ECONOMIC AND MARKET UPDATE - 2022 San Gabriel Valley Economic Forecast Summit Presented to: San Gabriel Valley Economic Partnership
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ECONOMIC AND MARKET UPDATE Presented to: 2022 San Gabriel Valley Economic Forecast Summit Baie Netzer, CFA®, CFP® Managing Director Private Bank Senior Investment Strategist West Division Bank of America Private Bank March 22, 2022 Proprietary
THE CIO OFFERS THESE INSIGHTS TO SUPPORT YOUR
LONG-TERM GOALS
The CIO brings together To offer you
238 Dedicated team members
across specialties
Solutions grounded in
investment insights
~ 17 Average years of experience
per professional
Access to Due Diligence and open
architecture investing
~ 58 CFA®
~ 15 CAIA®
A disciplined approach to investing
Source: Chief Investment Office. Data as of May 31, 2021.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. CAIA® is a registered certification mark owned and administered by the Chartered Alternative Investment
Analyst Association.
CIO does not provide legal, tax or accounting advice.
2
CHIEF INVESTMENT OFFICE
MARKET OUTLOOK 2022
A YEAR OF SHIFTS, ADJUSTMENTS
AND MAJOR PIVOTS
See Important Disclosures on slide 2 of this presentation.
IMPORTANT DISCLOSURES
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions
oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). This information
should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill
or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of
all investors.
Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.
Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the
companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-
term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in foreign securities (including ADRs) involve special risks,
including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging
markets. Investments in certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could
result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market.
Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment
performance deviating.
Alternative investments are speculative and involve a high degree of risk.
Alternative investments are intended for qualified investors only. Alternative Investments such as derivatives, hedge funds, private equity funds, and funds of funds can result in higher return
potential but also higher loss potential. Changes in economic conditions or other circumstances may adversely affect your investments. Before you invest in alternative investments, you should
consider your overall financial situation, how much money you have to invest, your need for liquidity, and your tolerance for risk.
Trust and fiduciary services are provided by Bank of America, N.A., Member FDIC and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
© 2021 Bank of America Corporation. All rights reserved. │ MAP4020425 │ 12/2021 (ADA)
4
WE HAVE REACHED THE NEW FRONTIER
The journey from the Great Separation to The Great New Dawn
2/19/2020 11/3/2021
S&P 500 3,386.15 3/2020 The Great Pivot
• Liquidity Crunch Fed announces beginning of asset
• Virus Freefall purchases tapering, signaling the
• Shutdown start of a policy shift
• Massive Policy Support 5
• Liquidity Programs 3/11/2021 PHASE 5:
• Fixed income • Small Business Lending Program Third stimulus bill THE NEW FRONTIER
Market Seizes signed into law 4 (NEW DAWN)
• Record Volatility
PHASE 4:
• Equity Market 12/27/2020 PENT-UP
Freefall Second stimulus bill DEMAND CYCLE
signed into law
3
1 3/27/2020 PHASE 3:
PHASE 1: First stimulus bill ECONOMIC
3/15/2020 LIQUIDITY (CARES Act) signed 2 RECOVERY
The Fed cuts rates to zero into law
PHASE 2:
and starts quantitative easing THE BRIDGE
3/23/2020 Q1 ’20 - Q2 '20 Q3 ’20 - Q1 ‘21 Q2 ’21 - YE ‘21 2022
S&P 500 2,237.40
Black line represents the lifecycle of the CIO economic workout process and is not meant to represent any specific investment, index or performance of any kind. Phase 5 represents the CIO
outlook for potential economic expansion. Source: Chief Investment Office. Data as of December 7, 2021. CIO views are subject to change. The economic and market forecasts presented are for
informational purposes as of December 7, 2021. Economic or financial forecasts are inherently limited and should not be relied on as indicators of future investment performance.
5
STILL-DEVELOPING FACTORS ARE LIKELY TO
DOMINATE 2022
Strong GDP Labor
Inflation and Ongoing Trade and
growth and shortages and
raising coronavirus geopolitical
capital energy
interest rates uncertainty tensions
spending dislocations
Source: Chief Investment Office, as of December 2021.
6
THE LABOR MARKET IS TIGHT, BUT HIGHER WAGES =
MORE SPENDING
Difference between those who say jobs are plentiful, compared to those that say they are hard to find
60 % 1
0.9
40
0.8
0.7
20
0.6
0 0.5
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
0.4
-20
0.3
0.2
-40
0.1
-60 0
Source: The Conference Board/Haver Analytics. Data as of September 28, 2021.
7
GROWING CAPITAL EXPENDITURE DEMONSTRATES BUSINESS
CONFIDENCE AND COULD BOOST PRODUCTIVITY
Domestic Investment Demand Proxy* – Nondefense Capital Goods Ex-Aircraft Index Level
100
90
80
70
60
50
40
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
*Shipments of nondefense capital goods ex-aircraft minus exports plus imports.
Sources: Census Bureau/Haver Analytics. Data as of December 7, 2021
8
WE ARE IN THE MIDST OF LAST SHIFT IN INFLATION
U.S. Output Gap as % of Potential GDP with Congressional Budget Office Projections 2021–2025*
4%
2
0
-2
-4
-6
-8
1970 1980 1990 2000 2010 2020 2030
*Estimate. Sources: CBO/Haver Analytics. Data as of December 2, 2021.
