Long-Short Equity Q1 2015 - River Road Asset Management, LLC

Long-Short Equity
QUARTERLY UPDATE AS OF MARCH 31, 2015
Portfolio Managers
Matt W. Moran, CFA
Lead Portfolio Manager
Bradley University, BS and University of Chicago, MBA
15 years of experience: Goldman Sachs, Citigroup, and
Morningstar
Investment Objective
Net Market Exposure
River Road’s Long-Short (LS) Equity is a fundamental,
bottom-up strategy that seeks to provide equity-like
returns with substantially reduced volatility while
emphasizing capital protection.
Expected net market exposure is between 50% and
70% in normal market conditions.
Portfolio Characteristics
Daniel R. Johnson, CFA, CPA
Portfolio Manager
Risk Management
Our long portfolio targets 20 to 40 positions,
representing between +50% and +100% of the
total portfolio value.
University of Kentucky, BS and MAcc
9 years of experience: PricewaterhouseCoopers
In extreme market conditions, net market exposure
may range from 10% to 90%.
Our short portfolio targets 20 to 40 positions,
representing between -10% and -90% of the total
portfolio value.

Stock specific: stop loss and momentum ranking

Portfolio construction: unrealized losses threshold

Reactive overlay: Drawdown and Draw Up Plans
Historical Data (since inception)
LS
Composite
9.80%
Russell
3000
18.50%
Morningstar
L-S Category
5.17%
Anlzd. Alpha
3.04
--
(2.42)
Sortino - 3% MAR
1.98
2.22
0.67
Best Month1
5.65%
11.51%
5.09%
Beta
0.44
1.00
0.45
Worst Month1
(4.39%)
(7.76%)
(4.16%)
Anlzd. Std. Dev.
7.12
12.60
5.87
Avg. Month1
0.80%
1.49%
0.47%
Max 1-Day Drawdown
(2.13)
(7.02)
(3.06)
% of Positive Months1
70.18%
68.42%
61.40%
Max 1-Month Drawdown
(4.29)
(7.76)
(4.16)
Cumulative Return1
55.91%
124.00%
26.99%
Max Drawdown
(7.64)
(20.40)
(11.77)
R-Squared
59.85
100.00
93.95
Return Analysis
Anlzd. Return1
Upside Capture
52%
100%
40%
Downside Capture
37%
100%
53%
LS
Composite
1.54
Risk Analysis
Sharpe Ratio
Russell
3000
1.46
Morningstar
L-S Category
0.93
Net Performance1
2015
2014
2013
LS Composite
Russell 3000
LS Composite
Russell 3000
LS Composite
Russell 3000
Jan
(2.42%)
(2.78%)
(4.39%)
(3.16%)
5.02%
5.49%
Feb
4.68%
5.79%
1.53%
4.74%
0.56%
1.33%
Mar
(1.74%)
(1.02%)
(0.60%)
0.53%
1.19%
3.92%
Feb
6.57%
(1.75%)
-3.18%
(1.06%)
(0.45%)
0.53%
0.17%
--
Mar
(1.75%)
0.15%
-0.18%
(0.68%)
0.00%
2.96%
(1.64%)
--
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
0.04%
0.12%
0.95%
1.64%
0.51%
2.18%
1.46%
2.36%
1.74%
2.51%
(1.62%)
(1.30%)
1.19%
(1.97%)
2.10%
5.48%
0.34%
4.20%
(0.52%)
(2.79%)
(1.83%)
(2.08%)
3.10%
3.72%
(2.95%)
2.75%
3.33%
4.25%
0.37%
2.42%
0.44%
2.90%
2.53%
0.00%
1.33%
2.64%
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
0.46%
(0.29%)
-2.04%
(0.96%)
--
1.25%
(0.62%)
-2.30%
(0.72%)
--
2.89%
(1.03%)
-(1.21%)
(0.30%)
--
(0.12%)
1.44%
-3.27%
(1.05%)
--
2.49%
(2.03%)
-(1.07%)
0.66%
--
(3.00%)
1.32%
-4.08%
(0.87%)
--
0.72%
(1.25%)
(2.28%)
4.23%
(0.77%)
--
0.94%
(0.24%)
(0.19%)
1.45%
(0.89%)
--
1.89%
0.80%
-2.37%
(0.91%)
--
YTD
0.37%
1.80%
(1.73%)
12.56%
18.58%
33.55%
Long / Short Attribution
2015
2014
2013
Long Portfolio
Short Portfolio
Index Hedges
Long Portfolio
Short Portfolio
Index Hedges
Long Portfolio
Short Portfolio
Index Hedges
Jan
(3.48%)
1.18%
-(4.91%)
0.62%
0.01%
6.26%
(1.08%)
--
Performance
2011 Drawdown Event (April 29 - October 31, 2011)
15 Worst Daily Returns of Russell 3000
1,600
1.00%
1,500
(1.00%)
1,400
(3.00%)
(0.91%)
(3.58%)
(5.00%)
1,300
(7.00%)
1,200
LS Composite
1,100
Apr
May
Jun
Russell 3000
Jul
YTD
1.13%
(0.35%)
-5.91%
(3.08%)
(3.00%)
29.31%
(9.00%)
--
Russell 3000
LS Composite
Morningstar L-S Category
Aug
Sep
Oct
Except where otherwise indicated, data is shown gross of fees as of March 31, 2015. 1Net of fees. Gross of fees performance does not reflect the effect of management fees (performance would have been lower). Please
refer to the net of fees performance provided when considering this strategy. Inception Date: July 1, 2010. Attribution presented based on a representative portfolio within the Strategy. Attribution excludes the impact of
all cash. Attribution is computed as the contribution of the representative portfolio component to the total return. All representative portfolio data is shown as supplemental information to the Composite presentation.
