Annual Presentation by Fred Alger Management, Inc. – Large-Cap Growth Manager (April 13, 2016, Regular Retirement Board Meeting)
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Item No. 14: Annual Presentation by Fred Alger Management, Inc. – Large-Cap Growth Manager (April 13, 2016, Regular Retirement Board Meeting) INVESTMENT MANAGER SUMMARY MANAGEMENT Firm Name Fred Alger & Company, Inc. Manager Tenure with Fund 12 Years Investment Strategy/Vehicle Large-Cap Growth Equity Contract Expiration 07/31/2018 ASSETS Total Firm AUM (12/31/2015) $22.1 Billion Total Firm Assets in Strategy (12/31/2015) $863.7 Million Total Assets Managed for WPERP (02/29/16) RP - $407.2 Million HP - $68.4 Million PERFORMANCE As of 02/29/2016 1 Year 3 Year 5 Year Inception Fred Alger LCG (gross) -12.15% 10.67% 7.79% 7.59% Fred Alger LCG (est. net) -12.40% 10.36% 7.48% 7.23% Russell 1000 Growth Index -5.05% 12.54% 10.95% 7.31% Difference (net of fees) -7.35% -2.18% -3.47% -0.08% FEES Schedule 28.5 bps on all assets WATCH STATUS Recommended for short-term performance watch status April 13, 2016. 14 Los Angeles Department of Water & Power April 13, 2016 Los Angeles Department of Water & Power Table of Contents 1. Company Overview 2. Investment Process and Discipline 3. Market Overview 4. Performance Review 5. Portfolio Review and Characteristics 6. Fee Schedule 7. Additional Information and Disclosure 8. Appendix 9. Glossary of Investment Terms For Institutional Presentation Purposes Only. Not for Distribution to the Public. Presenters’ Biographies Daniel C. Chung, CFA® Chief Executive Officer, Chief Investment Officer, Portfolio Manager Daniel C. Chung is Chief Executive Officer, Chief Investment Officer and Portfolio Manager of several Alger strategies. Dan joined Alger in 1994 and has 22 years of investment experience. He was named Chief Investment Officer in September 2001, President in 2003, and CEO in 2006. Dan graduated from Stanford University with B.A. and B.S. degrees, with Distinction and Phi Beta Kappa, in 1984. He earned his J.D. magna cum laude from Harvard Law School in 1987, where he was an editor of the Harvard Law Review. After law school, he served as law clerk for the Honorable Justice Anthony M. Kennedy, United States Supreme Court. He joined Simpson Thacher & Bartlett LLP in New York City in 1989 and earned an L.L.M. from New York University. Dan is a CFA charterholder and a member of the CFA Institute. Throughout his tenure at Alger, Dan has made numerous TV appearances on Bloomberg, CNBC, and Fox Business. Dan has also been featured and quoted frequently in Barron’s, Citywire, Forbes, Investment News, Pensions & Investments, USA Today, and the Wall Street Journal. Peter Latara Senior Vice President, Institutional Sales & Service Peter Latara is Senior Vice President in Institutional Sales & Service. He joined Alger in 2004 and has 19 years of experience. Peter develops and manages relationships with both potential and existing institutional clients. He started his career at Alger as Vice President in Institutional Sales, where he was primarily responsible for relationship management as well as leading our initiatives in the middle market. Before joining Alger, he was with Gabelli Asset Management for over eight years and was a major contributor to their institutional business and closed-end fund business. Previously, Peter was with Black, Manafort, Stone & Kelly and at Alliance Capital Management Corp. He earned a B.A. in Economics/Political Science from Emory University and an M.B.A. in Finance from the University of Maryland Robert H. Smith School of Business. For Institutional Presentation Purposes Only. Not for Distribution to the Public. 1.0 Company Overview Fred Alger Management, Inc. Mandate: • Hired in February 2004 to run a Large Cap Growth Equity mandate Firm: We believe that the greatest opportunity for superior returns comes from a portfolio comprised of dynamically changing and fast-growing companies We seek to uncover these opportunities through our: • Singular focus on growth investing • Vibrant, fundamental research-intensive culture • Consistent process, time-tested for over 50 years For Institutional Presentation Purposes Only. Not for Distribution to the Public. 1.1 Total Assets Under Management As of 12/31/15 Alger Strategy Institutional/Offshore Intermediary Total Category • Capital Appreciation • Capital Appreciation Focus Large Cap • Growth & Income $10,449 $8,867 $19,317 • Large Cap Growth • Spectra • Mid Cap Focus Mid Cap • Mid Cap Growth $339 $733 $1,071 • SMid Cap Growth • Small Cap Focus $555 $325 $879 Small Cap • Small Cap Growth • Emerging Markets International • Global Growth $31 $285 $316 • International Growth • Dynamic Opportunities $64 $120 $184 Alternatives (Long/Short) • Balanced • Green $75 $272 $347 Specialty • Health Sciences • Other $11,514 $10,601 $22,115 Numbers may not add up to totals exactly due to rounding. For Institutional Presentation Purposes Only. Not for Distribution to the Public. 