HomeMy WebLinkAbout2017 12 05 Other, Document PresentationDate: December 8, 2017
The attached document was presented by AndCo
Consulting during the Tuesday, December 5,
2017 Board of Trustees Regular Meeting in
reference to Regular Agenda Item "500 ".
June 30, 2017
Global Bond
Asset Class Primer
AndCo Consulting 1 (844) 44 -ANDCO I AndCoConsuldngxom
Overview
Why Extend a Bond Portfolio Beyond Core Domestic Issues?
Diversification
• Due to differences in business cycles across countries and industries, bond portfolio returns have the potential to be enhanced and /or risks (volatility) reduced through the inclusion of non - correlated fixed income investment
assets.
Risks
• The inclusion of high yield bonds and /or bonds whose rates are not directly linked to the U.S. yield curve have the potential to provide higher current income and yield enhancement in certain market environments.
Growth of the Global Credit Market
• The increasing growth and opportunities within the global credit system offers investors a broader range of investment opportunities.
Non -U.S. Dollar Bonds - Developed Market
Opportunities
• Increased Investment Opportunity — The U.S. bond market accounts for less than half of the global bond market.
• Yield Curve /Business Cycle Differences — Including global bonds as part of diversified portfolio has the effect of de- coupling a portfolio's return pattern from the U.S. yield curve.
• Market Structure — Investment managers have additional ways to diversify portfolios via allocations to non -U.S. debt by investing in undervalued currencies as well as by taking advantage of real interest rate differentials
across countries.
Risks
• Currency Fluctuation — Returns can be significantly impacted by fluctuations in currency exchange rates. If this currency exposure remains un- hedged, it can lead to volatile results once returns are converted to U.S. dollars.
• Geo- Political Concerns — In addition to the traditional default risk associated with all bonds, non -U.S. dollar denominated bonds are also subject to local sovereign risks such as political upheaval and economic instability.
High Yield Bonds
Opportunities
• Enhanced Current Income — High yield bonds typically offer additional yield relative to treasury or investment grade corporate issues.
• Capital Appreciation —A general economic upturn or specific improved company fundamentals can provide the potential for high yield bond price appreciation. As a result, market related events such as rating upgrades and
improved earnings reports can push up the price of a high yield bond.
• Relatively Low Duration — Due to the inherent risk in the securities, high yield bonds are typically issued with terms of less than 10 years and may be callable or putable after four or five years. This low duration reduces a
bond's overall sensitivity to changes in interest rates.
Risks
• Default — By their very nature, high yield bond investing can be associated with meaningful default rates. Higher yields on these bonds represent compensation for that risk.
• Credit Downgrade — Short of a default, deteriorating company fundamentals may cause an issue to be downgraded by a rating agency, which can reduce their market value.
• Greater Economic Sensitivity — High yield issues are more sensitive to downturns in the economic cycle since such conditions may reduce a company's financial health.
Non -U.S. Dollar Bonds - Emerging Market
Opportunities
• Enhanced Current Income — Emerging market bonds typically offer additional yield relative to developed market issues.
• Capital Appreciation —As a sovereign credit issuer matures into a more developed economy, there is a potential for bond price appreciation. Market related events such as rating upgrades and strong economic activity can
push up the price of emerging market bonds.
• Yield Curve /Business Cycle Differences — Including emerging market bonds as part of diversified portfolio has the effect of de- coupling a portfolio's return pattern from the U.S. yield curve.
Risks
• Currency Fluctuation — Returns can be significantly impacted by fluctuations in currency exchange rates. If this currency exposure remains un- hedged, it can lead to volatile results once returns are converted to U.S. dollars.
• Default — Emerging market bonds have historically experienced a higher default rate than those issued by their developed market counterparts.
• Geo - Political Concerns — In addition to the traditional default risk associated with all bonds, non - dollar denominated bonds are also subject to local sovereign risks such as political upheaval and economic instability.
Risk and Return
Time Period: 2/1/2003 to 6/30/2017
12.0
10.0
8.0
6.0
4.0
2.0
E
3
N
0.0
0.0
2.0
Std Dev
■ Diversified Bond Portfolio'
BBgBarc Gbl Agg Ex USD TR USD
JPM GBI -EM Diversified Composite TR USD
■
4.0
■
6.0
Global Diversified Bond Portfolio"
BBgBarc US Corporate High Yield TR USD
8.0
10.0
Historical Returns of Diversified Bond Investing
As of 6/30/2017
12.0
BBgBarc US Agg Bond TR USD
JPM EMBI Global Diversified TR USD
14.0
'Diversified Bond Portfolio: 70% BbgBarc US Aggregate, 10% BbgBarc Global Aggregate ex US, 10% BbgBarc US Corporate High Yield, 5% JPM EMBI Global Diversified, 5% JPM GBI -EM Diversified +
"Global Diversified Bond Portfolio: 33% BbgBarc Global Aggregate ex US, 33% BbgBarc US Corporate High Yield, 17% JPM EMBI Global Diversified, 17% JPM GBI -EM Diversified �)S"�
Longest Common Period: 2/1/2003 - 6/30/2017
Trailing Returns
As of 6/30/2017
13.5
N
12.8
12.0
11.3
0
10.5
9.8
M
ai
ei
rn OR
9.0
00
00
8.3
N
7.5
o
N
�
�
M
M M
6.8
M M
6.0
M
c
�
5.3
c
(q U)
U) U
4.5
v
ry
� o
c
3.8
`n
M
N
M
O
3.0
C9
N
In
M M
M
N
N
N
N
2.3
nj
o0
1.5
�
0.8
O
--
N
0.0
M
M �
-0.8 q
q q
-1.5
E -2.3
3
�
N
-3.0
N
O
ri
-3.8 c
ri
-4.5
YTD 1 Year 2 Years
3 Years 4 Years 5 Years
7 Years
10 Years 15 Years 2/1/2003 - 6/30/2017'
BBgBarc US Agg Bond TR USD
BBgBarc Gbl Agg Ex USD TR USD
BBgBarc US Corporate High Yield TR USD
JPM EMBI Global Diversified TR USD
JPM GBI -EM Diversified Composite TR USD
M I
ql�
65.0
60.0
55.0
50.0
45.0
40.0
35.0
30.0
25.0 u)
N
20.0 1 v
I� W I T7 M M
M
15.0 �' M
N N
O W
10.0 rn c M
o U�
(O W 0.0 is ic,
1 1■ ■■
O M M
M M
-10.0 06
O
-15.0 N
-20.0
C
3
-25.0
d'
-30.0
-35.0
2016 2015 2014 2013 2012 2011 2010
BBgBarc USAgg Bond TR USD
JPM EMBI Global Diversified TR USD
2009
2008
BBgBarc Gbl Agg Ex USD TR USD
JPM GBI -EM Diversified Composite TR USD
Calendar Year Returns
As of 6/30/2017
O
N
LQ
N V
N N
O �
� N O
M
O O M
N M
G� O O
N O
o 00
� N
O M M
■:� 1 ii■1 1
M
00
2007 2006 2005 2004 2003 2002
BBgBarc US Corporate High Yield TR USD
Conclusions
Diversification within a fixed income portfolio can provide a number of advantages over a traditional broad market bond portfolio including:
• Current Income Enhancement
• Potential Total Return Enhancement
• Potential Risk (Volatility) Reduction in the form of Non - Correlated Return Patterns
Although bond portfolio diversification is attractive, it is not without its risks including:
• Increased Default Risk
• Increased Sensitivity to Economic Cycles & Currency Fluctuations
• Increased Sensitivity to Geo- Political Events
In addition to the inclusion of global, high yield and emerging market securities in a traditional core domestic bond portfolio, many investors also use alternative bond strategies including:
• Treasury Inflation Protected Securities (TIPS)
• Real Return Strategies (Commodities)
• Hedge Funds
Overview
Investment Option Comparison
Purpose for this Manager Evaluation Report
Client is reviewing Global Fixed Income investment options.
Investment Options for this Manager Evaluation Report
Firm Name Strategy Name Vehicle Management Fee
Brandywine Global Investment Management
Loomis Sayles & Company
Pacific Investment Management Company ( PIMCO)
Franklin Templeton Investments
Franklin Templeton Investments
Legg Mason BW Global Opportunities I (GOBIX) MF 0.71%
Loomis Sayles Fixed Income (LSFIX)
MF
0.57%
PIMCO Diversified Income Instl (PDIIX)
MF
0.75%
Templeton Global Bond R6 (FBNRX)
MF
0.52%
Templeton Global Total Return R6 (FTTRX)
MF
0.70%
Introduction
As of 6/30/2017
m I
ql�
Asset Class Overview
As of 6/30/2017
Definition and Characteristics
The Global Bond category consists of fixed - income securities of both developed and emerging countries. The typical benchmarks for the category are the Bloomberg Barclays Multiverse Index and the Bloomberg Barclays Global
Aggregate Index. The Bloomberg Barclays Multiverse Index contains investment grade and high -yield bonds of 24 countries. Securities are generally fixed -rate, taxable bonds meeting basic criteria on minimum par amount, liquidity,
and term to maturity. The index consists of almost 23,000 securities. Over 50% of the index is made of the highest rated securities and typically less than 5% is below investment grade. The sovereign treasury and government -
related sectors dominate the index, accounting for approximately 80% of the total allocation. Corporate bonds represent over 15% of the overall sector composition. The US represents the largest country exposure (39 %), followed
by Japan (17 %), and France (5 %). The Bloomberg Barclays Global Aggregate Index, a component of the Multiverse Index, consists of over 20,000 securities, both senior and subordinated issues, including sovereign treasuries,
government - related, and corporates. These securities can be denominated in one of 24 eligible currencies. Approximately 40% of the index is made of the highest -rated securities. The Global Aggregate index has a similar sector
breakdown profile as its Multiverse counterpart. The main difference between the benchmarks is that all bonds in the Global Aggregate must be rated investment grade or higher.
Role within a Portfolio
The Global Bond category provides the portfolio exposure to bond markets around the world. Adding global fixed - income exposure to a portfolio offers diversification benefits compared to a strictly US- focused strategy. The Global
Bond category provides diversification through exposures to currencies, interest rates, and countries with varying macroeconomic environments. Managers in the space typically invest a significant share of the total allocation to
foreign bonds (usually 40% or more). The more conservative ones favor sovereign issues and high - quality instruments from developed markets while the more aggressive portfolios will own a higher percentage of lower- quality
bonds, including high -yield US debt, and emerging markets securities.
Benchmark and Peer Group
This Global Bond search report will use the following benchmark and peer group
Index — Bloomberg Barclays Multiverse Index: Represents the union of the Global Aggregate Index and Global High -Yield Index. The index consists of over 23,000 securities that are fixed -rate, taxable bonds meeting basic
criteria on term to maturity and minimum amount outstanding. Foreign currencies must be freely tradable and hedgeable.
