Investment Management

Wisco
Second Quarter 2014
Dear Clients & Friends;
The fnancial markets experienced broad-based gains in the second quarter. The U.S. equity market extended its
upward climb, rising 5%, while International equity markets, in aggregate, rose 5% this period as well. Domestic Fixed
Income posted a 2% gain in the quarter as treasury yields continued their downward trend. Alternative Investments also
produced favorable results this quarter, driven primarily by high single-digit gains in Real Estate Investment Trusts and
Energy Master Limited Partnerships and mid-single digit returns in Metals. Overall, we continue to believe that well-
diversifed, low-cost investment strategies will continue to produce favorable results over time.
As a reminder, our policy is to rebalance client portfolios on a semi-annual basis. This allows us to realign your portfolio
with our current market expectations. To that end, we recently completed our mid-year portfolio adjustments and will
be rebalancing portfolios over the next few weeks. As always, feel free to contact us to discuss the rebalancing of your
portfolio, your targeted risk level, or any other life changes that may be relevant to how your portfolio is invested.
We will also be integrating the Morningstar Offce suite into our business this summer. This will enhance our ability to
provide you with portfolio performance reporting and analysis, as well as other features you may fnd helpful. We plan
to get in touch with you this summer to discuss your interest in receiving performance reports on a regular basis and to
introduce our new web portal capabilities that might help simplify communications and document delivery between us.
Looking ahead, we are planning to host our third quarter investment seminar on Wednesday, August 27th at 6:00 pm
at Blackhawk Country Club. Please let us know if you would like to attend or if you feel a friend or family member might
beneft from joining us. In addition, as we move into the warmer summer months, we are excited to be sponsors of
the Smart Growth Greater Madison and the Madison Parks
Foundation golf outings.
We would like to thank you for providing us with the
opportunity to work with you as your investment
adviser. We appreciate your business!
Sincerely,
The Wisco Team
402 Gammon Place, Suite 380
Madison, WI 53719
Offce: 608.442.5507
Fax: 608.237.2206
Stephen Share
sshare@wiscoinvest.com
Chas Janisch
cjanisch@wiscoinvest.com
Greg Schroeder
gschroeder@wiscoinvest.com
Second Quarter 2014 Market Review
Domestic Equity
The domestic equity market had a solid quarter
posting a 5% gain. The S&P 500, once again, reached
a new all-time high this quarter when it closed at
1962.87 on June 20th. S&P 500 1Q14 operating
earnings grew a respectable 7% y/y, however, GDP
was surprisingly weak in 1Q14 declining 2.9%. Most
economists attributed this weakness to a harsh winter
and inventory drawdowns both of which could be
temporary headwinds. We would expect to see higher
GDP growth in both 2Q and 3Q. Steady job gains in the
United States continues to strengthen the economy
and we feel this improvement more than offsets
the headwinds of The Federal Reserves continued
tapering of its bond purchases.
Year-to-date the domestic stock market is up 7%. On
a valuation basis, the S&P 500 is trading at a P/E of
16.7x 2014 consensus earnings which suggests to us
multiple expansion opportunities may be limited in the
second half of the year. Furthermore, we think it may
be hard for the market to perform as well in the 2nd
half of 2014 as it did in the frst half of the year.
Interestingly, small cap stocks have lagged both the
domestic and international stock market so far in
2014. Therefore, Wisco is reinitiating a small cap
position in our Balanced, Balanced Growth and
Growth models and increasing our small cap
exposure in the Aggressive model.
Wisco Investment Management
Wisco model portfolios are constructed using fve different asset classes; Domestic Equity, International Equity,
Domestic Fixed Income, Alternative Investments and Money Market. As of July 1st, our model portfolio asset class
allocations are as follows:
Wisco Model Portfolios
Conservative Balanced Balanced Growth Growth Aggressive
Domestic Equity 33% 41% 49% 57% 62%
International Equity 5% 11% 18% 23% 28%
Domestic Fixed Income 42% 31% 19% 6% 0%
Alternative Investments 10% 10% 10% 10% 8%
Money Market 10% 7% 5% 4% 2%
Total 100% 100% 100% 100% 100%
Target Volatility
*
6% 8% 10% 12% 14%
*Target Volatility is our estimate for the annual standard deviation of portfolio returns.
Source: Wisco Investment Management LLC
Source: Dow Jones U.S. Broad Stock Market Index and Wisco.
35%
30%
25%
20%
15%
10%
5%
0%
2
Q
1
4
1
Q
1
4

