DAVID CRAIG:  Welcome to Fund Focus Five.  It’s the week of January 16, and I’m talking with Jim Keegan, Portfolio Manager of the RidgeWorth Total Return Bond Fund, about fourth quarter and 2011 performance.  So Jim, how did the investment grade fixed income market do in the fourth quarter and for the year?

JIM KEEGAN:  Fixed income investment grade market did fine in the first quarter.  You had the key investment grade benchmark, the Lehman (Barclay’s) Aggregate was up just over 1%, 1.12%, and for the year, it was up about 7.84%, so, very, very good year, and Treasuries led the way for the year and had a positive return in the fourth quarter, and the fourth quarter was really, from a capital markets perspective, was about October because that’s where corporate bonds, high yield bonds, CMBS (commercial mortgage-backed securities), and equities outperformed and that really set the tone for the quarter. 

DAVID CRAIG:  Now the Fund had a very good quarter and the year relative to the benchmark.  What led to that outperformance?

JIM KEEGAN:  Well, basically, you’re right, David.  In the fourth quarter, we beat the index by about 43 basis points and then for the year, beat it with a 9.79% return, so almost 200 basis points better than the index, and 300 basis points better than the median fund in the competitive universe.  Really, I think the quarter for us was about our tactical allocation to high yield and security selection within the corporate bond sector, but 2011 was really another example of bond funds not necessarily performing like bond funds, and if you look at the dispersion between returns of the best performing funds and the worst performing funds, it was pretty wide.  So, our alpha, relative to the index and the peer group, was really driven by 50% security selection/strategic positioning and then 50% security selection within the plus sectors that are available to us in the Total Return Bond Fund so tactical allocation and trading of high yield, and then our global strategies generated positive alpha for us. 

DAVID CRAIG:  Okay, great.  Now what were areas that held Fund performance back during the quarter? 

JIM KEEGAN:  We really didn’t have anything hold the performance back.  If there was one thing that was a slight drag on performance, because you remember we outperformed by 43 basis points, it was out exposure to the agency mortgage-backed securities area. 

DAVID CRAIG:  Okay, were there any other highlights during the quarter you want to discuss?

JIM KEEGAN:  Well, I mean, it sounds like a broken record here, but the fourth quarter was much like last year where it was all about Europe and Europe planning to have a plan and it just seemed like there was one summit after another and it almost seemed like the European leadership was meeting weekly, so, I guess if there’s one observation we’ve had, it’s been that it’s probably been a pretty good business to own a catering business in Brussels.

DAVID CRAIG:  Right.  Now what’s your outlook for investment grade bonds in 2012?

JIM KEEGAN:  Well, I mean, our view is that we’ve been on two themes that I think will continue to play out and that’s that we believe rates are going to stay lower for longer, and “safe income at a reasonable price” is the way we are thinking about how we invest.  And lower rates for longer are about the sub-par recovery that we’ve had here in the U.S. and then the pressures being brought on by Europe and the fact that this is a global, synchronized deleveraging cycle that has a long way to play out here, and that if you overlay that or juxtapose that against the zero interest rate policy environment that the Fed has telegraphed that we’re going to be in for at least another two to three years, we believe that there’s going to continue to be demand for investment grade fixed income – so U.S. corporates particularly from our perspective, U.S. non-financial corporates, agency mortgage-backed securities, CMBS, and high yield.  We’re in a world that is starved for income and the demographics are such that we’ve got the start of 78 million baby boomers that are going to be eligible to retire over the next eighteen years, and they have inadequate savings and therefore, we believe, pent up demand to save and we believe that this mantra of “safe income at a reasonable price” is going to continue to benefit the investment grade fixed income markets and the high yield market for those who need more income.  If we need any more evidence of what retail is voting with, just look at the, I think it’s $670 billion that has flowed into taxable bond funds since the beginning of 2009. 

DAVID CRAIG:  Absolutely.  Well Jim, thanks again for your insights.

JIM KEEGAN:  Thank you, David.  

DAVID CRAIG:  It’s the week of January 16, and I’m talking with George Goudelias, portfolio manager of the RidgeWorth Seix Floating Rate High Income Fund about fourth quarter performance.  So George, how did the bank loan market do in the fourth quarter and the year?

GEORGE GOUDELIAS:  The bank loan market rebounded in the fourth quarter after a tough August and September, so the bank loan market, the index was up 2.7%, and the Seix Floating Rate High Income Fund was up 3.27%, so outperforming the benchmark by 57 basis points. 

DAVID CRAIG:  Okay, and what worked specifically for the Fund during the quarter?

GEORGE GOUDELIAS:  I’d say the sectors that performed best were Telecom and Energy, and the sectors that probably lagged the most were Food & Tobacco and Food & Drug, and those are two sectors where we happen to be underweight relative to the index.

DAVID CRAIG:  Okay, and then what didn’t work as well?

GEORGE GOUDELIAS:  What didn’t work as well in the fourth quarter were some of the bond positions that we have, specifically a couple that have exposure to Europe and with all of the sovereign noise that was out there in the fourth quarter.  These companies were performing well; they nonetheless underperformed because of the macro issues.

DAVID CRAIG:  Okay.  And then what’s your outlook for bank loans for 2012?

GEORGE GOUDELIAS:  2012 we’re expecting that to return between 5 and 6%.  With an average coupon right now of just over 5%, naturally a 5% return would just be clipping your coupon; an assumption of 6% would imply some principal return as well, and given that repayments have quickened and were reaching 40% in 2011 from 27% in 2010, and the average price of a loan at roughly 96, there is some opportunity to receive some principal back in addition to the coupon.

DAVID CRAIG:  Okay.  And then over the past twelve to eighteen months, supply has been a concern.  Is supply a concern any more or not?

GEORGE GOUDELIAS:  I would say 2012 will likely see a lower supply in the loan market.  It’s been relatively balanced over the last six months, so the market has seen typically just refinancing opportunities; we’re not getting much in the way of LBO (leveraged buy-out) and not getting much in the way of just strategic financing, so most of the refinancing opportunities are for refi’s of 2013 and 2014 maturity, and because of the benign LBO environment now, we don’t believe issuance will be over $200 billion in the institutional loan market.  

DAVID CRAIG:  All right George.  Well, thanks for your insights.

GEORGE GOUDELIAS:  Thank you, David.   

DAVID CRAIG:  Hello and welcome to Fund Focus Five.  It’s the week of January 16, and I am talking with Brian Nold, portfolio manager of the RidgeWorth High Income Fund, about fourth quarter and 2011, performance.  So Brian, how did the high yield market do in the fourth quarter and for the year?

BRIAN NOLD:  The high yield market rebounded nicely in the fourth quarter after a fairly disappointing third quarter which was trading in conjunction with basically the global equities markets with a risk-off trade in third quarter risk came back into the market in the fourth quarter and high yield performed well.  The high yield market was up a little over 6% for the fourth quarter and that took it for a total return of about 4.5% for the year.  We did see some volatility within the quarter with October being fairly strong.  The month of November was very weak again, but then we rebounded again and finished the year with a solid footing in December which has continued on into January.

DAVID CRAIG:  Okay, and then what specifically worked for the Fund during the quarter?

BRIAN NOLD:  Well, Finance underperformed and that did not help the Fund but we did have numerous individual credit positions that did trade well in the quarter.  There was some benefit from M&A (mergers and acquisitions) activity mostly from investment grade companies coming down and purchasing high yield companies.  We have seen particular activity in the Energy space and would expect that to probably continue into 2012.

DAVID CRAIG:  Okay, and then what didn’t work as well?

BRIAN NOLD:  Well, as I mentioned Finance did not work well for the quarter, but that was really a trend that was there for most of the second half of the year since the summer volatility.  Another sector that was under pressure was Utilities in the high yield market.  That was largely driven by the fairly liquid trading characteristics meaning these bonds trade frequently and they get moved around a lot when there is volatility in the market, but also weakness in natural gas pricing drove some under performance in the utility space.

DAVID CRAIG:  Okay, and then what is your outlook for high yield? 

BRIAN NOLD:  We actually have a fairly positive outlook for high yield going into 2012.  When we look at the bottom-up fundamentals that we are seeing from the companies we follow we are actually seeing very positive trends.  Companies continue to generate strong earnings, generate good free cash flow and are using that free cash flow to generally benefit their credit profile, so they are paying down debt or they are improving liquidity, so fundamentally we’re actually very positive.  The biggest uncertainty that we see is the macro environment whether it is China, Europe, and what implications that may have on U.S. growth given the high yield market is most greatly affected by what is happening here in the U.S., but as of now we do have a positive view on fundamentals.  We would expect probably some spread tightening in the high yield asset class.  That is probably going to be offset slightly by a slight rise in the default rate but nothing too dramatic, so if we saw returns in the general area of where high yield is yielding which is close to 8% as we entered the year.  We would view that as a pretty positive scenario, but one that is definitely possible.

DAVID CRAIG:  Okay, great.   Well Brian, thanks for your insights. 

BRIAN NOLD:  Thank you.

DAVID CRAIG:  Welcome to the Fund Focus Five.  It’s the week of January 16, and I’m talking with Don Wordell, Portfolio Manager of the RidgeWorth Mid-Cap Value Equity Fund about fourth quarter performance.  So Don, how did mid-cap stocks do in the fourth quarter?

DON WORDELL:  Mid-cap stocks did very well in the fourth quarter.  The overall group was up ahead of the S&P 500 for the quarter and it was just a function of getting some relief on the macro front with Europe and with the U.S. economy actually showing some better economic data throughout the end of the quarter.

DAVID CRAIG:  Okay, and the Fund actually had a great quarter relative to the benchmark with both sector allocation and stock selection having positive impacts relative to the benchmark.  Can you first talk about the sector impact?

DON WORDELL:  Sure, I would guess that the sector impact is going to be with Financials and Technology stocks doing very well, plus a rebound in Industrials and Materials.  All the things that you did not want to own over the summer, did very well in the fourth quarter simply because it seems, it appears that the economic data, again, coming out of the U.S., all the macro things that are reported, was better than the market had feared.  Now we’re going go get fundamental looks over the next three weeks when companies report their individual earnings and give us guidance for 2012, but we’re still cautiously optimistic that earnings are in good shape and guidance will be probably at least in line. 

DAVID CRAIG:  Okay, and then stock selection was led by Financials and Technology, which were responsible for some underperformance in the third quarter as you mentioned, they were the key drivers of outperformance in the fourth quarter.  What happened in each of those sectors?

DONALD WORDELL:  Well, sure, so in Financials, again, it comes back to this issue all summer long that was high correlations to Europe.  The European debt issue has not been resolved; however, I think the market is now more comfortable that the leaders in Europe are at least working on a plan to get the situation resolved, get the situation under control, and that gave just some clarity and a bid to the financial stocks which are so universally hated, and so the Financials did very well.  On a stock specific basis, you could just, most of the banks we owned, things like Fifth Third which moved from below $10 to almost $14 a share, things like that, so very big moves on individual stock basis in the fourth quarter.  In Technology, it was really more related to the macro economic data in the U.S.  That data continues to get just to be better than expected, things like ISM (Institute of Supply Manufacturers), manufacturing data, seems to be a bit better.  You’re also getting better consumer data, as well as just we had an okay Christmas holiday season, which is really good for the technology chain.

DAVID CRAIG:  Okay, now the primary detractor from performance was an overweight in telecom.  What was going on in that sector that caused it to underperform?

DONALD WORDELL:  Well, it’s just the reverse.  The Telecom sector did very well on a relative basis in the first nine months of the year.  There was nothing company specific.  It was more when the higher beta sectors or the pro-cyclical sectors do well in Telecom, which is essentially a utility, isn’t going to do as well.  There was nothing fundamental that had an impact there; it was just we were overweight in the telecom sector.  It’s very small.  It’s less than 1% of the benchmark and we’re at 4%, so it looks like a dramatic overweight but it’s really not and those are big yielding stocks we’re very attracted to and we’ve maintained our positions there.  There’s nothing fundamental in telecom that we’re concerned about.

DAVID CRAIG:  Okay, any other highlights during the quarter you want to discuss?

DONALD WORDELL:  Yeah, I thing the interesting thing with the quarter is that this macro economic data.  I think that’s very important.  There were a lot of naysayers over the summer; double dip fears, recession fears, there’s a lot of talk out there that the U.S. economy is really in trouble and that is just, does not seem to be the case.  The recovery from the great recession of 2008 was not as robust as a lot of investors, or even people out there looking for a job might have wanted, but we’re still recovering.  Jobs are being created, the holiday season was okay, and I think that corporate earnings are going to be okay and guidance should be okay for 2012 and looking forward, so we remained cautiously optimistic on the equity markets looking out into 2012, and especially for mid-cap stocks looking out into 2012. 

DAVID CRAIG:  Great.  Alright, well, Don, thanks for your insights.

DONALD WORDELL:  Oh, you’re welcome.

DAVID CRAIG:  Hello, it’s December 19^th and I’m talking with Don Wordell of Ceredex Value Advisors, sub -advisor to the RidgeWorth Mid-Cap Value Equity Fund about what’s going on in the equity markets.  So Don, coming into 2011, you were cautiously optimistic about the equity markets after their strong performance in 2010.  You cited strong corporate balance sheets and earnings.  In hindsight, it turns out that those things just didn’t seem to matter much in 2011, did they?

DON WORDELL:  No, no, strong corporate balance sheets and earnings did not seem to matter.  The macro picture, the issues in Europe, some of the catastrophes that we had earlier in the year with the Japanese tsunami and earthquake, the rhetoric out of Washington, that’s what drove the volatility and equity prices this year.

DAVID CRAIG:  Okay.  Anything else in particular or were those the primary things?

DON WORDELL:  Well, I think the primary thing that really drove it was over the summer.  You know, the first quarter of 2011 everything seemed to be humming along just fine, but we were expecting a little bit better macroeconomic growth out of the U.S. economy.  But as the summer rolled on and we had the debt ceiling debate heat up and the debt downgrade and then people began to refocus on the debt that is strangling the European economies, all the while, China was trying to manufacture either a soft landing, some kind of slow down there.  You know, the market lost a lot of confidence over the summer and so therefore the equity prices really fell out.  Everything that we’ve talked about historically with strong balance sheets and corporate earnings do seem to be in good shape – it’s still there; however, I do believe that looking forward out into 2012, I think it’s going to be more and more difficult to really drive higher, to exceed expectations from an earnings standpoint.

DAVID CRAIG:  Now, you’re particular excited about the prospects for Financials in 2011 in regional banks specifically.  What happened there?

DON WORDELL:  Boy, were we wrong on that call.  You know, when we look at Financials, what happened was the confidence issues of the summer really eroded the ability for these banks to drive loan growth.  There is no loan growth out there for them to get to and the second thing is just the rhetoric around regulatory issues really just continues to be problematic for these banks.  So the regulatory issues, the lack of high quality loan growth, and then just still some of the issues that investors just can’t get their hands around capital and what the ultimate capital levels are going to be required are is causing a big headwind for these banks.

DAVID CRAIG:  Okay.  Now, let’s look ahead to 2012.  Do you think investors will start caring about fundamentals again?

DON WORDELL:  Yeah, they always do.  We’ve always had the short periods of time where the market gets focused in something.  In 1998 and 1999, it was the technology boom and in 2003, you had this low quality rally off the bottom, same thing in the second half of 2009.  But at the end of the day, the market does come back to fundamentals.  I think that in 2011, the correlations within the individual asset classes made it very difficult for folks like us that are stock pickers to differentiate ourselves in the market, but I do believe that investors will come back and look at fundamentals because they always have and they always will which is why we can continue follow our process looking for companies with fundamentals, low expectations where we think the fundamentals are better than the market thinks.

DAVID CRAIG:  Okay.  Now what sectors do you think will have the strongest performance in 2012?

DON WORDELL:  I think you’re going to see strong performance out of some of the Material sectors.  We think you’ll see strong performance in Industrials and Energy.  We continue still to believe that longer term Energy is an excellent place to invest.

DAVID CRAIG:  Okay.  Now what are the biggest risks that you see in 2012?

DON WORDELL:  Right now I think the biggest risk I see is just going to be what kind of confidence does the market have with the election year?  It’s almost what kind of issues are going to be raised.  Is anyone going to have the confidence to make investments in 2012 in front of this election and all of the rhetoric around the election is going to be probably pretty difficult.  That’s probably the biggest risk and then just the continued issues with the European debt situation and then as well as what’s going on in the Chinese economy. So it’s tough to put my finger on one thing, those are probably the top three risks in my mind.

DAVID CRAIG:  Okay.  Alright, well, Don, thanks again for your insights.  

DAVID CRAIG:  Good afternoon.  Welcome to Fixed Income Market Five.  It’s the week of January 2^nd and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and sub-advisor to the RidgeWorth Investment Grade Bond Funds discussing what’s going on in the fixed income market.  So Jim, coming into 2011, you were predicting volatility in the fixed income markets due to the macro issues, and potentially a decline in long-term rates when others were projecting a rising interest rate environment.  Both of those things came to pass, but was it for the reasons you expected?

JIM KEEGAN:  Yeah David.  I’d say generally speaking, our view was correct in the macro forces you were talking about is this continued deleveraging, the fact that the economy was weak in general and that the banking system issues, both here and abroad, were still front and center, and I’d say maybe the sequencing was a little bit off in the sense that we got hit with higher commodity prices early in the year, the weather, the tsunami, but generally speaking, our theme has been and remains we’re in this risk off, risk on environment, zero interest rate policy, the Fed on hold for the next few years, is still in play, and that was our view coming in to 2011, so our investment strategy really comes down to safe income at a reasonable price, and the ability to trade the markets in really 2011, came down to were you positioned properly for the third quarter, and if you were like we were, you won, and if you weren’t, it was pretty costly, but to your point, we expected a coupon clip-type year, which was going to be generated by a carry game rather than a capital appreciation in a range-bound interest rate market and, as you may recall, we felt that the rates market would be range-bound most likely, but if there was a breakout, that it would be to the downside and the way we played the lower rates was really almost an options-like strategy in the sense that we had a yield curve flattener which benefited from the decline in long-range since short rates were so well anchored and where our view really became confirmed was with the major benchmark revisions in GDP that came out in the third quarter, which confirmed our view that the economy remained troubled and that, in fact, the great recession was actually deeper than initially thought and therefore, the recovery weaker and the trajectory of growth less promising.

DAVID CRAIG:  Okay and you mentioned the coupon clip.  You did think at the beginning of the year that 2011 wouldn’t be able to match the strong returns of 2010.  As it turns out, most fixed income sectors had a better 2011.  Why was that? 

JIM KEEGAN:  Well, from a total return perspective, it was actually mixed in the sense that mortgage-backed securities and Treasuries actually had a better 2011 than 2010.  Corporates actually a little bit less, and then CMBS (commercial mortgage-backed securities), which had a gangbuster year in 2010 of being up over 20%, came in at 6%, so it was somewhat mixed.  What we always have to bear in mind is that when corporates and Treasuries with their longer duration will generally outperform the other sectors in a declining interest rate environment like we had last year.  The clear laggered in fixed income in 2011, though was high yield, which came in at just under 5% versus 2010 where it had a total return in excess of 15%. 

DAVID CRAIG:  Okay, now what were some of the other significant things that happened in 2011?

JIM KEEGAN:  Well, I actually was thinking about that and there’s three things that really come to mind from our perspective and they’re not necessarily going to be in order in terms of sequencing, but the U.S. lost its AAA rating from S&P in the beginning of August and just like everybody coming in to 2010 was predicting higher interest rates, even after an S&P downgrade, interest rates only continued to fall.  What’s interesting to note is I’ve been in this business a long time and it seems like every year you come in, everybody’s projecting higher interest rates.  As a matter of fact, I went back and looked at the Wall Street Journal consensus.  Coming in to 2011, the consensus was that we’d end the year at 370 and, in fact, we ended the year under 2%, and then this year coming in to 2012, the Wall Street Journal consensus is looking for 275 on the ten-year by year-end 2012.  We’re going to take the under on that one.  The other thing that comes to mind as being somewhat significant is the Arab Spring which seems has been forgotten, and the reason we think that’s important is that was driven by a lot of confluence of a lot of factors, but the pressure that was put on commodity prices and food prices in particular, were in some ways responsible for some of these governments being overthrown, and served as somewhat of a catalyst to incite the change in changing governments in some African and Middle Eastern regimes, and it’s interesting in that the Fed will argue that QE2 was responsible, or at least partially responsible, for the rise in stock prices and you might remember my comments about the Fed chairman referring to the Russell 2000 when he references QE2, and he cites the rise in stock prices, but yet the Fed completely absolves itself of QE2 having anything to do with commodity price rises, and you can’t pick and choose which one you want to look at here because they are inextricably linked and I would venture to say, we would venture to say that quantitative easing and money printing lifted all asset prices, including commodity prices, and then the last thing that’s related that I’d say was significant in 2011 was the end of QE2 and the market’s misinterpretation of what the end of QE2 meant and again, we’ve talked about this throughout the course of 2011 in the sense that everybody in the consensus was of the view that once you took out the largest buyer of Treasuries, that being the Fed, that interest rates had only one way to go and that was up, and I think what they missed and what we didn’t miss was the fact that people were focused on that part of what QE2 was, but they missed the other part which we felt was more important which was the mechanics of the way quantitative easing works as the Fed goes in and buys Treasuries but infuses cash into the markets which are clearly designed for that cash to go into other risky assets, most prominently stocks, and once you removed that liquidity and cash from the marketplace, that the implications for risky asset prices was that they would come under pressure and wallah, that was the reason that we took our beta down and materially reduced our exposure to financials, and banks in particular, at the end of the second quarter. 

DAVID CRAIG:  Okay.  Now let’s look ahead to 2012.  How do you think the best income markets will perform this year?

JIM KEEGAN:  Well, it’s interesting.  I’ve been doing this long enough that I don’t attempt to predict the future.  That is fraught with peril, but what we do attempt to do is allocate capital based on relative values in the context of the macroeconomic and geopolitical environment so, if we look at 2012, let’s start with interest rates.  We have been and remain of the view that interest rates will remain lower for longer.  That has been our view.  We continue to see no reason to change that view.  That was a lonely place to be coming in to 2011.  It’s probably not as lonely here at the beginning of 2012, but as I mentioned before, the consensus, as per the Wall Street Journal, is still calling for higher interest rates out the yield curve by year-end 2012.  As far as the yield curve goes, we remain of the view that the yield curve will remain directional, and by that I mean during times when rates are rising, the yield curve will steepen, and during times when rates are falling, the yield curve will flatten.  From a sector perspective for 2012, with the Fed in the zero interest rate policy environment and on hold for what looks like well into 2014 now, the Fed’s are going to be revising their communication strategy with the next FOMC meeting in a couple of weeks, we’ll find out if, in fact, we are right and that they’re going to remain on hold, at least at this point, until 2014.  The need for income is still critically important as real incomes continue to fall.  So, once again, we’re advocating what we call SIRP, which is Safe Income at a Reasonable Price, in a ZIRP world, which is Zero Interest Rate Policy.  Our positioning in this SIRP/ZIRP world, if you will, remains residential mortgage-backed securities (RMBS) are our largest overweight, and we just view agency RMBS as solid income against the front-end of the yield curve, and we remain very comfortable navigating against all the DC policy initiatives that have and will be put in place in the name of trying to help the homeowner.  Second favored largest position for us is the investment grade corporate sector, but our focus remains there in the defensive industrial and utility-type exposures.  We have a modest overweight to CMBS and that’s remained in the seasoned paper near the top of the capital structure, and then finally, we’ve got a neutral position in high yield in the total return fund, and that’s just about generating some income and yield, and at this point, we prefer to own high yield risk in lieu of bank paper, and we say in lieu of U.S. and international bank exposure, given where we are in the credit cycle, and to do that trade, we can actually, we feel more comfortable and we can pick up some yield, so that seems to make a lot of sense to us.

DAVID CRAIG:  Okay, so these are some of the opportunities you see.  What are some of the greatest risks that you see?

JIM KEEGAN:  I tell you, at this point, the greatest risk and the greatest opportunity depend on your view and your perspective.  I would have to say that the number one issue facing the markets in the global environment is the European sovereign debt banking crisis, and I say that that way because they are inextricably linked; that being sovereign debt and the banking crisis over in Europe, because they’re effectively one and the same in the sense that the problem is we have too much debt and too little income, too little economic growth, and once again, policy makers are attempting to solve an insolvency problem with liquidity-type solutions, so you have what boils down to several insolvent banks that are being propped up by several insolvent sovereigns who are being propped up by a highly levered central bank with a balance sheet of questionable collateral, that being the European Central Bank.  So the optimistic view as it relates to Europe is that the ECB will become like the Federal Reserve and start massive money printing operations, but our view at this point is that the bar for the European Central Bank to start to act like the Fed and conduct massive money printing operations is very high and very risky in the sense that the Germans may blink and allow the ECB to print like the Fed, or they may choose to end the monetary experiment, and what I think we need to bear in mind from the American’s perspective, is that money printing and quantitative easing to the Germans is like the Great Depression is to Americans.  It’s just something that is in their psyche that they don’t want to ever face again because money printing from Germany led to the hyper inflation of the 20s and that is in the German psyche just like the Great Depression is to the Americans.  The other risk or opportunity and risk relates to we think the election cycle is going to be very important as it relates to both policy deliberations and decisions here.  Obviously being in the U.S., everyone knows that we have a Presidential Election this year in November, but there are quite a few elections around the globe that are going to be pretty important here.  France has the first round of their elections in April.  Greece is supposed to have an election in February, but that doesn’t look like it’s going to come to pass and the speculation is that they’re postponing that until April.  Russia later this year has an election where Vladimir Putin is going to try and become President again, and what we have to bear in mind is that governments have turned over in all of the European countries that have had elections since the crisis over the last 18 to 24 months, and specifically I’m referring to Ireland, Portugal, Spain.  You know that we have two unelected EU appointed technocrats running Italy and Greece right now.  So, thus far, every government has been overturned by the electorate in Europe and I’d say, Mr. Sarkozy, watch out. 