Peer Group - Multisector Bond: Multisector -bond portfolios seek income by diversifying their assets among several fixed - income sectors, usually U.S. government obligations, U.S. corporate bonds, foreign bonds, and high -yield
U.S. debt securities. These portfolios typically hold 35% to 65% of bond assets in securities that are not rated or are rated by a major agency such as Standard & Poor's or Moody's at the level of BB (considered speculative for
taxable bonds) and below.
*Brandywine's High Yield and Emerging Market Debt (EMD) exposure is limited to 15% each. Below investment grade for EMD is defined as any security rated belowA -.
" PIMCO may invest in high yield securities subject to a maximum of 10% of assets in securities rated below B. j�T(7C
Source: Investworks, eVestment Alliance, Morningstar Direct, Proprietary Database
Investment Option Information
As of 6/30/2017
Brandywine Global Investment
Loomis Sayles & Co. Multisector
Franklin Templeton Investments
Franklin Templeton Investments
Management Global Opportunistic
Full Discretion
PIMCO Diversified Income
Global Bon Plus
Global Multisector Plus
Fixed Income
Geographic Focus
Global
Global
Global
Global
Global
Sectors:
Sovereign /Government Agency
Yes
Yes
Yes
Yes
Yes
Corporate — Investment Grade
Yes
Yes
Yes
No
Yes
Corporate — High Yield
Yes
Yes
Yes
No
Yes
Securitized
Yes
Yes
Yes
No
Yes
Currency Hedging
Unhedged to USD
Unhedged to USD
25% Maximum Unhedged
Unhedged to USD
Unhedged to USD
Yield Curve /Duration
Active
Active
Active
Active
Active
Country/Region
Security Selection
Sector Selection
Currency
Currency
Drivers of Performance (Greatest to Least)
Currency
Sector Selection
Security Selection
Country/Region
Country/Region
Duration /Yield Curve
Duration /Yield Curve
Duration /Yield Curve
Duration /Yield Curve
Duration /Yield Curve
Sector Selection
Maximum Portfolio Allocation Below Investment Grade
30 %'
35%
10 %"
25%
50%
Total Firm AUM ($ M)
71,744
257,581
1,615,965
742,836
742,836
Total Product AUM ($ M)
23,767
38,640
19,203
72,553
40,247
Fixed Income AUM ($ M)
55,075
206,869
1,535,215
288,742
288,742
Equity AUM ($ M)
15,901
50,712
35,144
311,989
311,989
Portfolio Managers
8
4
7
3
3
Research Analysts
13
84
57
63
145
Traders
6
47
-
8
15
Vehicles Available
SA, CF, MF
SA, CF, MF
SA, MF
SA, CF, MF
SA, CF, MF
Separate Account Annual Fee
45 bps (tiered)
50 bps (tiered)
50 bps (tiered)
45 bps (tiered)
45 bps (tiered)
Commingled Fund Annual Fee
45 bps (tiered)
57 bps (tiered)
62 bps (tiered)
62 bps (tiered)
Mutual Fund Annual Fee
58 bps
57 bps
75 bps
52 bps
70 bps
Mutual Fund Name
Legg Mason BW Global
Loomis Sayles Fixed Income
PIMCO Diversified Income Instl
Templeton Global Bond R6
Templeton Global Total Return R6
Opportunities Bond IS
Mutual Fund TICKER
GOBSX
LSFIX
PDIIX
FBNRX
FTTRX
*Brandywine's High Yield and Emerging Market Debt (EMD) exposure is limited to 15% each. Below investment grade for EMD is defined as any security rated belowA -.
" PIMCO may invest in high yield securities subject to a maximum of 10% of assets in securities rated below B. j�T(7C
Source: Investworks, eVestment Alliance, Morningstar Direct, Proprietary Database
Correlation Matrix
As of 6/30/2017
Correlation Matrix
Time Period: 10/1/2008 to 6/30/2017
1
2
3
4
5
6
7
8
9
10
11
12 13 14
1 Legg Mason BW Global Opportunities Bd 1
1.00
2 Loomis Sayles Fixed Income
0.84
1.00
3 PIMCO Diversified Inc Instl
0.84
0.93
1.00
4 Templeton Global Bond R6
0.62
0.69
0.66
1.00
5 Templeton Global Total Return R6
0.67
0.77
0.73
0.98
1.00
6 S &P 500 TR USD
0.57
0.77
0.67
0.66
0.69
1.00
7 MSCI EAFE NR USD
0.71
0.85
0.79
0.71
0.77
0.89
1.00
8 MSCI EM NR USD
0.79
0.88
0.83
0.74
0.78
0.81
0.88
1.00
9 BBgBarc US Agg Bond TR USD
0.61
0.38
0.53
0.18
0.23
0.02
0.14
0.22
1.00
10 BBgBarc Gbl Agg Ex USD TR USD
0.81
0.65
0.63
0.44
0.50
0.42
0.59
0.60
0.59
1.00
11 BBgBarc US Corporate High Yield TR USD
0.69
0.92
0.88
0.58
0.67
0.70
0.76
0.80
0.23
0.43
1.00
12 JPM EMBI Global Diversified TR USD
0.82
0.85
0.91
0.59
0.65
0.56
0.68
0.76
0.61
0.65
0.76
1.00
13 JPM GBI -EM Diversified Composite TR USD
0.87
0.82
0.80
0.77
0.80
0.66
0.79
0.86
0.43
0.76
0.66
0.82 1.00
14 BBgBarc Multiverse TR USD
0.84
0.68
0.70
0.45
0.51
0.41
0.57
0.60
0.73
0.98
0.46
0.72 0.77 1.00
Longest Common Period: 10/1/2008 - 6/30/2017
m I
ql�
Morningstar Direct does not provide fundamental data on Bloomberg Barclays' fixed income indices. ) +
Current Portfolio Comparison
As of 6/30/2017
Legg
Templeton
Mason
Loomis
PIMCO
Templeton
Global
BW
Sayles
Diversified
Global
Total
Global
Fixed
Inc
Bond
Return
Opportunities
Income
Instl
R6
R6
Bd I
COMPOSITION
# of Holdings
73
378
1,067
134
159
%Asset in Top 10 Holdings
40.19
12.78
56.41
29.14
25.95
Asset Alloc Cash %
7.55
16.70
24.70
31.22
27.86
Asset Alloc Equity %
0.00
2.07
0.00
0.00
0.00
AssetAlloc Bond %
89.33
70.89
189.68
68.12
69.23
Asset Alloc Other %
3.12
10.35
1.91
1.13
3.74
STATISTICS
Average Eff Duration
5.95
3.70
5.49
0.28
0.12
Average Eff Maturity
5.52
9.05
3.80
3.80
Average Coupon
4.41
5.49
3.92
8.72
8.52
Yield to Maturity
4.47
9.93
Average Credit Quality
BBB
BB
BB
BB
SECTOR ALLOCATION
Government %
59.17
14.56
31.84
66.88
69.08
Government Related %
4.78
2.07
40.68
0.00
0.00
Municipal Taxable %
0.56
0.67
0.84
0.00
0.00
Municipal Tax - Exempt %
0.00
0.00
0.00
0.00
0.00
Bank Loan %
0.00
0.07
2.41
0.00
0.00
Corporate Bond %
21.27
55.81
38.40
1.10
-0.16
Agency Mortgage- Backed %
0.14
0.00
0.03
0.00
0.00
Non -Ag. Res. Mortgage- Backed %
0.43
0.20
5.94
0.00
0.00
Commercial Mortgage- Backed %
0.00
0.09
15.95
0.00
0.00
Asset - Backed %
0.00
0.45
8.94
0.00
0.00
Cash & Equivalents %
7.55
16.70
-89.63
31.22
27.86
Morningstar Direct does not provide fundamental data on Bloomberg Barclays' fixed income indices. ) +
Current Portfolio Comparison
As of 6/30/2017
Legg
7.94
0.00
0.49
0.00
20.93
Maturity 1 -3 Yr %
21.01
13.67
Templeton
Mason
Loomis
PIMCO
Templeton
10.12
BW
Sayles
Diversified
Global
Global
Global
Fixed
Inc
Bond
Total
18.29
14.43
14.69
11.18
Return
Opportunities
Income
Instl
R6
R6
Bd I
Maturity 15 -20 Yr %
1.98
7.31
5.14
MATURITY DISTRIBUTION
7.94
0.00
0.49
0.00
20.93
Maturity 1 -3 Yr %
21.01
13.67
35.78
12.78
14.25
Maturity 3 -5 Yr %
6.56
10.12
53.62
17.86
15.52
Maturity 5 -7 Yr %
2.90
9.53
20.74
11.44
12.15
Maturity 7 -10 Yr %
18.29
14.43
14.69
11.18
12.77
Maturity 10 -15 Yr %
6.05
6.42
9.34
5.54
5.16
Maturity 15 -20 Yr %
1.98
7.31
5.14
1.52
1.15
Maturity 20 -30 Yr %
24.30
6.59
11.55
0.64
0.34
Maturity 30+ Yr %
2.80
1.12
13.79
0.09
0.00
QUALITY DISTRIBUTION
Credit Qual AAA %
Credit Qual AA %
Credit Qual A %
Credit Qual BBB %
Credit Qual BB %
Credit Qual B %
Credit Qual Below B %
Credit Qual Not Rated %
21.34
7.94
0.00
0.49
0.00
20.93
1.84
0.00
11.94
8.52
32.23
18.39
19.00
21.57
20.44
15.10
28.31
39.00
33.51
30.08
9.28
23.62
25.00
21.71
23.87
0.74
12.12
14.00
10.78
15.34
0.24
4.17
3.00
0.00
0.00
0.14
3.62
0.00
0.00
1.76
Historical Number of Holdings
1,800.0
1,600.0
1,400.0
N 1,200.0
m
6 1,000.0
x
0
�* 800.0
600.0
400.0
200.0
V
0.0
2009 2011 2013
Historical Cash Allocation
600.0
500.0
m
0
J
400.0
t
N
U
0 300.0
Q
N
Q 200.0
100.0
0.0
2009 2011
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
Historical Portfolio Characteristics Comparison
As of 6/30/2017
Historical Percentage of Assets in Top 10 Holdings
120.0
100.0
N
01
80.0
O
x
0
a 60.0
N 40.0
N
Q
0
20.0
0.0
-20.0
2015 2017
Historical Effective Maturity
20.0
17.5
15.0
3
12.5
W
rn 10.0
m
d
Q 7.5
5.0
2.5
0.0
2013 2015 2017
– Loomis Sayles Fixed Income
— Templeton Global Total Return R6
2009 2011 2013 2015 2017
2009 2011 2013 2015 2017
PIMCO Diversified Inc Instl
Historical Average Effective Duration
8.0
7.0
6.0
0
5.0
0
w 4.0
d
m
3.0
Q
2.0
1.0
0.0
-1.0
2009
Historical Yield to Maturity
10.0
8.0
t-
3
m 6.0
0
d
} 4.0
2.0
0.0
2009 2011
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
2011 2013 2015
Historical Average Coupon
9.0
8.3
7.5
0
a
0
0
U 6.8
d
m
m
d
Q 6.0
5.3
4.5