Morningstar L-S Category is Morningstar U.S. Open End Long-Short Equity Category. ©2015 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this
information. Morningstar performance calculated using daily net performance inputs and total return values reflect the effect of management, administrative, 12b-1 fees and other costs taken out of fund assets. LS
Composite is not subject to administration, 12b-1 fees or other costs. These fees would make the LS Composite performance lower. Source: River Road Asset Management, LLC, FactSet Research Systems Inc., Morningstar,
Inc., and Russell Investment Group. Past performance is no guarantee of future results. Please see reverse side for important disclosure information.
LONG-SHORT EQUITY
QUARTERLY UPDATE AS OF MARCH 31, 2015
Exposure
160%
120%
Gross
80%
40%
Net
0%
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Q3 12
Q4 12
Q1 13
Q2 13
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
Ending Monthly Exposure
2015 Long Portfolio
Short Portfolio
Index Hedge
Total Portfolio Gross Exposure
Total Portfolio Net Exposure
2014 Long Portfolio
Short Portfolio
Index Hedge
Total Portfolio Gross Exposure
Total Portfolio Net Exposure
2013 Long Portfolio
Short Portfolio
Index Hedge
Total Portfolio Gross Exposure
Total Portfolio Net Exposure
Jan
85.21%
(25.48%)
-110.69%
59.72%
78.30%
(25.90%)
(3.52%)
107.72%
48.88%
73.30%
(24.43%)
-97.73%
48.87%
Feb
83.59%
(27.53%)
-111.13%
56.06%
69.54%
(25.51%)
(0.50%)
95.54%
43.53%
74.23%
(19.31%)
-93.54%
54.92%
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
95.48%
(29.68%)
-125.16%
65.80%
77.33% 76.31% 74.80% 76.51% 83.13% 85.72% 87.16% 87.96%
(28.56%) (26.56%) (26.25%) (32.06%) (32.53%) (38.02%) (28.58%) (33.35%)
-------(24.88%)
105.89% 102.87% 101.06% 108.57% 115.66% 123.74% 115.75% 146.19%
48.77% 49.75% 48.55% 44.45% 50.60% 47.69% 58.58% 29.73%
75.80% 73.46% 67.31% 76.45% 71.67% 72.80% 73.46% 72.30%
(25.08%) (24.53%) (22.21%) (20.92%) (20.42%) (16.92%) (21.06%) (29.30%)
--------100.89% 98.00% 89.52% 97.38% 92.09% 89.72% 94.52% 101.60%
50.72% 48.93% 45.10% 55.53% 51.25% 55.88% 52.41% 43.00%
Long Portfolio
Short Portfolio
37.6
30
23.7
20
10
0
82.42%
(27.35%)
-109.77%
55.08%
80.61%
(31.69%)
-112.30%
48.92%
60
Long Portfolio
58.0
Short Portfolio
27.6
8.0 8.4
7.3
1.5 1.2
78.66%
(34.58%)
-113.24%
44.07%
78.08%
(24.89%)
-102.97%
53.19%
40
17.8
2.7 1.3
Dec
Exposure by Market Capitalization (%)1
Exposure by Sector (%)1
40
Nov
3.5
-- 0.5
2.1
1.2
3.2 3.0
1.1
--
1.0
20
12.5
9.9
13.1
4.1
0
> $15 B
$2 B - $15 B
< $2 B
Data as of March 31, 2015. 1Sector and market capitalization exposure presented as gross weights for the long and short portfolios, excluding the impact of the index hedge. Source: River Road Asset Management, LLC
and FactSet Research Systems Inc.