DAVID CRAIG:  Any final thoughts you want to leave listeners with?

JIM KEEGAN:  We still think it’s an environment where it’s much more important to be focused on the return of capital rather than return on capital, and again, we maintain that the risks are at this point, that we’re going to be in a low return-type environment for the next several years with, and again, I know I sound like a broken record, but this is a deleveraging cycle unlike anything that we’ve seen in the postwar period.  

DAVID CRAIG:  Great, well, Jim, thanks for your insights. 

JIM KEEGAN:  Thank you, David.  

Fixed Income Market 5

DAVID CRAIG:  Good afternoon.  Welcome to Fixed Income Market Five.  It’s the week of January 2^nd and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and sub-advisor to the RidgeWorth Investment Grade Bond Funds discussing what’s going on in the fixed income market.  So Jim, coming into 2011, you were predicting volatility in the fixed income markets due to the macro issues, and potentially a decline in long-term rates when others were projecting a rising interest rate environment.  Both of those things came to pass, but was it for the reasons you expected?

JIM KEEGAN:  Yeah David.  I’d say generally speaking, our view was correct in the macro forces you were talking about is this continued deleveraging, the fact that the economy was weak in general and that the banking system issues, both here and abroad, were still front and center, and I’d say maybe the sequencing was a little bit off in the sense that we got hit with higher commodity prices early in the year, the weather, the tsunami, but generally speaking, our theme has been and remains we’re in this risk off, risk on environment, zero interest rate policy, the Fed on hold for the next few years, is still in play, and that was our view coming in to 2011, so our investment strategy really comes down to safe income at a reasonable price, and the ability to trade the markets in really 2011, came down to were you positioned properly for the third quarter, and if you were like we were, you won, and if you weren’t, it was pretty costly, but to your point, we expected a coupon clip-type year, which was going to be generated by a carry game rather than a capital appreciation in a range-bound interest rate market and, as you may recall, we felt that the rates market would be range-bound most likely, but if there was a breakout, that it would be to the downside and the way we played the lower rates was really almost an options-like strategy in the sense that we had a yield curve flattener which benefited from the decline in long-range since short rates were so well anchored and where our view really became confirmed was with the major benchmark revisions in GDP that came out in the third quarter, which confirmed our view that the economy remained troubled and that, in fact, the great recession was actually deeper than initially thought and therefore, the recovery weaker and the trajectory of growth less promising.

DAVID CRAIG:  Okay and you mentioned the coupon clip.  You did think at the beginning of the year that 2011 wouldn’t be able to match the strong returns of 2010.  As it turns out, most fixed income sectors had a better 2011.  Why was that? 

JIM KEEGAN:  Well, from a total return perspective, it was actually mixed in the sense that mortgage-backed securities and Treasuries actually had a better 2011 than 2010.  Corporates actually a little bit less, and then CMBS (commercial mortgage-backed securities), which had a gangbuster year in 2010 of being up over 20%, came in at 6%, so it was somewhat mixed.  What we always have to bear in mind is that when corporates and Treasuries with their longer duration will generally outperform the other sectors in a declining interest rate environment like we had last year.  The clear laggered in fixed income in 2011, though was high yield, which came in at just under 5% versus 2010 where it had a total return in excess of 15%. 

DAVID CRAIG:  Okay, now what were some of the other significant things that happened in 2011?

JIM KEEGAN:  Well, I actually was thinking about that and there’s three things that really come to mind from our perspective and they’re not necessarily going to be in order in terms of sequencing, but the U.S. lost its AAA rating from S&P in the beginning of August and just like everybody coming in to 2010 was predicting higher interest rates, even after an S&P downgrade, interest rates only continued to fall.  What’s interesting to note is I’ve been in this business a long time and it seems like every year you come in, everybody’s projecting higher interest rates.  As a matter of fact, I went back and looked at the Wall Street Journal consensus.  Coming in to 2011, the consensus was that we’d end the year at 370 and, in fact, we ended the year under 2%, and then this year coming in to 2012, the Wall Street Journal consensus is looking for 275 on the ten-year by year-end 2012.  We’re going to take the under on that one.  The other thing that comes to mind as being somewhat significant is the Arab Spring which seems has been forgotten, and the reason we think that’s important is that was driven by a lot of confluence of a lot of factors, but the pressure that was put on commodity prices and food prices in particular, were in some ways responsible for some of these governments being overthrown, and served as somewhat of a catalyst to incite the change in changing governments in some African and Middle Eastern regimes, and it’s interesting in that the Fed will argue that QE2 was responsible, or at least partially responsible, for the rise in stock prices and you might remember my comments about the Fed chairman referring to the Russell 2000 when he references QE2, and he cites the rise in stock prices, but yet the Fed completely absolves itself of QE2 having anything to do with commodity price rises, and you can’t pick and choose which one you want to look at here because they are inextricably linked and I would venture to say, we would venture to say that quantitative easing and money printing lifted all asset prices, including commodity prices, and then the last thing that’s related that I’d say was significant in 2011 was the end of QE2 and the market’s misinterpretation of what the end of QE2 meant and again, we’ve talked about this throughout the course of 2011 in the sense that everybody in the consensus was of the view that once you took out the largest buyer of Treasuries, that being the Fed, that interest rates had only one way to go and that was up, and I think what they missed and what we didn’t miss was the fact that people were focused on that part of what QE2 was, but they missed the other part which we felt was more important which was the mechanics of the way quantitative easing works as the Fed goes in and buys Treasuries but infuses cash into the markets which are clearly designed for that cash to go into other risky assets, most prominently stocks, and once you removed that liquidity and cash from the marketplace, that the implications for risky asset prices was that they would come under pressure and wallah, that was the reason that we took our beta down and materially reduced our exposure to financials, and banks in particular, at the end of the second quarter. 

DAVID CRAIG:  Okay.  Now let’s look ahead to 2012.  How do you think the best income markets will perform this year?

JIM KEEGAN:  Well, it’s interesting.  I’ve been doing this long enough that I don’t attempt to predict the future.  That is fraught with peril, but what we do attempt to do is allocate capital based on relative values in the context of the macroeconomic and geopolitical environment so, if we look at 2012, let’s start with interest rates.  We have been and remain of the view that interest rates will remain lower for longer.  That has been our view.  We continue to see no reason to change that view.  That was a lonely place to be coming in to 2011.  It’s probably not as lonely here at the beginning of 2012, but as I mentioned before, the consensus, as per the Wall Street Journal, is still calling for higher interest rates out the yield curve by year-end 2012.  As far as the yield curve goes, we remain of the view that the yield curve will remain directional, and by that I mean during times when rates are rising, the yield curve will steepen, and during times when rates are falling, the yield curve will flatten.  From a sector perspective for 2012, with the Fed in the zero interest rate policy environment and on hold for what looks like well into 2014 now, the Fed’s are going to be revising their communication strategy with the next FOMC meeting in a couple of weeks, we’ll find out if, in fact, we are right and that they’re going to remain on hold, at least at this point, until 2014.  The need for income is still critically important as real incomes continue to fall.  So, once again, we’re advocating what we call SIRP, which is Safe Income at a Reasonable Price, in a ZIRP world, which is Zero Interest Rate Policy.  Our positioning in this SIRP/ZIRP world, if you will, remains residential mortgage-backed securities (RMBS) are our largest overweight, and we just view agency RMBS as solid income against the front-end of the yield curve, and we remain very comfortable navigating against all the DC policy initiatives that have and will be put in place in the name of trying to help the homeowner.  Second favored largest position for us is the investment grade corporate sector, but our focus remains there in the defensive industrial and utility-type exposures.  We have a modest overweight to CMBS and that’s remained in the seasoned paper near the top of the capital structure, and then finally, we’ve got a neutral position in high yield in the total return fund, and that’s just about generating some income and yield, and at this point, we prefer to own high yield risk in lieu of bank paper, and we say in lieu of U.S. and international bank exposure, given where we are in the credit cycle, and to do that trade, we can actually, we feel more comfortable and we can pick up some yield, so that seems to make a lot of sense to us.

DAVID CRAIG:  Okay, so these are some of the opportunities you see.  What are some of the greatest risks that you see?

JIM KEEGAN:  I tell you, at this point, the greatest risk and the greatest opportunity depend on your view and your perspective.  I would have to say that the number one issue facing the markets in the global environment is the European sovereign debt banking crisis, and I say that that way because they are inextricably linked; that being sovereign debt and the banking crisis over in Europe, because they’re effectively one and the same in the sense that the problem is we have too much debt and too little income, too little economic growth, and once again, policy makers are attempting to solve an insolvency problem with liquidity-type solutions, so you have what boils down to several insolvent banks that are being propped up by several insolvent sovereigns who are being propped up by a highly levered central bank with a balance sheet of questionable collateral, that being the European Central Bank.  So the optimistic view as it relates to Europe is that the ECB will become like the Federal Reserve and start massive money printing operations, but our view at this point is that the bar for the European Central Bank to start to act like the Fed and conduct massive money printing operations is very high and very risky in the sense that the Germans may blink and allow the ECB to print like the Fed, or they may choose to end the monetary experiment, and what I think we need to bear in mind from the American’s perspective, is that money printing and quantitative easing to the Germans is like the Great Depression is to Americans.  It’s just something that is in their psyche that they don’t want to ever face again because money printing from Germany led to the hyper inflation of the 20s and that is in the German psyche just like the Great Depression is to the Americans.  The other risk or opportunity and risk relates to we think the election cycle is going to be very important as it relates to both policy deliberations and decisions here.  Obviously being in the U.S., everyone knows that we have a Presidential Election this year in November, but there are quite a few elections around the globe that are going to be pretty important here.  France has the first round of their elections in April.  Greece is supposed to have an election in February, but that doesn’t look like it’s going to come to pass and the speculation is that they’re postponing that until April.  Russia later this year has an election where Vladimir Putin is going to try and become President again, and what we have to bear in mind is that governments have turned over in all of the European countries that have had elections since the crisis over the last 18 to 24 months, and specifically I’m referring to Ireland, Portugal, Spain.  You know that we have two unelected EU appointed technocrats running Italy and Greece right now.  So, thus far, every government has been overturned by the electorate in Europe and I’d say, Mr. Sarkozy, watch out. 

DAVID CRAIG:  Any final thoughts you want to leave listeners with?

JIM KEEGAN:  We still think it’s an environment where it’s much more important to be focused on the return of capital rather than return on capital, and again, we maintain that the risks are at this point, that we’re going to be in a low return-type environment for the next several years with, and again, I know I sound like a broken record, but this is a deleveraging cycle unlike anything that we’ve seen in the postwar period. 

DAVID CRAIG:  Great, well, Jim, thanks for your insights. 

JIM KEEGAN:  Thank you, David.

Equity Market 5

DAVID CRAIG:  Hello, it’s December 19^th and I’m talking with Don Wordell of Ceredex Value Advisors, sub -advisor to the RidgeWorth Mid-Cap Value Equity Fund about what’s going on in the equity markets.  So Don, coming into 2011, you were cautiously optimistic about the equity markets after their strong performance in 2010.  You cited strong corporate balance sheets and earnings.  In hindsight, it turns out that those things just didn’t seem to matter much in 2011, did they?

DON WORDELL:  No, no, strong corporate balance sheets and earnings did not seem to matter.  The macro picture, the issues in Europe, some of the catastrophes that we had earlier in the year with the Japanese tsunami and earthquake, the rhetoric out of Washington, that’s what drove the volatility and equity prices this year.

DAVID CRAIG:  Okay.  Anything else in particular or were those the primary things?

DON WORDELL:  Well, I think the primary thing that really drove it was over the summer.  You know, the first quarter of 2011 everything seemed to be humming along just fine, but we were expecting a little bit better macroeconomic growth out of the U.S. economy.  But as the summer rolled on and we had the debt ceiling debate heat up and the debt downgrade and then people began to refocus on the debt that is strangling the European economies, all the while, China was trying to manufacture either a soft landing, some kind of slow down there.  You know, the market lost a lot of confidence over the summer and so therefore the equity prices really fell out.  Everything that we’ve talked about historically with strong balance sheets and corporate earnings do seem to be in good shape – it’s still there; however, I do believe that looking forward out into 2012, I think it’s going to be more and more difficult to really drive higher, to exceed expectations from an earnings standpoint.

DAVID CRAIG:  Now, you’re particular excited about the prospects for Financials in 2011 in regional banks specifically.  What happened there?

DON WORDELL:  Boy, were we wrong on that call.  You know, when we look at Financials, what happened was the confidence issues of the summer really eroded the ability for these banks to drive loan growth.  There is no loan growth out there for them to get to and the second thing is just the rhetoric around regulatory issues really just continues to be problematic for these banks.  So the regulatory issues, the lack of high quality loan growth, and then just still some of the issues that investors just can’t get their hands around capital and what the ultimate capital levels are going to be required are is causing a big headwind for these banks.

DAVID CRAIG:  Okay.  Now, let’s look ahead to 2012.  Do you think investors will start caring about fundamentals again?

DON WORDELL:  Yeah, they always do.  We’ve always had the short periods of time where the market gets focused in something.  In 1998 and 1999, it was the technology boom and in 2003, you had this low quality rally off the bottom, same thing in the second half of 2009.  But at the end of the day, the market does come back to fundamentals.  I think that in 2011, the correlations within the individual asset classes made it very difficult for folks like us that are stock pickers to differentiate ourselves in the market, but I do believe that investors will come back and look at fundamentals because they always have and they always will which is why we can continue follow our process looking for companies with fundamentals, low expectations where we think the fundamentals are better than the market thinks.

DAVID CRAIG:  Okay.  Now what sectors do you think will have the strongest performance in 2012?

DON WORDELL:  I think you’re going to see strong performance out of some of the Material sectors.  We think you’ll see strong performance in Industrials and Energy.  We continue still to believe that longer term Energy is an excellent place to invest. 

DAVID CRAIG:  Okay.  Now what are the biggest risks that you see in 2012?

DON WORDELL:  Right now I think the biggest risk I see is just going to be what kind of confidence does the market have with the election year?  It’s almost what kind of issues are going to be raised.  Is anyone going to have the confidence to make investments in 2012 in front of this election and all of the rhetoric around the election is going to be probably pretty difficult.  That’s probably the biggest risk and then just the continued issues with the European debt situation and then as well as what’s going on in the Chinese economy. So it’s tough to put my finger on one thing, those are probably the top three risks in my mind.

DAVID CRAIG:  Okay.  Alright, well, Don, thanks again for your insights. 

DAVID CRAIG:  Hello and welcome to the Equity Market Five.  It’s December 7^th and I’m talking with Don Wordell with Ceredex Value Advisors, sub-advisor to the RidgeWorth Mid-Cap Value Equity Fund about what’s going on in the equity markets.  So, Don if you look at the 0.22% return for the S&P 500 Index in November, you’d think it was a pretty quiet month for the equity markets.  Was that the case?

DON WORDELL:  Oh, David, I think you know the answer to that question, of course not.  The month of November was another very volatile month in the equity markets.  The continued macro headlines that move the market one way or the other just are frustrating and exhausting but no, it was not at all a quiet month in November. 

DAVID CRAIG:  Now, Consumer Staples and Energy lead the way in the S&P in November.  What is it about those sectors that helped them perform relatively well in such a volatile month? 

DON WORDELL:  You know part of issue for energy was just the big move up in oil prices.  You know, as oil prices move higher because there was seemingly a resolution to the debt problems in Europe which then could get investors focused on global growth resuming then you’d see a big demand for energy.  Then with Consumer Staples, I think you just had a bifurcation in the market and some of the other commodity prices actually eased up which would help the Staples’ earnings because they’ve been really trying to match their pricing with their cost increases.  So, maybe the market was perceiving some help there as well.  It’s all fundamental but the move in oil really helped the energy stocks.

DAVID CRAIG:  Okay.  Now, Financials continue to struggle and gave back nearly 5% in the month.  Why do you think Financials still can’t find their footing?

DON WORDELL:  I think it’s the regulatory environment, the fact that the pressure from the regulatory agencies is just not easing up.  Towards the end of the month we had the indications on the stress test that all the largest banks are going to be put through next year and those stress tests are going to include testing for a sovereign default which is going to put more pressure on the results and then limit the capital return to shareholders that these banks can do.  I really think the regulatory environment is very punitive for these stocks right now. 

DAVID CRAIG:  Okay.  Now, on a positive note the unemployment rate did drop to its lowest level since March of 2009.  Do you think that drop is sustainable?  

DON WORDELL:  Well, you know unfortunately when you peel the onion back and you dig into the numbers, what you find is that the unemployment rate dropped because there were just a large number of folks that just dropped out of the workforce.  They just stopped looking for a job.  So, that skews the number.  Again, I think it comes back to the regulatory environment and confidence and as long as we have this continued class warfare, the heightened political rhetoric, and then the lack of a resolution to the global macro debt issues, I think it’s going to be very hard for the unemployment situation to get much better from here. Although it continues to grow slowly, you really have to dig behind the numbers and see that it’s probably not as good as most investors would like it to be. 

DAVID CRAIG:  Right.  Okay.  Were there any other highlights during the month that you think were worth noting?

DON WORDELL:  Yeah.  I think the biggest highlight was the end of the month.  I think what I want a lot of our clients to focus on is just the negative sentiment.  I know all the things that we’ve talked so far on this call have been somewhat negative and there is such a bearish sentiment out there on the market.  You saw right towards the end of the month what happens when the market got wind that they felt like there would be some kind of resolution in Europe I think we had a huge up-day in the market of almost 500 points.  I think there’s such, such negative sentiment that the market continues to climb that wall of worry and that’s very positive for building positions in stocks.

DAVID CRAIG:  Okay.  Now did anything that happened in November change your short to near term outlook?

DON WORDELL:  No.  Nothing at all that we saw in November would change our outlook.  We’re still, you know, near term we are cautiously optimistic.  We’ve been that way for a long time.  I think that corporate earnings continue to be in good shape.  Balance sheets appear to be in a good shape.  It seems that Europe continues to move ever so slowly towards a resolution but we are closer to one than we were a month ago and that will help the sentiment and help stock prices

DAVID CRAIG:  Great.  Alright, well, Don thanks again for your insights.

DON WORDELL:  Alright David.  

DAVID CRAIG:  Hello, welcome to Style Class Focus Five.  It’s December 7^th, and I’m talking with Michael Sansoterra, Senior Portfolio Manager with Silvant Capital Management subadvisor to the RidgeWorth Large Cap Growth Stock Fund about growth investing.  So Michael when we talked in April, I mentioned that after a pretty long run for value, growth had quietly come back into favor and was leading value over the one, three and five-year time periods according to Russell.  That’s still the case.  Why does growth continue to do well despite all the volatility we’ve seen this year. 

MICHAEL SANSOTERRA:  Thanks David.  You know we think growth stocks have done well primarily based on their scarcity value.  We have found that historically when investors are really struggling to find a place where they feel comfortable, which we’ve definitely seen as volatility has increased, growth stocks typically start to carry a premium to other types of asset classes and to other equities as well.  So, growth stocks in particular that have actually managed through this process pretty well for the last three to five years as the economy has come back from a pretty difficult period and have become more scarce, more difficult to find and therefore have commanded a premium so their performance has done quite well. 

DAVID CRAIG:  Okay.  Do you think growth still has room to run? 

MICHAEL SANSOTERRA:  You know we do.  We look at the reasons why those companies have done well and that’s really on a fundamental company by company basis and despite the macro fears and particularly the concerns around Europe, we’ve seen those companies continue to execute.  The companies that we own typically are beating investor expectations and are doing so by raising their revenue and earnings, are doing so by having pricing power, sometimes by taking market share and the trends in those companies we believe have continued not only in the last year but really even in the last quarter.  The data from the last quarter suggested pretty solid fundamental results from these types of companies and that typically means those performing shares can continue to outperform.  

DAVID CRAIG:  Now even though growth has done well, according to Morningstar through October the large growth category had nearly four times the outflows of large value year to date.  Why do you think that’s the case? 

MICHAEL SANSOTERRA:  Well I think broadly speaking from an equity perspective investors are still extremely fearful of equity markets and no surprise, the recession in 2008 and 2009 was very severe, arguably one of the most severe we’ve ever seen and that has really spooked investors from a sentiment perspective.  We see sentiment very, very poorly.  Folks are just terrified and when they’re terrified what do they do?  They put their money in fixed income which we’ve seen lots and lots of inflows in bond markets and to a lesser extent in dividend paying stocks, the stocks you find in typical value products.  So, no surprise that outflows on the margin have been out of riskier assets and into ones that make folks sleep at night a little better. 

DAVID CRAIG:  Now how have the European issues impacted the way you invest? 

MICHAEL SANSOTERRA:  We’re looking at the types of exposures all the time and I would say on the margin we have over the last few quarters lowered our exposure to Western Europe from a consumer perspective recognizing that some of the stocks we own do sell largely into Europe and we wanted to make certain that those risk adjusted weightings were appropriate and we’ve taken some of our growth expectations with those assets and expanded them into different parts of the world, emerging markets, some U.S. domestic but it’s really marginal.  Actually, we’re company by company.  We’re ground up in very fundamental specifics so we don’t make big macro calls.  I would say on the margin we have a little less exposure in Europe today than we did perhaps three to six months ago but it’s very marginal.  Ultimately the companies we own we believe can continue to outperform based on their fundamentals company by company.

DAVID CRAIG:  And what would your advice be to long-term investors?

MICHAEL SANSOTERRA:  For long-term investors, clearly this has been a challenging period.  We would tell them to stay the course.  We look at volatility even today over the last rolling 21-day period you’re talking about a three standard deviation moving volatility.  We’re seeing some of the highest volatility these markets have ever seen over the last 30 years.  We’re seeing equity valuations very reasonable twelve times forward earnings, twelve and a half times sort of a twelve month rolling forward earnings.  So, not expensive equities, a lot of fear in the market, very tough sentiment.  This is when you actually should be adding to equity.  This is when you should be staying the course.  It’s the tough time.  It’s the scary time but long-term investors should really keep their eye on their long-term asset expectations.  You’re not going to get fantastic results from bonds.  You’ve got opportunities.  You just need to recognize that times are going to be tough for a little while.  The volatility will be high but ultimately longer term we believe growth equities will actually do well for the next three to five years. 

DAVID CRAIG:  Great.  All right Michael, thanks for your insights. 

MICHAEL SANSOTERRA:  Appreciate it.  Thanks David. 

DAVID CRAIG:  Welcome to Fixed Income Market Five.  It’s December 7^th, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and subadviser of the Ridgeworth Investment Grade Bond Funds, discussing what’s going on with the fixed income market.  So, Jim, in our July Fixed Income Market Five, you said that you thought June was a brutally binary month.  It seems that it applies to November as well.

JIM KEEGAN:  November was incredibly binary, David.  If you recall, we came into the month, it started with the surprise referendum that Greece was going to hold on the bail-out package.  Then Greece was threatened by the EU, that they’d be thrown out of the Euro potentially and that only to be followed by a political crisis in Italy which led to within two weeks two democratically-elected prime ministers ousted by unelected bureaucrats in Brussels only to be replaced by two unelected technocrats that have connections to the experiment knows as the Euro.  That got the markets obviously bothered to the downside as it relates to risk assets.  All risk was off for most of the month and then towards the end of the month and the last day of the month in particular where you saw risk assets rally led by stocks which were up over 4% on the coordinated action by the Fed and five other central banks to reduce the rate on dollar swap lines to foreign banks and extending the program by six months out to February of 2012.  It was just that global coordinated central bank action which had a big effect on risk assets.  Ultimately all they did was reduce the cost of banks that are in need of dollar funding so they might alleviate some stress on the margin and potentially slow the deleveraging process that needs to occur in Europe at the margin, but it really doesn’t solve any of the fundamental problems. 

DAVID CRAIG:  Okay, that was my question.  With the Fed and European Central Bank moves, do you think they’d have a meaningful impact on European issues?

JIM KEEGAN:  No, I think the impact is to buy some time, but it doesn’t change the dynamics of the structural problems that the European Union has particularly in the peripheral countries although it’s pretty obvious that the contagion has hit the core with Italy definitely and potentially France down the road.

DAVID CRAIG:  Okay.  Now you’ve been saying all along that housing and employment were two things to keep an eye on.  The BLS just reported last Friday that the unemployment rate dropped to 8.6% which is the lowest rate since March 2009.  So the question is what were the causes of that drop and do you see that as a positive side of the economy?