3.8
2017
2013
Historical Portfolio Characteristics Comparison
As of 6/30/2017
2009 2011 2013 2015 2017
Historical Highly Speculative Exposure
12.0
10.0
m
8.0
O
d
m
m
6.0
d
U 4.0
2.0
0.0
2015 2017 2009
Loomis Sayles Fixed Income
Templeton Global Total Return R6
2011 2013 2015 2017
PIMCO Diversified Inc Instl
3 9
q,�
Current Portfolio Region Allocation
Portfolio Date: 3/31/2017
Templeton
Loomis
Legg
Templeton
Mason
Sayles
BW
Global
Global
Fixed
Opportunities
Bond
Bd I
Fixed -Inc Country United States %
48.31
North America %
50.54
Latin America %
11.20
United Kingdom %
0.00
Europe dev %
10.26
Europe emrg %
8.13
Japan %
0.00
Australasia %
14.31
Asia dev %
3.91
Asia emrg %
0.00
Africa /Middle East %
1.65
Developed %
79.94
Emerging %
20.06
Historical US Portfolio Exposure
70.0
60.0
z
N 50.0
d
m
40.0
d
30.0
U 20.0
U
C
10.0
X_
LL
0.0
2007 2008
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
Current and Historical Portfolio Region Exposure
As of 6/30/2017
2009 2010 2011
Loomis Sayles Fixed Income
- Templeton Global Total Return R6
2012 2013 2014 2015 2016 2017
PIMCO Diversified Inc Instl
Templeton
Loomis
PIMCO
Templeton
Sayles
Diversified
Global
Global
Fixed
Inc
Bond
Total
Income
Instl
R6
Return
R6
66.82
52.20
0.00
0.00
77.42
52.42
0.00
0.00
5.46
19.78
58.12
57.91
3.13
5.97
0.00
0.00
9.34
16.08
1.18
3.61
0.00
0.41
4.75
6.38
0.00
0.00
0.00
0.00
3.30
0.01
0.00
0.00
0.10
0.15
7.00
2.73
0.27
2.37
28.04
25.01
0.99
2.81
0.92
4.36
95.10
82.14
8.66
6.34
4.90
17.86
91.34
93.66
2009 2010 2011
Loomis Sayles Fixed Income
- Templeton Global Total Return R6
2012 2013 2014 2015 2016 2017
PIMCO Diversified Inc Instl
Quantitative Review
Peer Group (5 -95 %): Separate Accounts /CITs - U.S. - World Bond
12.0 •
11.0
10.0
9.0
8.0
7.0
6.0 •
3 5.0 • •
•
� 4.0 111111 •
3.0 • •
2.0 •
1.0 • •
0.0
-1.0 • •
-2.0
-3.0
-4.0
QTD 1 Year 2 Years 3 Years 4 Years
Calendar Year Performance
As of 6/30/2017
6A
5 Years 6 Years 7 Years 8 Years 9 Years 10 Years
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
Loomis Sayles Fixed Income
40 Templeton Global Total Return R6
PIMCO Diversified Inc Instl
■ BBgBarc Multiverse TR USD
QTD
Rank
1 Year
Rank
2 Years
Rank
3 Years
Rank
4 Years
Rank
5 Years
Rank
6 Years
Rank
7 Years
Rank
8 Years
Rank
9 Years
Rank
10 Years
Rank
Legg Mason BW Global Opportunities Bd 1
4.29
9
4.41
20
4.67
17
1.02
37
2.72
37
2.95
33
3.78
27
5.21
16
6.30
18
5.38
29
5.85
19
Loomis Sayles Fixed Income
2.54
57
8.73
7
5.30
9
2.08
27
4.87
15
5.71
6
5.55
9
7.00
4
8.66
3
7.08
7
6.76
7
PIMCO Diversified Inc Instl
2.35
61
8.68
7
7.14
2
4.49
8
5.83
4
5.31
7
5.65
9
6.53
5
8.47
4
7.45
4
6.92
7
Templeton Global Bond R6
-1.26
98
10.60
3
2.98
69
1.47
33
2.95
33
3.88
22
3.03
37
4.50
31
5.64
29
6.46
12
6.47
10
Templeton Global Total Return R6
-0.99
96
11.81
1
3.62
45
1.65
31
3.16
29
4.72
15
3.91
27
5.65
12
7.13
9
BBgBarc Multiverse TR USD
2.64
54
-1.38
75
3.50
50
-0.16
64
1.75
61
1.05
69
1.34
70
2.64
75
3.00
77
2.94
76
3.85
76
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
Loomis Sayles Fixed Income
40 Templeton Global Total Return R6
PIMCO Diversified Inc Instl
■ BBgBarc Multiverse TR USD
Peer Group (5 -95 %): Separate Accounts /CITs - U.S. - World Bond
40.0
35.0
30.0
25.0
20.0
E 15.0
3
10.0 •
5.0 •'
0.0
-5.0
-10.0
-15.0
-20.0
YTD 2016 2015 2014
•
•
2013 2012 2011 2010
•
Calendar Year Performance
As of 6/30/2017
2009 2008 2007
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
Loomis Sayles Fixed Income
40 Templeton Global Total Return R6
PIMCO Diversified Inc Instl
■ BBgBarc Multiverse TR USD
YTD
Rank
2016
Rank
2015
Rank
2014
Rank
2013
Rank
2012
Rank
2011
Rank
2010
Rank
2009
Rank
2008
Rank
2007
Rank
Legg Mason BW Global Opportunities Bd 1
9.93
2
4.91
28
-8.63
92
6.13
20
-4.04
85
13.16
17
7.79
15
13.03
11
20.96
11
-8.93
86
9.93
34
Loomis Sayles Fixed Income
5.78
34
9.94
5
-6.03
82
4.62
31
6.88
2
15.65
7
3.90
71
12.90
11
35.85
3
-17.78
95
9.16
53
PIMCO Diversified Inc Instl
5.67
34
10.56
4
1.26
9
2.96
42
-0.91
42
14.98
8
4.42
65
14.26
6
31.57
7
-13.34
93
3.97
84
Templeton Global Bond R6
3.37
70
6.78
14
-3.91
59
1.97
52
2.36
14
15.81
6
-2.37
99
12.68
13
18.86
20
6.28
23
10.86
21
Templeton Global Total Return R6
3.53
68
8.81
8
-4.53
68
0.73
71
3.86
6
19.31
1
-0.91
96
15.31
2
24.18
8
BBgBarc Multiverse TR USD
4.58
51
2.84
55
-3.29
47
0.48
76
-2.19
56
4.84
80
5.55
43
5.84
76
8.03
72
3.76
36
9.23
53
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
Loomis Sayles Fixed Income
40 Templeton Global Total Return R6
PIMCO Diversified Inc Instl
■ BBgBarc Multiverse TR USD
Rolling Return Analysis
As of 6/30/2017
Rolling Returns
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc Multiverse TR USD
20.0
15.0
C
10.0
d
5.0
0.0
-5.0 —
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 2015 2016 2017
Rolling Return Rankings
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc Multiverse TR USD
1 st to 25th Percentile 26th to Median 51 st to 75th Percentile 76th to 100th Percentile
0.0
i
25.0
C
�i 50.0
N
75.0
100.0
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 2015 2016 2017
Legg Mason BW Global Opportunities Bd I Loomis Sayles Fixed Income PIMCO Diversified Inc Instl
Templeton Global Bond R6 — Templeton Global Total Return R6 — BBgBarc Multiverse TR USD
Rolling Excess Returns
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc Multiverse TR USD
12.5 /
10.0 /
7.5
d
N 5.0
N
N
U
W 2.5
0.0
-2.5 —
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 12015 2016 2017
Rolling Excess Return Analysis
As of 6/30/2017
Rolling Excess Return Rankings
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc Multiverse TR USD
1 st to 25th Percentile 26th to Median 51 st to 75th Percentile 76th to 100th Percentile
0.0
25.0
50.0 /
N
N
N
W � /75.0 �\
100.0
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 2015 2016 2017
Legg Mason BW Global Opportunities Bd I Loomis Sayles Fixed Income PIMCO Diversified Inc Instl
Templeton Global Bond R6 — Templeton Global Total Return R6 — BBgBarc Multiverse TR USD
Rolling Risk Analysis
As of 6/30/2017
Rolling Standard Deviation
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc Multiverse TR USD
14.0
12.0
10.0
d
8.0
U)
6.0
4.0
2.0
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 2015 2016 2017
Rolling Standard Deviation Rankings
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc Multiverse TR USD
1 st to 25th Percentile 26th to Median 51 st to 75th Percentile 76th to 100th Percentile
0.0
25.0
0 50.0
U)
75.0
100.0
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 2015 2016 2017
Legg Mason BW Global Opportunities Bd I Loomis Sayles Fixed Income PIMCO Diversified Inc Instl
Templeton Global Bond R6 — Templeton Global Total Return R6 — BBgBarc Multiverse TR USD
Rolling Risk Analysis
As of 6/30/2017
Rolling Tracking Error
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc Multiverse TR USD
12.0
10.0
0
8.0
w`
6.0
Y
U
(6
4.0
2.0
0.0
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 2015 2016 2017
Rolling Tracking Error Rankings
Time Period: 7/1/2007 to 6/30/2017
Rolling Window: 3 Years 3 Months shift Calculation Benchmark: BBgBarc US Agg Bond TR USD
1 st to 25th Percentile 26th to Median 51 st to 75th Percentile 76th to 100th Percentile
0.0
25.0
`o
w`
m 50.0
Y
U
(6
H
75.0
100.0
09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06
2011 2012 2013 2014 2015 2016 2017
Legg Mason BW Global Opportunities Bd I Loomis Sayles Fixed Income PIMCO Diversified Inc Instl
Templeton Global Bond R6 — Templeton Global Total Return R6 — BBgBarc US Agg Bond TR USD
Risk - Reward: 3 -Year
Time Period: 7/1/2014 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
6.0
5.0
4.0
E 3.0
3
N
2.0
1.0
0.0
-1.0
0.0 2.0 4.0
Risk - Reward: 7 -Year
Time Period: 7/1/2010 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
10.0
8.0
6.0
d
4.0
2.0
0.0
0.0 2.0 4.0
6.0 8.0 10.0
Std Dev
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
6.0 8.0 10.0
Std Dev
