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APM Quarterly |
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| Portfolio Performance Report
APM not immune to Market Forces! It's not exactly a newsflash, but APM's performance had been holding up pretty well until this quarter. We got hammered! Only six of 31 holdings had positive returns in the quarter and most of those haven't had a good year. The only stellar performer for the year has been Capitol Federal (CFFN), up 30% ytd. At times like this, it's good to step back and take a longer term perspective. Since inception, we've outperformed the NASDAQ in 10 out of 15 years.
UMB’s Prospects - Words of Wisdom from CFO Mike Hagedorn On September 16, 2008 (the Monday of the Lehman Brothers (LEH) & collapse and Bank of America’s (BOA) sudden purchase of Merrill Lynch (MER)), the CFO of UMB, Mr. Mike Hagedorn, and The speakers' also discussed UMB’s Management Rotation Program, an program designed to give Tom Grutzmacher and Phillip Linville, Assistant Portfolio Managers and co-chairmen of the 2008 APM Golf Tournament, reported the fundraising event on See the slide show on the APM website! The results Raffle Winners! Thanks to all participants and most especially our sponsors. Gold Sponsors - Tradebot, Al Simmons and Gene Diederich, Scott Jones, and Todd Preheim Blue Sponsors - Inergy, Tortoise Capital, Garmin, and Steve Edmonds Crimson Sponsors - NIC Inc, Dan Drake, Matt Taylor, and Capitol Federal See you on the course next year! Commercial Real Estate - Do you have it in you? On September 22nd guest speaker Aaron Mesmer (APM S02) talked commercial real estate fundamentals with the class. Aaron works out of Much like company valuation, the real estate business calls for discounted cash flow models. A good rough, valuation of a commercial property is simply dividing a property’s net operating income by the annual return you want to receive (called the cap rate). This simple calculation helps brokers easily separate the worthwhile investments that could stand a closer look. Aaron also discussed three ways to build wealth in the real-estate business: cash flows, debt principal reduction, and price appreciation. The two he considers most significant when trying to make money are cash flows and debt principal reduction. The most important aspect of cash flows is maximizing net operating income of the asset under management. A big part of net operating income is making market assumptions and projections. When valuing real estate he discussed how a broker can make a deal look attractive, but you need be able to back up your projections and assumptions in order to make money. He also emphasized the importance of loan terms and diversifying holdings when using the concept of debt principal reduction. He did not feel price appreciation was an easy way to accumulate wealth in the short term. Still the numbers aren’t everything as the old real estate adage suggests it’s location, location, location that matters. Aaron discussed the market flight into new “hot” markets and how this leads to overvalued properties. The overvaluation often times is created when a real estate transaction has become highly levered. The students picked Aaron’s brain about the causes of current real estate problems and how they came about. Aaron discussed the risks that face the real estate market. Many of these risks are associated with all aspects of business such as financial risk, inflation risk, market risk, and political risk. More specific to real estate, he discussed the risk of not diversifying to different locations and property types (office, industrial, and retail). He also spoke about the risks of being a developer, something which Block and Company (Block Funds) does not typically engage in due to the high costs and uncertainty surrounding such deals. Thanks to all our great speakers in the 3rd quarter.
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nearly double that of the industry average. According to Mr. Hagedorn, by generating such a high percentage of revenue from their diverse mix of fee based business, UMB has been able to avoid many of the woes seen by others in their industry. Mr. Hagedorn also discussed UMB’s growth plans for the future that include a focus on growing higher yielding earning assets (a recent exit from the auto loan market) and plans to strengthen the asset management division. UMB currently holds $11.3 Billion in assets under management, an 8.6% growth from 2007. UMB’s plans to increase the asset management division rely primarily on their ability to specialize in certain asset classes; their current small cap world market fund (UMB Scout International Fund) manager Jim Moffett has been named runner-up for Morningstar’s International Fund Manager of the Year for two of the last three years.
young managers the opportunity to work on challenging projects in the various departments at UMB.
Friday, September 19th was a great success. Forty APM friends and alumni participated in raising a total of $6,000. “We were very happy with the turn out this year,” said Grutzmacher. “Aid from our valued corporate sponsors are especially appreciated, and we are truly grateful for all donations and contributions to the APM fund.” Linville noted, “on behalf of the APM class, we look forward to seeing an even greater showing next year.”
Kansas City for Block Funds in Acquisition and Investment Sales. Block Funds, is a private equity income fund associated with Block and Company that manages over $2 billion in assets and has annual leasing/sales volume of $870 million. Holdings in their portfolio include properties valued from $5 million to $100 million. Aaron has been recognized by the Kansas City Regional Association of Realtors as one of the top investment sales brokers in the city by dollar volume. In his time at Block funds, Aaron has been involved in transactions valued at close to $250 million. | Copyright 2004,
Applied Portfolio Management Program University of Kansas School of Business |