JIM KEEGAN:  Well, I’d say the employment report was okay, but it wasn’t great.  You need to understand the employment report in the context of the entire report and then understand an okay report, but in the context of we’re two plus years into this “recovery.”  Yet the reason the unemployment rate or a big part of the reason why the unemployment rate dropped from 9.0 to 8.6 is because you had 315,000 people leave the work force.  Two years into recovery, people should be encouraged about finding work and you should have people joining the work force, not going the other way.  We did have a 140,000 increase in private payrolls with revisions to overall payrolls for the prior two months of around 72,000.  What I was probably most encouraged by was the household survey where the three-month average gain has been 318,000.  To put that into some context, the six months average was 134,000 and the twelve-month average pretty similar at 139,000.  If you look at the core of the report as it gets into the consumer and as it relates to income, and you talked about housing, but average hourly earnings actually fell during the month.  And the average duration of those that are unemployed increased by a week and a half to 40.9 weeks which is almost ten months.  So the average duration of unemployment is going in the wrong direction.  The other thing that I would point out is that of the 140,000 jobs that we got in the month, two-thirds of those jobs were in retail, leisure and hospitality and temporary help which tend to be lower pay.

DAVID CRAIG:  And seasonal probably, too.

JIM KEEGAN:  There’s definitely some seasonality to that.  So the report was okay, but we’re going to need a lot more jobs to be created to bring this unemployment rate down and adjusting for that 315,000 that left the work force if you had added them back in, the unemployment rate would have been 8.8%, not 8.6%.

DAVID CRAIG:  How many jobs need to be added each month just to keep up with population growth?

JIM KEEGAN:  Well depending upon who’s survey you pay attention to, it’s somewhere between 125 and 150,000.  So the population, the work force grows by about 125,000 per month.  So just to keep the unemployment rate flat, we’d need to create 125,000 jobs.  This month we got 120 because we had 140 in the private sector and we lost 20 in the government sector.

DAVID CRAIG:  Okay.  Anything that happened during the month change your near or long-term outlook for fixed income? 

JIM KEEGAN:  No, I think we’re still in this binary risk on, risk off environment.  Our view which has been that rates would stay lower for longer remains intact.  I’d say about the only certainty that we see out there is high volatility.

DAVID CRAIG:  Right.  Well, Jim, thanks again for your insights.

JIM KEEGAN:  Okay, David, good talking to you.

DAVID CRAIG:  Hello and welcome to a special holiday edition of the Plan Advisor Tools Five.  Brandon Shea, Managing Director and DCIO Team Lead for RidgeWorth Investments, shares some insights in how to differentiate yourself this holiday season.  Brandon? 

BRANDON SHEA: When it comes to corporate giving in the holiday season, the advice of Harvey McKay rings true:

“Don’t be boring!
Don’t be predictable.
Be a differentiator.”

In his book Pushing the Envelope: All the Way to the Top, Harvey McKay says:

 “[Client gift) giving is wrapped up in the concept of staying close to your customer. To do the job right, you have to know that customer as a living, breathing human being, with likes & dislikes, interests, a family, and a background, so you can knock their socks off when a gift package shows up.” 

In this podcast, I’ll share with you three thought-provoking ideas to differentiate yourself as a professional this holiday season.

Idea No. 1: Personalize your communication.

My wife & I live in Los Angeles and in the past, we have received a lot of correspondence from a local realtor we know who is actively seeking our future business & referrals (the issue for him being most of those emails go unread). What separated the email he sent us last week from the others he’s sent in the past is that he personalized the message specifically to our situation.

He knows we have 2 young children & with that in mind - he sent us a note informing us there would be a family-friendly, holiday fireworks display next weekend in the local beach community. In other words, he did a great job of putting himself in our shoes and thinking of a holiday-specific activity that would resonate with us as parents with young kids. How’s that old saying go J? “People don’t care what you have to sell them until they know you care about them”.  I believe that’s true.

The benefit of putting forth an effort like this (of personalizing your communication) is that you retain “front of mind status” in the minds of those you’re connecting with – my wife has mentioned this email & the realtor’s thoughtfulness more than once this past week.

Personalize your communication.

Idea No. 2: Provide specific ideas for your clients to enhance their holiday experience

An issue for all of us is that the holidays are a busy time, a lot is going on & it’s easy to lose track of unique events taking place around us.

One simple but impactful idea for you is to scan your local community for ideas to help your clients celebrate the holiday season. Zagat.com is a great resource for restaurants in your community - why not create an email or send out a letter using nice stationary that lists the top 5-10 local restaurants to visit that would create a memorable family experience or even a romantic holiday dinner? For example, a local resort just south of Los Angeles is having a Christmas brunch next week where kids can have their picture taken with Santa Claus and there will be an elf station where kids can make cookies and ornaments. My wife & I made reservations to attend this event with our kids and when I’ve told other parents who have young kids about this event - their eyes lit up as they expressed they didn’t know this hotel had an event like this and they’d love to join us. 

The email or note on nice stationary you might send may also include local insight on where to get the best deals on produce or turkey or any of the fixings for a holiday dinner.   

As people’s attentions shift towards celebrating the holidays (be it Christmas or Hanukah or just Season’s Greetings), put yourself in the shoes of your existing clients and prospective clients.

Look for specific activities, places or ideas you can recommend that will enhance their experience this season. Not only can you help them build a memorable experience this season – you’ll become a lot more memorable in their eyes too!

Idea No. 3: Some of your clients grew up in other states and miss some of the familiar holiday customs.

Send them something that will remind them of home (&, in the process, your thoughtfulness). Having grown up in Nashville, Tennessee, I would sometimes get as a gift, a chocolate chip, bourbon pecan pie. I tell you, not only did that put a big smile on my face – J - but the sender got the full attention of my brain & stomach!

Also, if you’re sending a holiday card to your clients & you want to stand out from the crowd, I recommend going one step beyond just signing it. Every year my family receives a printed note that’s inserted into a signed holiday card from a financial professional we know. In the printed note, this gentleman briefly shares specific reasons why this past year was so significant for him and the clients he serves. He also talks about a couple reasons why he’s so enthusiastic about the potential each New Year’s Eve brings (for example – he may talk about the “psychological paycheck” he gets from helping clients establish their 12 month goals & then helping them nurture those goals to fruition).

While it only takes a couple minutes to read his note every year, my wife and I feel this professional has done a great job of distinguishing himself as a thoughtful person who is passionate about serving others & we’ve referred more than 1 person to him to be a client.

My wife and I have embraced this idea of sending personalized notes out with our Christmas & Season’s Greetings cards and the response has been very positive & it’s also sparked many meaningful conversations along the way. In fact, it’s had a large impact on my personal career. One of the personalized cards I sent out in 2010 (which happened to be an Independence Card celebrating the 4^th of July – I don’t limit my personalized cards to my network to just the holidays) – it attracted the attention of RidgeWorth Investments’ executive management team and it started a conversation. That conversation, and many thereafter, resulted in me becoming the National Sales Manager of RidgeWorth’s Defined Contribution Investment Only Team.

So, be creative, caring and personal with your communication.

I’ll close our time together by sharing another gem from Harvey MacKay J:

“If you’re creative, show it.
If you’ve got class, let them know it.
There’s nothing that results in indignation,
More than a deadly lack of imagination.”

From all of us at RidgeWorth Investments, May Peace, Joy, Hope and Happiness be yours during this Holiday Season and throughout the New Year.

Thank you.

Fixed Income Market 5

DAVID CRAIG:  Welcome to Fixed Income Market Five.  It’s December 7^th, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and subadviser of the Ridgeworth Investment Grade Bond Funds, discussing what’s going on with the fixed income market.  So, Jim, in our July Fixed Income Market Five, you said that you thought June was a brutally binary month.  It seems that it applies to November as well.

JIM KEEGAN:  November was incredibly binary, David.  If you recall, we came into the month, it started with the surprise referendum that Greece was going to hold on the bail-out package.  Then Greece was threatened by the EU, that they’d be thrown out of the Euro potentially and that only to be followed by a political crisis in Italy which led to within two weeks two democratically-elected prime ministers ousted by unelected bureaucrats in Brussels only to be replaced by two unelected technocrats that have connections to the experiment knows as the Euro.  That got the markets obviously bothered to the downside as it relates to risk assets.  All risk was off for most of the month and then towards the end of the month and the last day of the month in particular where you saw risk assets rally led by stocks which were up over 4% on the coordinated action by the Fed and five other central banks to reduce the rate on dollar swap lines to foreign banks and extending the program by six months out to February of 2012.  It was just that global coordinated central bank action which had a big effect on risk assets.  Ultimately all they did was reduce the cost of banks that are in need of dollar funding so they might alleviate some stress on the margin and potentially slow the deleveraging process that needs to occur in Europe at the margin, but it really doesn’t solve any of the fundamental problems.

DAVID CRAIG:  Okay, that was my question.  With the Fed and European Central Bank moves, do you think they’d have a meaningful impact on European issues?

JIM KEEGAN:  No, I think the impact is to buy some time, but it doesn’t change the dynamics of the structural problems that the European Union has particularly in the peripheral countries although it’s pretty obvious that the contagion has hit the core with Italy definitely and potentially France down the road.

DAVID CRAIG:  Okay.  Now you’ve been saying all along that housing and employment were two things to keep an eye on.  The BLS just reported last Friday that the unemployment rate dropped to 8.6% which is the lowest rate since March 2009.  So the question is what were the causes of that drop and do you see that as a positive side of the economy?

JIM KEEGAN:  Well, I’d say the employment report was okay, but it wasn’t great.  You need to understand the employment report in the context of the entire report and then understand an okay report, but in the context of we’re two plus years into this “recovery.”  Yet the reason the unemployment rate or a big part of the reason why the unemployment rate dropped from 9.0 to 8.6 is because you had 315,000 people leave the work force.  Two years into recovery, people should be encouraged about finding work and you should have people joining the work force, not going the other way.  We did have a 140,000 increase in private payrolls with revisions to overall payrolls for the prior two months of around 72,000.  What I was probably most encouraged by was the household survey where the three-month average gain has been 318,000.  To put that into some context, the six months average was 134,000 and the twelve-month average pretty similar at 139,000.  If you look at the core of the report as it gets into the consumer and as it relates to income, and you talked about housing, but average hourly earnings actually fell during the month.  And the average duration of those that are unemployed increased by a week and a half to 40.9 weeks which is almost ten months.  So the average duration of unemployment is going in the wrong direction.  The other thing that I would point out is that of the 140,000 jobs that we got in the month, two-thirds of those jobs were in retail, leisure and hospitality and temporary help which tend to be lower pay.

DAVID CRAIG:  And seasonal probably, too.

JIM KEEGAN:  There’s definitely some seasonality to that.  So the report was okay, but we’re going to need a lot more jobs to be created to bring this unemployment rate down and adjusting for that 315,000 that left the work force if you had added them back in, the unemployment rate would have been 8.8%, not 8.6%.

DAVID CRAIG:  How many jobs need to be added each month just to keep up with population growth?

JIM KEEGAN:  Well depending upon who’s survey you pay attention to, it’s somewhere between 125 and 150,000.  So the population, the work force grows by about 125,000 per month.  So just to keep the unemployment rate flat, we’d need to create 125,000 jobs.  This month we got 120 because we had 140 in the private sector and we lost 20 in the government sector.

DAVID CRAIG:  Okay.  Anything that happened during the month change your near or long-term outlook for fixed income?

JIM KEEGAN:  No, I think we’re still in this binary risk on, risk off environment.  Our view which has been that rates would stay lower for longer remains intact.  I’d say about the only certainty that we see out there is high volatility.

DAVID CRAIG:  Right.  Well, Jim, thanks again for your insights.

JIM KEEGAN:  Okay, David, good talking to you.

Equity Market 5

DAVID CRAIG:  Hello and welcome to the Equity Market Five.  It’s December 7^th and I’m talking with Don Wordell with Ceredex Value Advisors, sub-advisor to the RidgeWorth Mid-Cap Value Equity Fund about what’s going on in the equity markets.  So, Don if you look at the 0.22% return for the S&P 500 Index in November, you’d think it was a pretty quiet month for the equity markets.  Was that the case?

DON WORDELL:  Oh, David, I think you know the answer to that question, of course not.  The month of November was another very volatile month in the equity markets.  The continued macro headlines that move the market one way or the other just are frustrating and exhausting but no, it was not at all a quiet month in November. 

DAVID CRAIG:  Now, Consumer Staples and Energy lead the way in the S&P in November.  What is it about those sectors that helped them perform relatively well in such a volatile month? 

DON WORDELL:  You know part of issue for energy was just the big move up in oil prices.  You know, as oil prices move higher because there was seemingly a resolution to the debt problems in Europe which then could get investors focused on global growth resuming then you’d see a big demand for energy.  Then with Consumer Staples, I think you just had a bifurcation in the market and some of the other commodity prices actually eased up which would help the Staples’ earnings because they’ve been really trying to match their pricing with their cost increases.  So, maybe the market was perceiving some help there as well.  It’s all fundamental but the move in oil really helped the energy stocks.

DAVID CRAIG:  Okay.  Now, Financials continue to struggle and gave back nearly 5% in the month.  Why do you think Financials still can’t find their footing?

DON WORDELL:  I think it’s the regulatory environment, the fact that the pressure from the regulatory agencies is just not easing up.  Towards the end of the month we had the indications on the stress test that all the largest banks are going to be put through next year and those stress tests are going to include testing for a sovereign default which is going to put more pressure on the results and then limit the capital return to shareholders that these banks can do.  I really think the regulatory environment is very punitive for these stocks right now.

DAVID CRAIG:  Okay.  Now, on a positive note the unemployment rate did drop to its lowest level since March of 2009.  Do you think that drop is sustainable? 

DON WORDELL:  Well, you know unfortunately when you peel the onion back and you dig into the numbers, what you find is that the unemployment rate dropped because there were just a large number of folks that just dropped out of the workforce.  They just stopped looking for a job.  So, that skews the number.  Again, I think it comes back to the regulatory environment and confidence and as long as we have this continued class warfare, the heightened political rhetoric, and then the lack of a resolution to the global macro debt issues, I think it’s going to be very hard for the unemployment situation to get much better from here. Although it continues to grow slowly, you really have to dig behind the numbers and see that it’s probably not as good as most investors would like it to be. 

DAVID CRAIG:  Right.  Okay.  Were there any other highlights during the month that you think were worth noting?

DON WORDELL:  Yeah.  I think the biggest highlight was the end of the month.  I think what I want a lot of our clients to focus on is just the negative sentiment.  I know all the things that we’ve talked so far on this call have been somewhat negative and there is such a bearish sentiment out there on the market.  You saw right towards the end of the month what happens when the market got wind that they felt like there would be some kind of resolution in Europe I think we had a huge up-day in the market of almost 500 points.  I think there’s such, such negative sentiment that the market continues to climb that wall of worry and that’s very positive for building positions in stocks.

DAVID CRAIG:  Okay.  Now did anything that happened in November change your short to near term outlook?

DON WORDELL:  No.  Nothing at all that we saw in November would change our outlook.  We’re still, you know, near term we are cautiously optimistic.  We’ve been that way for a long time.  I think that corporate earnings continue to be in good shape.  Balance sheets appear to be in a good shape.  It seems that Europe continues to move ever so slowly towards a resolution but we are closer to one than we were a month ago and that will help the sentiment and help stock prices

DAVID CRAIG:  Great.  Alright, well, Don thanks again for your insights.

DON WORDELL:  Alright David. 

Style Class Focus 5

DAVID CRAIG:  Hello, welcome to Style Class Focus Five.  It’s December 7^th, and I’m talking with Michael Sansoterra, Senior Portfolio Manager with Silvant Capital Management subadvisor to the RidgeWorth Large Cap Growth Stock Fund about growth investing.  So Michael when we talked in April, I mentioned that after a pretty long run for value, growth had quietly come back into favor and was leading value over the one, three and five-year time periods according to Russell.  That’s still the case.  Why does growth continue to do well despite all the volatility we’ve seen this year. 

MICHAEL SANSOTERRA:  Thanks David.  You know we think growth stocks have done well primarily based on their scarcity value.  We have found that historically when investors are really struggling to find a place where they feel comfortable, which we’ve definitely seen as volatility has increased, growth stocks typically start to carry a premium to other types of asset classes and to other equities as well.  So, growth stocks in particular that have actually managed through this process pretty well for the last three to five years as the economy has come back from a pretty difficult period and have become more scarce, more difficult to find and therefore have commanded a premium so their performance has done quite well. 

DAVID CRAIG:  Okay.  Do you think growth still has room to run?

MICHAEL SANSOTERRA:  You know we do.  We look at the reasons why those companies have done well and that’s really on a fundamental company by company basis and despite the macro fears and particularly the concerns around Europe, we’ve seen those companies continue to execute.  The companies that we own typically are beating investor expectations and are doing so by raising their revenue and earnings, are doing so by having pricing power, sometimes by taking market share and the trends in those companies we believe have continued not only in the last year but really even in the last quarter.  The data from the last quarter suggested pretty solid fundamental results from these types of companies and that typically means those performing shares can continue to outperform. 

DAVID CRAIG:  Now even though growth has done well, according to Morningstar through October the large growth category had nearly four times the outflows of large value year to date.  Why do you think that’s the case?

MICHAEL SANSOTERRA:  Well I think broadly speaking from an equity perspective investors are still extremely fearful of equity markets and no surprise, the recession in 2008 and 2009 was very severe, arguably one of the most severe we’ve ever seen and that has really spooked investors from a sentiment perspective.  We see sentiment very, very poorly.  Folks are just terrified and when they’re terrified what do they do?  They put their money in fixed income which we’ve seen lots and lots of inflows in bond markets and to a lesser extent in dividend paying stocks, the stocks you find in typical value products.  So, no surprise that outflows on the margin have been out of riskier assets and into ones that make folks sleep at night a little better. 

DAVID CRAIG:  Now how have the European issues impacted the way you invest?

MICHAEL SANSOTERRA:  We’re looking at the types of exposures all the time and I would say on the margin we have over the last few quarters lowered our exposure to Western Europe from a consumer perspective recognizing that some of the stocks we own do sell largely into Europe and we wanted to make certain that those risk adjusted weightings were appropriate and we’ve taken some of our growth expectations with those assets and expanded them into different parts of the world, emerging markets, some U.S. domestic but it’s really marginal.  Actually, we’re company by company.  We’re ground up in very fundamental specifics so we don’t make big macro calls.  I would say on the margin we have a little less exposure in Europe today than we did perhaps three to six months ago but it’s very marginal.  Ultimately the companies we own we believe can continue to outperform based on their fundamentals company by company.

DAVID CRAIG:  And what would your advice be to long-term investors?

MICHAEL SANSOTERRA:  For long-term investors, clearly this has been a challenging period.  We would tell them to stay the course.  We look at volatility even today over the last rolling 21-day period you’re talking about a three standard deviation moving volatility.  We’re seeing some of the highest volatility these markets have ever seen over the last 30 years.  We’re seeing equity valuations very reasonable twelve times forward earnings, twelve and a half times sort of a twelve month rolling forward earnings.  So, not expensive equities, a lot of fear in the market, very tough sentiment.  This is when you actually should be adding to equity.  This is when you should be staying the course.  It’s the tough time.  It’s the scary time but long-term investors should really keep their eye on their long-term asset expectations.  You’re not going to get fantastic results from bonds.  You’ve got opportunities.  You just need to recognize that times are going to be tough for a little while.  The volatility will be high but ultimately longer term we believe growth equities will actually do well for the next three to five years. 

DAVID CRAIG:  Great.  All right Michael, thanks for your insights. 

MICHAEL SANSOTERRA:  Appreciate it.  Thanks David.

Plan Advisor Tools 5

DAVID CRAIG:  Hello and welcome to a special holiday edition of the Plan Advisor Tools Five.  Brandon Shea, Managing Director and DCIO Team Lead for RidgeWorth Investments, shares some insights in how to differentiate yourself this holiday season.  Brandon?

BRANDON SHEA: When it comes to corporate giving in the holiday season, the advice of Harvey McKay rings true:

“Don’t be boring!
Don’t be predictable.
Be a differentiator.”

In his book Pushing the Envelope: All the Way to the Top, Harvey McKay says:

 “[Client gift) giving is wrapped up in the concept of staying close to your customer. To do the job right, you have to know that customer as a living, breathing human being, with likes & dislikes, interests, a family, and a background, so you can knock their socks off when a gift package shows up.” 

In this podcast, I’ll share with you three thought-provoking ideas to differentiate yourself as a professional this holiday season.

Idea No. 1: Personalize your communication.

My wife & I live in Los Angeles and in the past, we have received a lot of correspondence from a local realtor we know who is actively seeking our future business & referrals (the issue for him being most of those emails go unread). What separated the email he sent us last week from the others he’s sent in the past is that he personalized the message specifically to our situation.

He knows we have 2 young children & with that in mind - he sent us a note informing us there would be a family-friendly, holiday fireworks display next weekend in the local beach community. In other words, he did a great job of putting himself in our shoes and thinking of a holiday-specific activity that would resonate with us as parents with young kids. How’s that old saying go J? “People don’t care what you have to sell them until they know you care about them”.  I believe that’s true.

The benefit of putting forth an effort like this (of personalizing your communication) is that you retain “front of mind status” in the minds of those you’re connecting with – my wife has mentioned this email & the realtor’s thoughtfulness more than once this past week.

Personalize your communication.

Idea No. 2: Provide specific ideas for your clients to enhance their holiday experience

An issue for all of us is that the holidays are a busy time, a lot is going on & it’s easy to lose track of unique events taking place around us.

One simple but impactful idea for you is to scan your local community for ideas to help your clients celebrate the holiday season. Zagat.com is a great resource for restaurants in your community - why not create an email or send out a letter using nice stationary that lists the top 5-10 local restaurants to visit that would create a memorable family experience or even a romantic holiday dinner? For example, a local resort just south of Los Angeles is having a Christmas brunch next week where kids can have their picture taken with Santa Claus and there will be an elf station where kids can make cookies and ornaments. My wife & I made reservations to attend this event with our kids and when I’ve told other parents who have young kids about this event - their eyes lit up as they expressed they didn’t know this hotel had an event like this and they’d love to join us. 

The email or note on nice stationary you might send may also include local insight on where to get the best deals on produce or turkey or any of the fixings for a holiday dinner.   

As people’s attentions shift towards celebrating the holidays (be it Christmas or Hanukah or just Season’s Greetings), put yourself in the shoes of your existing clients and prospective clients.

Look for specific activities, places or ideas you can recommend that will enhance their experience this season. Not only can you help them build a memorable experience this season – you’ll become a lot more memorable in their eyes too!

Idea No. 3: Some of your clients grew up in other states and miss some of the familiar holiday customs.

Send them something that will remind them of home (&, in the process, your thoughtfulness). Having grown up in Nashville, Tennessee, I would sometimes get as a gift, a chocolate chip, bourbon pecan pie. I tell you, not only did that put a big smile on my face – J - but the sender got the full attention of my brain & stomach!

Also, if you’re sending a holiday card to your clients & you want to stand out from the crowd, I recommend going one step beyond just signing it. Every year my family receives a printed note that’s inserted into a signed holiday card from a financial professional we know. In the printed note, this gentleman briefly shares specific reasons why this past year was so significant for him and the clients he serves. He also talks about a couple reasons why he’s so enthusiastic about the potential each New Year’s Eve brings (for example – he may talk about the “psychological paycheck” he gets from helping clients establish their 12 month goals & then helping them nurture those goals to fruition).

While it only takes a couple minutes to read his note every year, my wife and I feel this professional has done a great job of distinguishing himself as a thoughtful person who is passionate about serving others & we’ve referred more than 1 person to him to be a client.

My wife and I have embraced this idea of sending personalized notes out with our Christmas & Season’s Greetings cards and the response has been very positive & it’s also sparked many meaningful conversations along the way. In fact, it’s had a large impact on my personal career. One of the personalized cards I sent out in 2010 (which happened to be an Independence Card celebrating the 4^th of July – I don’t limit my personalized cards to my network to just the holidays) – it attracted the attention of RidgeWorth Investments’ executive management team and it started a conversation. That conversation, and many thereafter, resulted in me becoming the National Sales Manager of RidgeWorth’s Defined Contribution Investment Only Team.

So, be creative, caring and personal with your communication.

I’ll close our time together by sharing another gem from Harvey MacKay J:

“If you’re creative, show it.
If you’ve got class, let them know it.
There’s nothing that results in indignation,
More than a deadly lack of imagination.”

From all of us at RidgeWorth Investments, May Peace, Joy, Hope and Happiness be yours during this Holiday Season and throughout the New Year.

Thank you.

DAVID CRAIG:  Hello, and welcome to the Equity Market Five.  It’s November 4^th, and I’m with Don Wordell, of Ceredex Value Advisors, subadviser to the RidgeWorth Mid-Cap Value Equity Fund to talk about what’s going in in the equity markets.  So, Don, October looked like a mirror image of September. Materials, Energy, and Financials, which were all down the most in September, were up the most in October.  What happened?

DON WORDELL:  Well, there’s quite a few things that happened in October.  It was a very busy month.  I think the bigger drivers are going to be earnings.  As we enter earnings season, a lot of these companies in the Materials, Energy, and Financial space, were in line or exceeded the market’s expectation for earnings as well as the overall macro issues seemed to subside as Europe took another baby step forward towards solving their debt issues.

DAVID CRAIG:  Okay.  What were some of the other highlights of October?

