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2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert C. Doll, CFA Senior Portfolio Manager Chief Equity Strategist

2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

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Page 1: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

2016 Investment Outlook

October 2016

NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE

Presentation By:

Robert C. Doll, CFASenior Portfolio Manager

Chief Equity Strategist

Page 2: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

2

Frustrating the Bulls and the Bears

A Look at U.S. Returns

2015 2016

JAN 1 – FEB

11FEB 12 –APR 20

APR 21 –JUNE 30

YTD JAN 1 –JUNE 30

Stocks 1.4% –10.3% 14.0% 0.4% 3.8%

Bonds 0.6% 2.3% 1.0% 1.9% 5.3%

Cash 0.1% 0.0% 0.1% 0.1% 0.2%

Data source: Morningstar Direct as of 6/30/16. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index. For U.S. Returns, Stocks: S&P 500 Index; Bonds: Barclays U.S. Aggregate Bond Index; Cash: BofAML 3-Month U.S. Treasury Bill Index.

Page 3: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

3

Data source: Bloomberg, Nuveen Asset Management for all forecasted, estimated and target figures, which are based on the S&P 500 Index.

EARNINGS & RETURN

EXPECTATIONS

2015RESULTS

2016 OUTLOOK

Economy (Earnings) $118 $124

P/E Target 17.3x 17.3x

S&P 500 Target 2044 2150

COMPONENTS OF RETURN

Earnings –1% 5%

P/E 0% ─

Yield 2% 2%

Total Return 1% 7%

Equity Market Forecast

Page 4: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

4

POSITIVES

1. Earnings recession is over in U.S.

2. Central bank policy is friendly

3. Consumer is in good shape

4. Fiscal policy is likely

5. Sentiment is bearish

NEGATIVES

1. Economic growth is sluggish

2. Deflationary forces continue

3. Brexit creates uncertainties

4. Geopolitical risks remain

5. Fiscal policy lacking and over-regulation

Stock Market Balance Sheet

Page 5: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

5

Earnings Prospects Are Improving

Consumer spending is moderate (jobs, wages, lower gas prices, slower rent increases)

ISM data is improving (services, manufacturing, exports)

Oil prices have increased

Interest rates have fallen (including corporate yields)

U.S. dollar is down year over year

Page 6: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

9.7%

5.3%

8.1%

11.0%

6.5%

3.6%

1.5%

-0.5%

-2.1%

-4.6%

-0.6%

3.0%

5.2%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16

6

Earnings Are Key for the Stock Market

Data source: RBC Capital Markets, S&P, Compustat, Thomson Financial and FactSet as 7/8/16. Data for 2Q16 – 4Q16 is estimated. Assumes historical degradation for 2Q16 – 4Q16 and recent buyback rate. Past performance is no guarantee of future results. Used with permission.

Earnings Per Share Growth of S&P 500 Companies

Ear

nin

gs

Per

Sh

are

Gro

wth

(%

)

Estimated

1Q16 Was the Bottom of the Earnings Recession

Page 7: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

7

More than 300 S&P 500 Stocks Have a Higher Yield than 10-Year Treasuries

Data source: Cornerstone Macro from 1/1/90 – 6/30/16. Past performance is no guarantee of future results. Used with permission.

_Stocks with a Dividend Yield Greater than 10-Year U.S. Treasury

It’s Not Often that Many Stocks Yield More than 10-Year Treasuries

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

50

100

150

200

250

300

350

400

450

500

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Nu

mb

er o

f S

tock

s Percen

t of To

tal

Page 8: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

8

S&P 500 Dividend Yield Is Greater than 30-Year Treasuries

2009 Was the Last Time This Occurred

Data source: Cornerstone Macro from 1/1/06 – 7/12/16. Past performance is no guarantee of future results. Used with permission.

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

_S&P 500 Dividend Yield

_30-Year U.S. Treasury Yield

S&

P 5

00 D

ivid

end

Yie

ld

30-Year U

.S. Treasu

ry Yield

Page 9: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

9

1. Recession prospects

2. Accelerating inflation

3. Tight money

4. Excessive wage inflation

5. High interest rates

6. Investor euphoria

The Bull Market Is Not Over Yet

What Ends A Bull Market?

Page 10: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

10

Returns and Suggested Asset Mixes

Data source: Morningstar Direct as of 6/30/16. Past performance is no guarantee of future results.

2015RETURNS

2016 YTDRETURNS

SUGGESTED

ASSET MIX

Stocks +1.4% 3.8% +5% vs normal (was +10)

Bonds 0.6% 5.3% –10% vs normal (was –10)

Cash 0.1% 0.2% +5 vs normal (was 0)

Stocks Should Outperform Bonds in 2016

Page 11: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

11

Data source: Morningstar Direct as of 6/30/16. Past performance is no guarantee of future results.

EQUITIES BONDS

RUSSELL

1000®

INDEX

MSCI WORLD

EX-U.S. INDEX

BARCLAYS U.S. AGGREGATE

BOND INDEX

BARCLAYS GLOBAL

AGGREGATE BOND

EX-U.S. INDEX

2010 16.1% 9.4% 6.5% 5.0%

2011 1.5% –11.8% 7.8% 4.4%

2012 16.4% 17.0% 4.2% 4.1%

2013 33.1% 21.6% –2.0% –3.1%

2014 13.2% –3.9% 6.0% –3.1%

2015 0.9% –2.6% 0.6% –6.0%

2016 (6 mos) 3.7% –2.6% 5.3% 11.9%

U.S. Markets Have Outperformed in Recent Years

Page 12: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

12

In 2016, Anger Is the New Hope

Voters Feel the U.S. Economy Is Broken and Want Change_

3.1% GDP Growth Rate Trend _

Actual GDP

Data source: Strategas Research Partners. Past performance is no guarantee of future results. Used with permission. GDP: Gross Domestic Product.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

U.S

. Rea

l GD

P G

row

th (

US

D B

illio

ns)

$2.6 Trillion

GDP Gap

2008:

HopeBarack Obama

2016:

Anger

Donald Trump

Bernie Sanders

Page 13: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

13

Data source: Strategas Research Partners. Past performance is no guarantee of future results. Used with permission.