1.2 Company Overview Organizational Structure Ownership Alger Associates, Inc. is 100% owned by members of the Alger family. Alger Associates, Inc. is the owner of 100% of the shares of Fred Alger Management, Inc., which was formed in 1964. In addition, Alger has created various programs that allow key employees to participate in the long-term financial success of the Firm. These programs are The Alger Partners Plan and The Alger Profit Participation Plan. The Alger Partners Plan was approved by the Board on December 31, 2009 and, collectively for all participants, represents over 15% of the value of the Firm. Current members of The Alger Partners Plan include Dan Chung, CFA, CEO, CIO, Portfolio Manager; Ankur Crawford, Ph.D., Senior Analyst, Portfolio Manager; Jill Greenwald, CFA, Portfolio Manager; Patrick Kelly, CFA, Portfolio Manager, Head of Alger Capital Appreciation & Spectra Strategies; Hal Liebes, COO, Chief Legal Officer; and James Tambone, Chief Distribution Officer. The Alger Profit Participation Plan allows key Alger employees to create personal wealth from the growth in Alger by participating in the Firm’s investment and earnings results. Currently, approximately 34% of Alger’s employees participate in the program including all senior investment team members. Organizational Structure Fred Alger Management, Inc. is led by the following executive officers: • Daniel C. Chung, CFA, Chief Executive Officer and Chief Investment Officer • Hal Liebes, Chief Operating Officer and Chief Legal Officer • James Tambone, Chief Distribution Officer • Robert Kincel, Chief Financial Officer • Patrick Murphy, Chief Compliance Officer • Robert Isacco, Director of Human Resources 1.3 Alger’s Senior Investment Professionals Daniel C. Chung, CFA CEO, Chief Investment Officer 21 Years of Experience Jill Greenwald, CFA* Pedro Marcal Kevin D. Collins, CFA EVP, Portfolio Manager SVP, Portfolio Manager SVP, Client Portfolio Manager 29 Years of Experience 26 Years of Experience 23 Years of Experience Patrick Kelly, CFA Deborah Vélez Medenica, CFA William Rechter, CFA EVP, Portfolio Manager, Head SVP, Portfolio Manager SVP, Client Portfolio Manager of Alger Capital Appreciation 19 Years of Experience 44 Years of Experience and Spectra Strategies 18 Years of Experience Gregory S. Adams, CFA Amy Y. Zhang, CFA SVP, Portfolio Manager, SVP, Portfolio Manager Director of Quantitative 18 Years of Experience & Risk Management 28 Years of Experience Ankur Crawford, Ph.D. SVP, Senior Analyst, Portfolio Manager 11 Years of Experience As of 3/15/16. *On temporary medical leave. For Institutional Presentation Purposes Only. Not for Distribution to the Public. 1.4 Research Is the Foundation of Our Investment Process A Deep and Experienced Research Team Industry/Sector and Country/Regional Expertise Average Years Role Total Number Research Team Coverage of Experience Technology/Telecom Senior Analyst 7 18 Consumer Health Care Analyst 15 15 Industrials Energy/Materials/Utilities Associate Analyst 5 9 Financials Developed Non-U.S. Markets Emerging Markets Research Associate 6 1 Generalists • One team, one process, supporting all portfolios • Broad expertise across the economic spectrum, geography, and market capitalization • Hire passionate, creative, and resilient people • Culture of communication with open-door policy • Diverse academic, financial services, and direct industry fostering continuous collaboration backgrounds • Shared research database and weekly global • Alger Training Program renowned for developing investment team meeting talent in “The Alger Way” As of 3/15/16 For Institutional Presentation Purposes Only. Not for Distribution to the Public. 1.5 A Well-Balanced Array of Clients Assets by Channel Representative Clients Sub-Advisory Corporate Non-U.S. (13%) • ABN AMRO Multi-Manager Funds • Kaiser Permanente • AON Hewitt Group Trust • Navistar, Inc. Foundation/Endowment Socially Responsible Intermediary (51%)†† • Kern Family Foundation • Congregation of Our Lady of the Cenacle • Purdue Research Foundation • Dominican Convent of Our Lady of the Rosary • Saint Thomas Church • Ursuline Sisters of Tildonk • The Lutheran Foundation • Wisdom Charitable Trust Public Funds Institutional (49%)* • City of Lake Worth Employees’ Retirement System • City of Taylor (MI) Police and Fire Retirement System • City of Wichita Retirement Systems • Dallas/Fort Worth International Airport Board • Greater Orlando Aviation Authority Defined Benefit Pension Plan • Kansas City Public School Retirement System • Los Angeles Department of Water & Power Separate Accounts by Client Type • Oklahoma Firefighters Pension & Retirement Fund • Philadelphia Gas Works Socially Responsible (2%) • Riviera