DON WORDELL:  You know, again, I think that the other highlights that you saw, you really saw the market get way oversold at the end of September or in the early part of October.  Actually, the market bottomed on October 4, 2011, it feels like.  We think that a lot of that has to do with the expectations and the realization that earnings were going to be better than what the market was modeling.  You know, on top of that, you had the other expectation, or the highlight that I would put out there also, is you probably saw some more rebalancing going on where you had a lot of the big pension funds rebalance away from fixed income into equities. And then again, I think the bigger, overriding highlight is going to be what seems to be we’re getting closer to resolution with the debt issues in Europe.

DAVID CRAIG:  Okay.  You mentioned Europe.  There are still continued headlines about troubles in Europe.  How is that affecting the domestic equity markets?

DON WORDELL:  This market right now, the correlations are so high across stocks within sectors that it just seems like the market is just trading on whatever the next headline is out of Greece, Italy, or Spain.  So, it’s having a very big impact on the markets.  Also having a very big impact on just the overall intraday volatility which is very difficult and exhausting to trade, but it is creating opportunities.  So, we’re okay with it right now.  We think that, again, I really do feel like Europe is moving, not as quickly as I would like them to move, but moving in a direction of resolution.

DAVID CRAIG:  Okay, now the Fed just revised its expectations for economic growth lower.  Do you think that will have an impact on the equity markets?

DON WORDELL:  Yeah, and you know this is a bit counterintuitive in that I think that it will, and I think it will actually be positive, because the Fed is going to be rearview-mirror looking, so they’re going to be late.  They’re going to tell you something that you already know.  What that means is that they’re going to be there to help support the equity market, whether that’s QE3, or what have you, I think that that’s positive for equities because they know that they’ve got the Fed doing everything they can to help prop up the equity markets. 

DAVID CRAIG:  Okay.  What’s your near- to medium-term outlook for equities?

DON WORDELL:  You know, my near- to medium-term outlook has really not changed.  I’m still cautiously optimistic.  I feel like, again, I feel like we got through October.  All of the financial stocks reported earnings that were in line to better than expected.  You saw some loan growth on the banks.  Capital was still in a great position for the banks.  Credit is continuing to improve somewhat.  I think that we’ve taken a double-dip recession off the table in the United States, and I think those are all good things near-term and medium-term for equities.  I come back to corporate balance sheets are in great shape.  Cash levels have never been higher, and also you’re seeing corporations do good things for shareholders, increase dividend payments, increase share repurchase, and overall M&A, that’s all positive and shows a more positive sentiment.  So, if we keep earnings in line to better than expected and these balance sheets are in good shape, I think that the overall stock market is going to do well over the next three to six months.

DAVID CRAIG:  Okay, great.  Alright Don, well thanks for your insights.

DON WORDELL:  You’re welcome.

DAVID CRAIG:  Hello, and welcome to Fixed Income Market Five.  It’s November 4^th, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and subadviser for the RidgeWorth investment grade bond funds, discussing what’s going on in the fixed income market.

So Jim, last month we talked about the significant macro headlines, but in October, there’s a pretty big move to the upside for both equities and Treasury yields.  What happened?

JIM KEEGAN:  Well, basically, what we had, David, was the risk markets, equities being the most prominent, were oversold from the short-term technical perspective.  So what became pretty obvious in October was that financial markets were trading off headlines rather than anything else, as you could see from correlations rising. 

The economic data came in okay and better than expected.  Earnings started to be released for the third quarter, and I believe coming into the third quarter, we’re looking for 13% year-over-year growth in S&P 500 earnings, and it looks like they’re tracking at about a 16% rate so better than expected.

Also, at the beginning of the month, many stock markets, including ours, were down 20% from a peak earlier this year, and that occurred either October 3 or 4.

Then, what happened was, you had, again, this headline risk driving markets.  Bernanke, in his Congressional testimony, told Congress and the financial markets that the Fed is prepared to take further action.  In other words, turn the printing presses on again as appropriate, and then you just had all of the European headlines.  “Yeah, we understand that we have to put a concrete solution on the table,” and they continue to say they plan to have a plan, kept postponing what that plan was, and then they came out with the plan, but no details.  So that was what led to the heightened volatility in both risky assets and Treasuries.

So when risk assets are going up, generally the dollar’s weakening and Treasury yields are rising, and that’s what we saw in October.

DAVID CRAIG:  Okay.  Now surprise news this week was that Greece was going to put the European ballot to a vote.  What impact do you think that has?

JIM KEEGAN:  Well, obviously you could see that once the Prime Minister of Greece, Papandreou, surprised the European bureaucracy that he was going to actually put the bailout plan to a referendum, which seems to be the logical thing because the austerity that’s being imposed on the Greek people at this point is really leading to a deep recession, which could turn into a depression.  So it seems to me that is something that the Greek people should want to make a decision on.

The fact is that the Europeans almost mounted, the best way to say it is, an international coup, where they threw the Prime Minister under the bus and started negotiating with people in his party and the opposition’s party so the Prime Minister pulled back, but there’s a confidence vote scheduled for tonight, six o’clock East Coast time, 12 o’clock midnight in Greece, where we’ll know whether or not we have a government.

Now the question will be when we come in on Monday, what will that government consist of?  The issue, I think as far as the markets are concerned, is the markets do not want another election.  So are they able to cobble together some deal between the ruling party and the opposition, which are both very unpopular in Greece right now, or is there an election which may bring in a far left or a far right party, even further right and left than the two main parties?

DAVID CRAIG:  Okay.  Now the not so surprising news is the Fed has adjusted its outlook lower, predicting growth of a little more than 1.5% for 2011 and 2.5% for 2012.  Do you think the Fed will make any more moves that you think is stimulative? 

JIM KEEGAN:  I don’t expect that you’re going to see anything from the Fed for the balance of this year in the way of either increasing Operation Twist or doing Quantitative Easing 3, although I think they’re clearly laying the groundwork for Quantitative Easing 3, and I think the reason why we think that’ll be a 2012 event is because the chairman is very motivated to do more quantitative easing.

Right now, he’s got three voting members of the FLMC who have dissented with both respect to quantitative easing and Operation Twist, and they will be leaving or rotating out as voters in 2012.  They will be replaced by three doves.  So the environment will be much more conducive to a Bernanke-led mindset; not to mention the fact that in 2012, it being an election year that Congress may be distracted by the election and Bernanke may be able to thwart QE3 on the system.

DAVID CRAIG:  Okay.  And for those listening, Jim went into much more detail on that in the Seix Perspective which is on ridgeworth.com about what’s going on with the Fed.

So Jim, what’s in with your outlook?  Did anything happen in October to change your outlook for 2011 and 2012? 

JIM KEEGAN:  Well, David, as you know, we’ve been of the view that we’re going to be in this risk on, risk off environment, and there’s nothing that happened in October or anything that’s happened in 2011, or 2010, for that matter, that changes our view that we’re going to continue to be in a risk off, risk on environment.  Unfortunately, we’re subject to this headline-driven risk where markets perceive things as beneficial to risk assets in the short-term or negative to risk assets in the short-term, and that’s really what’s going to drive markets.

As I said earlier, Europe at this point plans to have a plan, but there are no details.  So once again, they’re long on promises, short on details, and as I always like to say, the devil’s always in the details and the biggest issue as it relates to the European sovereign debt banking crisis is where’s the money going to come from?  They keep talking about levering up this European financial stability fund, recapitalizing the banks and forcing Greece to take a haircut, but where is the money going to come from?

And then finally, as it relates to the US, we’re not at all dealing with the structural problems that we have in this country, and monetary policy does not lend itself to solving the structural problems that we have.  So we anticipate that we’re going to continue to be in a pretty volatile environment, and I think you’re going to hear more and more about this too big to fail concept globally.  When you think about too big to fail, it’s really an idiosyncratic concept, and we’re starting to ask the question and have been for awhile, as you know, that if there’s institutional, too big to fail solvency issues, is it really too big to save and therefore that’s what the volatility is indicating to the markets.

DAVID CRAIG:  Right.  Alright.  Well Jim, thanks again for your insights.

JIM KEEGAN:  Thank you, David.

Fixed Income Market 5

DAVID CRAIG:  Hello, and welcome to Fixed Income Market Five.  It’s November 4^th, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and subadviser for the RidgeWorth investment grade bond funds, discussing what’s going on in the fixed income market.

So Jim, last month we talked about the significant macro headlines, but in October, there’s a pretty big move to the upside for both equities and Treasury yields.  What happened?

JIM KEEGAN:  Well, basically, what we had, David, was the risk markets, equities being the most prominent, were oversold from the short-term technical perspective.  So what became pretty obvious in October was that financial markets were trading off headlines rather than anything else, as you could see from correlations rising. 

The economic data came in okay and better than expected.  Earnings started to be released for the third quarter, and I believe coming into the third quarter, we’re looking for 13% year-over-year growth in S&P 500 earnings, and it looks like they’re tracking at about a 16% rate so better than expected.

Also, at the beginning of the month, many stock markets, including ours, were down 20% from a peak earlier this year, and that occurred either October 3 or 4.

Then, what happened was, you had, again, this headline risk driving markets.  Bernanke, in his Congressional testimony, told Congress and the financial markets that the Fed is prepared to take further action.  In other words, turn the printing presses on again as appropriate, and then you just had all of the European headlines.  “Yeah, we understand that we have to put a concrete solution on the table,” and they continue to say they plan to have a plan, kept postponing what that plan was, and then they came out with the plan, but no details.  So that was what led to the heightened volatility in both risky assets and Treasuries.

So when risk assets are going up, generally the dollar’s weakening and Treasury yields are rising, and that’s what we saw in October.

DAVID CRAIG:  Okay.  Now surprise news this week was that Greece was going to put the European ballot to a vote.  What impact do you think that has?

JIM KEEGAN:  Well, obviously you could see that once the Prime Minister of Greece, Papandreou, surprised the European bureaucracy that he was going to actually put the bailout plan to a referendum, which seems to be the logical thing because the austerity that’s being imposed on the Greek people at this point is really leading to a deep recession, which could turn into a depression.  So it seems to me that is something that the Greek people should want to make a decision on.

The fact is that the Europeans almost mounted, the best way to say it is, an international coup, where they threw the Prime Minister under the bus and started negotiating with people in his party and the opposition’s party so the Prime Minister pulled back, but there’s a confidence vote scheduled for tonight, six o’clock East Coast time, 12 o’clock midnight in Greece, where we’ll know whether or not we have a government.

Now the question will be when we come in on Monday, what will that government consist of?  The issue, I think as far as the markets are concerned, is the markets do not want another election.  So are they able to cobble together some deal between the ruling party and the opposition, which are both very unpopular in Greece right now, or is there an election which may bring in a far left or a far right party, even further right and left than the two main parties?

DAVID CRAIG:  Okay.  Now the not so surprising news is the Fed has adjusted its outlook lower, predicting growth of a little more than 1.5% for 2011 and 2.5% for 2012.  Do you think the Fed will make any more moves that you think is stimulative?

JIM KEEGAN:  I don’t expect that you’re going to see anything from the Fed for the balance of this year in the way of either increasing Operation Twist or doing Quantitative Easing 3, although I think they’re clearly laying the groundwork for Quantitative Easing 3, and I think the reason why we think that’ll be a 2012 event is because the chairman is very motivated to do more quantitative easing.

Right now, he’s got three voting members of the FLMC who have dissented with both respect to quantitative easing and Operation Twist, and they will be leaving or rotating out as voters in 2012.  They will be replaced by three doves.  So the environment will be much more conducive to a Bernanke-led mindset; not to mention the fact that in 2012, it being an election year that Congress may be distracted by the election and Bernanke may be able to thwart QE3 on the system.

DAVID CRAIG:  Okay.  And for those listening, Jim went into much more detail on that in the Seix Perspective which is on ridgeworth.com about what’s going on with the Fed.

So Jim, what’s in with your outlook?  Did anything happen in October to change your outlook for 2011 and 2012?

JIM KEEGAN:  Well, David, as you know, we’ve been of the view that we’re going to be in this risk on, risk off environment, and there’s nothing that happened in October or anything that’s happened in 2011, or 2010, for that matter, that changes our view that we’re going to continue to be in a risk off, risk on environment.  Unfortunately, we’re subject to this headline-driven risk where markets perceive things as beneficial to risk assets in the short-term or negative to risk assets in the short-term, and that’s really what’s going to drive markets.

As I said earlier, Europe at this point plans to have a plan, but there are no details.  So once again, they’re long on promises, short on details, and as I always like to say, the devil’s always in the details and the biggest issue as it relates to the European sovereign debt banking crisis is where’s the money going to come from?  They keep talking about levering up this European financial stability fund, recapitalizing the banks and forcing Greece to take a haircut, but where is the money going to come from?

And then finally, as it relates to the US, we’re not at all dealing with the structural problems that we have in this country, and monetary policy does not lend itself to solving the structural problems that we have.  So we anticipate that we’re going to continue to be in a pretty volatile environment, and I think you’re going to hear more and more about this too big to fail concept globally.  When you think about too big to fail, it’s really an idiosyncratic concept, and we’re starting to ask the question and have been for awhile, as you know, that if there’s institutional, too big to fail solvency issues, is it really too big to save and therefore that’s what the volatility is indicating to the markets.

DAVID CRAIG:  Right.  Alright.  Well Jim, thanks again for your insights.

JIM KEEGAN:  Thank you, David.  

Equity Market 5

DAVID CRAIG:  Hello, and welcome to the Equity Market Five.  It’s November 4^th, and I’m with Don Wordell, of Ceredex Value Advisors, subadviser to the RidgeWorth Mid-Cap Value Equity Fund to talk about what’s going in in the equity markets.  So, Don, October looked like a mirror image of September. Materials, Energy, and Financials, which were all down the most in September, were up the most in October.  What happened?

DON WORDELL:  Well, there’s quite a few things that happened in October.  It was a very busy month.  I think the bigger drivers are going to be earnings.  As we enter earnings season, a lot of these companies in the Materials, Energy, and Financial space, were in line or exceeded the market’s expectation for earnings as well as the overall macro issues seemed to subside as Europe took another baby step forward towards solving their debt issues.

DAVID CRAIG:  Okay.  What were some of the other highlights of October?

DON WORDELL:  You know, again, I think that the other highlights that you saw, you really saw the market get way oversold at the end of September or in the early part of October.  Actually, the market bottomed on October 4, 2011, it feels like.  We think that a lot of that has to do with the expectations and the realization that earnings were going to be better than what the market was modeling.  You know, on top of that, you had the other expectation, or the highlight that I would put out there also, is you probably saw some more rebalancing going on where you had a lot of the big pension funds rebalance away from fixed income into equities. And then again, I think the bigger, overriding highlight is going to be what seems to be we’re getting closer to resolution with the debt issues in Europe.

DAVID CRAIG:  Okay.  You mentioned Europe.  There are still continued headlines about troubles in Europe.  How is that affecting the domestic equity markets?

DON WORDELL:  This market right now, the correlations are so high across stocks within sectors that it just seems like the market is just trading on whatever the next headline is out of Greece, Italy, or Spain.  So, it’s having a very big impact on the markets.  Also having a very big impact on just the overall intraday volatility which is very difficult and exhausting to trade, but it is creating opportunities.  So, we’re okay with it right now.  We think that, again, I really do feel like Europe is moving, not as quickly as I would like them to move, but moving in a direction of resolution.

DAVID CRAIG:  Okay, now the Fed just revised its expectations for economic growth lower.  Do you think that will have an impact on the equity markets?

DON WORDELL:  Yeah, and you know this is a bit counterintuitive in that I think that it will, and I think it will actually be positive, because the Fed is going to be rearview-mirror looking, so they’re going to be late.  They’re going to tell you something that you already know.  What that means is that they’re going to be there to help support the equity market, whether that’s QE3, or what have you, I think that that’s positive for equities because they know that they’ve got the Fed doing everything they can to help prop up the equity markets. 

DAVID CRAIG:  Okay.  What’s your near- to medium-term outlook for equities?

DON WORDELL:  You know, my near- to medium-term outlook has really not changed.  I’m still cautiously optimistic.  I feel like, again, I feel like we got through October.  All of the financial stocks reported earnings that were in line to better than expected.  You saw some loan growth on the banks.  Capital was still in a great position for the banks.  Credit is continuing to improve somewhat.  I think that we’ve taken a double-dip recession off the table in the United States, and I think those are all good things near-term and medium-term for equities.  I come back to corporate balance sheets are in great shape.  Cash levels have never been higher, and also you’re seeing corporations do good things for shareholders, increase dividend payments, increase share repurchase, and overall M&A, that’s all positive and shows a more positive sentiment.  So, if we keep earnings in line to better than expected and these balance sheets are in good shape, I think that the overall stock market is going to do well over the next three to six months.

DAVID CRAIG:  Okay, great.  Alright Don, well thanks for your insights.

DON WORDELL:  You’re welcome.

Style Class Focus 5

DAVID CRAIG:  Hello and welcome to Style Class Focus Five.  This is November 4^th, and I’m talking with Brian Nold of Seix Investment Advisors, subadviser to the RidgeWorth High Income Fund about the high yield market.  So Brian, through June high yield was up about 5%.  That gain was completely wiped out in the third quarter only to be recovered in October.  What was happening in the high yield markets?  

BRIAN NOLD:  Well David, we saw quite a bit of volatility during the third quarter in the high yield market and it continued into October.  Generally there was a global risk reduction across really any kind of risk asset class in the markets.  The high yield market was down over 6% during the third quarter, but as you said did rebound up about 5.9% in the month of October.  We saw outflows of cash from retail mutual funds across the bond and the high yield market of about $500 million in the third quarter.  However, in the last three weeks, we have seen over $8 billion of inflows, so clearly the market did correct and re-price, but investors, I think, saw a very attractive opportunity and cash came into the market and drove very strong returns in the month of October. 

DAVID CRAIG:  Ok, and then after the downturn and recovery, where are spreads now and then what about the forecast for defaults?

BRIAN NOLD:  Well spreads now are about 713 basis points and for comparison at the beginning of the year they were 534 basis points and the widest we saw at the beginning of October we reached about 900 basis points.  When you look through to figure out what that implies for the forward default rate for the high yield market, it implies about a 7% forward default rate.  That compares to roughly a 1% trailing twelve month default rate, so a fairly significant increase is forecast based on the spread levels.  However, in a recessionary environment, the forecast for defaults would be in the 5 to 5 ½% range and in a non-recessionary environment, or just a slow growth environment, defaults are likely to be in the 2 to 3% range, so there is quite a significant excess spread cushion built into the market right now due to the macro uncertainty that is mostly coming out of Europe. 

DAVID CRAIG:  OK and the Fed came out this week and revised their growth estimates lower.  Do you think the Fed’s commentary will have an impact on the forecast for defaults?

BRIAN NOLD:  Well the market is already anticipating a slow growth environment which we actually don’t believe will dramatically increase defaults, as companies have been very aggressively refinancing any of their near term debt maturities over the last three years, so it is mostly something that has been priced into the market. 

DAVID CRAIG:  Ok, now why would an investor want to invest in high yield and what looks to be a pretty stagnate economy? 

BRIAN NOLD:  Well there is an attractive current yield in the market of about 8 ¼ and the credit cycle in general is continuing to improve as companies are focused on continuing their balance sheet repair and generating strong free cash flow. So again, stagnate economy and slow growth is actually not a negative scenario for most high yield companies that have very strong balance sheets. 

DAVID CRAIG:  OK, and you touched on this a little bit, but how has the situation in Europe, and particularly in Greece, impacted high yield?

BRIAN NOLD:  Well as we saw in August there was a general risk reduction trade because of the uncertainty in Europe; however, from a direct impact to company fundamentals, we are seeing very little impact.  Third quarter numbers thus far are coming out fairly strong or in line with expectations.  The high yield market, in general, is generally dominated by companies that are mostly impacted by what is going on in the U.S. economy.

DAVID CRAIG:  Ok, and what is your outlook for high yield?

BRIAN NOLD:  Well in the scenario where Europe does prevent a contagion from enveloping the global banking system and then the U.S. faces a slow growth environment, we would actually expect high yield spreads to tighten as really the current spread levels discount a significantly higher default rate than what we would anticipate.  We believe the combination of the current yield of 8 ¼% and further spread compression from high yield could drive strong returns over the next twelve months.

DAVID CRAIG:  Ok, great, well Brian thanks for your insights.

BRIAN NOLD:  Ok, thank you.

Plan Advisor Tools 5

DAVID CRAIG:  Welcome to the Plan Advisor Tools Five.  It’s the week of November 7^th, and I’m with Daniella Moiseyev, retirement segment marketing manager for RidgeWorth Investments to talk about the potential impact of fee disclosure on advisor and consultant fees.  So Daniella, we’ve been talking about fees all year in this podcast due to the new fee disclosure regulations coming into effect in 2012.  With this new emphasis on fees do you think there will be an effect on advisor and consultant fees as well? 

DANIELLA MOISEYEV:  Oh absolutely, David.  There has been a renewed scrutiny on plan fees all across the board and we believe that advisor fees will not be immune to this scrutiny, but to quote RidgeWorth’s Investments president, Jim Stueve, only in the absence of value do people begin to focus on price.  That being said, we believe there are several things an advisor can do to refocus the client or plan sponsor on the value, and not the price, of the services that he or she provides. 

DAVID CRAIG:  Okay, what are those things?

DANIELLA MOISEYEV:  Well, there are three things you can do to ensure that your clients understand that the value of your professional expertise outweighs the fee.  First and foremost believe that the advice you provide is worth your fee and avoid becoming defensive.  Practice explaining your services clearly and confidently so you can answer with authority.  Second, don’t assume that every question about your fees is a challenge. And third and most importantly, practice your responses to objections until you are comfortable with articulating your value. 

DAVID CRAIG:  Okay, now let’s talk a little about the first item, believing you’re worth your fee. 

DANIELLA MOISEYEV:  Well, there is a huge body of scholarly work by William Bernstein, Daniel Kahneman, Dalbar and many others that shows that most people, most plan sponsors, most investors, pretty much anyone, are simply not wired to be successful investors.  Simply put, they don’t act rationally when investing.  Your process-driven decision-making and knowledge base add value to the relationship and to the plan and that’s been proven through scholarly work.  You need to be confident about the unique value that you provide.  Don’t think of a response to a fee objection in the moment.  Be ready, be prepared and speak with authority. 

DAVID CRAIG:  Okay, now what about the other two items that you mentioned, not assuming every question is a challenge and practicing your response?

DANIELLA MOISEYEV:  Well, just because a plan sponsor opens the door to the fee discussion doesn’t mean that you need to immediately rush into discount mode.  There are four easy steps on how you respond to an objection to your fees.  First, give a short, neutral response and then probe to get more information or to gain insight.  Identify the underlying issue and rephrase or reposition the question or objection and then answer it by relating it back to your value.  Now, don’t get me wrong.  This isn’t easy to do.  It takes practice and it takes some introspection, but we really believe that if you’re good at what you do and you’re doing it for the right reasons, you can do it. 

So, let me give you an example.  A common objection might be something like a plan sponsor saying “your fee is too high.”  First, give a short, neutral response.  Say something along the lines of “fees are relative to the type and quality of the service provided.”  Then, after clarifying questions to reveal a hidden agenda or gain some insight into why they are bringing up this objection, something like “high – compared to what?”  Then, identify the underling issue and rephrase or reposition the question.  Figure out that the plan sponsor doesn’t really understand what the fees encompass or the quality of the service that is provided.  So, you could say something like “let me review all the services that you will receive for the fee that I charge.”  Something like “plan design services, investment monitoring and investment policy statement development, employee education services, fiduciary services, serving on the investment committee,” et cetera, et cetera.  Once you’ve laid out your value, then you can answer by relating it back to your process.  So, you could say something like list out the services and answer “I believe in exchange for the X amount of fee, these comprehensive services are fair, reasonable and competitive with other programs available to you.” 

DAVID CRAIG:  Okay.  That’s a lot of good information, Daniella.  Thanks for your insights. 

DANIELLA MOISEYEV:  Thank you and thank you all for listening.  

DAVID CRAIG:  Welcome to the Plan Advisor Tools Five.  It’s the week of November 7^th, and I’m with Daniella Moiseyev, retirement segment marketing manager for RidgeWorth Investments to talk about the potential impact of fee disclosure on advisor and consultant fees.  So Daniella, we’ve been talking about fees all year in this podcast due to the new fee disclosure regulations coming into effect in 2012.  With this new emphasis on fees do you think there will be an effect on advisor and consultant fees as well? 

DANIELLA MOISEYEV:  Oh absolutely, David.  There has been a renewed scrutiny on plan fees all across the board and we believe that advisor fees will not be immune to this scrutiny, but to quote RidgeWorth’s Investments president, Jim Stueve, only in the absence of value do people begin to focus on price.  That being said, we believe there are several things an advisor can do to refocus the client or plan sponsor on the value, and not the price, of the services that he or she provides. 

DAVID CRAIG:  Okay, what are those things?

DANIELLA MOISEYEV:  Well, there are three things you can do to ensure that your clients understand that the value of your professional expertise outweighs the fee.  First and foremost believe that the advice you provide is worth your fee and avoid becoming defensive.  Practice explaining your services clearly and confidently so you can answer with authority.  Second, don’t assume that every question about your fees is a challenge. And third and most importantly, practice your responses to objections until you are comfortable with articulating your value. 

DAVID CRAIG:  Okay, now let’s talk a little about the first item, believing you’re worth your fee. 