Risk - Reward: 5 -Year
Time Period: 7/1/2012 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
7.0
6.0
5.0
E 4.0
3
N
3.0
2.0
1.0
0.0
0.0 2.0 4.0
Risk and Reward
As of 6/30/2017
Risk - Reward: 10 -Year
Time Period: 7/1/2007 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
A
6.0
� 4.0
Loomis Sayles Fixed Income
4D Templeton Global Total Return R6
2.0
0.0
0.0
6.0 8.0 10.0
Std Dev
2.0 4.0 6.0
Std Dev
PIMCO Diversified Inc Instl
■ BBgBarc Multiverse TR USD
8.0 10.0
m I
ql�
Up and Down Market Capture: 3 -Year
Time Period: 7/1/2014 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
150.0
120.0
0
m 90.0
d
a 60.0
CU
U
a
30.0
0.0
-30.0
-60.0 -30.0 0.0
30.0 60.0 90.0 120.0 150.0
Down Capture Ratio
Up and Down Market Capture: 7 -Year
Time Period: 7/1/2010 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
150.0
120.0
0
90.0
0 m
U 60.0
a
D
30.0
0.0
Up and Down Market Capture
As of 6/30/2017
Up and Down Market Capture: 5 -Year
Time Period: 7/1/2012 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
150.0
120.0
0
90.0
0 m
U 60.0
D
30.0
0.0
-50.0 -20.0 10.0 40.0 70.0
Down Capture Ratio
Up and Down Market Capture: 10 -Year
Time Period: 7/1/2007 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
140.0
120.0
.0 100.0
80.0
a
�j 60.0
a
D
40.0
20.0
0.0
0.0 20.0 40.0 60.0 80.0 100.0 120.0 0.0 20.0 40.0 60.0 80.0
Down Capture Ratio Down Capture Ratio
Legg Mason BW Global Opportunities Bd I Loomis Sayles Fixed Income PIMCO Diversified Inc Instl
Templeton Global Bond R6 4D Templeton Global Total Return R6 ■ BBgBarc Multiverse TR USD
100.0 130.0
100.0 120.0 140.0
m I
ql�
Time Period: 7/1/2014 to 6/30/2017
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
-0.1
-0.2
-0.3
-0.4
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
Multi Statistic Analysis
As of 6/30/2017
0.9
8.0
Legg Mason BW Global Opportunities Bd I
Sharpe
8.5
7.5
8.0
7.0
Loomis Sayles Fixed Income
6.5
7.5
6.0
PIMCO Diversified Inc Instl
5.5
7.0
5.0
4.5
Templeton Global Bond R6
0.3
Error
4.0
6.0
3.5
Templeton Global Total Return R6
0.1
37
3.0
-0.0
2.5
■ BBgBarc Multiverse TR USD
2.0
Time Period: 7/1/2014 to 6/30/2017
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
-0.1
-0.2
-0.3
-0.4
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
Multi Statistic Analysis
As of 6/30/2017
0.9
9.0
0.8
Sharpe
8.5
0.7
8.0
0.6
Ir
Rank
Tracking
7.5
0.5
7.0
0.4
6.5
0.3
Error
6.0
0.2
8
0.1
37
5.5
-0.0
0.27
5.0
-0.1
4.5
-0.2
4.0
-0.3
z s
-0.4
40 •40
0
3.0
-0.5
-0.6 2.5
2.0
-0.7
-0.8 1.5
-0.9 L 1.0
ip-
-1.0 0.5
F Information Ratio 3 Yr Tracking Error 3 Yr
Std Dev
Rank
Sharpe
Rank
Alpha
Rank
Information
Rank
Tracking
Rank
Ratio
Ratio
Error
Legg Mason BW Global Opportunities Bd 1
7.64
8
0.10
37
1.42
34
0.27
41
4.33
31
Loomis Sayles Fixed Income
5.26
49
0.35
31
2.12
27
0.49
34
4.55
27
PIMCO Diversified Inc Instl
4.89
64
0.87
15
4.42
8
1.02
9
4.55
27
Templeton Global Bond R6
6.56
25
0.18
35
1.37
34
0.19
47
8.57
1
Templeton Global Total Return R6
6.91
19
0.20
34
1.59
31
0.21
47
8.65
1
BBgBarc Multiverse TR USD
5.02
59
-0.08
64
0.00
64
0.00
100
Time Period: 7/1/2012 to 6/30/2017
1.5 5.5
1.4 5.0
1.3 4.5
1.2
4.0
1.1
3
1.0 .5
3.0
0.9
0.8 2.5
0.7 2.0
0.6 1.5
0.5 1.0
0.4
0.5
0.3
0.0
0.2
-0.5
0.1
-0.0 -1.0
-0.1 -1.5
-0.2 -2.0
Sharpe Ratio 5 Yr
1.2
1.1
1.0
40 0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
Alpha 5 Yr
-0.0
-0.1
-0.2
-0.3
-0.4
-0.5
-0.6
-0.7
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
10
Multi Statistic Analysis
As of 6/30/2017
0 •
0
0.5
r Tracking Error 5 Yr
7.3
Legg Mason BW Global Opportunities Bd 1
7.0
Rank
6.8
Rank
6.5
Rank
6.3
Loomis Sayles Fixed Income
6.0
5.8
Ratio
5.5
5.3
PIMCO Diversified Inc Instl
5.0
Error
4.8
Legg Mason BW Global Opportunities Bd 1
4.5
Templeton Global Bond R6
4.3
43
4.0
35
3.8
40
3.5
Templeton Global Total Return R6
3.3
5.15
3.0
1.07
2.8
4.80
2.5
■ BBgBarc Multiverse TR USD
2.3
Time Period: 7/1/2012 to 6/30/2017
1.5 5.5
1.4 5.0
1.3 4.5
1.2
4.0
1.1
3
1.0 .5
3.0
0.9
0.8 2.5
0.7 2.0
0.6 1.5
0.5 1.0
0.4
0.5
0.3
0.0
0.2
-0.5
0.1
-0.0 -1.0
-0.1 -1.5
-0.2 -2.0
Sharpe Ratio 5 Yr
1.2
1.1
1.0
40 0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
Alpha 5 Yr
-0.0
-0.1
-0.2
-0.3
-0.4
-0.5
-0.6
-0.7
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
10
Multi Statistic Analysis
As of 6/30/2017
0 •
0
0.5
r Tracking Error 5 Yr
Std Dev
Rank
Sharpe
Rank
Alpha
Rank
Information
Rank
Tracking
Rank
Ratio
Ratio
Error
Legg Mason BW Global Opportunities Bd 1
7.15
5
0.39
43
1.73
35
0.44
40
4.27
23
Loomis Sayles Fixed Income
5.15
46
1.07
19
4.80
10
1.14
7
4.09
27
PIMCO Diversified Inc Instl
4.99
49
1.03
20
4.45
11
1.05
11
4.04
27
Templeton Global Bond R6
6.11
23
0.61
32
3.66
19
0.39
42
7.18
1
Templeton Global Total Return R6
6.50
18
0.70
25
4.42
11
0.50
40
7.31
1
BBgBarc Multiverse TR USD
4.60
64
0.19
69
0.00
71
0.00
100
0
■
Time Period: 7/1/2010 to 6/30/2017
Legg Mason BW Global Opportunities Bd I
Loomis Sayles Fixed Income
PIMCO Diversified Inc Instl
Templeton Global Bond R6
Templeton Global Total Return R6
BBgBarc Multiverse TR USD
0
1.5 5.5
1.4 5.0
1.3 4.5
1.2 4.0
3.5
1.1
3.0
1.0
2.5
0.9
2.0
0.8
1.5
0.7
1.0
0.6
0.5
0.5
0.0
0.4 -0.5
0.3 -1.0
0.2 -1.5
0.1 -2.0
Sharpe Ratio 7 Yr I Alpha
1.0 8.0
0.9 7.5
0.8 7.0
• 0.7 6.5
0.6 6.0
0.5 5.5
0.4 5.0
0.3 4.5
0.2 4.0
0.1 3.5
-0.0 3.0
-0.1 2.5
-0.2 2.0
-0.3 1.5
-0.4 1.0
-0.5 - 0.5
r I I Information Ratio 7 Yr
Multi Statistic Analysis
As of 6/30/2017
Tracking Error 7 Yr
8.5
Legg Mason BW Global Opportunities Bd I
8.0
Information
7.5
Loomis Sayles Fixed Income
7.0
Std Dev
6.5
PIMCO Diversified Inc Instl
6.0
Alpha
5.5
5.0
Templeton Global Bond R6
Rank
4.5
Ratio
4.0
Templeton Global Total Return R6
Ratio
3.5
Error
3.0
BBgBarc Multiverse TR USD
2.5
Time Period: 7/1/2010 to 6/30/2017
Legg Mason BW Global Opportunities Bd I
Loomis Sayles Fixed Income
PIMCO Diversified Inc Instl
Templeton Global Bond R6
Templeton Global Total Return R6
BBgBarc Multiverse TR USD
0
1.5 5.5
1.4 5.0
1.3 4.5
1.2 4.0
3.5
1.1
3.0
1.0
2.5
0.9
2.0
0.8
1.5
0.7
1.0
0.6
0.5
0.5
0.0
0.4 -0.5
0.3 -1.0
0.2 -1.5
0.1 -2.0
Sharpe Ratio 7 Yr I Alpha
1.0 8.0
0.9 7.5
0.8 7.0
• 0.7 6.5
0.6 6.0
0.5 5.5
0.4 5.0
0.3 4.5
0.2 4.0
0.1 3.5
-0.0 3.0
-0.1 2.5
-0.2 2.0
-0.3 1.5
-0.4 1.0
-0.5 - 0.5
r I I Information Ratio 7 Yr
Multi Statistic Analysis
As of 6/30/2017
Tracking Error 7 Yr
Sharpe
Information
Tracking
Std Dev
Rank
Rank
Alpha
Rank
Rank
Rank
Ratio
Ratio
Error
7.15
21
0.71
36
2.07
32
0.64
23
4.00
31
6.07
34
1.13
22
4.62
9
0.99
3
4.41
24
5.19
62
1.23
16
4.44
9
0.98
3
3.95
31
7.75
8
0.56
55
3.01
22
0.25
59
7.43
4
8.24
3
0.67
43
3.90
14
0.40
49
7.63
3
4.97
65
0.50
69
0.00
74
0.00
100
1.5
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
5.0 -
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
Alpha 10 Yr
Multi Statistic Analysis
As of 6/30/2017
0.7
9.5
Legg Mason BW Global Opportunities Bd 1
9.0
Rank
8.5
Loomis Sayles Fixed Income
8.0
0.5
7.0
7.5
6.5
7.0
Ratio
PIMCO Diversified Inc Instl
6.0
6.5
Error
6.0 ■
Templeton Global Bond R6
5.5
5.5
0.3
5.0
5.0
0.2
4.5
34
Templeton Global Total Return R6
23
4.5
0.2
4.0
0.72
0.1
3.5
0.0
■ BBgBarc Multiverse TR USD
3.0
6.72
8
3.0
Std Dev 10 Yr
Time Period: 7/1/2007 to 6/30/2017
-0.1
1.5
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
5.0 -
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
Alpha 10 Yr
Multi Statistic Analysis
As of 6/30/2017
0.7
8.0
0.6
Sharpe
Rank
7.5
0.6
Information
0.5
7.0
0.5
6.5
0.4
Ratio
6.0
0.4
Error
0.3
8.66
5.5
0.3
53
5.0
0.2
0.39
34
5.13
23
4.5
0.2
9
0.72
0.1
4.0
0.0
3.5
-0.0
6.72
8
3.0
-0.1
34
-0.1
2.5
-0.2
2.0
-0.2
11
-0.3
1.5
-0.3
1.0
40
Information Ratio 10 Yr Tracking Error 10 Yr
Std Dev
Rank
Sharpe
Rank
Alpha
Rank
Information
Rank
Tracking
Rank
Ratio
Ratio
Error
Legg Mason BW Global Opportunities Bd 1
8.66
9
0.62
53
1.38
36
0.39
34
5.13
23
Loomis Sayles Fixed Income
8.66
9
0.72
31
3.17
21
0.43
25
6.72
8
PIMCO Diversified Inc Instl
7.21
34
0.89
25
3.67
16
0.55
11
5.60
17
Templeton Global Bond R6
