March 31, 2013

For the fourth year in a row U.S. stock prices have started the year in rally mode.  Despite anemic economic growth, the U.S. stock market (as measured by the Standard & Poor’s 500 Index®) returned 10.6% for the three months ended March 31st.  This comes on top of a 16.0% return in calendar year 2012.  Gains of this size naturally cause some investors to question why prices have risen so much and whether or not further gains are to come.

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Can Your Fund Beat the Index?

This is the question two Yale professors asked when they created the financial measure they named “Active Share”.  Essentially, Active Share looks at the percentage of a fund’s assets that is invested differently from a given benchmark index. If the fund’s holdings are substantially different from the index, the fund is said to have a high Active Share and is considered to be actively managed. If on the other hand the fund’s holdings are virtually the same as the benchmark, the fund is said to have a low Active Share and is considered to be, by definition, an index fund. Index funds typically have an Active Share of 20% and under. Funds that are actively managed usually have an Active Share measure greater than 60%. Funds with an Active Share between 20% and 60% often claim to be actively managed but are often found to simply be mimicking the market and as such are called “closet indexers” in market parlance. The upshot of the professors’ work is that on average, the higher the Active Share or the more active a fund manager, the higher the likelihood the manager will generate above-average performance, relative to peer funds. At the same time, closet indexers, with lower Active Share, tend to underperform relative to peer fund averages. (1.)

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December 31, 2012

Perhaps more than most, this past year created high levels of anxiety for investors.  In a year that included such major, and potentially negative, macroeconomic events as federal tax increases (of the “Fiscal Cliff” variety), the outcome of U.S. elections and Europe’s ongoing debt issues, it’s no surprise that investors were on edge.  Yet, for all the worry, 2012 was a very good year for investors as nearly all asset classes produced positive returns.  Stocks, in particular, were quite rewarding to investors as double digit returns were not uncommon across the globe. The U.S. stock market was no exception, providing a total return of 16% as measured by the S&P 500 Index^®.

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In looking back over 2012, we at Goelzer Investment Management can take pride in having achieved or surpassed many of the goals we set for the year.  As we look ahead, we will continue to dedicate ourselves to the pursuit of excellence in serving the needs of our clients.  This commitment is a part of everything we do at Goelzer.

To this end, the most important determinant of our success is our ability to attract and retain experienced professionals.  Over the course of our firm’s history, we have been provided with unique opportunities to welcome some of our industry’s leading talent.  This past year was no exception.  We are extremely pleased that in December Jeffrey A. Bush, J.D. joined Goelzer as Vice President and Chief Compliance Officer, focusing on investment advisory activities.

Jeff comes to Goelzer from the Securities Division of the Indiana Secretary of State, where he served as Chief Deputy Commissioner.  As Goelzer’s Chief Compliance Officer, Jeff oversees the firm’s Corporate Compliance Program, focusing on investment advisory activities.  Jeff’s addition to the firm further demonstrates our commitment to upholding the highest in regulatory standards and best practices throughout the organization.  Going forward, Jeff’s experience and insight will contribute significantly to the firm.  To view Jeff’s curriculum vitae and the Goelzer press release announcing his joining our firm, please visit our website at www.goelzerinc.com.

Should you have any questions or comments about the enclosed report or require additional information, please do not hesitate to give Sherri or me a call.  You can reach Sherri directly at (317) 264-2618 (e-mail: sgrabhorn@goelzerinc.com) or, if outside the Indianapolis calling area, (800) 428-1618.

Sincerely,
GOELZER INVESTMENT MANAGEMENT, INC.

Brett D. Mckamey, CFA
President

I recently was reminded of a story that powerfully incorporates both these themes of giving and family and I would like to share this story with you in this Holiday season:

A couple of years ago, a former Goelzer colleague realized he wanted to make a difference in someone’s life by giving a gift that would change them forever. After much consideration, he decided to donate a kidney to a perfect stranger.

After a rigorous testing process to find the perfect match, a woman who had experienced continuous discomfort for many years was selected.   The two strangers went into separate surgeries, and the result was a successful kidney transplant. My colleague gave one of only 150 kidneys donated nationwide to strangers that year.

While he and I no longer work together, my colleague will always be a part of the Goelzer family.  He has touched our lives and those of others in very many ways.  In fact, his sister was so taken by his act of giving that she donated one of her own kidneys to a stranger just weeks ago.

I share this story with you because it has deeply moved me and because it exemplifies the caring nature of our Goelzer family. Indeed, it is part of an ongoing story that is our firm’s 44-year heritage of charity and giving back to our community.

I would like to take this opportunity at year-end to thank you for your continued friendship and confidence. For this we are sincerely grateful.

I wish you and your family a very happy and healthy New Year.

Greg Goelzer
Chief Executive Officer

The ability of investors to access the equity markets using index mutual funds (also known as “passive” investing) has become more prevalent over the past decade.  Indexes were originally created to measure the change (performance) in the stock market or the economy. An example is the long-standing and commonly used Standard & Poor’s 500 Index^©. The investment community has adopted the use of such indexes as one way to measure the performance of a portfolio relative to the overall market or a particular component of it.  Each index has its own calculation methodology and its performance is usually expressed in terms of a change from a base value over a period of time.

