Friday, April 16, 2010

Low Risk/Low Cost versus High Risk/High Cost

In the 12 months ending December 31, 2009, the S&P 500 index gained 23.5%, moving from 903.25 to 1115.10. At the same time, NYCERS total assets rose by 17.5% from $30.4B to $35.7B driven by the same market rebound.

In particular, NYCERS holdings with its domestic stock indexed managers, and its government and corporate bond managers gained 22.3%, closing the year at $15.5B up from $12.7B. The interesting aspect of this is that NYCERS paid only $1.8M in management fees for this return.

At the same time, the rest of the portfolio returned 16.2% moving from $17.7B to $20.6B. For this performance, NYCERS paid $132.2M.

If the NYCERS trustees had invested the entire portfolio with the indexed stock and the government/corporate bond managers, the portfolio would have been worth $37.2B instead of $35.7B and NYCERS would have saved $130M in fees.

Managers Assets 12/31/2008 Assets 12/31/2009 Return % Fees - 2009
US Stock Index$9.651B$12.333B27.80%$295,108
US Government Bond$1.229B$1.007B-18.03%$261,158
US Corporate Bond$1.794B$2.161B20.48%$1,211,612
Sub-total$12.675B$15.50322.31%$1,767,878
Total Portfolio
Actual Reported $30.396B$35.727B17.54%$134,000,000
Low Risk - Low Cost $30.396B$37.179B22.31%$4,000,000

This is a clear example how a low risk/low cost strategy actually is more profitable than a high risk/high cost strategy. NYCERS makes no attempt to review the effectiveness of its investment decisions.

A note of warning: NYCERS lost $387.2M on its real estate investments in 2009, a 32.7% loss.

2 comments:

Blogger said...

If you want your ex-girlfriend or ex-boyfriend to come crawling back to you on their knees (even if they're dating somebody else now) you must watch this video
right away...

(VIDEO) Get your ex back with TEXT messages?

Blogger said...

eToro is the #1 forex trading platform for new and advanced traders.