8.28
21
0.72
32
3.87
16
0.34
37
7.62
7
Templeton Global Total Return R6
BBgBarc Multiverse TR USD
5.87
69
0.57
67
0.00
79
0.00
100
Batting Average
Source Data: Monthly Return
Calculation Benchmark: BBgBarc Multiverse TR USD
75.0
67.5
60.0
52.5
CU
45.0
rn 37.5
30.0
Co
22.5
15.0
7.5
0.0
3 Years 5 Years
Drawdown
Time Period: 7/1/2007 to 6/30/2017
Source Data: Monthly Return
0.0
-2.5
-5.0
-7.5
-10.0
-12.5
-15.0
-17.5
-20.0
-22.5
-25.0
2007 2008 2009
Legg Mason BW Global Opportunities Bd I
Templeton Global Bond R6
1
2010 2011
Loomis Sayles Fixed Income
Templeton Global Total Return R6
7 Years
Batting Average and Drawdown
As of 6/30/2017
2012 2013 2014 2015
PIMCO Diversified Inc Instl
BBgBarc Multiverse TR USD
10 Years
2016 2017
MPT Statistics
As of 6/30/2017
MPT Statistics: 3 -Year
Time Period: 7/1/2014 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
Legg
Templeton
Mason
Loomis
PIMCO
Templeton
Global
BBgBarc
BW
Sayles
Diversified
Global
Total
Multiverse
Global
Fixed
Inc
Bond
Return
TR US D
Opportunities
Income
Instl
R6
R6
BdI
Return
1.02
2.08
4.49
1.47
1.65
-0.16
Excess Return
1.18
2.24
4.65
1.63
1.80
0.00
Std Dev
7.64
5.26
4.89
6.56
6.91
5.02
Beta
1.29
0.63
0.56
-0.11
-0.04
1.00
Tracking Error
4.33
4.55
4.55
8.57
8.65
0.00
Sharpe Ratio
0.10
0.35
0.87
0.18
0.20
-0.08
Alpha
1.42
2.12
4.42
1.37
1.59
0.00
Information Ratio
0.27
0.49
1.02
0.19
0.21
Batting Average
52.78
58.33
55.56
50.00
52.78
100.00
Up Capture Ratio
121.54
71.02
88.64
-11.38
-5.55
100.00
Down Capture Ratio
102.78
37.77
18.93
-33.93
-30.84
100.00
MPT Statistics: 5 -Year
Time Period: 7/1/2012 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
Legg
Templeton
Mason
Loomis
PIMCO
Templeton
Global
BBgBarc
BW
Sayles
Diversified
Global
Total
Multiverse
Global
Fixed
Inc
Bond
Return
TR US D
Opportunities
Income
Instl
R6
R6
BdI
Return
2.95
5.71
5.31
3.88
4.72
1.05
Excess Return
1.89
4.66
4.26
2.83
3.67
0.00
Std Dev
7.15
5.15
4.99
6.11
6.50
4.60
Beta
1.28
0.73
0.70
0.16
0.23
1.00
Tracking Error
4.27
4.09
4.04
7.18
7.31
0.00
Sharpe Ratio
0.39
1.07
1.03
0.61
0.70
0.19
Alpha
1.73
4.80
4.45
3.66
4.42
0.00
Information Ratio
0.44
1.14
1.05
0.39
0.50
Batting Average
53.33
70.00
60.00
58.33
60.00
100.00
Up Capture Ratio
123.01
105.06
106.67
37.46
49.00
100.00
Down Capture Ratio
93.89
25.16
33.83
-23.91
-24.69
100.00
6T
MPT Statistics
As of 6/30/2017
MPT Statistics: 7 -Year
Time Period: 7/1/2010 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
Legg
Templeton
Mason
Loomis
PIMCO
Templeton
Global
BBgBarc
BW
Sayles
Diversified
Global
Total
Multiverse
Global
Fixed
Inc
Bond
Return
TR US D
Opportunities
Income
Instl
R6
R6
BdI
Return
5.21
7.00
6.53
4.50
5.65
2.64
Excess Return
2.57
4.37
3.89
1.86
3.02
0.00
Std Dev
7.15
6.07
5.19
7.75
8.24
4.97
Beta
1.21
0.85
0.73
0.60
0.70
1.00
Tracking Error
4.00
4.41
3.95
7.43
7.63
0.00
Sharpe Ratio
0.71
1.13
1.23
0.56
0.67
0.50
Alpha
2.07
4.62
4.44
3.01
3.90
0.00
Information Ratio
0.64
0.99
0.98
0.25
0.40
Batting Average
58.33
66.67
61.90
52.38
55.95
100.00
Up Capture Ratio
128.15
115.56
105.84
78.71
94.27
100.00
Down Capture Ratio
95.57
45.92
39.86
35.47
38.04
100.00
MPT Statistics: 10 -Year
Time Period: 7/1/2007 to 6/30/2017
Calculation Benchmark: BBgBarc Multiverse TR USD
Legg
Templeton
Mason
Loomis
PIMCO
Templeton
Global
BBgBarc
BW
Sayles
Diversified
Global
Total
Multiverse
Global
Fixed
Inc
Bond
Return
TR US D
Opportunities
Income
Instl
R6
R6
BdI
Return
5.85
6.76
6.92
6.47
3.85
Excess Return
2.00
2.91
3.07
2.62
0.00
Std Dev
8.66
8.66
7.21
8.28
5.87
Beta
1.21
0.95
0.81
0.65
1.00
Tracking Error
5.13
6.72
5.60
7.62
0.00
Sharpe Ratio
0.62
0.72
0.89
0.72
0.57
Alpha
1.38
3.17
3.67
3.87
0.00
Information Ratio
0.39
0.43
0.55
0.34
Batting Average
56.67
62.50
60.83
52.50
100.00
Up Capture Ratio
121.97
107.09
102.68
90.25
100.00
Down Capture Ratio
103.96
66.03
56.42
43.34
100.00
6T
Investment Option Narratives
Firm Overview
Founded in 1986, Brandywine Global Investment Management (BGIM) is an SEC - registered investment
manager headquartered in Philadelphia, PA. Shortly after its founding, BGIM was acquired by Legg Mason, Inc.
(ticker: LM) and became a wholly- owned, but independent subsidiary. Since the acquisition, the firm has
maintained complete control over investments, hiring and compensation. Approximately 80% of the firm's assets
under management are managed within fixed income and all strategies, whether equity or fixed income, are
managed in a value style. The firm also maintains office locations in San Francisco, Singapore and an operating
unit in London.
Team Overview
The Global Bond team, led by Managing Directors Stephen Smith and David Hoffman, manage all of the fixed
income portfolios at BGIM, including the Global Opportunistic Fixed Income (GOFI) strategy. Smith and Hoffman
have worked in the asset management business for almost 40 years and joined BGIM in 1991 and 1995,
respectively. Smith and Hoffman are joined on the portfolio management team by PM /Sr. Analyst Jack McIntyre.
While not a member of the portfolio management team, Director of Global Research Francis Scotland is a key
member of the team as he oversees the macro research process at the firm. In addition to McIntyre and
Scotland, the Global Bond team is comprised of five additional analysts, five traders, and four members of the
credit team.
Strategy Overview
As with all of the BGIM fixed income portfolios, the GOFI strategy is managed according to a top -down, value
oriented philosophy. The Global Bond team believes an active management approach to investing in fixed
income is superior to a passive approach as bond indices are dominated by the largest issuers of debt, and
therefore are poor guides to attractive areas of the market. In light of their philosophical views, BGIM seeks to
establish broad, macro themes across a select number of countries with the goal of outperforming broad, global
bond markets by 2% annually over rolling, five -year periods.
The Global Bond team believes the best measure of value is real yield (nominal interest rates minus inflation).
The reason for using real yields as the primary measure of value stems from a view that high, real yields boost
income to investors and allows them to capture the mean - reversion properties of interest rates. It is this view of
value that is the foundational element of BGIM's investment process. The process begins with the team
conducting macroeconomic research to identify the countries and currencies with the most attractive risk - reward
profile. The macro work has both a value component (real yield) and a fundamental component, which focuses
on the information risk, policy considerations and business cycle of each country. Once BGIM has established
its country and currency positions, the team will select securities that represent the best value within their
established themes. The investment universe includes sovereign and corporate bonds as well as mortgage -
backed securities. Smith and Hoffman are responsible for all decisions.
Legg Mason BW Global Opportunities Bd I
As of 6/30/2017
Expectations
Over a full market cycle, the GOFI strategy should do well in many environments, including bull markets, bear
markets and flat /non- trending markets. In bull markets, the investment team's practice of taking long duration
positions when they see value. In bear markets, the strategy will potentially suffer, but the value orientation
should mitigate the impact. In sideways markets, Brandywine's issue selection has proven to add value.
The strategy will tend to lag the market in periods when overvalued countries or currencies drive performance
In frothy markets, the strategy may lag due to the team's desire to focus on capital preservation in favor of
higher returns. As with most value- oriented strategies, the portfolio will likely underperform when undervalued
areas of the market remain below fair value for an extended period.