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In light of the blizzard conditions currently affecting the Midwest and central Indiana, Goelzer Investment Management has encouraged all staff to remain home and to implement our business continuity plan. Please note:

• The office is fully operational and functioning via remote access;
• The corporate office is partially staffed and directing incoming calls and office activity;
• The GIM team can be reached by utilizing their corporate contact information available at Meet our Professionals.

If you have any questions or require assistance communicating with staff, please do not hesitate to contact me via my cell phone at 317-752-8012 or visit our website at www.goelzerinc.com for additional updates.

Greg Goelzer
CEO

As Goelzer’s Chief Compliance Officer, Mr. Bush will oversee the firm’s Corporate Compliance Program, focusing on investment advisory activities.  Jeff’s addition to the firm further demonstrates Goelzer’s commitment to upholding the highest in regulatory standards and best practices throughout the organization. His experience and insight will contribute significantly to the firm, adding value to its client relationships, including individuals, families, and institutions.

Jeff’s background in securities regulation is extensive. While with the Indiana Secretary of State, he was responsible for formulating and enforcing the Security Division’s policies and procedures. During his tenure, Jeff worked with the Indiana General Assembly and its Legislative Services Agency in drafting and passing securities legislation, including the Indiana Uniform Securities Act. His duties also included supervision of the Division’s staff and administrative oversight of the Division’s operations.

Jeff received his law degree from Vanderbilt University and his L.L.M. in taxation from the University of Washington. He graduated from Calvin College in Grand Rapids, Michigan with a BA in Psychology and Philosophy.

Jeff resides in Indianapolis, Indiana with his wife Heather, and his two children. Jeff has taught continuing legal education classes through the Indiana Bar Association and the Indiana Continuing Legal Education Foundation. He is active in his church, Holy Cross Lutheran. In his spare time he enjoys reading, hiking, and spending time with his family.

Over the course of the last 43 years, Goelzer Investment Management has built an experienced team of   dedicated and career professionals.  The firm has grown from its roots in 1969 to now include 20 talented individuals with an average of 30 years of investment experience.  Today Goelzer Investment Management is a leading investment advisory/portfolio management firm with approximately 375 clients in 34 states and Europe. As an independent, dual registrant firm, Goelzer provides comprehensive investment planning, advice, and portfolio management services to affluent individuals and families and to institutional investors. For more information on Goelzer Investment Management, please visit www.golezerinc.com

“Connecting our Clients, our Colleagues and our Community.”

Giving back to the community is a philosophy of Goelzer Investment Management that began with its founder, Don Goelzer. “Connecting our Clients, our Colleagues and our Community” is the theme that guides the company’s philanthropy and volunteerism. With our roots in central Indiana, Goelzer Investment Management partners with organizations that are best equipped to make a difference in the community and are most effective in achieving their mission.

As an Investment firm serving our community for over 40 years, Goelzer Investment Management has a company-wide commitment to touch the community in which we live. Our objective is to lend our partner associations a helping hand, while engaging our colleagues in useful team-building projects outside the office.

This passion is evident by Goelzer Investment Managements’ thoughtful approach to improving the quality of life in central Indiana, by providing both financial and volunteer support to the organizations that best reflect our philosophy. This focus, hard work and enthusiasm demonstrated by our colleagues, has allowed us to help our partner associations (listed below), accomplish concrete results.

Cookies for Kids Cancer
IU Foundation
Crown Point Community Foundation
Friends of Holliday Park
Nature Conservancy
Crossroads of America Boy Scouts
Day Nursery
Jameson Camp
Cornea Research Foundation
Concord Coalition
Purdue Foundation
Brown County High School Library
Historic Madison Inc
Woodland Christmas Club for Children
High Street United Methodist Church
YMCA of Great Indianapolis
Leukemia & Lymphoma Society Indiana
TherAplay
Butler University
Children’s Bureau
Lacy Foundation
Healing Place
Bosom Buddies
Kiwanis Club of Indianapolis Inc
MDA Indianapolis
IPS Education Foundation
Noble of Indiana
Dollars for Scholars
Riley Children’s Hospital
Sycamore School
Silver Oak Charity Dinner
American Heart Association
WFYI Public Television
Kiwanis Foundation
Civic Theater
ISO Development
NIC Foundation Inc
Center Grove Bantam Football
United Way of Central Indiana
Gleanors Food Bank

St. Vincent Foundation
Sycamore School
Juvenile Diabetes Research Foundation
Holliday Park Foundation
Cookies for Kids – Cancer Research
The Nature Conservancy
MDA of Indianapolis
YMCA – Support Youth Development
Children’s Museum Guild
Center Grove Little League
Kids Against Hunger
Day Nursery
School on Wheels
Crossroads Rehabilitation
IU School of Dentistry – International Dental School
CBMC Get Connected
North United Methodist Church
Passion for Children Medical Center
Woodland Christmas Club for Children
Junior League of Indianapolis
Children’s TherAplay – Golf Tournament
Children’s TherAplay – Hoe Down
NIC Foundation
Children’s Bureau – Fore Kids
Children’s Bureau – Celebrity Cook-off
Crossroads of America Boy Scouts
Warbirds Aviation Museum
Nobel of Indiana
IPS Educational Foundation
Sheltering Wings Center for Women
Cornea Research Foundation
United Way of Central Indiana
Gleaners Food Bank