9
TAPERING BY THE FEDERAL RESERVE IS AN INDICATOR
OF A STRONG ECONOMY
Year-over-Year Change in Federal Reserve Assets ($ Trillions)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sources: Federal Reserve Bank/Haver Analytics. Data as of September 26, 2021.
10SOME POTENTIAL RISKS STILL REMAIN
Inflation U.S.-China Supply chain
continues to relations issues may
be a risk remains fraught continue
Tax reform is
Labor markets
still adding
remain tight
uncertainty
Source: Chief Investment Office, as of December 2021.
11OVERALL, WE SEE POSITIVE SIGNS FOR
INVESTORS IN 2022
Corporate
Higher yields,
profits Continued Potential for
based on
supported by equity dividend
economic
strong nominal momentum growth
growth
GDP growth
Source: Chief Investment Office, as of December 2021.
12VALUATIONS DECLINE DUE TO LOW INVESTOR CONFIDENCE
Rising multiples and strong consumer
Lower valuations due to low confidence
spending
High liquidity, revenue and profit growth Peak in profits and slowing growth
Creeping inflation and continued supply
Waning threat from coronavirus
chain disruption
13THE CIO’S OUTLOOK AND POSITIONING VIEWS FOR
EQUITIES IN 2022
Equities Maintain an overweight to
equities, relative to fixed
income, with a preference for
• Continue to hold a positive view on equities, emphasizing quality
both US large and small cap
and the U.S.
companies
• Conditions are favorable to cyclicals, value equities and small caps
Incorporate both growth and
• Financials, Industrials, Energy and Materials sectors should benefit value factors, with a
from the continued economic recovery continued emphasis on
quality
• Technology firms should benefit in the long-run from spending on
innovation and digitization Do not write-off/abandon
international developed or
emerging markets
Source: Chief Investment Office, as of December 2021.
14THE CIO’S OUTLOOK AND POSITIONING VIEWS FOR
FIXED INCOME IN 2022
Fixed Income
Maintain fixed income as a
• Fixed income remains an important component of portfolios portfolio diversifier and
volatility hedge
• As rates rise, a preference for short duration fixed income may
be preferable Remain partial to quality and
limit duration – favor
• Treasurys, Investment Grade Corporates and Munis are the
investment grade corporates
preferred sectors with lower emphasis on High Yield and
and municipal bonds, as
Mortgage-Backed Securities
appropriate
Do not chase yield
Source: Chief Investment Office, as of December 2021.
15THE CIO’S OUTLOOK AND POSITIONING VIEWS FOR
ALTERNATIVE INVESTMENTS IN 2022
Alternative Investments Consider alternative
investments as a
• Volatility will favor active management and certain hedge non-correlated asset class for
fund strategies qualified investors
• A focus on stock selection and quality will help hedge funds seeking Focus on AI opportunities
to deliver alpha that can take advantage of
and withstand volatility
• Private credit markets may offer enhanced opportunities in a rising
interest rate environment Favor managers with strong
domain expertise, proven
track records and aligned
interests
Source: Chief Investment Office, as of December 2021.
16ALSO CONSIDER STRUCTURAL INVESTMENT TRENDS
FOR LONG-TERM GROWTH POTENTIAL
Big data Demographics Climate change
Future mobility Security Post-coronavirus world
Source: Chief Investment Office, Viewpoint: November 2021. CIO views are subject to change.
17STAY TRUE TO A DISCIPLINED INVESTMENT PROCESS
Maintain Avoid chasing Consider
Stay invested
Pursue quality process yield – take a non-
– don’t time
investments discipline & broader view correlated
the market
diversification of income strategies
Asset allocation and diversification do not assure a profit or protect against loss in declining markets.
18Portfolio Strategy
Slightly Slightly Slightly Slightly
Asset Class Underweight Underweight Neutral Overweight Overweight
Sector Underweight Underweight Neutral Overweight Overweight
Equities Energy
U.S. Large-cap Financials
U.S. Mid-cap Industrials
U.S. Small-cap Materials
International Developed Information Technology
Emerging Markets Consumer Discretionary
Fixed Income Real Estate
U.S. Investment-grade Taxable Healthcare
International Communication Services
Global High Yield Taxable Consumer Staples
U.S. Investment-grade Tax Exempt Utilities
U.S. High Yield Tax Exempt
Alternative Investments*
Hedge Funds
ALTERNATIVE INVESTMENTS NOTE: Given the differences in liquidity characteristics between AI and traditional
Private Equity investments, the AI portfolio positioning and CIO asset class views have been neutral rated versus our strategic
Real Estate allocations. These types of investments, in our opinion, should not be viewed at the asset class level on a
tactical basis, rather the tactical positioning should be expressed at the subasset level.