The strategy tends to maintain a long- duration profile over time. The strategy will typically be overweight
Sovereign bonds, but can tilt heavily in favor of Corporates when spreads widen.
Points to Consider
Smith and Hoffman are both in their mid -to -late 60's. There are no indications their retirement from the firm is
imminent. Nevertheless, the succession process as well as the development of the second generation of
investment professionals, especially McIntyre, should be closely monitored.
As with all value managers, one of the greatest risks in investing early or buying into a value trap. BGIM is not
immune to this risk as demonstrated by their poor performance in 2008. When future market declines occur, we
believe the team has the skill and experience to find value in the markets and move accordingly. That said,
during such times, we will monitor the strategy closely to understand their investment themes and reasoning
behind any large tactical positions they own.
Recommendation Summary
Co- Portfolio Managers Stephen Smith and David Hoffman have served together managing this strategy for over
20 years. Overall, the depth and experience of this team is extensive. In the last 10+ years, BGIM has made
over 15 additions to the team and experienced but three departures.
We believe BGIM's value philosophy and skill at identifying undervalued opportunities has been a key strength
and driver of the strategy's strong historical returns. We believe the degree to which the global bond team will
act on their convictions is high and this should allow for continued outperformance over time. The willingness to
act is evident in light of the team's practice of concentrating positions in 8 -16 countries versus 25+ for most
global bond indices. Another area where they act on their convictions is the tactical use of corporate bonds
(including high yield) and mortgage securities. Historically, when they have viewed the asset class as attractive,
the weighting to spread product has grown to 30 -50% of the portfolio. Conversely, when they are negative, the
weight has been near zero (2005 -06).
Sector
Quality
Legg Mason BW Global Opportunities Bd I
As of 6/30/2017
100% -
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
O� O) O) O� O� O� O� O$ 00 00 00 00 �O �O �O �O �� �^ �� �� �� �� �� �� �O �O �O �O �� �� � �� �� �� �b NO �O �O �O NO
at eC; at �� �Q e� at �� eQ e� at �� eQ e� a� �� eQ e� at �� �Q eri at �� �Q �� at �� �Q eri, at �� �Q lip t �� ZQ erj
0�� 5 0
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Nh NO NO NO NO
Source: Investworks, eVestment Alliance, Morningstar Direct, Proprietary Database
• Other
Non - Dollar
Convertibles
High Yield Corporates
• Municipals
■ABS /CMBS
• Non - Agency MBS
• Invt Grad Corporates
■Agencies /Regionals
■ Govts /Sovereigns
• Other
• Not Rated
• Below BBB /Baa
• BBB /Baa
■A
• AA /Aa
• AAA/Aaa
Kit
Firm Overview
Loomis Sayles & Company, LP is an SEC - registered investment advisor based in Boston, Massachusetts.
Founded in 1926, Loomis is a subsidiary of Natixis Global Asset Management. The firm's client list includes a
broad array of institutional investors. Today, the firm offers a broad line -up of fixed income and equity strategies,
which are supported by over 100 employees dedicated to investment research.
Team Overview
Dan Fuss, Matt Eagan and Elaine Stokes manage the strategy. Fuss has over 55 years of experience in the
investment industry and has been with Loomis since 1976. He is vice chairman of the firm's Board of Directors
and manages multiple fixed income strategies at the firm. Eagan has been with Loomis since 1997 and has over
25 years of experience as either portfolio manager or analyst. Stokes joined Loomis in 1998 and has over 25
years of investment industry experience. All three co- manage Loomis' flagship Bond Fund, which was awarded
the 2009 Morningstar Fund Manager of the Year award in the fixed income category.
Strategy Overview
The Multisector Full Discretion (MFSD) strategy seeks to achieve high total return through individual security
selection using fundamental credit analysis from its fixed income research department, as well as input from
various sector and macro teams. MSFD employs an opportunistic style, focusing on out of favor sectors of the
fixed income markets to generate ideas. The strategy emphasizes a long -term view of market developments,
with the intention being to hold securities through a cycle, as they improve fundamentally. MSFD does not focus
on the benchmark as a starting point for portfolio construction. Instead, Loomis views the entire spectrum of
fixed income markets as a global opportunity set from which to choose the most attractive total return
opportunities, regardless of market sector. The performance objective of Loomis Sayles' Multisector Full
Discretion strategy is to maximize total return while managing downside risk. In order to achieve this goal, the
strategy utilizes a value- driven, opportunistic style that will buy securities across a broad universe, including
Emerging Markets, Non -US dollar, Convertibles, Structured Finance, and High Yield. The investment process is
comprised of top -down analysis and bottom -up research as they seek to identify attractive sectors and
securities. This strategy will typically look much different from any global bond benchmark due to its benchmark
agnostic style. The Fund may invest up to 35% of its assets in below investment -grade fixed - income securities
(commonly known as "junk bonds ") and up to 20% of its assets in equity securities, such as common stocks and
preferred stocks (with up to 10% of its assets incommon stocks). The Fund's fixed - income securities
investments may include unrated securities (securities that are not rated by a rating agency) if Loomis Sayles
determines that the securities are of comparable quality to rated securities that the Fund may purchase. The
Fund may invest in fixed - income securities of any maturity.
Loomis Sayles Fixed Income
As of 6/30/2017
Expectations
By and large, as credit goes, so goes this strategy. When credit spreads widen, this strategy will suffer. We take
heart in the experience of the team to navigate spread movements as they've seen this story before. Further
comforting is the fact that the team will grow conservative when markets dictate that they do so. They aren't
credit perma - bulls. In 2014, the strategy briefly built a 16% stake in short -term Treasuries before quickly putting
that money back into high yield when spreads widened. That trade hasn't played out in the strategy's favor as
the subsequent Energy collapse hit high yield issuers the hardest, but the team has shown the ability to deftly
navigate these waters before. This was evidenced by the strong winning position in Ford debt in 2009 when
many pundits were predicting bankruptcy for the company that did not end up playing out as expected.
Points to Consider
Investors may not realize that the strategy can hold up to 20% equities and typically maintains a healthy
allocation to dividend - paying equities. This can result in higher equity sensitivity than the investor may prefer,
especially one investing with the mindset that this allocation will fill a dedicated fixed income slot in the portfolio.
Dan Fuss' age might be of a concern to some investors. Fuss is almost 80 years old. This is less a concern to
us given the succession plan that was put in place many years ago with the ascension of Stokes and Eagan.
We also do not believe that Fuss's retirement is imminent, despite his advanced age.
Recommendation Summary
The Loomis Sayles Multisector Full Discretion portfolio continues to hold a sizable overweight to Corporate
Bonds (IG & HY in aggregate), including Convertible Bonds and Prefereds. This is consistent with the
portfolio's style and the culture at Loomis. The short -and near -term performance will be heavily influenced by
the direction of credit spreads.
The strategy is recommended for clients in search of yield who are OK with credit exposure. The strategy will
maintain a volatility profile higher than peers given its credit, preferred, convertible bond and equity exposures
The strategy should be viewed as a carve out within a dedicated asset allocation framework. Given the credit
and equity sensitivity, the strategy will correlate much higher to equity benchmarks than it will to the Barclays
Multiverse or Citigroup World Government Bond Indices. As a result, we believe clients should view this strategy
as an opportunistic carve out within the plan structure as opposed to a stand alone fixed income allocation.
Sector
Quality
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
�at �JOSeeQeG�a� �OOSe
�o �o �o NO
Q ECG at �� eQ ECG at �� eQ ECG at J� eQ ECG at J� eQ �Ci 0� J� eQ �Ci 0� J� eQ eCi 0� J� eQ eCi at J� eQ eCi
0�� 5 0
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
ZQ e�
5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0
Source: Investworks, eVestment Alliance, Morningstar Direct, Proprietary Database
Loomis Sayles Fixed Income
As of 6/30/2017
• Other
Non - Dollar
Convertibles
High Yield Corporates
• Municipals
■ABS /CMBS
• Non - Agency MBS
• Invt Grad Corporates
■Agencies /Regionals
■ Govts /Sovereigns
■ Other
• Not Rated
• Below BBB /Baa
■ BBB /Baa
■A
■ AA /Aa
■ AAA/Aaa
Kit
Firm Overview
Pacific Investment Management Company (PIMCO) was founded in Newport Beach, CA in 1971. PIMCO started
as a subsidiary of Pacific Life Insurance Company to manage separate accounts for institutional clients. In 2000,
PIMCO was acquired by Allianz, a global financial services company headquartered in Germany. PIMCO
operates as a separate and autonomous subsidiary of Allianz. Today, the firm is one of the world's largest fixed
income managers with a presence in every major bond market. PIMCO has offices in Newport Beach and 12
other global locations and manages over $1.4 trillion in client assets.
Team Overview
Daniel Ivascyn is the lead portfolio manager responsible for the Diversified Income Fund, and works in
conjunction with Alfred Murata and Eve Tournier, and the Investment Grade Credit, Emerging Markets, High
Yield, and Mortgage Backed Security specialist portfolio managers in constructing Diversified Income portfolios
Additionally, PIMCO's Diversified Income team utilizes over 30 global corporate credit analysts who provide
research coverage on a broad range of credits, with an emphasis on independent and original research.
Strategy Overview
The Diversified Income strategy is designed to provide investors with a comprehensive global credit solution. It
is a multi- sector strategy that invests across a broad spectrum of global credit market sectors, including
investment grade and high yield, corporate debt as well as emerging market debt. The allocation among each of
these markets will vary based on PIMCO's assessment of global trends and relative valuations. This active and
dynamic approach allows for increased responsiveness in asset allocation to changing economic and market
conditions while remaining anchored by PIMCO's investment process and longer -term orientation.
PIMCO's investment process stars with an annual Secular Forum at which PIMCO investment professionals
from around the world gather with industry experts for a three -day discussion about the future of the global
economy and financial markets. The goal of this forum is to look beyond the current business cycle and
determine how secular forces will play out over the next three -to -five years. The Diversified Income team is
responsible for implementing top down strategies developed at the Forum, as well as for developing bottom -up
strategy by maintaining constant contact with the PIMCO specialist teams responsible for the sectors in the
Diversified Income strategy's opportunity set. New investment ideas are sourced by individual team members
and discussed in regularly scheduled strategy meetings. In evaluating new investment ideas, the team applies a
number of qualitative and quantitative screens. The team also makes a full assessment of the fundamental
credit factors underpinning an investment idea, incorporating the relevant credit analysis team into the
discussion as needed.