As of March 31, 2015, net of fees returns for the Long-Short Equity Composite are as follows for the month, QTD, YTD, 1 year, 3 year, and Inception to Date periods: -1.74%, 0.37%, 0.37%, 2.22%, 6.87%, 9.80%. As
of March 31, 2015, returns for the Russell 3000 are as follows for the month, QTD, YTD, 1 year, 3 year, and Inception to Date periods: -1.02%, 1.80%, 1.80%, 12.37%, 16.43%, 18.50%. Performance presented net of
fees is after the deduction of trading costs and management fees and includes the reinvestment of all income.
Representative Portfolios - Unless noted as LS Composite, the data presented is based on representative portfolios within the Long-Short Equity Strategy. Since no single representative portfolio is available to represent the
strategy since inception, data for historical periods combines two or more representative portfolios, using the same criteria, within the Long-Short Equity Strategy to create a continuous representative portfolio. All
representative portfolio data is shown as supplemental information to the Long-Short Equity Composite presentation.
River Road Asset Management, LLC (“RRAM”) is a registered investment adviser formed in April 2005 and is partially owned by Affiliated Managers Group, Inc. This presentation may be presented by an employee of
Affiliated Managers Group, Inc., AMG Funds, or Aston Asset Management, LLC, which are affiliates of RRAM. RRAM claims compliance with the Global Investment Performance Standards (GIPS®). The firm maintains a
complete list and description of composites and a presentation that complies with the requirements of the GIPS® standards, which is available upon request by contacting Thomas D. Mueller, CPA, CFA at (502) 371-4100 or
thomas.mueller@riverroadam.com. The Composite contains a fully discretionary account that seeks equity-like returns with reduced volatility and an emphasis on capital protection by investing in long equity securities that
trade at a discount to the firm's estimate of absolute value and selling short equity securities that trade at a premium to the firm's estimate of absolute value. The Composite will invest in short securities. The long and short
portfolios will typically represent 50 to 100% and -10 to -90% of the total composite, respectively. Additionally, the Composite may use options, futures, and other derivatives but these will not represent a significant
portion on the composite. Performance presented includes the reinvestment of all income. The U.S Dollar is the currency used to express performance. The official benchmark for the Composite is the Russell 3000 Unmanaged index that contains the 3,000 largest stocks in the U.S. based on total market capitalization. All other indices listed throughout the presentation are shown for additional information only.
The information provided in this report should not be considered a recommendation to purchase or sell any particular security. Characteristics and sector weightings may not be indicative of this strategy’s current or future
investments. It should not be assumed that any of the holdings discussed herein were or will be profitable or that the investment recommendations or decisions we make in the future will be profitable or will equal the
investment performance of the securities discussed herein. This information is shown as supplemental information only and complements the full disclosure presentation.
Sector, Industry Group, Industry, or Sub-industry group levels are provided from the Global Industry Classification Standard (“GICS”), developed and exclusively owned by MSCI, Inc. (“MSCI”) and Standard & Poor’s Financial
Services LLC (“S&P”), unless otherwise stated that they have been reclassified or classified by RRAM. Reclassifications/classifications by RRAM are not supported by S&P or MSCI. All GICS data is provided “As Is” with no
warranties. River Road Asset Management does classify securities that are not automatically classified by MSCI and S&P.
Data was previously shown for a component of the Portfolio called the “individual short portfolio,” which excluded the impact of (1) index hedges held during drawdown periods and (2) two equity hedges. Beginning Q4
2014, this component is no longer presented. Instead, a component of the Portfolio called the “short portfolio” is shown, which includes the two equity hedges but excludes the index hedges. Before the change, the
component defined as the “short portfolio” included the impact of the index hedges. These changes have been applied retroactively and change the data previously presented. All data for components of the Portfolio
exclude the impact of cash and an immaterial investment in covered call options previously held in the Portfolio. The total portfolio net and gross market exposure presented represents the representative portfolio, which
includes the impact of the long portfolio, short portfolio , index hedges, cash, and an immaterial investment in covered call options previously held in the portfolio. The Drawdown Plan is subject to market fluctuations and
exact percentage of long and short portfolios will typically not be achieved.
© Copyright: All rights reserved; 2015, River Road Asset Management, LLC.
RIVER ROAD ASSET MANAGEMENT, LLC
Meidinger Tower I 462 South Fourth Street I Suite 1600 I Louisville, KY 40202 USA
502.371.4100 I riverroadam.com