Tangible Assets/Commodities
*Many products that pursue Alternative Investment strategies, specifically Private Equity and Hedge Funds, are available only to qualified investors. Source: GWIM Investment Strategy Committee (GWIM
ISC) as of December 7, 2021. Please refer to the December 2021 Viewpoint for more detail weightings information. CIO views are subject to change. All sector and asset allocation recommendations must be
considered in the context of an individual investor's goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors. Please refer to appendixfor
asset class and sector proxies and index definitions.
19 of 53 Q4 2021 Chart Book – The Great New Dawn
4017728 | 1/2022APPENDIX See Important Disclosures on slide 2 of this presentation.
INDEX DEFINITIONS
Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships and is calculated by Standard & Poor’s using a float-
adjusted, market capitalization-weighted methodology. The total return index is calculated on an end-of-day basis and is disseminated daily through its
ticker symbol, AMZX, on the New York Stock Exchange.
Binance BTCDOM Index is a cryptocurrency price index reflecting the market dominance performance of Bitcoin.
Bloomberg Barclays US Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the
market size of each bond type. Most U.S. traded investment grade bonds are represented.
Bloomberg U.S. Large Cap Total Return Index is a float market-cap-weighted benchmark of the 500 most highly capitalized US companies.
Brent Crude Oil is a classification of sweet light crude oil and is a major benchmark price for oil purchases worldwide.
Cardano is a public blockchain platform. It is open-source and decentralized, with consensus achieved using proof of stake.
Conference Board U.S. Leading Credit Index: This index is consisted of six financial indicators: 2-years Swap Spread (real time), LIBOR 3 month less 3
month Treasury-Bill yield spread (real time), Debit balances at margin account at broker dealer (monthly), AAII Investors Sentiment Bullish (%) less
Bearish (%) (weekly), Senior Loan Officers C&I loan survey – Bank tightening Credit to Large and Medium Firms (quarterly), and Security Repurchases
(quarterly) from the Total Finance-Liabilities section of Federal Reserve’s flow of fund report.
The Measure of CEO Confidence: Business Executive Confidence Index is based on CEOs' perceptions of current and expected business and industry
conditions.
CoreLogic Case–Shiller U.S. National Home Price Index is a composite of single-family home price indices for the nine U.S. Census divisions. It is calculated
monthly, using a three-month moving average.
Equity Hedge Funds HFRI Equity Hedge (Total) Index Investment Managers who maintain positions both long and short in primarily equity and equity
derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and
fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net
exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. EH managers would
typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities, both long and short.
FTSE EPRA/NAREIT Global Index is a free float, market capitalization-weighted real estate index designed to represent publicly traded equity REITs and listed
property companies globally.
Gold reflects the gold spot price and is quoted in U.S. dollars per Troy Ounce.
HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge
fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger
arbitrage, and relative vdalue arbitrage.
LBMA Gold Price Precious Metals Index are the global benchmark prices for unallocated gold and silver delivered in London.
LPX 50 TR USD Index is a global index that consists of the 50 largest liquid LPE companies covered by LPX Group.
MSCI ACWI Index captures large and mid cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries. With
2,484 constituents, the index covers approximately 85% of the global investable equity opportunity set.
21INDEX DEFINITIONS (CONTINUED)
MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries (excluding the US) and 23
Emerging Markets (EM) countries. With 1,854 constituents, the index covers approximately 85% of the global equity opportunity set outside the US.
MSCI EAFE (Europe, Australasia, and Far East) Index comprises 21 MSCI country indices, representing the Developed Markets outside of North America.
MSCI Emerging Markets Index captures large and mid cap representation across 23 Emerging Markets (EM) countries. With 832 constituents, the index
covers approximately 85% of the free float-adjusted market capitalization in each country. EM countries include: Brazil, Chile, China, Colombia, Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand,
Turkey and United Arab Emirates.
MSCI ESG Indexes are designed to represent the performance of the most common ESG investment approaches by including, re-weighting or excluding
companies by leveraging ESG criteria.
MSCI Europe Index is a free float-adjusted market capitalization index designed to measure Developed Market equity performance in Europe. As of July
2009, the index consisted of 15 Developed Market country indexes: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland.
MSCI Japan Index is designed to measure the performance of the large and mid cap segments of the Japanese market. With 319 constituents, the
index covers approximately 85% of the free float-adjusted market capitalization in Japan.
MSCI Pacific ex Japan Index captures large and mid cap representation across 4 of 5 Developed Markets (DM) countries in the Pacific region (excluding
Japan). With 150 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
MSCI World ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries*-- excluding the United States.
With 934 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
Nasdaq Composite Index is a large market-cap-weighted index of more than 2,500 stocks, American depositary receipts (ADRs), and real estate investment
National Federation of Independent Business(NFIB) U.S. Small-Business Optimism Index is compiled from a survey that is conducted each month by the
National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the
following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real
sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.
National Financial Conditions Index (NFCI) provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity
markets and the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than on average,
while negative values indicate financial conditions that are looser than on average.
NCREIF Farmland Index is a quarterly time series composite return measure of investment performance of a large pool of individual farmland properties
acquired in the private market for investment purposes only. NCREIF Timberland Index is a quarterly time series composite return measure of
investment performance of a large pool of individual timber properties acquired in the private market for investment purposes only. NCREIF U.S. Real
Estate Index is a quarterly time series composite return measure of investment performance of a large pool of US Real Estate properties.