PIMCO Diversified Inc Instl
As of 6/30/2017
Expectations
PIMCO's investment philosophy seeks to add value in all market environments and circumstances. The
philosophy of measured risk - taking across multiple concurrent strategies may deliver stable excess returns
across different market conditions. At any one time, one or several of their strategies may be working to provide
excess return. The disciplined style works to limit the likelihood that any single strategy that falls out of favor
would negate the positive returns from other strategies.
During periods of extreme volatility, PIMCO's investment philosophy may be deemed out of favor. During these
periods, certain managers may accurately predict large movements in prices and subject the portfolio to more
risk than PIMCO would. This would result in substantially higher returns than PIMCO could be expected to
achieve. However, in volatile periods, large amounts of risk can also lead to substantial underperformance,
which PIMCO's approach seeks to mitigate.
Points to Consider
As with most PIMCO strategies, assets under management and capacity are always considerations. With over
$813 in ALIM, the strategy will employ liberal use of derivatives to manage portfolio exposures as it is often
difficult, and sometimes impossible, for PIMCO to manage exposures in this fashion via the cash market.
Therefore, clients need to be comfortable with the use of derivatives. In addition, accurately assessing what the
strategy is invested in is problematic because the use of deriviates will often showcase unique and confusing
portfolio exposures, such as negative cash balances and leverage (per 40 Act regulations, the strategy can be
up to 30% levered). These are considerations clients need to assess to determine suitability.
Recommendation Summary
PIMCO's scale gives it a significant advantage when sourcing allocations to new issuance. In oversubscribed
situations, PIMCO typically gets a sizeable allocation where smaller managers would be forced to source in the
secondary market. Furthermore, the team's global credit resources compare favorably with best in class peers.
The firm employs over 30 analysts located around the globe. These analysts internally rate every credit held
across PIMCO portfolios. While this is a practice utilized by many peers, the depth and experience of the team
give PIMCO a competitive advantage in this area. Finally, PIMCO's contacts within emerging markets are also a
differentiator. The team operates out of multiple locations including Singapore, Munich, and Newport Beach.
Analysts travel extensively to investigate opportunities around the globe. This "boots on the ground" orientation
provides unique insights that less global firms are unable to secure.
We believe that PIMCO is suitable for clients seeking a higher yielding alternative to core fixed income, and low
correlation to G -3 government interest rates. The diversified approach looks to benefit from PIMCO's
macroeconomic views on credit trends, global interest rates, duration, currencies, and curve positioning. This
diversified approach aims to provide the potential for consistent outperformance over the long -term through
relative value trades, especially compared to approaches that focus on a single asset class.
Sector
Quality
100%
90%
80%
70%
60% IME101
50%
40%
30%
20%
10%
0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
^h..`O ^`O ^`O ^`O
at ��c�eQQ�U�ac �O�g�Qp�G�`a� ��.��eQQ�U�ac ��.c�eQQ�U�ac ��.c�eQQeU�ac �J.c�eQQeU�ac �JC�eQQec;
0% --
O� 1.0 ^O ^O ^O ^O
ZQ e'j
5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0
5 <D
Source: Investworks, eVestment Alliance, Morningstar Direct, Proprietary Database
PIMCO Diversified Inc Instl
As of 6/30/2017
• Other
Non - Dollar
Convertibles
High Yield Corporates
• Municipals
■ABS /CMBS
• Non - Agency MBS
• Invt Grad Corporates
■Agencies /Regionals
■ Govts /Sovereigns
• Other
• Not Rated
• Below BBB /Baa
• BBB /Baa
■A
• AA /Aa
• AAA/Aaa
Kit
Firm Overview
Founded in 1947, Franklin Resources, Inc. (operating worldwide as Franklin Templeton Investments) is one of
the largest publicly- traded investment management companies in the world, with offices in over 35 countries and
over 9,200 staff globally. The company is listed on the NY Stock Exchange under the ticker BEN, and is a
constituent of the S &P 500 Index. Directors and officers of the firm own approximately 20% of the outstanding
shares. In addition, management -level employees, as well as all portfolio managers and analysts, receive
deferred Franklin Resources, Inc. stock as part of their compensation.
Team Overview
Michael Hasenstab, PhD, is the lead portfolio manager for the Global Bond Plus strategy. He is Executive Vice
President and Chief Investment Officer of the Templeton Global Macro group and a member of the Fixed Income
Policy Committee. Dr. Hasenstab specializes in global macroeconomic analysis, focusing on currency, interest
rate, and sovereign credit analysis of developed and emerging market countries. He has ultimate decision -
making authority for the strategy and is accountable for strategy implementation, including buy /sell decision and
risk management. Sonal Desai is a co- portfolio manager for the strategy and participates in the decision - making
process. She is focused on portfolio construction and implementation, analytics, and risk management. Desai
also provides broad operational support including ensuring compliance with investment guidelines and local
regulations, and managing portfolio flows. The Templeton Global Macro Group is actively involved in the
management of Global Bond Plus and reports to Dr. Hasenstab.
Strategy Overview
Global Bond Plus seeks current income, with capital appreciation and growth of income, by investing at least
80% of its net assets in bonds of governments and government agencies located anywhere in the world. The
strategy regularly uses various currency - related and other transactions involving derivative instruments. The
strategy draws on the firm's global resources: top -down macroeconomic views, bottom -up country and sector
research, as well as quantitative analysis and rigorous risk management. The group tailors the Fixed Income
Policy Committee's macroeconomic investment themes, conducting fundamental, country-by- country
macroeconomic research. To identify potential alpha sources and the most attractive risk exposures relative to
current valuations, the group independently evaluates four sources of potential return: interest rate, currency,
sovereign credit, and security selection. Positions are built to capitalize on short -term market inefficiencies,
allowing for shifts reflecting anticipated changes in interest rates and credit spreads.
The Global Macro group meets daily to discuss ongoing market activity, as well as political and macroeconomic
events. The team meets weekly with Franklin Templeton's equity teams to discuss opportunities and
developments across regions, countries, sectors and asset classes. The very broad, global perspective of
Franklin Templeton's research process looks beyond the predominantly developed core markets that get the
most attention to the peripheral markets which can not only provide excellent sources of diversification, but also
offer higher return potential.
Templeton Global Bond R6
As of 6/30/2017
Expectations
The strategy will fare best in risk on environments and when global growth is improving or stable. When
emerging markets outperform developed markets, the strategy should outperform.
The strategy will fare worst in slow growth environments, when commodities are out of favor (due to the
strategy's reliance on emerging market debt) and when developed markets outperform emerging markets.
Hasenstab has been consistent in his view that global growth is better than most market participants appreciate.
Therefore, the strategy has had a low duration profile for much of the past three years. We expect this low
duration positioning to continue into the future, but we do not expect it to be consistent forever. Should
Templeton's Global Macro team change its opinion on global growth, the strategy most likely will reverse its
duration posture.
Points to Consider
The team that manages this strategy has shown a willingness to take risk. The investments have historically
been of a contrarian nature, with investments in highly stressed Irish debt (2011), Ukrainian debt (2014) and
more recently increasing its stake in the Mexico Peso (late 2015). Finally, the team has shown willingness to
invest in less liquid areas (Uruguay & Ghana). This results in a strategy that does not resemble the Citigroup
World Government Bond Index to which it is benchmarked. Furthermore, the strategy's five- and ten -year
correlations tend to track far more closely to the MSCI EAFE equity index than they do to the benchmark, so the
strategy is hard to place in an asset allocation framework as it acts more like an equity strategy than it does
fixed income.
Recommendation Summary
The depth and experience of the team sets it apart from the competition. Hasenstab began his career at
Templeton in 1995 and has worked his way up through the ranks, first as an emerging markets sovereign credit
analyst, to his current role as Global Macro CIO which he ascended to in 2015. This most recent promotion
separates Hasenstab and his team from the firm's taxable bond group and reinforces his importance to the
broader organization. With the departure of Analyst Canyon Chan in 2014, the team has been relatively stable.
Furthermore, the team has "boots on the ground" with specialists operating out of Templeton's foreign offices,
which gives the team local insights that other firms may lack.
While Franklin Templeton is an extremely large organization, each individual team within the organization
operates independently and is given significant autonomy in areas such as hiring and training. These factors
contribute to cohesion and have benefitted investment professional retention. Furthermore, the team's
autonomy is reinforced by Hasenstab's ability to take large bets in this portfolio. He is willing to express his
views and the firm gives him the ability to do so by maintaining a "hands off" approach. While not a strategy
suitable for every investor, and appropriately placing this investment within the context of an asset allocation
framework is challenging, we believe this strategy is a very compelling option for investors seeking a global,
unconstrained approach.
Sector
Quality
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
�at �JOSeeQeG�a� �OOSe
�o �o �o NO
Q ECG at �� eQ ECG at �� eQ ECG at J� eQ ECG at J� eQ �Ci 0� J� eQ �Ci 0� J� eQ eCi 0� J� eQ eCi at J� eQ eCi
0�� 5 0
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
�O
ZQ e�
5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0
Source: Investworks, eVestment Alliance, Morningstar Direct, Proprietary Database
Templeton Global Bond R6
As of 6/30/2017
• Other
Non - Dollar
Convertibles
High Yield Corporates
• Municipals
■ABS /CMBS
• Non - Agency MBS
• Invt Grad Corporates
■Agencies /Regionals
■ Govts /Sovereigns
■ Other
• Not Rated
• Below BBB /Baa
■ BBB /Baa
■A
■ AA /Aa
■ AAA/Aaa
Kit
Firm Overview
Founded in 1947, Franklin Resources, Inc. (operating worldwide as Franklin Templeton Investments) is one of
the largest publicly- traded investment management companies in the world, with offices in over 35 countries and
over 9,200 staff globally. The company is listed on the NY Stock Exchange under the ticker BEN, and is a
constituent of the S &P 500 Index. Directors and officers of the firm own approximately 20% of the outstanding
shares. In addition, management -level employees, as well as all portfolio managers and analysts, receive
deferred Franklin Resources, Inc. stock as part of their compensation.
Team Overview
Michael Hasenstab, PhD, is the lead portfolio manager for the Global Multisector Plus strategy. He is Executive
Vice President and Chief Investment Officer of the Templeton Global Macro group and a member of the Fixed
Income Policy Committee. Dr. Hasenstab specializes in global macroeconomic analysis, focusing on currency,
interest rate, and sovereign credit analysis of developed and emerging market countries. He has ultimate
decision - making authority for the strategy and is accountable for strategy implementation, including buy /sell
decision and risk management. Sonal Desai is a co- portfolio manager for the strategy and participates in the
decision - making process. She is focused on portfolio construction and implementation, analytics, and risk
management. Desai also provides broad operational support including ensuring compliance with investment
guidelines and local regulations, and managing portfolio flows. The Templeton Global Macro Group is actively
involved in the management of Global Multisector Plus and reports to Dr. Hasenstab.