DANIELLA MOISEYEV:  Well, there is a huge body of scholarly work by William Bernstein, Daniel Kahneman, Dalbar and many others that shows that most people, most plan sponsors, most investors, pretty much anyone, are simply not wired to be successful investors.  Simply put, they don’t act rationally when investing.  Your process-driven decision-making and knowledge base add value to the relationship and to the plan and that’s been proven through scholarly work.  You need to be confident about the unique value that you provide.  Don’t think of a response to a fee objection in the moment.  Be ready, be prepared and speak with authority. 

DAVID CRAIG:  Okay, now what about the other two items that you mentioned, not assuming every question is a challenge and practicing your response?

DANIELLA MOISEYEV:  Well, just because a plan sponsor opens the door to the fee discussion doesn’t mean that you need to immediately rush into discount mode.  There are four easy steps on how you respond to an objection to your fees.  First, give a short, neutral response and then probe to get more information or to gain insight.  Identify the underlying issue and rephrase or reposition the question or objection and then answer it by relating it back to your value.  Now, don’t get me wrong.  This isn’t easy to do.  It takes practice and it takes some introspection, but we really believe that if you’re good at what you do and you’re doing it for the right reasons, you can do it. 

So, let me give you an example.  A common objection might be something like a plan sponsor saying “your fee is too high.”  First, give a short, neutral response.  Say something along the lines of “fees are relative to the type and quality of the service provided.”  Then, after clarifying questions to reveal a hidden agenda or gain some insight into why they are bringing up this objection, something like “high – compared to what?”  Then, identify the underling issue and rephrase or reposition the question.  Figure out that the plan sponsor doesn’t really understand what the fees encompass or the quality of the service that is provided.  So, you could say something like “let me review all the services that you will receive for the fee that I charge.”  Something like “plan design services, investment monitoring and investment policy statement development, employee education services, fiduciary services, serving on the investment committee,” et cetera, et cetera.  Once you’ve laid out your value, then you can answer by relating it back to your process.  So, you could say something like list out the services and answer “I believe in exchange for the X amount of fee, these comprehensive services are fair, reasonable and competitive with other programs available to you.” 

DAVID CRAIG:  Okay.  That’s a lot of good information, Daniella.  Thanks for your insights. 

DANIELLA MOISEYEV:  Thank you and thank you all for listening.  

DAVID CRAIG:  Hello and welcome to Style Class Focus Five.  This is November 4^th, and I’m talking with Brian Nold of Seix Investment Advisors, subadviser to the RidgeWorth High Income Fund about the high yield market.  So Brian, through June high yield was up about 5%.  That gain was completely wiped out in the third quarter only to be recovered in October.  What was happening in the high yield markets?   

BRIAN NOLD:  Well David, we saw quite a bit of volatility during the third quarter in the high yield market and it continued into October.  Generally there was a global risk reduction across really any kind of risk asset class in the markets.  The high yield market was down over 6% during the third quarter, but as you said did rebound up about 5.9% in the month of October.  We saw outflows of cash from retail mutual funds across the bond and the high yield market of about $500 million in the third quarter.  However, in the last three weeks, we have seen over $8 billion of inflows, so clearly the market did correct and re-price, but investors, I think, saw a very attractive opportunity and cash came into the market and drove very strong returns in the month of October. 

DAVID CRAIG:  Ok, and then after the downturn and recovery, where are spreads now and then what about the forecast for defaults?

BRIAN NOLD:  Well spreads now are about 713 basis points and for comparison at the beginning of the year they were 534 basis points and the widest we saw at the beginning of October we reached about 900 basis points.  When you look through to figure out what that implies for the forward default rate for the high yield market, it implies about a 7% forward default rate.  That compares to roughly a 1% trailing twelve month default rate, so a fairly significant increase is forecast based on the spread levels.  However, in a recessionary environment, the forecast for defaults would be in the 5 to 5 ½% range and in a non-recessionary environment, or just a slow growth environment, defaults are likely to be in the 2 to 3% range, so there is quite a significant excess spread cushion built into the market right now due to the macro uncertainty that is mostly coming out of Europe. 

DAVID CRAIG:  OK and the Fed came out this week and revised their growth estimates lower.  Do you think the Fed’s commentary will have an impact on the forecast for defaults?

BRIAN NOLD:  Well the market is already anticipating a slow growth environment which we actually don’t believe will dramatically increase defaults, as companies have been very aggressively refinancing any of their near term debt maturities over the last three years, so it is mostly something that has been priced into the market. 

DAVID CRAIG:  Ok, now why would an investor want to invest in high yield and what looks to be a pretty stagnate economy? 

BRIAN NOLD:  Well there is an attractive current yield in the market of about 8 ¼ and the credit cycle in general is continuing to improve as companies are focused on continuing their balance sheet repair and generating strong free cash flow. So again, stagnate economy and slow growth is actually not a negative scenario for most high yield companies that have very strong balance sheets. 

DAVID CRAIG:  OK, and you touched on this a little bit, but how has the situation in Europe, and particularly in Greece, impacted high yield? 

BRIAN NOLD:  Well as we saw in August there was a general risk reduction trade because of the uncertainty in Europe; however, from a direct impact to company fundamentals, we are seeing very little impact.  Third quarter numbers thus far are coming out fairly strong or in line with expectations.  The high yield market, in general, is generally dominated by companies that are mostly impacted by what is going on in the U.S. economy.

DAVID CRAIG:  Ok, and what is your outlook for high yield?

BRIAN NOLD:  Well in the scenario where Europe does prevent a contagion from enveloping the global banking system and then the U.S. faces a slow growth environment, we would actually expect high yield spreads to tighten as really the current spread levels discount a significantly higher default rate than what we would anticipate.  We believe the combination of the current yield of 8 ¼% and further spread compression from high yield could drive strong returns over the next twelve months.

DAVID CRAIG:  Ok, great, well Brian thanks for your insights.

BRIAN NOLD:  Ok, thank you.

DAVID CRAIG:  Hello, welcome to Fund Focus Five.  It’s the week of October 17^th and I’m talking with Don Wordell, portfolio manager of the RidgeWorth Mid-Cap Value Equity Fund, about third quarter performance.  Don, how did mid caps stocks do in the third quarter?

DON WORDELL:  Well, mid cap stocks did poorly during the third quarter.  As you know, the overall macro-related issues really drove underperformance of the stocks, the fears around the debt issues in Europe, the fears around the United States debt downgrade all drove stocks down during the third quarter.

DAVID CRAIG:  The Fund had a tough quarter with both sector allocation and stock selection having negative impacts relative to the benchmark.  Can you first talk about the sector impact?

DON WORDELL:  Sure, we were overweight banks, we were overweight Industrials, we were overweight Materials and we were overweight Energy.  You know between banks, Materials, Industrials and Energy probably the worst four sectors you can be overweight in a macro malaise that we went through over the last three months.

DAVID CRAIG:  Then with stock selection, it seems that Industrial, Financials and Technology were the key drivers of underperformance.  What happened in each of those sectors?

DON WORDELL:  Yeah, in Financials, it was really banks.  The issues there are very frustrating because what you saw was very high correlations among stocks.  So for example over the summer you had big declines in Morgan Stanley and Bank of America.  Yet they took down banks in the mid cap space that have zero exposures that those companies have.  The risk profile of Comerica and Lazard is very different to the risk profile of Morgan Stanley, but it didn’t matter.  The high correlations, highly correlated markets just took those stocks down as well.  In Industrials, the stock selection there was Ingersoll Rand and Parker Hannifin and FlowServe as names that we believe have outstanding long-term earnings potential, but because they have multi-national or are considered to be global, the issues in Europe and the expectations for a hard-landing in China really drove the industrial stocks lower.  Technology, that was really driven by the same reasons that Industrials were brought down.  Technology and industrial stocks are very much, they trade very similar.  Again, it speaks to the high correlations of stocks that we saw.  In that environment that we saw over the summer with high correlation, it’s very difficult for managers like us that are stock pickers that do fundamental work from the bottom up to outperform.  We can’t differentiate ourselves in that type of market.

DAVID CRAIG:  Now on a positive note, both Materials and Telecomm had positive contributions to relative performance.  Why was that the case? 

DON WORDELL:  Well, the positive contributions from material stocks is driven by a couple of stocks we one; one being Airgas.  This was a company that was trying to fend off a suitor all summer long and so you had a highly motivated management team that really outperformed and really beat the market’s expectations all summer long.  Then in Telecomm, names like Windstream and CenturyLink are very high-yielding stocks with dividend yields well over 8%, and the market was very much attracted to those yields as the bond markets strengthened and yields on bonds went very low.

DAVID CRAIG:  Okay.  Any other highlights during the quarter you want to discuss?

DON WORDELL:  You know, I would just say the thing I would add at the very end is that you know we continue to be positive as we look forward.  Corporate balance sheets are in great shape, cash balances have never been higher.  The other thing too, as we’re recording this we’re in the middle of earning season.  Earnings are in line to better than expectations across the board, and we think that will be very positive for stocks as we get resolution to some of these macro issues.

DAVID CRAIG:  Okay.  Great, well, Don, thanks for your insights.

DON WORDELL:  You’re welcome.

DAVID CRAIG:  Hello, and welcome to Fund Focus Five, it’s the week of October 17^th, and I’m talking with Jim Keegan, portfolio manager for the RidgeWorth Total Return Bond Fund, about third quarter performance.  Jim, how did the investment grade fixed income market do in the third quarter?

JIM KEEGAN:  The investment grade fixed income market did pretty well David.  Led by treasuries, treasuries had the best performance.  You had 125 basis points decline in the ten year rate, and as you know the spread sectors tend to key off the treasuries, so they did well but within the various sectors treasuries did very well, mortgage product did ok, corporate did ok, but you needed to get below the surface to really understand there were aspects of the mortgage market that didn’t perform as well, and then in the corporate market the financials really underperformed.  It wasn’t just about being in the right sectors so much in the third quarter; it was being in the right subsectors, as well as your overall risk profile.

DAVID CRAIG:  How did the Total Return Bond Fund do relative to the benchmark and its peer group?

JIM KEEGAN:  Total Return Bond Fund did quite well, and you might step back and say oh so they must have been overweight treasuries and in fact we were not overweight treasuries.  We were modestly underweight treasuries, but we did have a yield curve flattener on and by that meaning that we felt that longer rates were biased to fall while short rates obviously with the fed conveying that we’re going to be in the zero interest rate policy environment for at least two more years, short rates have no where to go, so that was a winner for us.  We took the beta down in our portfolios towards the end of the second quarter, actually at the end of the second quarter, and we did that primarily through decreasing our bank bond exposure, as well as our cyclical corporate bonds.  Then within the mortgage space we moved to more structure convexity positive profile bonds and away from what had been an open coupon bias that we had coming in to this year, which outperformed in the first half of the year, but we took profits and moved into more stable cash flow like securities, figuring that rates were biased to fall in the third quarter due to the end of QE2 and the global slowdown. 

DAVID CRAIG: Now rates came down in the third quarter and generally bond prices are suppose to go up when that happens, but there are some funds in the peer group that actually had negative performance.  What do you think was happening with some funds in the category?

JIM KEEGAN:  Well, what’s interesting is that interest rates fell across the curve, so bond funds should not have a negative return, so why would a bond fund have had a negative return.  Now you could have had a bond fund that underperformed the market or underperformed treasuries, but it still should have had a positive return, which means that those bond funds that had a negative return had large exposures to either Financials would be my guess, and potentially some peripheral European sovereign debt, and/or some of the European bank papers. I think it would have been a combination of financial exposure both here in the U.S. and in Europe, and I’d say the other thing would have been exposure to some of the peripheral European sovereign markets. 

DAVID CRAIG:  Were there things that didn’t work as well for the funds during the quarter?

JIM KEEGAN:  Well you know, everything pretty much kicked in in the third quarter largely related to us having an out of consensus view of what the end of QE2 meant for financial markets in general and risk assets in particular.  As you know, the end of QE2 to us meant that you were taking out a big part of not only the treasury market, as the Fed would go in and buy treasuries, but the mechanics of the way that works is the Fed infuses cash into the marketplace when they take out those treasuries and buy those treasuries, and that cash is then meant to go into risky assets, i.e., stocks, high-yield bonds, leverage loans, even commodities and corporate bonds.  The big catalyst in the third quarter to us was going to be that when you remove that cash from the market the implications were that risky assets were more vulnerable, and then if you think about the global slow down, which was becoming pretty clear as we ended the second quarter, that that would potentially lead to a flight to quality into treasuries and you’d have treasuries rallying.  I guess if there is something that we could have done better, I guess we could have owned more treasuries.  In spite of the fact that we were over rate spread product, we pretty significantly outperformed the market.

DAVID CRAIG:  What is your outlook for investment grade fixed income? 

JIM KEEGAN:  Our outlook for investment grade fixed income is a pretty constructive outlook, and it’s driven by the fact that, I said it before, I’ll say it again, the Fed is conveying that we’re going to be in this zero interest rate policy environment for at least another two years, people need income, and our mantra right now is safe income at a reasonable price.  We think investment grade fixed income right now has the elements of safe income at a reasonable price.  We think that treasury rates can stay low for a long period of time and potentially head lower, and then within the investment grade fixed income space we continue to be favorably disposed towards both the corporate sector and the agency mortgage backed security sector, but again, being in the right parts of each of those sectors is going to be pretty important as they were in the third quarter going forward.

DAVID CRAIG:  Alright Jim, thanks for your insights. 

JIM KEEGAN:  Thank you David.

DAVID CRAIG:  Hello and welcome to Fund Focus Five.  It’s the week of October 17^th, and I’m talking with George Goudelias, portfolio manager of the RidgeWorth Seix Floating Rate High Income Fund about third quarter performance.  So George, how did the bank loan market do in the third quarter?

GEORGE GOUDELIAS:  Consistent with other asset classes bank loans were down for the quarter on renewed worries about European sovereign debt and a slowdown in U.S. economic growth that resulted in a global flight to quality in August that continued into September.  As a result the Seix Floating Rate High Income Fund was down 3.66% for the quarter and that compares to the Credit Swiss Institutional Index down 2.64% and the Leveraged Loan Index, which was down 3.76%.  The difference between those two indices being a function of the institutional index dropping loans once their price drops below 90, so it understates markets in very volatile times as it doesn’t capture the full price impact. 

DAVID CRAIG:  Right, so once the loans go under 90 they drop out of the institutional and into the general?

GEORGE GOUDELIAS:  Correct. 

DAVID CRAIG:  Okay, tough quarter but worked specifically for the Fund during the quarter?

GEORGE GOUDELIAS:  The positions that worked well were primarily higher quality names like Royalty Pharma, NDS, which is a technology name, Gray TV, which is a broadcaster, but those were positions that were up and companies that are generating free cash flow and growing their businesses.  

DAVID CRAIG:  Okay, and then what didn’t work as well?

GEORGE GOUDELIAS:  What didn’t work was one segment in our Fund that was roughly 8% of the Fund were high-yield bonds and those underperformed relative to loans.  So, bonds in names like Intelsat and Spingleaf Finance underperformed as well as a couple of loans.    

DAVID CRAIG:  So, what’s your outlook for bank loans?

GEORGE GOUDELIAS:  We still remain constructive on bank debt that our fundamental view remains positive.  We believe companies have been managing their balance sheets with the possibility of an economic slowdown in mind, really since the credit crisis in 2008 they have been focused on refinancing shorter term maturities and using proceeds to pay down the short-term maturities, extend the term of their debt and giving themselves plenty of liquidity over the next 24 to 36 months.  In addition, overall credit metrics for bank debt have improved steadily over the last two years and we’re starting to see the results of that as October starts to turn around with the bank debt fund up almost 1.8% just in the first nineteen days of the month and our Fund continues to perform well relative to peers with an eighteenth percentile Lipper ranking over the last twelve months.    

DAVID CRAIG:  Okay, that’s great.  All right, well George thanks for your insights. 

GEORGE GOUDELIAS:  Thank you David

DAVID CRAIG:  Welcome to the Plan Advisor Tools Five.  It’s the week of October 3^rd, and I’m with Daniella Moiseyev, retirement segment marketing manager for RidgeWorth Investments to talk about fee disclosure regulations.  So Daniella, we’ve had ERISA attorney David Williams with us in the past podcasts to discuss regulation 404(a)(5).  Can you give us a quick refresher?

DANIELLA MOISEYEV:  Sure, thanks David.  What we found over the last few months is a lot of people are talking about the plan provider disclosure which is the 408(b)(2), but not as many people are talking about the new regulation under ERISA 404(a)(5).  Now that regulation requires the disclosure of certain plan and investment-related information, most significantly expenses and fees, to participants in what they call participant-directed individual plans.  So things such as 401(k)-type plans.  Basically what it requires is that the plan sponsor, and what they call the plan administrator, but in most cases it is the plan sponsor, has to regularly disclose to plan participants the features of the plan that effect the investment of their plan account as well as a wide variety of expenses and fees that potentially could be charged to their account and then actually are charged to their account.  By regularly, it varies depending on what components are being disclosed; some are quarterly and some are annually.  That is discussed in more detail on our white paper about 404(a)(5).  Now the aim of this regulation, the reason the DOL undertook to write this, is to give the approximately 72 million participants in these types of plans better information about their expenses and fees in order for them to better manage their retirement savings.  The regulation goes into effect on May 31, 2012, for most plans.  There are some plans that will go earlier.  Then it is 45 days after the end of the first quarter after regulation goes into effect so effectively for most plans that will be August 14, 2012.

DAVID CRAIG:  Okay, so what do you think will be the effect on plan participants as a result of this new regulation?

DANIELLA MOISEYEV:  Well what we’re finding and what the research is showing is that most plan participants are completely unaware that their plans cost them anything.  Most of them think that they’re cost free.  What we think is going to happen after they get that first account statement is going to be a mixture of confusion and shock.  They’ll be able to see in black and white, in dollars and cents and in some cases percentages, what their plan is actually costing them and what is being deducted out of their account.  That’s going to cost quite a bit of consternation.  We think the first thing that most people will do is go ask their family and friends to see what they’re paying.  When you start comparing in that way, you know, one of the first things that they’ll realize is that those participants with higher value accounts are actually paying more than those with lower value accounts and in some cases they may not think that is fair.  What we think is that’s going to cause a lot of people to come into the HR office or call the call lines and on top of that, Dalbar which is an industry consulting group did a study of the model comparative disclosures that the DOL wrote up, and they assessed on a variety of factors; document length, Flesh reading ease, confusing terms, number of confusing concepts, etc. ,etc.  Basically they came up with it was very confusing that the reading ease is very low, that the length is too long to engage with most regular, ordinary participants, that it has a variety of confusing terms (seventeen I believe that they found) and has a lot of confusing concepts.  So that’s going to cause some problems.  Now Dalbar came up with the idea that this is going to cause spikes in call volumes, disgruntled participants and a mass exodus out of 401(k) plans.  We believe that it doesn’t necessarily have to be this way and there are certain things that plan sponsors can do to be prepared to help their participants not be so concerned and so upset and exit the plan.

DAVID CRAIG:  Okay, what are some of those things plan sponsors can do? 

DANIELLA MOISEYEV:  Well, we break it up into four things.  First, we think that a plan sponsor needs to understand and be able to articulate the different components of their plan fees in a way that participants can understand.  There are multiple components here, but the ones that we think people will be most concerned with and that most plan sponsors or whoever is staffing the call line or the HR office where participants are going to go need to be able to do that is investment management fees which are probably going to be the bulk of the fees that are being deducted and the participant’s specific fee  so things such as when they are taking a loan or when they’re doing some various transfers or rider charges or redemption fees or transfer fees and those kinds of things.  Then also the administrative expenses and fees which may also include an offset due to revenue share by the investment option.  So all of that are line items in the new disclosure are pretty confusing.  So you need to do as a plan sponsor need to be able to articulate what those means and understand them yourself.  We cover these fees in some detail in two pieces that we have available on our retirement plan website, www.planadvisortools.com.  We have a Managing your Plans Fees white paper and a 404(a)(5) fiduciary focus participant guide both of which go into some of these fees in detail to help you understand them in plain English.  Now the second thing that we feel plan sponsors should do to prepare is to understand and be able to articulate the comparative value of their plan.  There are a lot of ways that you can do that.  As an advisor of the plan, you can work with your plan sponsor client to benchmark their plans.  We do have some benchmarking tools available on our retirement site, but we also feel strongly that you shouldn’t only benchmark the fees of a plan.  You need to benchmark all the various aspects of the plan in light of participant success measures or participant outcome.  So how well is your plan performing relative to its peers will go a long way towards helping your plan participants understand why they pay what they pay.  Now that being said, if your plan is completely out of line or if it’s not having very good participant success outcome, you may wish to work with your advisor to find a better lower cost option.  The third thing we feel is very important to be prepared is to have your staff trained.  That front line staff that will be dealing with participants who come into the office whether it’s the person in the HR department or it may be the employer, the company owner himself, needs to be prepared to answer questions and really understand this.  Again, I think some of the materials that we have available will help go quite a way to help people understand it.  Then the fourth thing we really think is important is to consider distributing a participant guide in advance of the first disclosure.  So before they get that first statement with these fees, send something out to your participants so that they understand what’s coming.  We’re working on something like that now that we’ll have out ahead of the time of the required disclosures, and we’re working on making something that’s going to be in plain English that you’re average participant can understand it.

DAVID CRAIG:  Great.  And I assume advisers can also go to Plan Advisors Tools to get information to support that?’

DANIELLA MOISEYEV:  Absolutely.  Advisors can go to www.planadvisortools.com.  We have benchmarking tools there that can help you with all the plan sponsors that you work with benchmarking the plan.  We also have all of our printed materials around 404(a)(5) as well as managing your plan fees there that you can take a look at and see if it’s something you would like to use with your plan sponsor client.

DAVID CRAIG:  Great, thanks for your insights Daniella.

DANIELLA MOISEYEV:  Thank you.

DAVID CRAIG: Hello, and welcome to the Style Class Focus Five.  It’s the week of October 3, 2011, and I’m talking with Alan Gayle, Senior Investment Strategist and Director of Asset Allocation for RidgeWorth Investments about the evolution of asset allocation.  Now Alan, asset allocation has become much more complex over the past decade.  Can you talk about where we’ve gone since the days of a portfolio being made up of domestic stocks, bonds and cash?

ALAN GAYLE:  Right.  The capital markets have become infinitely more sophisticated and a lot faster over the years.  In years past the manager would virtually back into the fixed income allocation for a client based on how much income the portfolio needed to generate and the current yield available in the market, it was simple.  Also many managers used what we call a buy and hold equity strategy.  Usually with the iconic and branded S&P 500 Companies.  Those days are long gone.  In fact, a new group of securities enables a more actively and broadly diversified strategy to be developed.  We can now move very quickly to increase or decrease exposures to developed International markets, emerging markets, commodities, real estate and we can employee ETFs to get tactical tilts and things very quickly.  This has led to opportunistic trading and ways to buffer downside risk in portfolios.

DAVID CRAIG:  So how do you determine what the right mix of these new asset classes is for a given risk tolerance?

ALAN GAYLE:  There are a couple of approaches that investors and investment professionals use.  One is to choose a set number of asset classes and always have an allocation to each that lines up with a specific risk tolerance.  Another approach is to have a range of asset classes that you may include but allocate to them based on current opportunities.  At RidgeWorth, we believe the right mix or the optimized asset allocation is a function of current opportunities to generate total return with a client’s risk tolerance’s very much in mind.  We have four general strategies based on risk profiles.  The conservative allocation strategy has a 70% fixed income, 30% equity target.  Moderate has 50/50 mix.  Growth has 70% equity/30% fixed and aggressive growth has 100% equity allocation.  We can vary equity exposure plus or minus 10% around those respective targets based on expected returns.  Within these risk banks, we then drill down on estimated total returns using what we call our 360 degree analysis.  It’s not as easy to say that stocks should provide and 8% to 10% annual return like the old days.  Instead we look at stocks in myriad ways.  By market capitalizations – large, mid and small; by domicile, US based, International develop and emerging markets and we look at fixed income as having opportunity sets.  Short, intermediate, long, high yield, floating rate, credit and we augment all of that with alternatives – real estate, commodities and TIPs.  At any point in time some of these securities may be undergoing stress or what could be defined, what we define as overvalued based on our estimates absolute and relative forward returns.  We do that by looking at both fundamentals and technical momentum with the intent of identifying market traction before taking action.  Not buying too early, not selling to late.  In addition, we have discussions with RidgeWorth portfolio managers to take their pulse on what they’re hearing from companies and how they define the best opportunities.  Clearly we have to examine how all the pieces work together in a portfolio.  Gold is not highly correlated with the S&P 500 over time.  It serves more as an inflation /risk off hedge.  So we also look at longer term correlations and what kind of returns we can expect versus the volatility or the risk that we take.  The result of all this is a portfolio true to its Lipper category and one that should be more “all weather” than ones that we would characterize as alpha generators or downside protectors.  We’re active traders.  Always looking for opportunities to maximize returns per unit of risk so frequently we purchase attractive securities or funds across all the portfolios just at different weightings.  This provides consistency and reflects our best thinking.

DAVID CRAIG:  Okay, great.  So once an allocation has been set what are some ways to keep it in balance?

ALAN GAYLE: Again, there are different approaches.  Some investors and investment professionals may rebalance over periodic intervals.  Quarterly, for instance.  Others may rebalance when a portfolio gets a certain percentage out of balance.  At RidgeWorth, we rebalance actively based on cash flows and opportunities.  In fact, we start each day talking about news flow and craft a game plan for when we receive the daily cash report.  We take a sophisticated approach and adjust with more of a fine tuning perspective based on the fundamental landscape, news events and technical factors such as the Fibonacci retracements, distance from the moving averages, support and resistance levels. 