Normal Fit Index (NFI) is an incremental measure of goodness of fit for a statistical model, which is not affected by the number of parameters/variables in
the model.
Rogers International Commodity Total Return Index represents the value of a basket of futures contracts on commodities consumed in the global
economy, ranging from agricultural to energy and metals products.
22INDEX DEFINITIONS (CONTINUED)
Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe.
Russell 1000 Growth Index measures the performance of the large- cap growth segment of the US equity universe.
Russell 1000 Large-cap Index comprises about 92% of the total market cap of all listed stocks in the U.S. equity market. It is considered a bellwether index
for large-cap investing.
Russell 2000 Index refers to a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index.
Russell 2000 Small-cap Index refers to a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000
Index.
Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.
Russell 2000 Growth Index measures the performance of the small- cap growth segment of the US equity universe
Russell 3000 Index is a market-capitalization-weighted equity index that seeks to track 3000 of the largest U.S.-traded stocks
Russell 3000 Value Index is a market-capitalization weighted equity index maintained by the Russell Investment Group and based on the Russell 3000 Index,
which measures how U.S. stocks in the equity value segment perform by including only value stocks.
Solana is a crypto computing platform that aims to achieve high transaction speeds without sacrificing decentralization.
S&P Bitcoin Index is designed to track the performance of the digital asset Bitcoin.
S&P Ethereum Index is designed to track the performance of the digital asset Ethereum.
S&P Mid-cap 400 Index is a stock market index from S&P Dow Jones Indices. The index serves as a barometer for the U.S. mid-cap equities sector and
is the most widely followed mid-cap indexTether (USDT) is a stablecoin; a crypto asset pegged to the price of an underlying asset, backed by
equivalent value.
XRP is a borderless coin running on the open-source XRP Ledger blockchain.
USD Coin is redeemable on a 1:1 basis for U.S. dollars, issued by regulated financial institutions and backed by fully reserved assets.
U.S. dollar index (DXY) is a measure of the U.S. dollar's value relative to the majority of its most significant trading partners S&P 500 Index is a stock market
index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity
indices.
WTI crude oil reflects the Bloomberg West Texas Intermediate Crushing Crude Oil Spot Price. The price is derived by adding spot market spreads to the
NYMEX contract. Units are in U.S. dollars per barrel and is traded intraday.
23ASSET CLASS AND SECTOR PROXIES
Asset Class Index Index Description
The Consumer Price Index for All Urban Consumers, or CPI-U, is used by IA SBBI to measure inflation, which is the rate of
Inflation IA SBBI US Inflation change of consumer goods prices. All inflation measures are constructed by the U.S. Department of Labor, Bureau of
Labor Statistics, Washington.
For the IA SBBI U.S. Treasury Bill Index, the CRSP U.S. Government Bond File is the source from 1926 to 1976. Each month
a one-bill portfolio containing the shortest-term bill having not less than one month to maturity is constructed. (The bill's
IA SBBI US 30 Day TBill TR USD & BofA original term to maturity is not relevant). The ICE BofA Global Research US 3-Month Treasury Bill Index is comprised of a
Cash U.S. single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is
Treasury Bills 3 months sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding Treasury
Bill that matures closest to, but not beyond, three months from the rebalancing date. To qualify for selection, an issue
must have settled on or before the month-end rebalancing date.
Russell 1000 Growth Total Return measures the performance of the large-cap growth segment of the U.S. equity
US Large Cap Growth Russell 1000 Growth Total Return universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth
values.
Russell 1000 Value Total Return measures the performance of the large-cap value segment of the U.S. equity universe. It
US Large Cap Value Russell 1000 Value Total Return includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.
Russell 2000 Growth Total Return measures the performance of the broad growth segment of the U.S. equity universe.
US Small Cap Growth Russell 2000 Growth Total Return It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 2000 Value Total Return measures the performance of the large-cap value segment of the U.S. equity universe. It
US Small Cap Value Russell 2000 Value Total Return includes those Russell 2000 companies with lower price-to-book ratios and lower expected growth values.
The MSCI World ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM)
International Equity MSCI Daily TR Net World Ex USA USD countries – excluding the United States. The index covers approximately 85% of the free float-adjusted market
capitalization in each country.
The MSCI Emerging Markets (EM) Index captures large and mid cap representation across 23 Emerging Markets
Emerging Markets MSCI Daily TR Net EM USD countries and targets coverage of approximately 85% of the free float adjusted market capitalization in each country.
The MSCI North America Index is designed to measure the performance of the large and mid cap segments of the US and
North America MSCI Daily TR Net North America Canada markets. The index covers approximately 85% of the free float-adjusted market capitalization in the US and
Canada.
The MSCI Europe ex UK Index captures large and mid cap representation across 14 Developed Markets (DM) countries in
Developed Europe ex-UK MSCI Daily TR Net Europe Ex U.K. USD Europe. The index covers approximately 85% of the free float-adjusted market capitalization across European
Developed Markets excluding the UK.
