payments to Members

Short-term

Investments

Short-term

Investments

Board of Pensions Balanced Investment Portfolio


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Investment Structure

U.S. Stocks

International

Stocks

Fixed Income

Alternatives

Pension

Death & Disability

Assistance Programs

Endowment

Restricted Gifts/Other Programs

Board of Pensions

Balanced Investment

Portfolio


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A Portfolio that Reflects the Values of the Presbyterian Church (U.S.A.)

  • Two voting members on Mission Responsibility Through Investment (MRTI)

  • Divestment program of the PCUSA

  • Shareholder resolutions

  • Proactive proxy voting


Part 2 2010 investment overview and performance l.jpg
Part 22010 Investment Overview and Performance



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2010 Global Market Performance

Treasuries sell off

Long Treasury bonds rally

2009 equity rally continues

Russell 3000 peaks on 4/23/10

19%

17%

17%

13%

9%

8%

Commodities lead huge risk asset rally

Equity markets sell off

~ All indices include dividends; high yield bonds and long U.S. Treasuries use ETF index values ~


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2010 U.S. Equity Market Performance

Small stocks surge

Small value stocks gain 22%

Small growth stocks up 34% since August 31

29%

Large stocks perform better during selloff

25%

17%

16%

~ All indices include dividends; high yield bonds and long U.S. Treasuries use ETF index values ~


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Returns of Market Indices and Board of Pensions Balanced Investment Portfolio2010

Source: MSCI (net)


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Board of Pensions Balanced Investment Portfolio Investment PortfolioDecember 31, 2010


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Part 3: A Time Traveler Investment Portfolio

Back 200

Forward 50

Proverbs, Shakespeare, Malthus, Smith, and Butterfly Wings

Interconnected Global Markets

in 2011


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Demographics - Investment PortfolioWhy It Matters

D- Drinking water, discount rates, debts, deficits

E-Economic growth, emerging markets, social equality

M- Mortality, longevity risk, mega-cities

O- Organizational structure and behaviors, outsourcing

G- Geopolitical risks, genomics, global labor force

R- Retirement, real estate, resource allocation

A- Asset prices, asset allocation

P- Pensions, pharmaceuticals

H- Health, housing

I- Inflation, information technology, infrastructure

C- Climate, countries, commodities, communications

S- Societal structures, investment sectors


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“A foolish man devours all he has” Investment Portfolio

Proverbs 21:20


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“Neither a borrower nor a lender be,

For loan oft loses both itself and friend,

And borrowing dulls the edge of husbandry.”


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Malthus Investment Portfolio

Food, Glorious Food

Smith

Debt, Devious Debt


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The Outlook for the Future of Food Investment Portfolio

“The power of population is indefinitely greater than the power in the earth to produce subsistence for man.”

The Reverend Thomas Robert Malthus,

An Essay on the Principle of Population, 1798


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Global Yield Growth Investment Portfolio

Source: The Economist


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Price Change in Selected Commodities Investment Portfolio

One year ended February 28, 2011

US Stocks:

23%

US Bonds:

5%

Source: Bloomberg


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Food, Revolutionary Food Investment Portfolio

“Let them eat cake”

Attributed to Marie-Antoinette, 1791


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Impact of Food on Inflation Investment Portfolio

Source: Bridgewater


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The Outlook for the Future of Debt Investment Portfolio

“Ordinary expenses ought to be equal to ordinary revenue, and it is well if it does not frequently exceed it.”

Adam Smith, Philosopher

Wealth of Nations, 1776


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Sovereign Debt and Deficits Investment PortfolioYear end 2010

Source: Bloomberg, IMF, Colchester


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Sovereign Debt Risk Investment Portfolio

Improved

Worsened

Source: The Economist


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Sovereign Debt and GDP Investment Portfolio

(Bubble size illustrates population)

Poorer

Richer

More debt

Japan

Greece

Italy

Turkey

U.S.

