Minutes of the Archives Partnership Trust
Investment Committee Meeting
10:00am, January 16, 2013
Cultural Education Center, Room 11G, Albany, NY

Investment Committee Members Present

Barbara Brinkley, Board Treasurer and Committee Chair; John Hanna, Jr., Board Chair; and Stephen Pagano (all attending telephonically)

Staff Present

Christine W. Ward, Assistant Commissioner for the State Archives and Trust Executive Officer; Robert Bullock, Trust President; and Jill Rydberg, Board Assistant Treasurer and Administrative Officer/Director of Prospect Research

Others Present

Paul Murray, First Vice President, Investments, Janney Montgomery Scott LLC (attending telephonically)

Investment Committee Members Excused

Harold N. Iselin and Rosemary Vietor.

Call to Order

Ms. Brinkley called the meeting of the Investment Committee to order at 10:06am, noting the presence of a quorum.  She invited Mr. Murray to begin with his report.

Review of Portfolio Performance for the Last Quarter and Investment Distribution as a Result of Market Performance

Mr. Murray noted that no portfolio changes have been made since the last meeting. Reviewing the Executive Summary page of the Portfolio Review he reported that as of December 31, 2012:

  • Portfolio Composition was 5.49% in cash equivalents (cash and fixed income or securities that will mature in the next six months), 68.55% in equities (stock mutual funds and stock index exchange traded funds), 22.19% in fixed income (remainder of laddered bonds and CDs, and the bond funds), and 3.78% in multi-asset holdings (e.g., mutual funds that are composed of multiple asset classes).
  • Performance of the Trust’s portfolio vs selected benchmarks for the 4th quarter 2012, year-to-date, and since 12/31/2006 respectively:
      • 1.78%, 11.70%, and 3.44% for the Trust’s Portfolio
      • 1.58%, 12.51%, and 4.19% for the Blended Benchmark Portfolio (33% BarcAgg; 35% MSCI; 34% Russ2000).  Mr. Murray noted the Trust’s portfolio is probably a bit more conservative than the blended benchmark portfolio.
      • 0.21%, 4.22%, and 6.12% for Barclays Capital Aggregate Bond Index
      • -0.38%, 15.98%, and 2.29% for S&P 500 Composite Total Return
      • 0.02%, 0.11%, and 0.97% for 3-month yield T-Bill
  • Activity Summary:  the account’s value was $3,446,166, a decrease of $84,297 for the quarter, with a net flow of -$143,846 (deposits less withdrawals) and total earnings of $59,549 ($32,160 earned income and $27,388 change in market value).  For the year-to-date, the account’s value was an increase of $86,510, with a net flow of -$286,462 (deposits less withdrawals) and total earnings of $372,972 ($72,397 earned income and $300,575 change in market value).  He noted that even with the withdrawals, the portfolio managed to grow in value for the year.

Mr. Murray said even with the portfolio running about 70%-72% in equities it is a conservative equity portfolio, that he would not expect it to track a growth portfolio, and noted performance was comparatively good for the 4th quarter.  He said stocks showed a good year, although there was pull-back in the 4th quarter (due to uncertainty related to the elections and the fiscal cliff). Also that investors’ appetite for yield and growth – and general appetite for better returns than CDs and cash – were the main reasons equity markets were so strong in 2012. The 3-month T-Bill yield illustrates how low interest rates remain, and he anticipates rates to remain low for a year or two, until there are signs that the economy is stabilizing and growing.  The low interest rates are fueling the market – the 1.8% yield of the 10-year Treasury is hardly enough to keep up with normal inflation, so it sets things up well for stocks.  Investors with a tolerance for short-term risk are buying good blue chip companies like Johnson & Johnson (3.5% dividend yield), the same types of high quality companies American Funds Group is buying.

Ms. Brinkley asked how a single stock, such as Apple, influences the indices as well as the Trust’s portfolio.  Mr. Murray explained that indices are calculated based on a market cap weighting, and as one of the world’s most valuable companies, a stock like Apple having a high market cap will count more in an overall index resulting in one stock having the potential to skew the numbers.  For example, if a stock comprises 15.0% of an index, then the price of that stock can influence the direction of the index.  This is the reason it is rare to find a mutual fund with a 15.0% exposure to any one stock, and the American Funds Group tends to not have more than 5.0% of any one stock in a mutual fund’s portfolio. An index can have the larger exposure as it has no parameters. Apple is a component of Growth Fund of America, but only about 4.0% to 5.0% of the portfolio.  So if one is looking to measure the American Fund’s Growth Fund of America against the NASDAQ, it is not an apples-to-apples comparison.

Mutual Funds - Growth and Reasonable Safety

Mr. Murray noted that no changes to the mutual funds have been made recently.  He said the Morningstar report – which is widely accepted for its reports and services – shows how each of the Trust’s mutual fund components performed in 2012, as well as over the preceding 3-, 5-, and 10-year periods.  While Morningstar’s ratings are performance-based, he likes to look at risk-adjusted returns.