The MSCI United Kingdom Index is designed to measure the performance of the large and mid cap segments of the UK
UK MSCI Daily TR Net UK USD market. The index covers approximately 85% of the free float-adjusted market capitalization in the UK.
The MSCI Japan Index is designed to measure the performance of the large and mid cap segments of the Japanese
Japan MSCI Daily TR Net Japan USD market. The index covers approximately 85% of the free float-adjusted market capitalization in Japan.
The MSCI AC Asia ex Japan Index captures large and mid cap representation across 2 Developed Markets countries (Hong
Developed Asia MSCI Daily TR Net Pacific Ex Japan USD Kong and Singapore) and 8 Emerging Markets countries (China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan
Pacific ex-Japan and Thailand) in Asia. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
x is made up of 22 exchange-traded futures on physical commodities, which are weighted to account for economic
Commodities Bloomberg Commodity Total Return significance and market liquidity.
Index
The ICE BofA US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and non-
subordinated US agency debt issued in the US domestic market. Qualifying securities must have an investment grade rating
U.S. Government & ICE BofA AAA U.S. Treasury/Agency (based on an average of Moody’s, S&P and Fitch). In addition, qualifying securities must have at least one year remaining
Quasi Government Master term to final maturity, at least 18 months to maturity at time of issuance, a fixed coupon schedule and a minimum amount
outstanding of $1 billion for sovereigns and $250 million for agencies.
The ICE BofA US Mortgage Backed Securities Index tracks the performance of US dollar denominated fixed rate and hybrid
residential mortgage pass-through securities publicly issued by US agencies in the US domestic market. 30-year, 20-year,
U.S. Mortgage Backed ICE BofA Mortgage Master 15-year and interest-only fixed rate mortgage pools are included in the Index provided they have at least one year
remaining term to final maturity and a minimum amount outstanding of at least $5 billion per generic coupon and $250
million per production year within each generic coupon.
24ASSET CLASS AND SECTOR PROXIES (CONTINUED)
Asset Class Index Index Description
The ICE BofA US Corporate Index tracks the performance of US dollar denominated investment grade corporate debt
publicly issued in the US domestic market. Qualifying securities must have an investment grade rating (based on an average
U.S. Corp Master ICE BofA U.S. Corp Master of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to
final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $250 million.
The ICE BofA US Cash Pay High Yield Index tracks the performance of US dollar denominated below investment grade
USD High Yield ICE BofA High Yield Cash Pay corporate debt, currently in a coupon paying period, that is publicly issued in the US domestic market.
The ICE BofA Global Broad Market Excluding US Dollar Index tracks the performance of investment grade debt publicly issued
International Fixed Income ICE BofA Global Broad Market TR ex in the major domestic and eurobond markets, including sovereign, quasi-government, corporate, securitized and
USD (Hedged) collateralized securities, excluding all securities denominated in US dollars.
(i) The ICE BofA Global Government Index tracks the performance of publicly issued investment grade sovereign debt
denominated in the issuer's own domestic currency. (ii) The ICE BofA Global Large Cap Quasi-Government Index tracks the
Global Governments ICE BofA Global Govt Bond Index + ICE performance of large capitalization investment grade quasi-government debt publicly issued in the major domestic and
BofA Global Large Cap Quasi-Govt euro-bond markets, including agency, foreign government, local government, supranational and government guaranteed
Index (Hedged) securities. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch).
The ICE BofA Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the
major domestic
Global Corporates ICE BofA Global Broad Market Corp and euro-bond markets. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P
(Hedged) and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity
as of the rebalancing date and a fixed coupon schedule.
Treasury Inflation- Tracks the performance of U.S. dollar-denominated inflation linked sovereign debt publicly issued by the U.S.
ICE BofA U.S. Inflation-Linked Treasury government in its domestic market.
Protected Securities Index
(TIPS)
The ICE BofA Global Collateralized Index tracks the performance of investment grade securitized and
collateralized debt, including mortgage backed, asset backed, commercial mortgage backed, covered bond, and US
Global Mortgages ICE BofA Global Broad Market Collateralized mortgage pass- through securities publicly issued in the major domestic and euro-bond markets. Qualifying securities
(Hedged) must have an investment grade rating (based on an average of Moody’s, S&P and Fitch).
(i) The ICE BofA Global High Yield Country External Corporate & Government Index tracks the performance of USD and EUR
denominated emerging market debt, including sovereign, quasi-government and corporate securities. (ii) The ICE BofA
Global HY / EM ICE BofA Global HY Country External Corp Global High Yield Index tracks the performance of USD, CAD, GBP and EUR denominated below investment grade
& Govt + ICE BofA Global High Yield corporate debt publicly issued in the major domestic or euro-bond markets.
(Unhedged)
An index is based on return data compiled for private equity funds (including buyout, growth equity and mezzanine
Private Equity Cambridge Associates U.S. Private Equity funds) that represent the majority of institutional capital raised by private equity partnerships formed since 1986.
Index
Investment Managers who maintain positions in companies currently or prospectively involved in corporate transactions of
a wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks,
debt exchanges, security issuance or other capital structure adjustments. Security types can range from most senior in the
Event Driven HFRI Event Driven (Total) Index capital structure to most junior or subordinated, and frequently involve additional derivative securities. Event Driven
exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company specific
developments. Investment theses are typically predicated on fundamental characteristics (as opposed to quantitative), with
the realization of the thesis predicated on a specific development exogenous to the existing capital structure.