4
Q
1
3
3
Q
1
3
2
Q
1
3
2
0
1
3
2
0
1
2
2
0
1
1
2
0
1
0
2
0
0
9
6%
10%
3%
5%
33%
28%
17%
1%
16%
Quarterly Returns
2%
International Equity
The international equity markets posted a 5% return
in the quarter, with emerging markets recovering from
a 1Q14 decline to outperform developed markets.
In Europe, the STOXX 50 gained 2% this quarter as
Eurozone GDP showed modest 1Q14 growth of 0.7%.
Year-to-date, Denmarks Copenhagen Index (up 20%)
and Italys FTSE MIB Index (up 15%) are among the
top European markets, while Austrias ATX Index is
fat this year. Japans Nikkei 225 increased 2% in the
quarter as the countrys GDP increased 1.6%. The
FTSE Emerging Market Index returned 7% in 2Q14, as
Russias RTSI index recovered from a weak 1Q14 to
post an 11% return. Brazils IBOVESPA increased 5%
in the quarter, while the Shanghai composite was up
1% in 2Q14.
While Wisco continues to have a positive view on the
Developed International Markets, we are modestly re-
ducing our exposure to these markets in all our mod-
els except the Conservative model. We feel it makes
sense to reduce our holdings given the strength of the
market and redeploy these assets in areas that have
less risk or have lagged in performance. Furthermore,
we continue to be cautious on Emerging International
Markets and feel many of these markets could under-
perform should global interest rates go up.
Domestic Fixed Income
The Barclays Capital U.S. Aggregate Bond Index
increased 2% in the quarter, as interest rates
remained low. The Federal Reserve continues to
taper its bond buying program with a $10 billion
reduction in July to $45 billion a month and we think
the Fed would like to end this program by year end.
The 10-year treasury yield fell from 2.72% at the start
of the quarter to a low of 2.44% on May 28th before
moving back up to 2.52% at the end of the quarter.
Barclays U.S. Treasury Infation Protected Securities
Index (TIPS) increased 4% in the quarter, and is up 6%
year-to-date. Annual CPI reached 2.1% in May, its
highest percentage increase since October 2012.
Investment grade and high yield corporate bonds
increased 3% and 2%, respectively.
Wisco continues to expect low Fixed Income
returns for the foreseeable future. We feel a
potential improvement in economic growth along
with less monetary support of the Treasury market
could push yields gradually higher. That said, we
continue to have a Fixed Income position in our more
conservative models to take advantage of the asset
classes low volatility. We are supplementing our
aggregate bond ETF exposure with a TIPS ETF to
protect against infation.
Source: MSCI ACWI ex USA and Wisco
40%
30%
20%
10%
0%
-10%
-20% 2
Q
1
4
1
Q
1
4

4
Q
1
3
3
Q
1
3
2
Q
1
3
2
0
1
3
2
0
1
2
2
0
1
1
2
0
1
0
2
0
0
9
10%
5%
-3%
5%
14%
37%
11%
-14%
17%
Quarterly Returns
0%
Source: Barclays Capital U.S. Aggregate Bond Index and Wisco.
10%
8%
6%
4%
2%
0%
-2%
-4%
2
Q
1
4
1
Q
1
4

4
Q
1
3
3
Q
1
3
2
Q
1
3
2
0
1
3
2
0
1
2
2
0
1
1
2
0
1
0
2
0
0
9
1%
-1%
-3%
-2%
6%
7%
8%
3%
Quarterly Returns
2% 2%
Wisco Investment Management LLC is a registered investment adviser. Information presented is for educational purposes only
and does not intend to make an offer or solicitation for the sale or purchase of any specifc securities product, service, or invest-
ment strategy. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to frst consult with a qualifed
fnancial adviser, tax professional, or attorney before implementing any strategy or recommendation discussed herein.
Alternative Investments
The United States Commodity Index (USCI) returned
3% in the quarter. In agriculture, corn prices fell 14%
1

and Soybean prices declined 2%
1
, as early indications
point to strong yields from North America pushing
agricultural prices lower. Precious metals saw prices
drift higher in the second quarter with gold up 4%
2

and silver up 6%
3
. Higher infation and political
uncertainty in the Middle East and Ukraine may have
caused investors to rotate into safe-haven metals.
Real Estate Investment Trusts (REIT) had a nice quarter
returning 7%
4
and are now up 18% year-to-date. In the
Energy market, crude oil returned 5%
5
while Energy
Master Limited Partnerships returned 9%
6
.
In Wiscos Aggressive model we are replacing the REIT
ETF with an Energy Master Limited Partnership ETF.
This change better aligns our Aggressive model with
our more conservative models which now all hold an
energy infrastructure master limited partnership. We
expect the MLP ETF to offer consistent returns at a
better yield than most fxed income investments. We
also hold a broad-based commodity ETF in all our
model portfolios except the Conservative model. We
like this investment both for its return potential as
well as its low correlation to other investments
we hold. Finally, our Conservative model portfolio
continues to hold a gold ETF, to protect against
infation eroding the value of this models
substantial Fixed Income exposure.
Money Market
Wisco keeps a modest money market allocation in
all of our model portfolios. The current yield of the
Schwab Money Market is 0.01%. Low Federal Funds
rates have held down short-term yields. We think
short-term interest rates will remain low for an
extended period of time.
1
Return calculation based on the near future contract as quoted in the Wall Street Journal.
2
Return calculation uses ETFS Physical Swiss Gold Shares (SGOL) as a proxy for gold.
3
Return calculation uses iShares Silver Trust ETF (SLV) as a proxy for silver.
4
Return calculation uses Schwab U.S. REIT ETF (SCHH) as a proxy for Real Estate Investment Trusts.
5
Return calculation uses Cushing, OK WTI spot price FOB as a proxy for oil.
6
Return calculation uses Alerian MLP (AMLP) as a proxy for Energy Master Limited Partnerships.