DAVID CRAIG:  Okay, now how would a well allocated portfolio have benefited investors this year?

ALAN GAYLE:  Client’s would have benefited with a diversified portfolio.  On a year to date basis through September 30, 2011, the S&P 500 returned -8.7%, while many of the fixed income categories had positive returns.  Precious metals such as gold performed well as did real estate.  The benefits of broad diversification were clear since the equity market returns lagged fixed income returns rather dramatically.  Having said that, the market segments that have lagged are looking increasingly attractive so it could be a very solid opportunity moving forward based on our cautiously positive outlook.  Our expectation that Euro’s own uncertainties will gradually dissipate and the current high degree of asset and stock correlations lessens.

DAVID CRAIG:  Great.  Well thanks for you insights Alan. 

ALAN GAYLE:  Thanks very much.

DAVID CRAIG:  Hello, welcome to Fixed Income Market Five, it’s the week of October 3^rd, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and sub-advisor for the Ridgeworth Investment Grade Bond Funds, discussing what’s going on in the fixed income market.  Jim, in your end of 2010 Seix Perspective you wrote that “We remain hardened skeptics of the hope trade.  By the middle of 2011 the headwinds with the moribund housing market and intensifying drag emanating from state and local government spending, and an unemployment and underemployment rate incapable of sustained downtrend will be sobering reminders in how different this recovery cycle is.  In short, there is nothing normal about it, new or old.”  Now the headwinds you referenced, in addition to the European issues, have certainly seemed to impact the equity markets in the third quarter.  How did they impact the fixed income market?

JIM KEEGAN: Well David, they’ve impacted the fixed income market primarily through the manifestation of the consensus once again coming into this year being wrong, and what I’m referring to there is that the expectation coming into this year is that GDP would be on the order of 3.5% to 4%, we’d have higher rates and a steeper curve, etc., etc., and the end of QE2 would just lead to higher interest rates and a steeper yield curve.  In fact what’s happened is as we said in prior Fixed Income Market Five’s in addition to the quarterly perspectives is that the end of QE2 was likely going to be no different than the end of QE1.  What happened was interest rates fell and the yield curve flattened, and that was very much an out of consensus view.  The reason is, if you think about the mechanics of QE2 or QE1 for that matter, what the Fed does is every day at 11 a.m. is they go into the market, they buy treasuries and take treasuries out of the market but infuse cash into the market, and that cash was designed to go into riskier assets, i.e., stocks, commodities, high-yield bonds, high-yield bank loans, corporate bonds, etc., etc.  Our view was that once you removed that cash that was coming in as a result of quantitative easing, that the bigger implication would be for risky assets, like stocks, and commodities, and that’s in fact what we’ve seen and rates have in fact fallen.  In fact they’ve fallen over 120 basis points if you look at the ten year treasury during the third quarter.

DAVID CRAIG:  Ok, so the ten year treasury fell more than 100 basis points during the quarter, which is a big move.  Now that should have pushed bond prices and bond fund values higher.

JIM KEEGAN:  Oh exactly, I mean if you think about bond math, interest rates go down, bond prices go up, so you know treasuries lead the way in the third quarter with the big decline we had in treasury rates.  In fact while the US Treasury or the US Government was downgraded by S&P.  If you think about bonds and the Lehman Ag was up a little over 3.8% while stocks were down anywhere from 14% to 20% in the third quarter.  I think what you need to find from your fixed income manager is that they better have a positive return in an environment like that serving as the anchor of the portfolio.  Our performance here at Seix was quite good and we were overweight spread product.  But it’s this safe income at a reasonable price that we’ve been talking about.  The other thing that I’d say about the third quarter is the dispersion of returns that we say in the third quarter amongst bond funds is very reminiscent of what we saw in 2008.  It doesn’t seem like a lot of lessons were learned.

DAVID CRAIG:  Now with interest rates where they are, they’re bound to go up from here right?

JIM KEEGAN:  No, not necessarily David.  Again, that was the consensus, that’s been the consensus for the last several years, ok.  Now here at Seix we’re not market timers so we’re not trying to time interest rates, but we do have a view on the interest rate market.  Look, three things can happen to rates right, they can stay low for a longer period of time, they can head lower, or they can head higher. The consensus view for the last several years is they got to head higher because they’re so low.  In our view there’s a higher probability that rates stay low like they are right now for a longer period of time and an extended period of time, or they even head lower, given the fundamental backdrop and the structural problems that our policy makers globally refuse to acknowledge, let alone address.  Policy makers seem to think that they can create a pain free crisis, or get us through a pain free crisis.  And the amortization strategy and the dragging out of the deleveraging process, really not allowing markets to clear based on true fundamental underlying supply and demand, supports our investment strategy that at minimum rates are going to stay low for longer, but they can potentially go even lower. 

DAVID CRAIG:  Isn’t that what the fed is actually trying to do now, push them lower?

JIM KEEGAN:  Well through their Operation Twist the Fed is trying to bring down long-term interest rates, and by definition that’s going to flatten the curve because there’s not much they can do on the short end with their zero interest rate policy environment.  The housing market is not about low rates, because we’ve had low rates for the last three years, and it doesn’t seem to be doing much for the housing market, so on the margin yeah the Fed will Operation Twist will potentially lower interest rates, but it’s not going to solve what’s fundamentally wrong with the economy.  It’s the structural problems that I talked about in prior Fixed Income Market Fives, and that being excessive debt, a savings problem in this country, unemployment and an underemployment that is not easily solved by monetary policy, housing prices that remain under pressure, and then trillion dollar plus deficits as far as the eye can see.  Monetary policy can not solve those problems. 

DAVID CRAIG:  Let’s move to Europe.  You’ve been warning people about the sovereign debt crisis since the middle of 2009, you talked about it being a competitiveness issue not a fiscal one.  Is Europe addressing its competitiveness?  

JIM KEEGAN:  Well I mean, the easiest way, let’s take a step back and something that I said a couple years back, when everybody was focused on well Greece only represents 0.5% of global GDP.  If you remember, I made the point that you know folks this is not about Greece, this is about the fragility of the global banking system.  Yes, peripheral Europe has a competitiveness problem, and the problem that they have is they don’t control monetary policy because they’re part of a monetary union called the Euro.  Then as a result of that they’re tied from a currency standpoint to that Euro.  The easiest way for these countries to solve the competitiveness problem would be through a lower exchange rate, but given the fact that the Euro has remained artificially high as a result of Germany primarily, I guess the easiest for a peripheral Europe to solve its competitiveness problem would be for Germany to leave the Euro.  While that may be something that happens down the road, it seems like the politicians throughout Europe are wetted to this experiment called the Euro.

DAVID CRAIG:  In let’s end with your outlook, what is your outlook from here?

JIM KEEGAN:  Well as I said, you know the structural problems are still with us, our politicians and policy makers refuse to make hard decisions, and at the end of the day we think that we’re going to continue to be in this below trend growth environment that’s largely driven by inadequate policy responses of allowing markets to clear.  I’m talking about stocks, housing, etc., and you know paying down debt and deleveraging in general.  This cycle is unlike any cycle that we’ve seen in the post-war period, which is why we’ve had a more skeptical view as it relates to the economy, interest rates and risk asset prices. Corporate sector to us is the one sector, and we’ve been singing this song for the last several years.  We took our corporate position down at the end of the second quarter, and we took our beta down when we did that trade, which 20/20 hindsight has worked out quite well.  Having said that though, the corporate sector is in pretty good shape from a liquidity standpoint, from a leverage standpoint.  Does not have the excessive debt problem that the household sector has, that the financial sector has, and that the government sector has as they have transferred a lot of this private sector debt to the public sector.  We still like the corporate bond sector, with a defensive orientation, agency mortgage backed security paper we think makes some sense here, and then certain aspects of the commercial mortgaged backed securities sector as well.  Again, the theme to us is safe income at a reasonable price, because as Chairman Bernanke has conveyed, we’re going to be in this zero interest rate policy environment for quite a long time. 

DAVID CRAIG:  Jim, thanks for your insights.

JIM KEEGAN:  Thank you David. 

DAVID CRAIG:  Hello, welcome to Fixed Income Market Five, it’s the week of October 3^rd, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and sub-advisor for the Ridgeworth Investment Grade Bond Funds, discussing what’s going on in the fixed income market.  Jim, in your end of 2010 Seix Perspective you wrote that “We remain hardened skeptics of the hope trade.  By the middle of 2011 the headwinds with the moribund housing market and intensifying drag emanating from state and local government spending, and an unemployment and underemployment rate incapable of sustained downtrend will be sobering reminders in how different this recovery cycle is.  In short, there is nothing normal about it, new or old.”  Now the headwinds you referenced, in addition to the European issues, have certainly seemed to impact the equity markets in the third quarter.  How did they impact the fixed income market?

JIM KEEGAN: Well David, they’ve impacted the fixed income market primarily through the manifestation of the consensus once again coming into this year being wrong, and what I’m referring to there is that the expectation coming into this year is that GDP would be on the order of 3.5% to 4%, we’d have higher rates and a steeper curve, etc., etc., and the end of QE2 would just lead to higher interest rates and a steeper yield curve.  In fact what’s happened is as we said in prior Fixed Income Market Five’s in addition to the quarterly perspectives is that the end of QE2 was likely going to be no different than the end of QE1.  What happened was interest rates fell and the yield curve flattened, and that was very much an out of consensus view.  The reason is, if you think about the mechanics of QE2 or QE1 for that matter, what the Fed does is every day at 11 a.m. is they go into the market, they buy treasuries and take treasuries out of the market but infuse cash into the market, and that cash was designed to go into riskier assets, i.e., stocks, commodities, high-yield bonds, high-yield bank loans, corporate bonds, etc., etc.  Our view was that once you removed that cash that was coming in as a result of quantitative easing, that the bigger implication would be for risky assets, like stocks, and commodities, and that’s in fact what we’ve seen and rates have in fact fallen.  In fact they’ve fallen over 120 basis points if you look at the ten year treasury during the third quarter.

DAVID CRAIG:  Ok, so the ten year treasury fell more than 100 basis points during the quarter, which is a big move.  Now that should have pushed bond prices and bond fund values higher.

JIM KEEGAN:  Oh exactly, I mean if you think about bond math, interest rates go down, bond prices go up, so you know treasuries lead the way in the third quarter with the big decline we had in treasury rates.  In fact while the US Treasury or the US Government was downgraded by S&P.  If you think about bonds and the Lehman Ag was up a little over 3.8% while stocks were down anywhere from 14% to 20% in the third quarter.  I think what you need to find from your fixed income manager is that they better have a positive return in an environment like that serving as the anchor of the portfolio.  Our performance here at Seix was quite good and we were overweight spread product.  But it’s this safe income at a reasonable price that we’ve been talking about.  The other thing that I’d say about the third quarter is the dispersion of returns that we say in the third quarter amongst bond funds is very reminiscent of what we saw in 2008.  It doesn’t seem like a lot of lessons were learned.

DAVID CRAIG:  Now with interest rates where they are, they’re bound to go up from here right?

JIM KEEGAN:  No, not necessarily David.  Again, that was the consensus, that’s been the consensus for the last several years, ok.  Now here at Seix we’re not market timers so we’re not trying to time interest rates, but we do have a view on the interest rate market.  Look, three things can happen to rates right, they can stay low for a longer period of time, they can head lower, or they can head higher. The consensus view for the last several years is they got to head higher because they’re so low.  In our view there’s a higher probability that rates stay low like they are right now for a longer period of time and an extended period of time, or they even head lower, given the fundamental backdrop and the structural problems that our policy makers globally refuse to acknowledge, let alone address.  Policy makers seem to think that they can create a pain free crisis, or get us through a pain free crisis.  And the amortization strategy and the dragging out of the deleveraging process, really not allowing markets to clear based on true fundamental underlying supply and demand, supports our investment strategy that at minimum rates are going to stay low for longer, but they can potentially go even lower. 

DAVID CRAIG:  Isn’t that what the fed is actually trying to do now, push them lower?

JIM KEEGAN:  Well through their Operation Twist the Fed is trying to bring down long-term interest rates, and by definition that’s going to flatten the curve because there’s not much they can do on the short end with their zero interest rate policy environment.  The housing market is not about low rates, because we’ve had low rates for the last three years, and it doesn’t seem to be doing much for the housing market, so on the margin yeah the Fed will Operation Twist will potentially lower interest rates, but it’s not going to solve what’s fundamentally wrong with the economy.  It’s the structural problems that I talked about in prior Fixed Income Market Fives, and that being excessive debt, a savings problem in this country, unemployment and an underemployment that is not easily solved by monetary policy, housing prices that remain under pressure, and then trillion dollar plus deficits as far as the eye can see.  Monetary policy can not solve those problems. 

DAVID CRAIG:  Let’s move to Europe.  You’ve been warning people about the sovereign debt crisis since the middle of 2009, you talked about it being a competitiveness issue not a fiscal one.  Is Europe addressing its competitiveness? 

JIM KEEGAN:  Well I mean, the easiest way, let’s take a step back and something that I said a couple years back, when everybody was focused on well Greece only represents 0.5% of global GDP.  If you remember, I made the point that you know folks this is not about Greece, this is about the fragility of the global banking system.  Yes, peripheral Europe has a competitiveness problem, and the problem that they have is they don’t control monetary policy because they’re part of a monetary union called the Euro.  Then as a result of that they’re tied from a currency standpoint to that Euro.  The easiest way for these countries to solve the competitiveness problem would be through a lower exchange rate, but given the fact that the Euro has remained artificially high as a result of Germany primarily, I guess the easiest for a peripheral Europe to solve its competitiveness problem would be for Germany to leave the Euro.  While that may be something that happens down the road, it seems like the politicians throughout Europe are wetted to this experiment called the Euro.

DAVID CRAIG:  In let’s end with your outlook, what is your outlook from here?

JIM KEEGAN:  Well as I said, you know the structural problems are still with us, our politicians and policy makers refuse to make hard decisions, and at the end of the day we think that we’re going to continue to be in this below trend growth environment that’s largely driven by inadequate policy responses of allowing markets to clear.  I’m talking about stocks, housing, etc., and you know paying down debt and deleveraging in general.  This cycle is unlike any cycle that we’ve seen in the post-war period, which is why we’ve had a more skeptical view as it relates to the economy, interest rates and risk asset prices. Corporate sector to us is the one sector, and we’ve been singing this song for the last several years.  We took our corporate position down at the end of the second quarter, and we took our beta down when we did that trade, which 20/20 hindsight has worked out quite well.  Having said that though, the corporate sector is in pretty good shape from a liquidity standpoint, from a leverage standpoint.  Does not have the excessive debt problem that the household sector has, that the financial sector has, and that the government sector has as they have transferred a lot of this private sector debt to the public sector.  We still like the corporate bond sector, with a defensive orientation, agency mortgage backed security paper we think makes some sense here, and then certain aspects of the commercial mortgaged backed securities sector as well.  Again, the theme to us is safe income at a reasonable price, because as Chairman Bernanke has conveyed, we’re going to be in this zero interest rate policy environment for quite a long time. 

DAVID CRAIG:  Jim, thanks for your insights.

JIM KEEGAN:  Thank you David.

Equity Market 5

DAVID CRAIG:  Hello, welcome to the Equity Market Five.  It’s the week of October 3^rd, and I’m with Don Wordell of Ceredex Value Advisors, sub-advisor to the RidgeWorth Mid-Cap Value Equity Fund to talk about what’s going on in the equity markets.  So, Don, you’ve been cautiously optimistic about the equity markets for most of the year, citing strong earnings and balance sheets, but being concerned about the macro environment.  Recently the macro environment seems to be dominating.  How do you, as a stock picker, deal with this?

DON WORDELL:  Yeah, it’s been a really challenging third quarter and summer for us.  You’re absolutely right.  The macro environmental is overwhelming the fundamental bottom-up research, but the stock picking, what we did, we just stick to our guns.  We do not stray from our process.  Our process has guided us through many, many business cycles before this, and we are confident it will guide us through forward business cycles.  So, we stick to our process, which is just going back and checking and rechecking our fundamentals, and as valuations become more attractive, we just buy bigger positions in stocks that we want to own.

DAVID CRAIG:  Okay, great.  As the stock market drop has a pretty significant decline in consumer and small business optimism.  What do you think it’s going to take to reverse that downward trend and confidence?

DON WORDELL:  You know, I think what’s going to reverse it over the next six weeks is there’s going to be earnings.  I think that earnings are going to begin to be announced.  Usually you get them starting about the third week of October, and I think that earnings are going to be in good shape.  You might see some ease back in forward guidance, but I think that for the most part, most of our fundamental work is showing us that margins are going to be fine, earnings are going to be in good shape, and the market is now at a level where expectations are so low that we think it’s pretty attractive. 

DAVID CRAIG:  Okay, great.  Now the sectors that you’ve been most positive on over the next 18 to 24-month time period have been Financials, Industrials, Energy, and Materials.  These four have not performed well since June.  Do you still have a favorable long-term outlook for them?

DON WORDELL:  I do.  I still have a very favorable long-term outlook for Financials.  I think that Industrials, Energy, and Materials are probably the ones that are more suspect at this point.  I think that we’re beginning to hear about hints of questionable growth in China, and that’s going to have a big impact on Energy, Materials, and Industrials.  So, if the developing economies catch the flu that seems to be going around Europe right now, then it could be a problem for the next 18 to 24 months.  However, corporate companies that we’re looking at in this space have very strong balance sheets.  They have very strong individual catalysts that drive them higher.  But when you look at what we’ve done, we have lightened up on some of our Industrials exposure, and we have lightened up on some of our Energy exposure in this time period because you could see real softening in global demand.  That would be very short-term in nature but something that’s enough for us to sell some positions.

DAVID CRAIG:  Okay.  So, what are some of the positive things you’re seeing in the equity markets? 

DON WORDELL:  Well, just continuing along with my last comment, the positives that I saw that we’re seeing over the summer is that if the fundamentals weaken and some of the global developing economies, you’ll see money move back to the U.S. dollar and its commodity prices come down or stay a little bit lower.  What we expect for that to do is to have a positive impact on the U.S. consumer through lower pricing for gasoline, lower pricing for food at the grocery store, all of this will drive higher discretionary income.  So, we’ve taken some of the money that we’ve sold and some of our Industrial positions and bought some consumer discretionary stocks that really had low expectations and were really discounting fairly draconian outcomes for their earnings that we don’t think are realistic, and we think that they’re going to be better off than what the value of the market is giving them.

DAVID CRAIG:  Okay, great.  And let’s end with your outlook.  We’ve already been incredibly volatile the past couple of months, but what’s your outlook for equities for the balance of 2011 and then into 2012?

DON WORDELL:  I think volatility is going to continue.  The volatility is exhausting.  This is what I tell everyone.  It absolutely is, but I think that as you look forward over the short-term, over the next three months, my outlook is that earnings should come in better than what the market is expecting right now.  However, that volatility is going to continue based on, unfortunately, whatever news comes out of Europe.  It seems to be all we have to do is wake up in the morning and look at what’s going on with the European banks, and that determines the direction of the U.S. equity market.  I would tell you that at the end of the day people are describing a lot of reasons for the stock market to be going the way it does, correlations are high, or correlation across asset classes are high, or it’s European contagion, or debt crisis, but at the end of the day fundaments will win out.  I can’t tell you if that’s three months or eighteen months, but they will.  When they do, we feel very comfortable with the stocks we own and their fundamental stories going into 2012.  However, I still think you’re going to have some volatility higher than what most people like over the near to medium term because of things like the election coming up next year.  If we can get past all that, we’re very confident that this is a great time to be building positions in your equity portfolios. 

DAVID CRAIG:  Great.  Alright, well, Don, thanks for your insights. 

Style Class Focus 5

DAVID CRAIG: Hello, and welcome to the Style Class Focus Five.  It’s the week of October 3, 2011, and I’m talking with Alan Gayle, Senior Investment Strategist and Director of Asset Allocation for RidgeWorth Investments about the evolution of asset allocation.  Now Alan, asset allocation has become much more complex over the past decade.  Can you talk about where we’ve gone since the days of a portfolio being made up of domestic stocks, bonds and cash?

ALAN GAYLE:  Right.  The capital markets have become infinitely more sophisticated and a lot faster over the years.  In years past the manager would virtually back into the fixed income allocation for a client based on how much income the portfolio needed to generate and the current yield available in the market, it was simple.  Also many managers used what we call a buy and hold equity strategy.  Usually with the iconic and branded S&P 500 Companies.  Those days are long gone.  In fact, a new group of securities enables a more actively and broadly diversified strategy to be developed.  We can now move very quickly to increase or decrease exposures to developed International markets, emerging markets, commodities, real estate and we can employee ETFs to get tactical tilts and things very quickly.  This has led to opportunistic trading and ways to buffer downside risk in portfolios.

DAVID CRAIG:  So how do you determine what the right mix of these new asset classes is for a given risk tolerance?

ALAN GAYLE:  There are a couple of approaches that investors and investment professionals use.  One is to choose a set number of asset classes and always have an allocation to each that lines up with a specific risk tolerance.  Another approach is to have a range of asset classes that you may include but allocate to them based on current opportunities.  At RidgeWorth, we believe the right mix or the optimized asset allocation is a function of current opportunities to generate total return with a client’s risk tolerance’s very much in mind.  We have four general strategies based on risk profiles.  The conservative allocation strategy has a 70% fixed income, 30% equity target.  Moderate has 50/50 mix.  Growth has 70% equity/30% fixed and aggressive growth has 100% equity allocation.  We can vary equity exposure plus or minus 10% around those respective targets based on expected returns.  Within these risk banks, we then drill down on estimated total returns using what we call our 360 degree analysis.  It’s not as easy to say that stocks should provide and 8% to 10% annual return like the old days.  Instead we look at stocks in myriad ways.  By market capitalizations – large, mid and small; by domicile, US based, International develop and emerging markets and we look at fixed income as having opportunity sets.  Short, intermediate, long, high yield, floating rate, credit and we augment all of that with alternatives – real estate, commodities and TIPs.  At any point in time some of these securities may be undergoing stress or what could be defined, what we define as overvalued based on our estimates absolute and relative forward returns.  We do that by looking at both fundamentals and technical momentum with the intent of identifying market traction before taking action.  Not buying too early, not selling to late.  In addition, we have discussions with RidgeWorth portfolio managers to take their pulse on what they’re hearing from companies and how they define the best opportunities.  Clearly we have to examine how all the pieces work together in a portfolio.  Gold is not highly correlated with the S&P 500 over time.  It serves more as an inflation /risk off hedge.  So we also look at longer term correlations and what kind of returns we can expect versus the volatility or the risk that we take.  The result of all this is a portfolio true to its Lipper category and one that should be more “all weather” than ones that we would characterize as alpha generators or downside protectors.  We’re active traders.  Always looking for opportunities to maximize returns per unit of risk so frequently we purchase attractive securities or funds across all the portfolios just at different weightings.  This provides consistency and reflects our best thinking.

DAVID CRAIG:  Okay, great.  So once an allocation has been set what are some ways to keep it in balance?

ALAN GAYLE: Again, there are different approaches.  Some investors and investment professionals may rebalance over periodic intervals.  Quarterly, for instance.  Others may rebalance when a portfolio gets a certain percentage out of balance.  At RidgeWorth, we rebalance actively based on cash flows and opportunities.  In fact, we start each day talking about news flow and craft a game plan for when we receive the daily cash report.  We take a sophisticated approach and adjust with more of a fine tuning perspective based on the fundamental landscape, news events and technical factors such as the Fibonacci retracements, distance from the moving averages, support and resistance levels. 

DAVID CRAIG:  Okay, now how would a well allocated portfolio have benefited investors this year?

ALAN GAYLE:  Client’s would have benefited with a diversified portfolio.  On a year to date basis through September 30, 2011, the S&P 500 returned -8.7%, while many of the fixed income categories had positive returns.  Precious metals such as gold performed well as did real estate.  The benefits of broad diversification were clear since the equity market returns lagged fixed income returns rather dramatically.  Having said that, the market segments that have lagged are looking increasingly attractive so it could be a very solid opportunity moving forward based on our cautiously positive outlook.  Our expectation that Euro’s own uncertainties will gradually dissipate and the current high degree of asset and stock correlations lessens.

DAVID CRAIG:  Great.  Well thanks for you insights Alan.

ALAN GAYLE:  Thanks very much.

Plan Advisor Tools 5

DAVID CRAIG:  Welcome to the Plan Advisor Tools Five.  It’s the week of October 3^rd, and I’m with Daniella Moiseyev, retirement segment marketing manager for RidgeWorth Investments to talk about fee disclosure regulations.  So Daniella, we’ve had ERISA attorney David Williams with us in the past podcasts to discuss regulation 404(a)(5).  Can you give us a quick refresher?