25ASSET CLASS AND SECTOR PROXIES (CONTINUED)
Asset Class Index Index Description
Investment Managers who maintain positions both long and short in primarily equity and equity derivative securities.
A wide variety of investment processes can be employed to arrive at an investment decision, including both
quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors
Equity Hedge HFRI Equity Hedge (Total) Index and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market
capitalizations and valuation ranges of typical portfolios. EH managers would typically maintain at least 50% exposure
to, and may in some cases be entirely invested in, equities, both long and short.
Cambridge Associates U.S. Venture is a horizon calculation based on data compiled from 1,807 US venture capital funds (1,161) early stage, 210 late &
U.S. Venture expansion stage, and 436 multi-stage funds), including fully liquidated partnerships, formed between 1981 and 2018.
Capital/Growth Capital/Growth Index
Investment Managers who maintain positions in which the investment thesis is predicated on realization of a
valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and
quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income,
derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing
Relative Value HFRI Relative Value (Total) Index relationship between instruments and, in some cases, identify attractive positions in which the risk adjusted spread
between these instruments represents an attractive opportunity for the investment manager. RV position may be
involved in corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on
realization of a pricing discrepancy between related securities, as opposed to the outcome of the corporate transaction.
Discretionary Thematic strategies are primarily reliant on the evaluation of market data, relationships and influences,
as interpreted by an individual or group of individuals who make decisions on portfolio positions; strategies employ an
investment process most heavily influenced by top down analysis of macroeconomic variables. Investment Managers
may trade actively in developed and emerging markets, focusing on both absolute and relative levels on equity
Global Macro/CTA HFRI Macro: Discretionary Thematic Index markets, interest rates/fixed income markets, currency and commodity markets; frequently employing spread trades
to isolate a differential between instrument identified by the Investment Manager to be inconsistent with expected
value. Portfolio positions typically are predicated on the evolution of investment themes the Manager expects to
materialize over a relevant time frame, which in many cases contain contrarian or volatility focused components.
Cambridge Associates Developed Europe is a horizon calculation based on data compiled from 413 Developed Europe buyout & growth equity funds, including fully
Buyout/Growth liquidated partnerships, formed between 1987 and 2018. Buyout Cambridge Associates Non-U.S. Global Buyout Index
Buyout & Growth Equity Index/Buyout based on data compiled from more than 2,000 institutional-quality global buyout and growth equity funds formed
Cambridge Associates Non-U.S. Global Buyout between 1986 and 2016.
Index
is a horizon calculation based on data compiled from 461 credit opportunities (i.e. general credit opps and distressed),
Private Credit Cambridge Associates Private Credit Index subordinated capital (i.e. mezz and capital appreciation opps) , and senior debt (i.e. direct lending) funds, including fully
liquidated partnerships, formed between 1986 and 2018.
tracks the performance of all Equity REITs not designated as Timber REITs or Infrastructure REITs. NAREIT Index a
Real Estate/REITs FTSE NAREIT All Equity REITS Total Return market capitalization-weighted index that includes all tax-qualified real estate investment trusts (REITs) that are
listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market.
is composed of futures contracts on crude oil, heating oil, unleaded gasoline, and natural gas. It reflects the
Natural Gas Bloomberg Energy Total Return return on fully collateralized futures positions and is quoted in USD.
Information Technology Total Return (TR) USD; Consumer Discretionary TR USD; Industrials TR USD; Real Estate
S&P 500 sub-sectors S&P 500 Total Return TR USD; Communication Services TR USD; Materials TR USD; Financials TR USD; Consumer Staples TR USD;
and industry groups Utilities; Energy TR USD; Healthcare TR USD.
26ASSET CLASS AND SECTOR PROXIES (CONTINUED)
Asset Class Index Index Description
Investment Managers who maintain positions both long and short in primarily equity and equity derivative securities.
A wide variety of investment processes can be employed to arrive at an investment decision, including both
quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors
Equity Hedge HFRI Equity Hedge (Total) Index and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market
capitalizations and valuation ranges of typical portfolios. EH managers would typically maintain at least 50% exposure
to, and may in some cases be entirely invested in, equities, both long and short.
Cambridge Associates U.S. Venture is a horizon calculation based on data compiled from 1,807 US venture capital funds (1,161) early stage, 210 late &
U.S. Venture expansion stage, and 436 multi-stage funds), including fully liquidated partnerships, formed between 1981 and 2018.
Capital/Growth Capital/Growth Index
Investment Managers who maintain positions in which the investment thesis is predicated on realization of a
valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and
quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income,
derivative or other security types. Fixed income strategies are typically quantitatively driven to measure the existing
Relative Value HFRI Relative Value (Total) Index relationship between instruments and, in some cases, identify attractive positions in which the risk adjusted spread
between these instruments represents an attractive opportunity for the investment manager. RV position may be
involved in corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on
realization of a pricing discrepancy between related securities, as opposed to the outcome of the corporate transaction.