Strategy Overview
Global Multisector Plus takes an unconstrained approach to global fixed income investing free of benchmark
constraints. The strategy seeks total return by investing in government and government agencies bonds,
corporate and mortgage credit in addition to currencies. The strategy draws on the firm's global resources: top -
down macroeconomic views, bottom -up country and sector research, as well as quantitative analysis and
rigorous risk management. The group tailors the Fixed Income Policy Committee's macroeconomic investment
themes, conducting fundamental, country-by- country macroeconomic research. To identify potential alpha
sources and the most attractive risk exposures relative to current valuations, the group independently evaluates
four sources of potential return: interest rate, currency, sovereign credit, and security selection. Positions are
built to capitalize on short -term market inefficiencies, allowing for shifts reflecting anticipated changes in interest
rates and credit spreads.
The Global Macro group meets daily to discuss ongoing market activity, as well as political and macroeconomic
events. The team meets weekly with Franklin Templeton's equity teams to discuss opportunities and
developments across regions, countries, sectors and asset classes. The very broad, global perspective of
Franklin Templeton's research process looks beyond the predominantly developed core markets that get the
most attention to the peripheral markets which can not only provide excellent sources of diversification, but also
offer higher return potential.
Templeton Global Total Return R6
As of 6/30/2017
Expectations
The strategy will fare best in risk -on environments and when global growth is improving or stable. Given the
wide breadth of investment opportunities, the strategy will maintain a yield advantage over commonly used
benchmarks.
The strategy will fare worst in slow growth environments, when commodities are out of favor (due to the
strategy's reliance on emerging market debt and currencies) and when developed markets outperform emerging
markets.
Hasenstab has been consistent in his view that global growth is better than most market participants appreciate.
Therefore, the strategy has maintained a low duration profile for much of the past three years. We expect this
low duration positioning to continue into the future, but we do not expect it to be consistent forever. Should
Templeton's Global Macro team change its opinion on global growth, the strategy most likely will reverse its
duration posture.
Points to Consider
The team that manages this strategy has shown a willingness to take risk. The investments have historically
been of a contrarian nature, with investments in highly stressed Irish debt (2011), Ukrainian debt (2014) and
more recently increasing its stake in the Mexico Peso (late 2015). Finally, the team has shown willingness to
invest in less liquid areas (Uruguay & Ghana). This results in a strategy that does not resemble the Barclays
Multiverse Bond Index to which it is benchmarked. Furthermore, the strategy's five- and ten -year correlations
tend to track far more closely to the MSCI EAFE equity index than they do to the benchmark, so the strategy is
hard to place in an asset allocation framework as it acts more like an equity strategy than it does fixed income.
Recommendation Summary
The depth and experience of the team sets it apart from the competition. Hasenstab began his career at
Templeton in 1995 and has worked his way up through the ranks, first as an emerging markets sovereign credit
analyst, to his current role as Global Macro CIO which he ascended to in 2015. This most recent promotion
separates Hasenstab and his team from the firm's taxable bond group and reinforces his importance to the
broader organization. With the departure of Analyst Canyon Chan in 2014, the team has been relatively stable.
Furthermore, the team has "boots on the ground" with specialists operating out of Templeton's foreign offices,
which gives the team local insights that other firms may lack.
While Franklin Templeton is an extremely large organization, each individual team within the organization
operates independently and is given significant autonomy in areas such as hiring and training. These factors
contribute to cohesion and have benefitted investment professional retention. Furthermore, the team's
autonomy is reinforced by Hasenstab's ability to take large bets in this portfolio. He is willing to express his
views and the firm gives him the ability to do so by maintaining a "hands off" approach. While not a strategy
suitable for every investor, and appropriately placing this investment within the context of an asset allocation
framework is challenging, we believe this strategy is a very compelling option for investors seeking a global,
unconstrained approach.
Sector
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
�at 1J�GjQ'eQQ'G�a` �J�
Quality 100%
O O O O
a�O' e°
0�� 5 0
90%
80%
70%
60%
50% Vr
40%
30%
20%
10%
0%
Ib
N NO NO
ZQ z'j
5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0
5 Q
Source: Investworks, eVestment Alliance, Morningstar Direct, Proprietary Database
Templeton Global Total Return R6
As of 6/30/2017
• Other
Non - Dollar
Convertibles
High Yield Corporates
• Municipals
■ABS /CMBS
• Non - Agency MBS
• Invt Grad Corporates
■Agencies /Regionals
■ Govts /Sovereigns
■ Other
• Not Rated
• Below BBB /Baa
■ BBB /Baa
■A
■ AA /Aa
■ AAA/Aaa
Kit
Definitions
Alpha - A measure of the difference between a portfolio's actual returns and its expected performance, is symmetric with skewness 0.
given its level of risk as measured by beta.
Sortino Ratio - The Sortino Ratio is similar to Sharpe Ratio except it uses downside risk (Downside
Batting Average — A measure of a manager's ability to consistently beat the market. It is calculated by Deviation) in the denominator. It was developed in early 1980's by Frank Sortino. Since upside
dividing the number of months in which the manager beat or matched an index by the total number of variability is not necessarily a bad thing, Sortino ratio is sometimes more preferable than Sharpe ratio.
months in the period.
Standard Deviation - A statistical measure of the range of a portfolio's performance. It represents the
Best Quarter- This is the highest quarterly (3 month) return of the investment since its inception. variability of returns around the average return over a specified time period.
Beta - A measure of the sensitivity of a portfolio to the movements in the market. It is a measure of the Tracking Error - This is a measure of the standard deviation of a portfolio's excess returns versus its
portfolio's systematic risk. designated market benchmark.
Down Period Percent - Number of months below 0 divided by the total number of months.
Downmarket Capture Ratio - The ratio of average portfolio performance over the designated
benchmark during periods of negative returns. A lower value indicates better product performance.
Downside Std Dev - This measures only deviations below a specified benchmark.
Excess Return- This is a measure of an investment's return in excess of a benchmark.
Information Ratio - This calculates the value -added contribution of the manager and is derived by
dividing the excess rate of return of the portfolio by the tracking error. The higher the Information Ratio,
the more the manager has added value to the portfolio.
Longest Down - Streak Return - Return for the longest series of negative monthly returns.
Longest Down - Streak # of Periods - Longest series of negative monthly returns.
Longest Up- Streak Return - Return for the longest series of positive monthly returns.
Longest Up- Streak - Longest series of positive monthly returns.
Kurtosis - Kurtosis indicates the peakedness of a distribution. For normal distribution, Kurtosis is 3.
Max Drawdown - The peak to trough decline during a specific record period of an investment or fund. It
is usually quoted as the percentage between the peak to the trough.
Max Drawndown # of Periods - This is the number of months that encompasses the max drawdown
for an investment.
R- Squared - The percentage of a portfolio's performance that can be explained by the behavior of the
appropriate benchmark. A high R- Squared means the portfolio's performance has historically moved in
the same direction as the appropriate benchmark.
Return - Compounded rate of return for the period.
Sharpe Ratio - Represents the excess rate of return over the risk free return divided by the standard
deviation of the excess return. The result is an absolute rate of return per unit of risk. A higher value
demonstrates better historical risk - adjusted performance.
Skewness - Skewness reflects the degree of asymmetry of a distribution. If the distribution has a longer
left tail, the function has negative skewness. Otherwise, it has positive skewness. A normal distribution
Treynor Ratio - Similar to Sharpe Ratio, Treynor Ratio is a measurement of efficiency utilizing the
relationship between annualized risk - adjusted return and risk. Unlike Sharpe Ratio, Treynor Ratio
utilizes "market" risk (beta) instead of total risk (standard deviation). Good performance efficiency is
measured by a high ratio.
Up period Percent - Number of months above 0 divided by the total number of months.
Upmarket Capture Ratio - The ratio of average portfolio performance over the designated benchmark
during periods of positive returns. A higher value indicates better product performance.
Worst Quarter - This is the lowest quarterly (3 month) return of the investment since its inception.
Disclosures
AndCo compiled this report for the sole use of the client for which it was prepared. AndCo uses the results from this evaluation to make observations and recommendations to the client
When client - specific performance is shown, AndCo uses time - weighted calculations, which are founded on standards recommended by the CFA Institute. In these cases, the performance- related data shown are
based on information that is received from custodians. As a result, this provides AndCo with a reasonable basis that the investment information presented is free from material misstatement.
The strategies listed may not be suitable for all investors. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Past performance is not an indication of future
performance. Any information contained in this report is for informational purposes only and should not be construed to be an offer to buy or sell any securities, investment consulting, or investment management
services.
Additional information included in this document may contain data provided by index databases, public economic sources and the managers themselves
This document may contain data provided by Barclays. Barclays Index data provided by way of Barclays Live.
This document may contain data provided by Standard and Poor's. Nothing contained within any document, advertisement or presentation from S &P Indices constitutes an offer of services in jurisdictions where
S &P Indices does not have the necessary licenses. All information provided by S &P Indices is impersonal and is not tailored to the needs of any person, entity or group of persons. Any returns or performance
provided within any document is provided for illustrative purposes only and does not demonstrate actual performance. Past performance is not a guarantee of future investment results.
This document may contain data provided by MSCI, Inc. Copyright MSCI, 2012. Unpublished. All Rights Reserved. This information may only be used for your internal use, may not be reproduced or
redisseminated in any form and may not be used to create any financial instruments or products or any indices. This information is provided on an "as is" basis and the user of this information assumes the entire
risk of any use it may make or permit to be made of this information. Neither MSCI, any of its affiliates or any other person involved in or related to compiling, computing or creating this information makes any
express or implied warranties or representations with respect to such information or the results to be obtained by the use thereof, and MSCI, its affiliates and each such other person hereby expressly disclaim all
warranties (including, without limitation, all warranties of originality, accuracy, completeness, timeliness, non - infringement, merchantability and fitness fora particular purpose) with respect to this information.
Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any other person involved in or related to compiling, computing or creating this information have any liability for any direct,
indirect, special, incidental, punitive, consequential or any other damages (including, without limitation, lost profits) even if notified of, or if it might otherwise have anticipated, the possibility of such damages.
This document may contain data provided by Russell Investment Group. Russell Investment Group is the source owner of the data contained or reflected in this material and all trademarks and copyrights related
thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a user presentation of the data. Russell Investment
Group is not responsible for the formatting or configuration of this material or for any inaccuracy in presentation thereof.
This document may contain data provided by Morningstar. All rights reserved. Use of this content requires expert knowledge. It is to be used by specialist institutions only. The information contained herein: (1) is
proprietary to Morningstar and /or its content providers; (2) may not be copied, adapted 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, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past financial performance is not
guarantee of future results.
FW
Putting clients first.
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