Twele Capital Management, Inc.
ETF Panel Discussion
Introduction
July 23, 2009
By
John A. Twele, CFA, President & CEO
Our Company
Twele Capital Management, Inc. is a Minnesota-based, SEC
Registered Investment Advisor (RIA), founded in 2004,
providing specialized portfolio management services to
individuals, charities, foundations, Taft-Hartley funds and
institutional clients.
The company is a fee-based advisor specializing in Exchange
Traded Fund asset allocation strategies.
Our mission is to help clients accumulate assets utilizing wellproven financial practices that emphasize diversification, risk
controls and low costs/expenses.
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Twele Capital Management, Inc.
Assets Under Management (AUM) *as of 6/30/09
3 employees - home offices.
$160,000,000
Client service and referral
agreement with Professional
Connections, LLC.
$140,000,000
34 clients, 4 institutional.
$100,000,000
Typical portfolios contain 12 –
15 ETF’s.
No individual securities – ETFonly.
$120,000,000
$80,000,000
$60,000,000
$40,000,000
Maximum equity weight: 75%.
$20,000,000
Fees: 40 to 80 bps.
$0
Detailed IPS – required.
Turnover: ~5% - 8% annual.
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Twele Capital Management, Inc.
5 year performance record.
Three composites: Moderate
Income, Moderate Growth and
Aggressive Growth.
Twele Capital Management, Inc.
Composite Total (Gross) Return
Period ended 6.30.2009
$500,000 Minimum.
Composite
YTD
1Year
3 Year*
5 Year*
Charles Schwab Custodian for
all accounts.
Moderate Income
6.35%
-16.79%
-11.04%
6.33%
Moderate Growth
4.06%
-16.59%
-9.65%
9.83%
Aggressive Growth
9.62%
-20.84%
-8.22%
N/A
S&P 500
3.17%
-26.21%
-22.68%
-10.72%
Strategic asset allocation, no
tactical allocations or market
timing.
Rebalancing after significant
market events, or to invest
income and cash flows.
* Time-Weighted Total Returns, not annualized.
Note: See disclaimer and composite descriptions on final page of this presentation.
Maintain approved ranges for
all asset classes.
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ETF’s & The Prudent Investor Act
“ETFs are dream vehicles for fiduciary investors. Certain funds tend to be
extraordinarily well-diversified within the particular asset class each represents.
Moreover, the range of ETF asset classes facilitates that dimension of diversification as
well. The large variety of ETFs allows a trustee or other investor to tailor asset allocation
to the needs of each account with exceptional precision. ETFs have been particularly
important in facilitating the internationalization of fiduciary portfolios. Other advantages of
ETFs include their tax efficiency , pricing transparency, their greater variety, and the
economies of scale that can inhere in their greater size. Moreover, the expense ratios of
ETFs have clustered at the low end by comparison with many competing types of
investments. That’s a fairly impressive set of achievements for fiduciary investors”.
John Langbien, Sterling Professor of Law at Yale University, principal drafter of
the Uniform Prudent Investor Act of 1994. Article: Inside the Prudent Investor Act.
Source: BGI
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ETF’s offer very efficient access to capital
markets
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ETFs are the most efficient, predictable and safest way for fiduciaries
to discharge their responsibilities.
Carefully constructed asset allocations using ETFs that are “actively”
rebalanced achieve “alpha-like” results.
No Fiduciary has ever been sued over assets held in index funds.
ETFs are priced continuously and are completely transparent – index
mutual funds are opaque, realize costly capital gains distributions and
receive end-of day pricing.
Index ETFs have no 12b-1 fees, hidden expenses or conflicts of
interest and can be bought using limit orders – we choose the price we
pay.
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Other Benefits of ETF Portfolios…
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Complete transparency: no stale prices and no need to
externally verify asset values.
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Eliminates the need for costly proxy voting services.
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Dramatically reduces annual audit expenses – a dozen ETFs
versus thousands of securities and manager transactions.
Simplified reporting: no need for multiple custodians or slow,
cumbersome third party reports, such as mutual fund
statements.
Top quartile performance against active managers – in recent
years, top decile performance.
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Disclaimer and Notes
Notes:
Twele Capital Management, Inc., has suspended its claim of compliance with the Global Investment Performance Standards (GIPS®) as of September 30, 2008.
Twele Capital Management, Inc., is an independent investment management firm incorporated in Minnesota and established in 2004.
Twele Capital Management manages a variety of low-cost, well-diversified portfolios primarily utilizing Exchange Traded Funds (ETF’s) for institutional and individual clients.
Additional information regarding the firm's policies and procedures for calculating and reporting performance returns is available upon request.
Results are calculated in U.S. dollars on a cash basis. All returns include dividends, interest, unrealized and realized capital gains - total return approach.
Current annual investment advisory fees are as follows:
Assets less than $5.0 million, 0.80%; assets greater than $5.0 million, but less than $10.0 million, 0.60%; and assets above $10.0 million, 0.50%.
Fees are calculated in arrears and deducted quarterly. Fees are negotiable.
Composite Construction Rules:
Composites include all accounts after the completion of their first full quarter, as follows:
At least 60% of the equity assets are invested as per the client's Investment Policy Statement (IPS) for the full period.
The account does not include non-model, non-discretionary equity investments exceeding 5% of initial portfolio assets at the time of account inception.
Institutional accounts with quarter-end inception dates are allowed a grace period of 5 business days to comply with the 60% equity invested rule.
Composite inclusion is based upon the percentage of assets allocated to equities as follows:
Moderate Income Accounts = less than 60% equities (compare to the Conservative Benchmark)
Moderate Growth Accounts = 60% or more equities, but less than 70% (Compare to the Moderate Benchmark).
Aggressive Growth Accounts = 70% or more equities (Compare to the Aggressive Benchmark).
Separate Intervals are calculated to account for significant cash flows comprising 10% or more of a portfolio.
Reference Benchmarks do not include fees of any kind and represent simple reference index portfolios, as follows:
Conservative Simple Benchmark = 30% Dow Jones Total Market Index, 10% MSCI EAFE Index, 45% Lehman Aggregate Bond Index and 15% Goldman Sachs Corp. Bond Index.
Moderate Simple Benchmark = 50% Dow Jones Total Market Index, 10% MSCI EAFE Index, 30% Lehman Aggregate Bond Index and 10% Goldman Sachs Corp. Bond Index
Aggressive Simple Benchmark = 50% Dow Jones Total Market Index, 5% MSCI EAFE Index, 5% MSCI Emerging Market Index, 20% Russell 3000 Growth Index,
10% Lehman Aggregate Bond Index and 10% Goldman Sachs Corp. Bond Index.
Please note: you could lose money with this investment. Past performance is no guarantee of future results. Indexes are not available for investment.
Individual account performance may be greater than or less than the performance of the composite.
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