Discretionary Thematic strategies are primarily reliant on the evaluation of market data, relationships and influences,
as interpreted by an individual or group of individuals who make decisions on portfolio positions; strategies employ an
investment process most heavily influenced by top down analysis of macroeconomic variables. Investment Managers
may trade actively in developed and emerging markets, focusing on both absolute and relative levels on equity
Global Macro/CTA HFRI Macro: Discretionary Thematic Index markets, interest rates/fixed income markets, currency and commodity markets; frequently employing spread trades
to isolate a differential between instrument identified by the Investment Manager to be inconsistent with expected
value. Portfolio positions typically are predicated on the evolution of investment themes the Manager expects to
materialize over a relevant time frame, which in many cases contain contrarian or volatility focused components.
Cambridge Associates Developed Europe is a horizon calculation based on data compiled from 413 Developed Europe buyout & growth equity funds, including fully
Buyout/Growth liquidated partnerships, formed between 1987 and 2018. Buyout Cambridge Associates Non-U.S. Global Buyout Index
Buyout & Growth Equity Index/Buyout based on data compiled from more than 2,000 institutional-quality global buyout and growth equity funds formed
Cambridge Associates Non-U.S. Global Buyout between 1986 and 2016.
Index
is a horizon calculation based on data compiled from 461 credit opportunities (i.e. general credit opps and distressed),
Private Credit Cambridge Associates Private Credit Index subordinated capital (i.e. mezz and capital appreciation opps) , and senior debt (i.e. direct lending) funds, including fully
liquidated partnerships, formed between 1986 and 2018.
tracks the performance of all Equity REITs not designated as Timber REITs or Infrastructure REITs. NAREIT Index a
Real Estate/REITs FTSE NAREIT All Equity REITS Total Return market capitalization-weighted index that includes all tax-qualified real estate investment trusts (REITs) that are
listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market.
is composed of futures contracts on crude oil, heating oil, unleaded gasoline, and natural gas. It reflects the
Natural Gas Bloomberg Energy Total Return return on fully collateralized futures positions and is quoted in USD.
Information Technology Total Return (TR) USD; Consumer Discretionary TR USD; Industrials TR USD; Real Estate
S&P 500 sub-sectors S&P 500 Total Return TR USD; Communication Services TR USD; Materials TR USD; Financials TR USD; Consumer Staples TR USD;
and industry groups Utilities; Energy TR USD; Healthcare TR USD.
27METHODOLOGY
The hypothetical historical returns are based on the U.S..-based Tier 0 Strategic Asset Allocation and proxy indices as of June 2021. The calculations
are performed in Morningstar using daily returns and monthly rebalancing. Results shown are based on indexes and are illustrative; they assume
reinvestment of income and no transaction costs or taxes. Indexes are unmanaged. Direct investment cannot be made in an index. The strategy
benchmark was composed as follows: From 1/1/2020 to current quarter end: 17% Russell 1000 Growth Total Return, 19% Russell 1000 Value Total
Return, 2% Russell 2000 Growth Total Return, 2% Russell 2000 Value Total Return, 13% MSCI World Ex US TR Net, 6% MSCI Emerging Markets TR
Net USD, 12% ICE BofA US Treasury & Agency, 10% ICE BofA US Mortgage Backed Securities, 13% ICE BofA US Corporate, 2% ICE BofA US Cash Pay
High Yield, 2% ICE BofA Global Broad Market ex USD Hedge USD, 2% ICE BofA US 3- Month Treasury Bill. From 1/1/2019 to 12/31/2019: 12% Russell
1000 Growth Total Return, 20% Russell 1000 Value Total Return, 2% Russell 2000 Growth Total Return, 2% Russell 2000 Value Total Return, 13%
MSCI World ex US TR Net, 6% MSCI Emerging Markets TR Net USD, 13% ICE BofA US Treasury & Agency, 10% ICE BofA US Mortgage Backed
Securities, 15% ICE BofA US Corporate, 3% ICE BofA US Cash Pay High Yield, 2% ICE BofA Global Broad Market ex USD Hedge USD, 2% ICE BofA US 3-
Month Treasury Bill. From 1/1/2018 to 12/31/2018: 12% Russell 1000 Growth Total Return, 19% Russell 1000 Value Total Return, 2% Russell 2000
Growth Total Return, 2% Russell 2000 Value Total Return, 14% MSCI World ex US TR Net, 5% MSCI Emerging Markets TR Net USD, 14% ICE BofA US
CIO Moderate Allocation US SAA
Treasury & Agency, 11% ICE BofA US Mortgage Backed Securities, 13% ICE BofA US Corporate, 4% ICE BofA US Cash Pay High Yield, 2% ICE BofA
Global Broad Market ex USD Hedge USD, 2% ICE BofA US 3-Month Treasury Bill. From 01/10/2017 to 12/18/2017: 12% Russell 1000 Growth ; 19%
Russell 1000 Value; 2% Russell 2000 Growth; 2% Russell 2000 Value; 13% MSCI World ex USA NR; 5% MSCI EM NR; 11% BofA US MBS; 14% ICE BofA
US Corporate; 14% ICE BofA Us Treasury & Agency; 2% ICE BofA Global Board Market xUS USD ; 4% ICE BofA US Cash Pay HY; 2% ICE BofA US 3M
Treasury Bill.