DANIELLA MOISEYEV:  Sure, thanks David.  What we found over the last few months is a lot of people are talking about the plan provider disclosure which is the 408(b)(2), but not as many people are talking about the new regulation under ERISA 404(a)(5).  Now that regulation requires the disclosure of certain plan and investment-related information, most significantly expenses and fees, to participants in what they call participant-directed individual plans.  So things such as 401(k)-type plans.  Basically what it requires is that the plan sponsor, and what they call the plan administrator, but in most cases it is the plan sponsor, has to regularly disclose to plan participants the features of the plan that effect the investment of their plan account as well as a wide variety of expenses and fees that potentially could be charged to their account and then actually are charged to their account.  By regularly, it varies depending on what components are being disclosed; some are quarterly and some are annually.  That is discussed in more detail on our white paper about 404(a)(5).  Now the aim of this regulation, the reason the DOL undertook to write this, is to give the approximately 72 million participants in these types of plans better information about their expenses and fees in order for them to better manage their retirement savings.  The regulation goes into effect on May 31, 2012, for most plans.  There are some plans that will go earlier.  Then it is 45 days after the end of the first quarter after regulation goes into effect so effectively for most plans that will be August 14, 2012.

DAVID CRAIG:  Okay, so what do you think will be the effect on plan participants as a result of this new regulation? 

DANIELLA MOISEYEV:  Well what we’re finding and what the research is showing is that most plan participants are completely unaware that their plans cost them anything.  Most of them think that they’re cost free.  What we think is going to happen after they get that first account statement is going to be a mixture of confusion and shock.  They’ll be able to see in black and white, in dollars and cents and in some cases percentages, what their plan is actually costing them and what is being deducted out of their account.  That’s going to cost quite a bit of consternation.  We think the first thing that most people will do is go ask their family and friends to see what they’re paying.  When you start comparing in that way, you know, one of the first things that they’ll realize is that those participants with higher value accounts are actually paying more than those with lower value accounts and in some cases they may not think that is fair.  What we think is that’s going to cause a lot of people to come into the HR office or call the call lines and on top of that, Dalbar which is an industry consulting group did a study of the model comparative disclosures that the DOL wrote up, and they assessed on a variety of factors; document length, Flesh reading ease, confusing terms, number of confusing concepts, etc. ,etc.  Basically they came up with it was very confusing that the reading ease is very low, that the length is too long to engage with most regular, ordinary participants, that it has a variety of confusing terms (seventeen I believe that they found) and has a lot of confusing concepts.  So that’s going to cause some problems.  Now Dalbar came up with the idea that this is going to cause spikes in call volumes, disgruntled participants and a mass exodus out of 401(k) plans.  We believe that it doesn’t necessarily have to be this way and there are certain things that plan sponsors can do to be prepared to help their participants not be so concerned and so upset and exit the plan.

DAVID CRAIG:  Okay, what are some of those things plan sponsors can do?

DANIELLA MOISEYEV:  Well, we break it up into four things.  First, we think that a plan sponsor needs to understand and be able to articulate the different components of their plan fees in a way that participants can understand.  There are multiple components here, but the ones that we think people will be most concerned with and that most plan sponsors or whoever is staffing the call line or the HR office where participants are going to go need to be able to do that is investment management fees which are probably going to be the bulk of the fees that are being deducted and the participant’s specific fee  so things such as when they are taking a loan or when they’re doing some various transfers or rider charges or redemption fees or transfer fees and those kinds of things.  Then also the administrative expenses and fees which may also include an offset due to revenue share by the investment option.  So all of that are line items in the new disclosure are pretty confusing.  So you need to do as a plan sponsor need to be able to articulate what those means and understand them yourself.  We cover these fees in some detail in two pieces that we have available on our retirement plan website, www.planadvisortools.com.  We have a Managing your Plans Fees white paper and a 404(a)(5) fiduciary focus participant guide both of which go into some of these fees in detail to help you understand them in plain English.  Now the second thing that we feel plan sponsors should do to prepare is to understand and be able to articulate the comparative value of their plan.  There are a lot of ways that you can do that.  As an advisor of the plan, you can work with your plan sponsor client to benchmark their plans.  We do have some benchmarking tools available on our retirement site, but we also feel strongly that you shouldn’t only benchmark the fees of a plan.  You need to benchmark all the various aspects of the plan in light of participant success measures or participant outcome.  So how well is your plan performing relative to its peers will go a long way towards helping your plan participants understand why they pay what they pay.  Now that being said, if your plan is completely out of line or if it’s not having very good participant success outcome, you may wish to work with your advisor to find a better lower cost option.  The third thing we feel is very important to be prepared is to have your staff trained.  That front line staff that will be dealing with participants who come into the office whether it’s the person in the HR department or it may be the employer, the company owner himself, needs to be prepared to answer questions and really understand this.  Again, I think some of the materials that we have available will help go quite a way to help people understand it.  Then the fourth thing we really think is important is to consider distributing a participant guide in advance of the first disclosure.  So before they get that first statement with these fees, send something out to your participants so that they understand what’s coming.  We’re working on something like that now that we’ll have out ahead of the time of the required disclosures, and we’re working on making something that’s going to be in plain English that you’re average participant can understand it. 

DAVID CRAIG:  Great.  And I assume advisers can also go to Plan Advisors Tools to get information to support that?’

DANIELLA MOISEYEV:  Absolutely.  Advisors can go to www.planadvisortools.com.  We have benchmarking tools there that can help you with all the plan sponsors that you work with benchmarking the plan.  We also have all of our printed materials around 404(a)(5) as well as managing your plan fees there that you can take a look at and see if it’s something you would like to use with your plan sponsor client.

DAVID CRAIG:  Great, thanks for your insights Daniella. 

DANIELLA MOISEYEV:  Thank you.

DAVID CRAIG:  Hello, welcome to the Equity Market Five.  It’s the week of October 3^rd, and I’m with Don Wordell of Ceredex Value Advisors, sub-advisor to the RidgeWorth Mid-Cap Value Equity Fund to talk about what’s going on in the equity markets.  So, Don, you’ve been cautiously optimistic about the equity markets for most of the year, citing strong earnings and balance sheets, but being concerned about the macro environment.  Recently the macro environment seems to be dominating.  How do you, as a stock picker, deal with this?

DON WORDELL:  Yeah, it’s been a really challenging third quarter and summer for us.  You’re absolutely right.  The macro environmental is overwhelming the fundamental bottom-up research, but the stock picking, what we did, we just stick to our guns.  We do not stray from our process.  Our process has guided us through many, many business cycles before this, and we are confident it will guide us through forward business cycles.  So, we stick to our process, which is just going back and checking and rechecking our fundamentals, and as valuations become more attractive, we just buy bigger positions in stocks that we want to own.

DAVID CRAIG:  Okay, great.  As the stock market drop has a pretty significant decline in consumer and small business optimism.  What do you think it’s going to take to reverse that downward trend and confidence?

DON WORDELL:  You know, I think what’s going to reverse it over the next six weeks is there’s going to be earnings.  I think that earnings are going to begin to be announced.  Usually you get them starting about the third week of October, and I think that earnings are going to be in good shape.  You might see some ease back in forward guidance, but I think that for the most part, most of our fundamental work is showing us that margins are going to be fine, earnings are going to be in good shape, and the market is now at a level where expectations are so low that we think it’s pretty attractive. 

DAVID CRAIG:  Okay, great.  Now the sectors that you’ve been most positive on over the next 18 to 24-month time period have been Financials, Industrials, Energy, and Materials.  These four have not performed well since June.  Do you still have a favorable long-term outlook for them?

DON WORDELL:  I do.  I still have a very favorable long-term outlook for Financials.  I think that Industrials, Energy, and Materials are probably the ones that are more suspect at this point.  I think that we’re beginning to hear about hints of questionable growth in China, and that’s going to have a big impact on Energy, Materials, and Industrials.  So, if the developing economies catch the flu that seems to be going around Europe right now, then it could be a problem for the next 18 to 24 months.  However, corporate companies that we’re looking at in this space have very strong balance sheets.  They have very strong individual catalysts that drive them higher.  But when you look at what we’ve done, we have lightened up on some of our Industrials exposure, and we have lightened up on some of our Energy exposure in this time period because you could see real softening in global demand.  That would be very short-term in nature but something that’s enough for us to sell some positions.

DAVID CRAIG:  Okay.  So, what are some of the positive things you’re seeing in the equity markets? 

DON WORDELL:  Well, just continuing along with my last comment, the positives that I saw that we’re seeing over the summer is that if the fundamentals weaken and some of the global developing economies, you’ll see money move back to the U.S. dollar and its commodity prices come down or stay a little bit lower.  What we expect for that to do is to have a positive impact on the U.S. consumer through lower pricing for gasoline, lower pricing for food at the grocery store, all of this will drive higher discretionary income.  So, we’ve taken some of the money that we’ve sold and some of our Industrial positions and bought some consumer discretionary stocks that really had low expectations and were really discounting fairly draconian outcomes for their earnings that we don’t think are realistic, and we think that they’re going to be better off than what the value of the market is giving them.

DAVID CRAIG:  Okay, great.  And let’s end with your outlook.  We’ve already been incredibly volatile the past couple of months, but what’s your outlook for equities for the balance of 2011 and then into 2012?

DON WORDELL:  I think volatility is going to continue.  The volatility is exhausting.  This is what I tell everyone.  It absolutely is, but I think that as you look forward over the short-term, over the next three months, my outlook is that earnings should come in better than what the market is expecting right now.  However, that volatility is going to continue based on, unfortunately, whatever news comes out of Europe.  It seems to be all we have to do is wake up in the morning and look at what’s going on with the European banks, and that determines the direction of the U.S. equity market.  I would tell you that at the end of the day people are describing a lot of reasons for the stock market to be going the way it does, correlations are high, or correlation across asset classes are high, or it’s European contagion, or debt crisis, but at the end of the day fundaments will win out.  I can’t tell you if that’s three months or eighteen months, but they will.  When they do, we feel very comfortable with the stocks we own and their fundamental stories going into 2012.  However, I still think you’re going to have some volatility higher than what most people like over the near to medium term because of things like the election coming up next year.  If we can get past all that, we’re very confident that this is a great time to be building positions in your equity portfolios. 

DAVID CRAIG:  Great.  Alright, well, Don, thanks for your insights.

Fixed Income Market 5

DAVID:  Welcome to Fixed Income Market Five.  It’s the week of September 5^th, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and subadvisor for the RidgeWorth Investment Grade Bond Funds, discussing what’s going on with the fixed income market.  So Jim, in August we had the debt ceiling deal, the U.S. debt downgrade, huge volatility in the equity markets, significant turmoil in Libya, Chairman Bernanke saying that the economy is worse than he expected, but the Fed wouldn’t be doing anything and Hurricane Irene.  How does the fixed income market respond to all that?

JIM:  Well, the reaction of the fixed income markets David was a fight to quality bid in the risk-free asset class, that being treasuries.  So the downgrade really didn’t come into effect.  We had a widening in risk premiums for the spread sector in the markets.  I think you have to step back here for a second and think about this in the context of what we’ve been through in the last four years.  People were still dealing with the aftermath of the financial crisis.  In 2008 it was led by U.S. Banks and in 2011 it’s pretty obvious it’s being led by the European sovereign debt/banking crisis.  The bottom line is this all in our view stems from the fact that the global banking system remains extremely fragile.

DAVID:  June 30^th seems like ages ago, but in the past two months have you seen any impact of the end of QE2?

JIM:  Well, you know we saw and continue to see exactly what we anticipated which was wider risk premiums and lower treasury yields.  The market seemed to be completely focused on potential for interest rates to rise in the absence of treasury buying on the part of the Fed, but that missed the critical point that QE2 was promoted and designed to lead to risk taking in both the equity and the bond markets.  Remember the mechanics of quantitative easing is the Fed would go in every day and buy treasuries in the secondary markets and thereby taking out treasury supply, but injecting cash into the system through those U.S. treasury purchases.  Cash was meant to be used to buy riskier assets.

DAVID:  Right.  Now let’s switch and talk about housing.  Jim, you’ve been saying housing will be a key data point to watch.  According to the latest Case-Schiller data, home prices have actually increased in the past three months.  Do you think that’s just a seasonal affect or is there more to that?

JIM:  No, this is definitely a seasonal affect, David, and something that will likely dissipate over the coming months.  We anticipate that the Case-Schiller index will decline again and in all likelihood make a new cycle low over the next year or two.  While we haven’t completely updated the internal focus here, we would not be surprised by a further decline of 10% to 15%.  The index currently corresponds to the pricing of homes back to June of 2003.  So if we went down another 15%, that would correspond to October 2001 pricing.  That would give us a lost decade in housing prices which would join the lost decade that we already have in jobs, real household income and stock prices.  The three-month rise as you pointed out in June was up 2.7% on a year-over-year basis, but it’s still down 4.5%.  This spring’s seasonal rise is lower than last spring’s seasonal rise of 3.2% so there’s definitely seasonality here.

DAVID:  Okay, great.  Now another area you said keep an eye on is the employment picture.  The President is introducing his ideas about a new jobs program this week.  Do you think this could have a measurable impact on employment?

JIM:  Unfortunately we’re not too optimistic here as it seems that both political parties seem to be trying to gain the upper hand for the 2012 election.  That seems to be at the heart of each iteration, each proposal, so I think we’ll take the under as it relates to this week’s speech.

DAVID:  Jim, you’ve covered a lot of topics this call.  Did anything that happened in August really change your outlook?

JIM:  No, actually events over the past summer and August have essentially ratified what’s been our view for the last couple of years.  The risk rally prompted by QE2 last fall has begun to unwind as it was not rooted in fundamentals.  Neither is the consensus expectation for a second half bounce after the 0.7% GDP growth that we’ve had in the first half of the year.  The economy we have to remember is gripped by deleveraging.  It’s probably not even half over.  The healing is not going to be accelerated by monetary policy be it conventional or unconventional as low rates will not prompt additional borrowing and spending which is what the Fed seems to be trying to do.  It seems to be trying to put Humpty Dumpty back together again and Humpty Dumpty being consumers that borrow, spend, borrow, spend and just increase their leverage.  We think that that was the exception rather than the rule.  Then when you incorporate demographics and the fact that 77,000,000 baby boomers are going to be retiring over the next eighteen years and they have inadequate savings we think as I said before, many times before, that we think there’s penned up demand to save rather than to spend.  As for fiscal policy, a decade plus with multiple wars, additional entitlement programs, ineffective stimulus programs have left our country stretched.  That GDP ratio is approaching 100% so without major entitlement and tax reform there’s no real avenue for fiscal policy to be enacted to offer any assistance to this cycle.  So at the end of the day it comes down to time.  There’s going to be austerity and unfettered capital markets are the key ingredients to the repair process.  Our political process just does not seem to allow for the right mix of these ingredients to work and allow the system to heal.

DAVID:  Jim, thanks again for your insights.

JIM:  Thank you, David, talk to you next month.

Equity Market 5

DAVID CRAIG:  Hello, welcome to the Equity Market Five.  It is September 1^st and I am with Don Wordell of Ceredex Value Advisors, subadvisor to the RidgeWorth Mid-Cap Value Equity Fund to talk about what is going on in the equity markets.  So August was quite a month with the U.S. downgrade leading right into multiple plus and minus 4% days in the S&P, and then you had the Libya turmoil and the Fed saying that they are going to stay on the sidelines for now, and Hurricane Irene.  How did you navigate through the month?   

DON WORDELL:  It has been a very difficult month.  I have had better Augusts in my lifetime I can tell you that.  You know, you just have to stay committed to working the process.  You can’t let the macro noise distract you away from the process, which is building portfolios from the bottom up.

DAVID CRAIG:  Now in July you mentioned that investors should keep their eye on the budget negotiations and their long-term implications.  Now that the deal is done, what do you see as the long term implications? 

DON WORDELL:  I think the long-term implications really could be quite negative.  It is painfully obvious that we have to cut the entitlement programs that have been legislated into existence.  I don’t know how deep the cuts are going to be, but it is obvious that near term we can’t afford to cut because we just still have a weak recovery, but longer term they could really have an impact on things like defense budgets and even the entitlements, which would be Medicare, Medicaid and Social Security.  I think those things could be somewhat negative longer term.

DAVID CRAIG:  Let’s switch to sectors.  Industrials and Financials have taken a particular beating so far in the second half of the year; to what do you attribute that?

DON WORDELL:  I think we will start with Industrials.  It is almost like a replay from last year where it was really focused on the issues in Europe.  A lot of the industrial companies that we own in the market, they are all global.  They have multiple operations around the world and with the European austerity programs that have to be put in place, as well as the debt issues over there; it has just caused a lot of investors to doubt the sustainability of the global recovery.  With Financials, I think it is really a function, and I’m going to use a song which we used to sing as kids, the knee bone is connected to the shin bone, and that is exactly what is going on.  The Greek banks all have their paper held by the European banks and the U.S. banks hold the European bank paper, and it is just a contagion and you have got a lot of portfolio managers out there saying well we saw this in 2008 it is not going to happen to me again, so they are selling first and asking questions later. 

DAVID CRAIG::  Now Utilities and Consumer Staples have been able to pretty much stay flat in the second half.  Why is that the case?

DON WORDELL:  Well that is just a function on the Utilities you have a ten year yield that is down as we are talking 2.15% and there are a lot of utilities out there that have pretty stable earning streams that pay dividend yields in the 4, 4 1/2 and 5% range and it is a yield grab.  People are just gravitated towards the yield because they can’t get it anywhere else.  With Consumer Staples, you are just seeing the stocks do well for almost the same reason; higher yielding than the treasury and then their earning streams are somewhat more stable and while they are clearly being impacted by higher commodity costs for consumer staples, they are able to pay the dividends and it is not having that big of an impact on their earnings and so those stocks are doing much better. 

DAVID CRAIG::  Did anything that occurred in August cause you to revise your outlook?

DON WORDELL:  You know, it actually has.  I am more cautious now than I was 30 to 60 days ago.  I really feel like the European situation could be more severe this time and there is not going to be an easy answer to that.  I do believe that the U.S. economic recovery and the lack of job growth is worrisome.  Although I offset that by saying the corporate balance sheets are in great shape and corporations are still sitting on trillions of dollars in cash right now; it is just getting the right incentives for them to get that cash to work and I think you are going to hear something next week from our President along those lines.  In the near term, I am still more cautious over the next one to three months, but longer term, six, twelve months, eighteen months out, I do believe that the strength in the corporate balance sheets and all that cash will find its way back into investment and the recovery will continue, albeit probably at a little bit slower pace than what we expected or hoped for before.  

Style Class Focus 5

David Craig:  Hello and welcome to The Style Class Focus Five.  It is the week of September 5^th, and I am talking with Chad Decans, President and CIO of the Certium Asset Management, sub-advisor to the RidgeWorth International Equity Funds.  So Chad, headlines are definitely negative for the Eurozone.  What are you seeing there and how can it get better.

Chad Deakins:  Well, the Eurozone is in a difficult spot right now.  They have got slow growth outside of Germany.  They have had a lack of physical reserve in preferi countries, meaning they have got high debt to GDP and they are running deficits and they have got a lack of physical integration across the Eurozone and the ECB tightened too early in this cycle, making things worse for them.  So, there is a lack of political leadership, like I said.  That is starting to solidify a little bit and starting to get a little bit of leadership there and the austerity plans in the preferi along with the debt restructuring in Greece should help solidify the situation right now.  The thing about Europe is that there are a lot of multinational corporations that trade on European Markets that get probably less than a quarter of their revenues out of Europe and they are trading at very depressed levels right now.  So I think there is a lot of opportunity for investment in the European Markets right now.

David Craig:  Okay.  Now how do you think that the crisis in Europe is affecting U.S. investors?

Chad Deakins:  Well as I said, there is a lack of political leadership and a lot of instability and it brings more uncertainty on top of the current uncertainty in the United States. We have the kind of stale mate in our government but in Europe they have just been kind of stumbling along with a lack of leadership and waiting to find solutions when their feet get held to the fire just at the last moment.  So far they have been successful in continuing to provide solutions to the crisis at the last minute each time.  I think they are going to need to start getting a little bit further out in front of the problems to reduce global volatility.  So the U.S. investors are obviously seeing the uncertainty over there, uncertainty here, we have got a lot of fear in the markets, which is preventing investors from taking advantage of the attractive evaluations that we have right now. 

David Craig:  Okay.  There sure have been a lot of headlines about Europe but what are your current thoughts on the Emerging Markets?

Chad Deakins:  Well the Emerging Markets are actually one of the things we looked at as a leading economic indicator.  We look at the leading economic indicators, we look at Global CPI, and the ISM figures and what we see right now is Brazil has just cut rates and China market may be getting ready to loosen monetary policy.  When the U.S. kept monetary policy very loose, it caused inflation in much of the rest of the world, food inflation was caused by weather, but oil and other energy inflation was caused by the easy money in the west.  So we have a spot where inflation was very bad now and starting to ease and as inflation eases, we think the leading economic indicators will start to rise.  So right now Brazil, like I said was the first to loosen policy and their stock market rallied to about 4% in a week and especially small cap so, globally this is a very important thing if we get the Emerging Markets including China to start easing their monetary policy, we can reaccelerate the global economy quite quickly.  Now Emerging Markets are trading at very attractive multiples relative to history and relative to the develop markets.  They are currently trading at about a 23% discount to their ten year average valuations but the developed markets are also trading at attractive discounts to their historical valuations.  So we have a situation in International Markets right now where the valuations are very attractive but sentiment and momentum is very negative.  As soon as we can get sentiment and momentum to turn, we are going to see some much better returns in the equity markets.

David Craig:  Now, is the movement of currency having any impact on evaluations?

Chad Deakins:  It has but it has been give and take.  So we have seen the Euro accelerate quite dramatically against the dollar and then come back and all of the Emerging Markets have basically appreciated against the dollar because the U.S. has been increasing the number of dollars in circulation which makes the dollars less valuable relative to what has been going on in the other markets so, it has been good for Emerging Markets and it has been back and forth for other developed markets.

David Craig:  Okay – great.  In looking out over the balance of the calendar year, what do you see and what are your investment strategies for the period?

Chad Deakins:  Well coming into August, we had a pretty well balanced return in the market, valuation was important and quality has continued to be important so balance sheet stability has been very important all through this entire recovery, but then in August with the sharp market correction right off the bat; right after we got some negative economic data in the beginning, value or defensive stocks, defensive sectors dramatically out performed the rest of the market, the more cyclical parts of the market.  We think that it created a significant discount to those parts of the market.  We think that is eventually going to come back but we are not sure of the timing of that so the Global economic indicators need to start to pick up like I said Brazil and China may be the first hints that that is going to start to happen.  Most likely inflation needs to come down a little bit more and that is going to be more of a fourth quarter 2011, first quarter 2012 and then we will start to see pick up again and start to see reacceleration in the equity markets.  Until then, you know a more barbell strategy where you are holding more defensive, non-cyclical types of names in say healthcare, utilities, telecom, staples, those types of names of solid balance sheets and a lot of earning certainty are going to probably outperform your more cyclical parts of the market until we get that uptick.  So, the cyclical stocks are very attractive with value right now and some time in the next year or two they are going to have had a very strong run.  You have got to start making your list of the names that you are interested in and as you think things are starting to get a little bit better go in and start allocating to those more attractive cyclical names.

David Craig: Great.  Okay thanks for your insights Chad.

Chad Deakins:  Thank you.

Plan Advisor Tools 5

David Craig:  Good afternoon, welcome to Plan Advisor Tools Five.  It is the week of September 5^th, and I am talking with Brandon Shea, Managing Director and DCIO Team Lead for RidgeWorth Investments, discussing insights on building rapport with business owners.  So Brandon, you have five insights on how retirement plan advisors can build rapport; what are they and where exactly are they coming from?

Brandon Shea:  David, in my position I get the opportunity to work with some of the top 401(k) specialists around the country.  One person in particular I have had a working relationship for many years and he has become a personal friend is Joseph Burke, the owner of Pension Plan Specialists, a very successful third party administration in Vancouver, Washington.  Prior to founding Pension Plan Specialists, Joe is a top producer 401(k) wholesaler nationally for a 401(k) vendor.  He has sat through hundreds of finals presentation meetings with advisors and business owners and he became very methodical about asking business owners five specific questions in post final meeting wrap-ups, and those specific questions were:

1. When a financial advisor has called you what made you want to meet with that individual?
2. During the finals meeting presentation, what did you look for and what separated the good advisors from the not so good?
3. During the implementation process, what were your expectations?
4. What is the best way for an investment professional to earn ancillary business?
5. How do you maintain a long-term relationship with your investment professional?

So Joe was asking these questions with the express purpose of gaining a better understanding of how the best financial advisors build rapport with business owners from the business owner’s perspective.

David Craig:  All right Brandon that sounds great.  Let’s start with the first question.  When financial advisors have called upon business owners, what was it that made a business owner want to meet with one advisor over another?

Brandon Shea:  David the feedback from business owners state that they appreciate it when an advisor is brief and respectful of their time.  They also stated that they appreciated when an advisor made a “power statement” that applied to them, and this might have been in a form of a 15-second elevator pitch, but simply and effectively, the advisors were able to state who they were, why they were calling and how they could benefit the business owners.  Business owners also stated that they like it when advisors know their company and the good will and influence they have been able to generate in their local community.  They said they liked it when advisors are direct and exude confidence, but are not overbearing, and they said that they don’t like threats.  In other words, business owners want to be enlightened about the fiduciary risk that might be on their shoulders, but their advice to advisors is don’t overdo it by trying to frighten them with fiduciary risk and litigation; enlighten, but don’t threaten. 

David Craig:  Now Brandon during the finals meeting presentation, what did business owners look for and what separated the good advisors from the not so good in their eyes? 