Singapore

India

Ireland

Egypt

France

Portugal

Brazil

Germany

Vietnam

Philippines

Pakistan

Bangladesh

Ethiopia

Indonesia

UK

Netherlands

Malaysia

Norway

Spain

Poland

Denmark

Argentina

Mexico

Canada

Taiwan

Saudi

Venezuela

Hong Kong

Less debt

Australia

S Korea

Russia

Iran

Nigeria

Algeria

China

South Africa

Source: CIA World Factbook, 2010 levels


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The Butterfly Effect Investment Portfolio

“The flapping of a butterfly’s wings might create a minuscule disturbance that, in the chaotic motion of the atmosphere…change the large scale atmospheric motion.”

Edward Lorenz,

Meteorologist

Chaos Theory, 1963


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Global Population Growth through a Presbyterian Historical Lens

UPCUSA forms

1958

Book of Confessions

1967

Reunion

PCUSA 1983

John Calvin born

1509

Fund for

Pious Uses

1717

First GA

Phila, PA

Global population (billions)

1789

Moses born

c1250 BC

North-South

split

GreatPyramids

c2500 BC

Birth of

Christ

1861

Rome

c750 BC

Noah born

c3000 BC

1 AD

1000

1750 - 1900

1950 - 2010

70000 BC – 500 BC

Source: Wikipedia, Presbyterian Historical Society, spiritrestoration.org


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Global Population Growth Lens

20 yrs

14 yrs

12 yrs

12 yrs

13 yrs

14 yrs

33 years

123 years

1804

1927

1960

74

87

99

2011

25(E)

45(E)

Source: Wikipedia


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Gross Domestic Product Lens

Per Capita Levels and 5-Year Growth

2004 - 2009

Source: World Bank, Purchasing Power Parity Basis


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The World’s Most Populated Countries - 2010 Lens

Rest of World

Russia

Bangladesh

Japan

Nigeria

Brazil

Pakistan

U.S.

India

Indonesia

The ten most populated countries account for almost 60% of the world’s nearly 7 billion people

China

Source: Wikipedia


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The World’s Most Populated Countries - 2050 Lens

Rest of World

Ethiopia

Congo

Bangladesh

Brazil

Nigeria

Indonesia

U.S.

Pakistan

China

By 2050, the ten most populated countries are expected to account for about 55% of the world’s

more than 9 billion people.

India

Source: World Population Prospects, the 2008 Revision


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Global Population by Region Lens

Global population (billions)

Source: UN, 2008 estimates


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Estimated Population Growth Lens

2000 to 2050

Global population growth

Source: UN, 2008 estimates



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The Investing Cycle Lens

Point of maximum financial risk

Euphoria

Anxiety

Thrill

Denial

Point of maximum financial opportunity

Fear

Excitement

Desperation

Optimism

Optimism

Panic

Relief

Hope

Capitulation

Depression

Despondency


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January 1, 2001-December 31, 2010 LensTen-Year Annualized Investment Returns

%

  • U.S. Large Growth Stocks 0.0

  • S&P 500 Stock Index 1.4

  • Developed Mkts Int’l Stocks 3.9

  • U.S. Govt and Corp Bonds 5.8

  • U.S. Small Value Stocks 8.4

  • Emerging Markets Bonds 10.9

  • Emerging Markets Stocks 16.2


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The Importance of Diversification Lens

Data: S&P 500, DJ U.S. Completion TSM, MSCI EAFE, MSCI EM, Barclays Capital Government/Credit


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Where are We Today? Lens

The Outlook for 2011

  • Challenging year for investors

    • Fragile U.S. economy

    • Global economic and political instability

    • Natural disasters of epic proportions

  • Interest rates and inflation will increase


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Outlook Lensfor 2011

  • Selective investments in credit and distressed debt remain attractive

  • U.S. stocks should outperform international developed markets

  • Emerging market stocks and bonds will provide superior long-term returns

  • Inflation protection and real return strategies continue to be implemented


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1939 - A Great Church Now Maintains Lens

A Great Pension Program

The Annual Report of the Board of Pensions of the Presbyterian Church in the United States of America 1939

2011 - Secure Benefits in Uncertain Times


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