From 01/10/2017 to 12/18/2017: 12% Russell 1000 Growth; 19% Russell 1000 Value; 2% Russell 2000 Growth; 2% Russell 2000 Value; 13% MSCI
World ex USA NR; 5% MSCI EM NR; 11% BofA US MBS; 14% ICE BofA US Corporate;14% ICE BofA US Treasury & Agency; 2% ICE BofA Global Broad
Market xUS USD; 4% ICE BofA US Cash Pay HY; 2% ICE BofA US 3M Treasury Bill. From 04/14/2009 to 01/09/2017: 23% Russell 1000 Growth; 23%
Russell 1000 Value; 2% Russell 2000 Growth; 2% Russell 2000 Value; 8% MSCI EAFE NR; 2% MSCI EM NR; 9% ICE BofA US MBS; 13% Bloomberg US
Government; 9% Bloomberg US Credit ; 2% ICE BofA Global Broad Market xUS Loc; 2% ICE BofA US Cash Pay HY; 5% IA SBBI US 30 Day Treasury
Bill.
The hypothetical historical returns are based on the Globally-based Tier 0 Strategic Asset Allocation and proxy indices as of June 2021. The
calculations are performed in Morningstar using daily returns and monthly rebalancing. Results shown are based on indexes and are illustrative;
they assume reinvestment of income and no transaction costs or taxes. Indexes are unmanaged. Direct investment cannot be made in an index.
The strategy benchmark was composed as follows: From 1/1/2020 to current quarter end: 34% MSCI North America TR Net USD, 8% MSCI Europe
ex UK TR Net USD, 4% MSCI United Kingdom TR Net USD, 2% MSCI Japan TR Net USD, 3% MSCI Pacific ex Japan TR Net USD, 6% MSCI Emerging
Markets TR Net USD, 17% ICE BofA Global Govt TR Hedged USD, 3% ICE BofA Global Large Cap Quasi-Govt TR Hedged USD, 9% ICE BofA Global
Broad Market Corporate TR Hedged USD, 9% ICE BofA Global Broad Market Collateralized TR Hedged USD, 2% ICE BofA Global High Yield TR USD,
1% ICE BofA Global HY Country External Corp & Govt TR USD, 2% ICE BofA US 3-Month Treasury Bill. From 1/1/19 to 12/31/2019: 31% MSCI North
America TR Net USD, 7% MSCI Europe ex UK TR Net USD, 5% MSCI United Kingdom TR Net USD, 2% MSCI Japan TR Net USD, 3% MSCI Pacific ex
Japan TR Net USD, 6% MSCI Emerging Markets TR Net USD, 19% ICE BofA Global Govt Bond Hedge USD TR, 3% ICE BofA Global Large Cap Quasi-
Govt TR Hedged USD, 9% ICE BofA Global Broad Market Corporate TR Hedged USD, 10% ICE BofA Global Broad Market Collateralized TR Hedged
CIO Moderate Allocation Global SAA
USD, 2% ICE BofA Global High Yield TR USD, 1% ICE BofA Global HY Country External Corp & Govt TR USD, 2% ICE BofA US 3-Month Treasury Bill.
From 1/01/2018 to 12/31/2018: 29% MSCI North America TR Net USD, 8% MSCI Europe ex UK TR Net USD, 5% MSCI United Kingdom TR Net USD,
2% MSCI Japan TR Net USD, 3% MSCI Pacific ex Japan TR Net USD, 5% MSCI Emerging Markets TR Net USD, 19.6 ICE BofA Global Govt Bond Hedge
USD TR, 3.4% ICE BofA Global Large Cap Quasi-Govt TR Hedged USD, 9% ICE BofA Global Broad Market Corporate TR Hedged USD, 10% ICE BofA
Global Broad Market Collateralized TR Hedged USD, 2.96% ICE BofA Global High Yield TR USD, 1.04% ICE BofA Global HY Country External Corp &
Govt TR USD, 2% ICE BofA US 3-Month Treasury Bill. From 2/01/2017 to 12/31/2017: 30% MSCI North America TR Net USD, 7% MSCI Europe ex UK
TR Net USD, 5% MSCI United Kingdom TR Net USD, 2% MSCI Japan TR Net USD, 3% MSCI Pacific ex Japan TR Net USD, 5% MSCI Emerging Markets
TR Net USD, 20% ICE BofA Global Govt Bond Hedge USD TR, 3% ICE BofA Global Large Cap Quasi-Govt TR Hedged USD, 9% ICE BofA Global Broad
Market Corporate TR Hedged USD, 10% ICE BofA Global Broad Market Collateralized TR Hedged USD, 3% ICE BofA Global High Yield TR USD, 1.0%
ICE BofA Global HY Country External Corp & Govt TR USD, 2% ICE BofA US 3-Month Treasury Bill. From 7/01/2012 to 1/31/2017: 61% MSCI AC
World TR Net, 39% ICE BofA Global Fixed Income Markets TR USD.
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