Brandon Shea:  Well there were four consistent responses here from business owners as to how good advisors really separated themselves and the first thing was that image is very important.  When business owners were asked how important image was on a scale of 1 to 5, 5 being extremely important, they answered 4.5, or in other words, the image you project as an advisor is very important to extremely important in their eyes, and this encompasses your personal brand as a professional; this is your wardrobe, your manners, your marketing collateral.  I know of several top advisor firms nationally who conduct presentations solely with iPads just to demonstrate their technical proficiency; not to mention it adds a little bit of a “wow” factor on the prospective clients. 

The second area that helped advisors stand out in a good way during the finals presentation was that they demonstrated  an organized thought process and a clear meeting agenda, but were flexible enough to adjust to the business owner’s needs, so they brought an agenda, but as the meeting warranted, they flexed to answer the needs of the business owners. 

The third way that good advisors separated themselves in the finals meeting is that they do their homework in two notable ways to the business owners:

1. They address specific needs that the company is facing.
2. They come prepared to make a strong recommendation. 

It is one thing to work with a lot of different vendors.  The business owners don’t want to hear subtle nuances between five different platforms, they want the advisor to do their homework and make a strong recommendation based on their expertise.  Also, a fourth distinguishing factor is presenting oneself as the member of a team to business owners.  When these business owners were asked how important is it to work with a team of professionals on a scale of 1 to 5, with 5 again being extremely important, the answer was 4.  So the old adage is surround yourself with people smarter than you, but probably more appropriately, surround yourself with people who have complementing strengths where you might be weak. 

David Craig:  Okay, now during the implementation process what did business owners expect?

Brandon Shea:  Business owners expect a clear, concise action plan.  They want advisors to help them with a clear understanding of the roles and responsibilities during the implementation, specifically who is doing what, when and where.  Business owners are also looking for advisors who are energetic and can communicate to their employees enthusiastically.  Here is a key point, and an area that advisors can really generate goodwill with business owners if they execute this properly, and if they help employers really communicate to their employees that they are making a good faith effort to help them prepare for their retirement; for example, they are doing matching contributions, providing education, etc., that is really going to go a long way in the eyes of an employer. 

Another important expectation that business owners place upon an advisor is to hold the hands of the staff responsible for implementing the retirement plan.  So to get to the heart of the business owner, take care of the employee or employers that keep the business running.  This key employee or group of employees, their hand must be held after the decision makers make the decision so that he or she doesn’t feel like they are on an island trying to figure out this thing on their own. 

David Craig:  Okay, now what is the best way for investment professional to earn ancillary business?

Brandon Shea:  From the perspective of business owners, the best way to gain ancillary business is to gain their confidence and advisors do this by doing what is in the best interest of the company and its employees and consistently communicating why those specific actions the advisor is taking are in the best interest of the company.  Also business owners remarked that advisors should not seem overly eager to work with the company’s highly compensated employees to the neglect of the non-highly compensated employees.  They understand that it takes time to work with the non-highly compensated employees and often senior advisors will have a junior partner work with the non-highly compensated folks, but they are still willing to work with them.  This is a very important point because business owners often view their employees as family members and if you neglect part of the family, it is not going to bode well.

Finally, business owners acknowledge that when an advisor handles the plan correctly that ancillary business is expected to take place.  One suggestion from business owners though is to make an effort to know the ground rules on how and when to ask for ancillary business.  For example, maybe it is best to do it during non-work hours during their production time. 

David Craig:  Okay, now how does an investment professional earn a long-term relationship with a business owner? 

Brandon Shea:  Well a common response from business owners is that if an advisor exhibits honesty with a high level of integrity that is going to be a strategy that always wins in the end.  Another thing that was said is that the advisors who are present and continually communicate, the ones who don’t stick their head in the sand, but share the good and the bad news that is something that goes a long way to building a relationship.  They also said that when the advisor comes with solutions and ideas that is going to reinforce that relationship.   Let me give you a quick example, I heard about a case recently where a law firm won a large settlement and they were going to have a large influx of cash over a multi-year period of time that was going to incur a lot of taxes.  That law firm was courted by a lot of advisors trying to win that retirement plan business, but the advisor that really got the attention of the senior partners was the one that showed through smart plan decision solutions a way for the partners to maximize their savings in a tax advantage way.  In other words, the advisor truly understood the client’s problems and came with actual ideas on how to solve it, so just coming with solutions and ideas.

Another way to maintain the long-term relationship with a business owner is to continually provide oversight.  There is a great example of a 401(k) advisor in the Northwest who has over 220 retirement plans in his book of business.  He tells every client at the annual review “I called your 401(k) platform and tried to renegotiate the plan’s fees.”  He also asks “Has there been any changes to the program this year?”  So he is constantly reinforcing to the business owners that he is providing oversight to their plan.

Finally, loyalty goes a long way.  The advisors that can find ways to express loyalty to its employer and its employees will definitely make contributions in that long-term relationship. 

David Gray:  Great, that is great information.  Thanks again for your insights Brandon.

Brandon Shea:  My pleasure, thank you David.

David Craig:  Good afternoon, welcome to Plan Advisor Tools Five.  It is the week of September 5^th, and I am talking with Brandon Shea, Managing Director and DCIO Team Lead for RidgeWorth Investments, discussing insights on building rapport with business owners.  So Brandon, you have five insights on how retirement plan advisors can build rapport; what are they and where exactly are they coming from?

Brandon Shea:  David, in my position I get the opportunity to work with some of the top 401(k) specialists around the country.  One person in particular I have had a working relationship for many years and he has become a personal friend is Joseph Burt, the owner of Pension Plan Specialists, a very successful third party administration in Vancouver, Washington.  Prior to founding Pension Plan Specialists, Joe is a top producer 401(k) wholesaler nationally for a 401(k) vendor.  He has sat through hundreds of finals presentation meetings with advisors and business owners and he became very methodical about asking business owners five specific questions in post final meeting wrap-ups, and those specific questions were:

1. When a financial advisor has called you what made you want to meet with that individual?
2. During the finals meeting presentation, what did you look for and what separated the good advisors from the not so good?
3. During the implementation process, what were your expectations?
4. What is the best way for an investment professional to earn ancillary business?
5. How do you maintain a long-term relationship with your investment professional?

So Joe was asking these questions with the express purpose of gaining a better understanding of how the best financial advisors build rapport with business owners from the business owner’s perspective.

David Craig:  All right Brandon that sounds great.  Let’s start with the first question.  When financial advisors have called upon business owners, what was it that made a business owner want to meet with one advisor over another?

Brandon Shea:  David the feedback from business owners state that they appreciate it when an advisor is brief and respectful of their time.  They also stated that they appreciated when an advisor made a “power statement” that applied to them, and this might have been in a form of a 15-second elevator pitch, but simply and effectively, the advisors were able to state who they were, why they were calling and how they could benefit the business owners.  Business owners also stated that they like it when advisors know their company and the good will and influence they have been able to generate in their local community.  They said they liked it when advisors are direct and exude confidence, but are not overbearing, and they said that they don’t like threats.  In other words, business owners want to be enlightened about the fiduciary risk that might be on their shoulders, but their advice to advisors is don’t overdo it by trying to frighten them with fiduciary risk and litigation; enlighten, but don’t threaten. 

David Craig:  Now Brandon during the finals meeting presentation, what did business owners look for and what separated the good advisors from the not so good in their eyes? 

Brandon Shea:  Well there were four consistent responses here from business owners as to how good advisors really separated themselves and the first thing was that image is very important.  When business owners were asked how important image was on a scale of 1 to 5, 5 being extremely important, they answered 4.5, or in other words, the image you project as an advisor is very important to extremely important in their eyes, and this encompasses your personal brand as a professional; this is your wardrobe, your manners, your marketing collateral.  I know of several top advisor firms nationally who conduct presentations solely with iPads just to demonstrate their technical proficiency; not to mention it adds a little bit of a “wow” factor on the prospective clients. 

The second area that helped advisors stand out in a good way during the finals presentation was that they demonstrated  an organized thought process and a clear meeting agenda, but were flexible enough to adjust to the business owner’s needs, so they brought an agenda, but as the meeting warranted, they flexed to answer the needs of the business owners. 

The third way that good advisors separated themselves in the finals meeting is that they do their homework in two notable ways to the business owners:

1. They address specific needs that the company is facing.
2. They come prepared to make a strong recommendation. 

It is one thing to work with a lot of different vendors.  The business owners don’t want to hear subtle nuances between five different platforms, they want the advisor to do their homework and make a strong recommendation based on their expertise.  Also, a fourth distinguishing factor is presenting oneself as the member of a team to business owners.  When these business owners were asked how important is it to work with a team of professionals on a scale of 1 to 5, with 5 again being extremely important, the answer was 4.  So the old adage is surround yourself with people smarter than you, but probably more appropriately, surround yourself with people who have complementing strengths where you might be weak. 

David Craig:  Okay, now during the implementation process what did business owners expect?

Brandon Shea:  Business owners expect a clear, concise action plan.  They want advisors to help them with a clear understanding of the roles and responsibilities during the implementation, specifically who is doing what, when and where.  Business owners are also looking for advisors who are energetic and can communicate to their employees enthusiastically.  Here is a key point, and an area that advisors can really generate goodwill with business owners if they execute this properly, and if they help employers really communicate to their employees that they are making a good faith effort to help them prepare for their retirement; for example, they are doing matching contributions, providing education, etc., that is really going to go a long way in the eyes of an employer. 

Another important expectation that business owners place upon an advisor is to hold the hands of the staff responsible for implementing the retirement plan.  So to get to the heart of the business owner, take care of the employee or employers that keep the business running.  This key employee or group of employees, their hand must be held after the decision makers make the decision so that he or she doesn’t feel like they are on an island trying to figure out this thing on their own. 

David Craig:  Okay, now what is the best way for investment professional to earn ancillary business?

Brandon Shea:  From the perspective of business owners, the best way to gain ancillary business is to gain their confidence and advisors do this by doing what is in the best interest of the company and its employees and consistently communicating why those specific actions the advisor is taking are in the best interest of the company.  Also business owners remarked that advisors should not seem overly eager to work with the company’s highly compensated employees to the neglect of the non-highly compensated employees.  They understand that it takes time to work with the non-highly compensated employees and often senior advisors will have a junior partner work with the non-highly compensated folks, but they are still willing to work with them.  This is a very important point because business owners often view their employees as family members and if you neglect part of the family, it is not going to bode well.

Finally, business owners acknowledge that when an advisor handles the plan correctly that ancillary business is expected to take place.  One suggestion from business owners though is to make an effort to know the ground rules on how and when to ask for ancillary business.  For example, maybe it is best to do it during non-work hours during their production time. 

David Craig:  Okay, now how does an investment professional earn a long-term relationship with a business owner? 

Brandon Shea:  Well a common response from business owners is that if an advisor exhibits honesty with a high level of integrity that is going to be a strategy that always wins in the end.  Another thing that was said is that the advisors who are present and continually communicate, the ones who don’t stick their head in the sand, but share the good and the bad news that is something that goes a long way to building a relationship.  They also said that when the advisor comes with solutions and ideas that is going to reinforce that relationship.   Let me give you a quick example, I heard about a case recently where a law firm won a large settlement and they were going to have a large influx of cash over a multi-year period of time that was going to incur a lot of taxes.  That law firm was courted by a lot of advisors trying to win that retirement plan business, but the advisor that really got the attention of the senior partners was the one that showed through smart plan decision solutions a way for the partners to maximize their savings in a tax advantage way.  In other words, the advisor truly understood the client’s problems and came with actual ideas on how to solve it, so just coming with solutions and ideas.

Another way to maintain the long-term relationship with a business owner is to continually provide oversight.  There is a great example of a 401(k) advisor in the Northwest who has over 220 retirement plans in his book of business.  He tells every client at the annual review “I called your 401(k) platform and tried to renegotiate the plan’s fees.”  He also asks “Has there been any changes to the program this year?”  So he is constantly reinforcing to the business owners that he is providing oversight to their plan.

Finally, loyalty goes a long way.  The advisors that can find ways to express loyalty to its employer and its employees will definitely make contributions in that long-term relationship. 

David Gray:  Great, that is great information.  Thanks again for your insights Brandon.

Brandon Shea:  My pleasure, thank you David.

DAVID CRAIG:  Hello, welcome to the Equity Market Five.  It is September 1^st and I am with Don Wordell of Ceredex Value Advisors, subadvisor to the RidgeWorth Mid-Cap Value Equity Fund to talk about what is going on in the equity markets.  So August was quite a month with the U.S. downgrade leading right into multiple plus and minus 4% days in the S&P, and then you had the Libya turmoil and the Fed saying that they are going to stay on the sidelines for now, and Hurricane Irene.  How did you navigate through the month?   

DON WORDELL:  It has been a very difficult month.  I have had better Augusts in my lifetime I can tell you that.  You know, you just have to stay committed to working the process.  You can’t let the macro noise distract you away from the process, which is building portfolios from the bottom up.

DAVID CRAIG:  Now in July you mentioned that investors should keep their eye on the budget negotiations and their long-term implications.  Now that the deal is done, what do you see as the long term implications? 

DON WORDELL:  I think the long-term implications really could be quite negative.  It is painfully obvious that we have to cut the entitlement programs that have been legislated into existence.  I don’t know how deep the cuts are going to be, but it is obvious that near term we can’t afford to cut because we just still have a weak recovery, but longer term they could really have an impact on things like defense budgets and even the entitlements, which would be Medicare, Medicaid and Social Security.  I think those things could be somewhat negative longer term.

DAVID CRAIG:  Let’s switch to sectors.  Industrials and Financials have taken a particular beating so far in the second half of the year; to what do you attribute that?

DON WORDELL:  I think we will start with Industrials.  It is almost like a replay from last year where it was really focused on the issues in Europe.  A lot of the industrial companies that we own in the market, they are all global.  They have multiple operations around the world and with the European austerity programs that have to be put in place, as well as the debt issues over there; it has just caused a lot of investors to doubt the sustainability of the global recovery.  With Financials, I think it is really a function, and I’m going to use a song which we used to sing as kids, the knee bone is connected to the shin bone, and that is exactly what is going on.  The Greek banks all have their paper held by the European banks and the U.S. banks hold the European bank paper, and it is just a contagion and you have got a lot of portfolio managers out there saying well we saw this in 2008 it is not going to happen to me again, so they are selling first and asking questions later. 

DAVID CRAIG::  Now Utilities and Consumer Staples have been able to pretty much stay flat in the second half.  Why is that the case?

DON WORDELL:  Well that is just a function on the Utilities you have a ten year yield that is down as we are talking 2.15% and there are a lot of utilities out there that have pretty stable earning streams that pay dividend yields in the 4, 4 1/2 and 5% range and it is a yield grab.  People are just gravitated towards the yield because they can’t get it anywhere else.  With Consumer Staples, you are just seeing the stocks do well for almost the same reason; higher yielding than the treasury and then their earning streams are somewhat more stable and while they are clearly being impacted by higher commodity costs for consumer staples, they are able to pay the dividends and it is not having that big of an impact on their earnings and so those stocks are doing much better. 

DAVID CRAIG::  Did anything that occurred in August cause you to revise your outlook?

DON WORDELL:  You know, it actually has.  I am more cautious now than I was 30 to 60 days ago.  I really feel like the European situation could be more severe this time and there is not going to be an easy answer to that.  I do believe that the U.S. economic recovery and the lack of job growth is worrisome.  Although I offset that by saying the corporate balance sheets are in great shape and corporations are still sitting on trillions of dollars in cash right now; it is just getting the right incentives for them to get that cash to work and I think you are going to hear something next week from our President along those lines.  In the near term, I am still more cautious over the next one to three months, but longer term, six, twelve months, eighteen months out, I do believe that the strength in the corporate balance sheets and all that cash will find its way back into investment and the recovery will continue, albeit probably at a little bit slower pace than what we expected or hoped for before.  

DAVID:  Welcome to Fixed Income Market Five.  It’s the week of September 5^th, and I’m with Jim Keegan, CEO and CIO of Seix Investment Advisors and subadvisor for the RidgeWorth Investment Grade Bond Funds, discussing what’s going on with the fixed income market.  So Jim, in August we had the debt ceiling deal, the U.S. debt downgrade, huge volatility in the equity markets, significant turmoil in Libya, Chairman Bernanke saying that the economy is worse than he expected, but the Fed wouldn’t be doing anything and Hurricane Irene.  How does the fixed income market respond to all that?

JIM:  Well, the reaction of the fixed income markets David was a fight to quality bid in the risk-free asset class, that being treasuries.  So the downgrade really didn’t come into effect.  We had a widening in risk premiums for the spread sector in the markets.  I think you have to step back here for a second and think about this in the context of what we’ve been through in the last four years.  People were still dealing with the aftermath of the financial crisis.  In 2008 it was led by U.S. Banks and in 2011 it’s pretty obvious it’s being led by the European sovereign debt/banking crisis.  The bottom line is this all in our view stems from the fact that the global banking system remains extremely fragile.

DAVID:  June 30^th seems like ages ago, but in the past two months have you seen any impact of the end of QE2?

JIM:  Well, you know we saw and continue to see exactly what we anticipated which was wider risk premiums and lower treasury yields.  The market seemed to be completely focused on potential for interest rates to rise in the absence of treasury buying on the part of the Fed, but that missed the critical point that QE2 was promoted and designed to lead to risk taking in both the equity and the bond markets.  Remember the mechanics of quantitative easing is the Fed would go in every day and buy treasuries in the secondary markets and thereby taking out treasury supply, but injecting cash into the system through those U.S. treasury purchases.  Cash was meant to be used to buy riskier assets.

DAVID:  Right.  Now let’s switch and talk about housing.  Jim, you’ve been saying housing will be a key data point to watch.  According to the latest Case-Schiller data, home prices have actually increased in the past three months.  Do you think that’s just a seasonal affect or is there more to that?

JIM:  No, this is definitely a seasonal affect, David, and something that will likely dissipate over the coming months.  We anticipate that the Case-Schiller index will decline again and in all likelihood make a new cycle low over the next year or two.  While we haven’t completely updated the internal focus here, we would not be surprised by a further decline of 10% to 15%.  The index currently corresponds to the pricing of homes back to June of 2003.  So if we went down another 15%, that would correspond to October 2001 pricing.  That would give us a lost decade in housing prices which would join the lost decade that we already have in jobs, real household income and stock prices.  The three-month rise as you pointed out in June was up 2.7% on a year-over-year basis, but it’s still down 4.5%.  This spring’s seasonal rise is lower than last spring’s seasonal rise of 3.2% so there’s definitely seasonality here.

DAVID:  Okay, great.  Now another area you said keep an eye on is the employment picture.  The President is introducing his ideas about a new jobs program this week.  Do you think this could have a measurable impact on employment?

JIM:  Unfortunately we’re not too optimistic here as it seems that both political parties seem to be trying to gain the upper hand for the 2012 election.  That seems to be at the heart of each iteration, each proposal, so I think we’ll take the under as it relates to this week’s speech.

DAVID:  Jim, you’ve covered a lot of topics this call.  Did anything that happened in August really change your outlook?

JIM:  No, actually events over the past summer and August have essentially ratified what’s been our view for the last couple of years.  The risk rally prompted by QE2 last fall has begun to unwind as it was not rooted in fundamentals.  Neither is the consensus expectation for a second half bounce after the 0.7% GDP growth that we’ve had in the first half of the year.  The economy we have to remember is gripped by deleveraging.  It’s probably not even half over.  The healing is not going to be accelerated by monetary policy be it conventional or unconventional as low rates will not prompt additional borrowing and spending which is what the Fed seems to be trying to do.  It seems to be trying to put Humpty Dumpty back together again and Humpty Dumpty being consumers that borrow, spend, borrow, spend and just increase their leverage.  We think that that was the exception rather than the rule.  Then when you incorporate demographics and the fact that 77,000,000 baby boomers are going to be retiring over the next eighteen years and they have inadequate savings we think as I said before, many times before, that we think there’s penned up demand to save rather than to spend.  As for fiscal policy, a decade plus with multiple wars, additional entitlement programs, ineffective stimulus programs have left our country stretched.  That GDP ratio is approaching 100% so without major entitlement and tax reform there’s no real avenue for fiscal policy to be enacted to offer any assistance to this cycle.  So at the end of the day it comes down to time.  There’s going to be austerity and unfettered capital markets are the key ingredients to the repair process.  Our political process just does not seem to allow for the right mix of these ingredients to work and allow the system to heal.

DAVID:  Jim, thanks again for your insights.

JIM:  Thank you, David, talk to you next month.

David Craig:  Hello and welcome to The Style Class Focus Five.  It is the week of September 5^th, and I am talking with Chad Decans, President and CIO of the Certium Asset Management, sub-advisor to the RidgeWorth International Equity Funds.  So Chad, headlines are definitely negative for the Eurozone.  What are you seeing there and how can it get better.

Chad Deakins:  Well, the Eurozone is in a difficult spot right now.  They have got slow growth outside of Germany.  They have had a lack of physical reserve in preferi countries, meaning they have got high debt to GDP and they are running deficits and they have got a lack of physical integration across the Eurozone and the ECB tightened too early in this cycle, making things worse for them.  So, there is a lack of political leadership, like I said.  That is starting to solidify a little bit and starting to get a little bit of leadership there and the austerity plans in the preferi along with the debt restructuring in Greece should help solidify the situation right now.  The thing about Europe is that there are a lot of multinational corporations that trade on European Markets that get probably less than a quarter of their revenues out of Europe and they are trading at very depressed levels right now.  So I think there is a lot of opportunity for investment in the European Markets right now.

David Craig:  Okay.  Now how do you think that the crisis in Europe is affecting U.S. investors?

Chad Deakins:  Well as I said, there is a lack of political leadership and a lot of instability and it brings more uncertainty on top of the current uncertainty in the United States. We have the kind of stale mate in our government but in Europe they have just been kind of stumbling along with a lack of leadership and waiting to find solutions when their feet get held to the fire just at the last moment.  So far they have been successful in continuing to provide solutions to the crisis at the last minute each time.  I think they are going to need to start getting a little bit further out in front of the problems to reduce global volatility.  So the U.S. investors are obviously seeing the uncertainty over there, uncertainty here, we have got a lot of fear in the markets, which is preventing investors from taking advantage of the attractive evaluations that we have right now. 

David Craig:  Okay.  There sure have been a lot of headlines about Europe but what are your current thoughts on the Emerging Markets?

Chad Deakins:  Well the Emerging Markets are actually one of the things we looked at as a leading economic indicator.  We look at the leading economic indicators, we look at Global CPI, and the ISM figures and what we see right now is Brazil has just cut rates and China market may be getting ready to loosen monetary policy.  When the U.S. kept monetary policy very loose, it caused inflation in much of the rest of the world, food inflation was caused by weather, but oil and other energy inflation was caused by the easy money in the west.  So we have a spot where inflation was very bad now and starting to ease and as inflation eases, we think the leading economic indicators will start to rise.  So right now Brazil, like I said was the first to loosen policy and their stock market rallied to about 4% in a week and especially small cap so, globally this is a very important thing if we get the Emerging Markets including China to start easing their monetary policy, we can reaccelerate the global economy quite quickly.  Now Emerging Markets are trading at very attractive multiples relative to history and relative to the develop markets.  They are currently trading at about a 23% discount to their ten year average valuations but the developed markets are also trading at attractive discounts to their historical valuations.  So we have a situation in International Markets right now where the valuations are very attractive but sentiment and momentum is very negative.  As soon as we can get sentiment and momentum to turn, we are going to see some much better returns in the equity markets.

David Craig:  Now, is the movement of currency having any impact on evaluations?

Chad Deakins:  It has but it has been give and take.  So we have seen the Euro accelerate quite dramatically against the dollar and then come back and all of the Emerging Markets have basically appreciated against the dollar because the U.S. has been increasing the number of dollars in circulation which makes the dollars less valuable relative to what has been going on in the other markets so, it has been good for Emerging Markets and it has been back and forth for other developed markets.

David Craig:  Okay – great.  In looking out over the balance of the calendar year, what do you see and what are your investment strategies for the period?

Chad Deakins:  Well coming into August, we had a pretty well balanced return in the market, valuation was important and quality has continued to be important so balance sheet stability has been very important all through this entire recovery, but then in August with the sharp market correction right off the bat; right after we got some negative economic data in the beginning, value or defensive stocks, defensive sectors dramatically out performed the rest of the market, the more cyclical parts of the market.  We think that it created a significant discount to those parts of the market.  We think that is eventually going to come back but we are not sure of the timing of that so the Global economic indicators need to start to pick up like I said Brazil and China may be the first hints that that is going to start to happen.  Most likely inflation needs to come down a little bit more and that is going to be more of a fourth quarter 2011, first quarter 2012 and then we will start to see pick up again and start to see reacceleration in the equity markets.  Until then, you know a more barbell strategy where you are holding more defensive, non-cyclical types of names in say healthcare, utilities, telecom, staples, those types of names of solid balance sheets and a lot of earning certainty are going to probably outperform your more cyclical parts of the market until we get that uptick.  So, the cyclical stocks are very attractive with value right now and some time in the next year or two they are going to have had a very strong run.  You have got to start making your list of the names that you are interested in and as you think things are starting to get a little bit better go in and start allocating to those more attractive cyclical names.

David Craig: Great.  Okay thanks for your insights Chad.

Chad Deakins:  Thank you.