Mr. Murray highlighted:

  • All of the mutual funds in the Trust’s portfolio ranged from 3- to 5-star ratings.
  • Three of the Trust’s mutual funds (SMALLCAP World, New Perspectives, and Growth Fund of America) returned over 20.0% in 2012.
  • Growth Fund of America was up 16.92% YTD, fueled by technology stocks including Apple, Google, Microsoft, and Cisco.
  • SMALLCAP World and New Perspectives benefited from a bounce-back in European markets, as did New World and Capital Income Builder.
  • Risk has been rewarded with the above funds.
  • The domestic market funds did well, with the lowest – American Mutual – having a return of 12.33%.
  • The bond funds are performing as expected given the year we had, and are in the portfolio to protect against market volatility.
  • The Morningstar report includes the SPDR Gold Shares and Market Vectors Gold Miners ETF for informational purposes only as while they are not currently held in the Trust’s portfolio, they had been discussed at the previous Committee meeting.

Mr. Murray said his Quick View report expands on asset allocation.  He noted the Vanguard Short-Term Bond Fund has been a good place to park cash as it has been bringing in returns of 2.0%-2.5% annually.  Emphasis has been, and will continue to be, on large U.S. stocks and this report shows a little over 40.0% of the Trust’s portfolio is in this large cap segment of the market.

Review of Bond Performance 

Bonds/CDs Called

Mr. Murray reported that no bonds had been called during the quarter; however he suspects there is a high probability the GE Capital Corp bond may be called in February 2013.  While not due until 2016, the bond (purchased in 2003) is callable in 10 years.  Ms. Brinkley asked if the bond is callable at par or premium.  Mr. Murray said at par.

Bonds/CDs Matured/Maturing

Mr. Murray noted the $50,000 GE Company Note bond matures in February 2013 and the $50,000 GE Money Bank CD matures in May 2013. 

Bond Ratings/Investment Changes

Mr. Murray reported that no bond ratings had been downgraded during the quarter. 

Fulfillment of Bond/CD Safety and Yield Goals

Mr. Murray said that the bonds currently held continue to fulfill safety goals (FDIC-insured CDs or investment grade corporate bonds rated A or better) and yield goals.

Cash Available vs. Cash Flow Needs

As noted in the agenda, at December 30, 2012, there was $137,075 in cash, with commitments of $86,142, leaving $50,933 available for potential investing.  Mr. Murray reported between the current cash, the two $50,000 maturing bond and CD, and the possible calling of the GE bond that would bring total cash to about $300,000 by early May.  Ms. Rydberg said with to the current $86,142 in commitments, upcoming expenses, and the drawdown of the coming fiscal year (beginning April 2013) about $144,000 (likely needed earlier in the fiscal year than in the past), she was uncertain what would remain potentially available for investing.  Mr. Murray estimated most of the current and February cash would likely be needed within 6 months and as such recommended leaving that cash in the money market, and to discuss at the April 17, 2013, Committee meeting investing remaining cash not needed for more than 6 months.  Ms. Rydberg will provide Mr. Murray a cash-needs timeline by mid-February in order to determine what cash may be available for investment.

Endowment Balance and Quality

Mr. Murray said:

  • He was comfortable with the current allocation and therefore did not recommend any changes at this time.
  • 72.0% in exposure to equities is the most the Trust’s portfolio has had, but many of Janney’s portfolios are over-weighted in equities as investors are looking for yields.  He wants to make sure the Committee is comfortable with the current exposure, yet doesn’t want to get too far away from the goal of a portfolio balanced between equities and fixed income.  There just are not good investment options for sitting on the sidelines, but in the meantime the Trust has a good risk-adjusted portfolio.
  • With cash flow needs and maturing bonds/CDs, the portfolio will be losing a good portion of its fixed income holdings in the coming months.
  • Bonds used to be a place to hide during volatile times, however even A and AA-rated corporate bonds are yielding less than 2.0%.
  • Eventually interest rates will go up and the Trust’s portfolio can be rebalanced when times are better.
  • He would expect some market volatility as Washington discusses the debt limit.

The Committee concurred it was in agreement with the portfolio’s current allocation and Mr. Murray’s recommendations.  If there is a need to make any changes to the portfolio, a special meeting can always be scheduled.


Ms. Brinkley noted the Investment Committee was next scheduled to meet at 10:00am on April 17, 2013.

A motion to adjourn the meeting was made by Mr. Hanna, seconded by Mr. Pagano, and unanimously passed. Ms. Brinkley adjourned the meeting at 10:47 am and thanked all for their participation.

Respectfully submitted,

Jill A. Rydberg
Assistant Treasurer
January 23, 2013