YEAR

S&P 500 PRICE

RETURN

INCUMBENT

PARTY YEAR

S&P 500 PRICE

RETURN

INCUMBENT

PARTY

1928 14.91% Won 1972 6.91% Won

1932 -2.56% Lost 1976 -0.09% Lost

1936 7.92% Won 1980 6.73% Lost

1940 8.56% Won 1984 4.80% Won

1944 2.29% Won 1988 1.91% Won

1948 5.36% Won 1992 -1.22% Lost

1952 -3.26% Lost 1996 8.17% Won

1956 -2.58% Won 2000 -3.21% Lost

1960 -0.74% Lost 2004 2.16% Won

1964 2.63% Won 2008 -19.48% Lost

1968 6.45% Lost 2012 2.48% Won

The S&P 500 Index Predicted 19 of 22 Presidential Elections Since 1928

Incumbent Party Generally Wins When Stocks Higher Before Election

3-Month Performance Prior to Election

Page 14: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

14

Highest marginal tax rate

High taxation on repatriated earnings

(Perhaps coupled with infrastructure spending legislation)

Corporate Tax Reform

Biggest Washington, D.C. Issue After the Election

Page 15: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

15

Sector Preferences

POSITIVE NEUTRAL NEGATIVE

Cyclicals Information Technology

Consumer Discretionary

Industrials

Financials

Materials

Energy

Defensives Health Care Telecom Services

Consumer Staples

Utilities

Page 16: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

16

Strength of Defensive Sectors Waning in Second Half of 2016

Sector Performance Has Shifted Since Mid Year

Data source: Factset, 1/1/16 – 8/31/16. Past performance is no guarantee of future results. Sector performance based on the Russell 1000 Index.

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Util

ities

Tel

ecom

mun

icat

ions

Ene

rgy

RE

ITs

Con

sum

er S

tapl

es

Mat

eria

ls

Indu

stria

ls

Rus

sell

1000

Inde

x

Con

sum

er D

iscr

etio

nary

Hea

lth C

are

Tec

hnol

ogy

Fin

anci

als

Tota

l Ret

urn

First Half of 2016 Third Quarter Through 8/31

Page 17: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

1. U.S. real GDP remains below 3% and nominal GDP below 5% for an unprecedented tenth year in a row

2. U.S. Treasury rates rise for a second year, but high yield spreads fall

3. S&P 500 earnings make limited headway as consumer spending advances are partially offset by oil, the dollar and wage rates

4. For the first time in almost 40 years, U.S. equities experience a single-digit percentage change for the second year in a row

5. Stocks outperform bonds for the fifth consecutive year

6. Non-U.S. equities outperform domestic equities, while non-U.S. fixed income outperforms domestic fixed income

7. Information technology, financials and telecommunication services outperform energy, materials and utilities

8. Geopolitics, terrorism and cyberattacks continue to haunt investors but have little market impact

9. The federal budget deficit rises in dollars and as a percentage of GDP for the first time in seven years

10. Republicans retain the House and the Senate and capture the White House

17

2016 Ten Predictions – as of 7/18/16

MUDDLE THROUGH CONTINUES

Overall Scoring

Heading in the Right Direction 6

Too Early to Call 2

Heading in the Wrong Direction 2

Scoring as of 7/18/16. Based on data available at the time of publication and subject to change.

Page 18: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

18

Data source: MRB Partners, Nuveen Asset Management as of December 2015. The forecast data reflects the opinion of the author, Bob Doll, and not the firm. The information provided herein is not intended to be a forecast or guarantee of future events or results. It is not a recommendation to buy or sell any specific securities and should not be considered investment advice of any kind. Investing in securities involves risk of loss that clients should be prepared to bear. There is no assurance that an investment will provide positive performance over any period of time. Past performance is no guarantee of future results and different periods and market conditions may result in significantly different outcomes.

Think About the Long-Term and Remain Diversified

10-YEAR RETURN FORECAST BY ASSET CLASS FORECASTED RETURN RANGE

EQUITIES 6 – 8%

U.S. 6 – 8%

Non-U.S. Developed Markets 4 – 6%

Emerging Markets 8 – 10%

BONDS 2 – 4%

U.S. Government 0 – 2%

U.S. Investment Grade 2 – 4%

U.S. High Yield 4 – 6%

Emerging Market Sovereign 5 – 7%

CASH 1 – 2%

INFLATION 2 – 3%

DIVERSIFIED PORTFOLIO 4 – 6%

Page 19: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

Important Disclosures

19

This presentation is for general information purposes only and should not be construed as specific tax or investment advice.

The statements contained in this presentation are the opinions of Nuveen Asset Management, LLC and data available at the time of publication, and is not intended to be

a forecast or guarantee of future events or results. It contains information from third party sources believed to be reliable but are not guaranteed as to accuracy and not

intended to be all inclusive. It does not constitute an offer, solicitation, or recommendation regarding securities or investment strategy and is not intended to predict or

depict performance of any investment. Past performance is no guarantee of future results.

A Word on Risk

Equity investments are subject to market risk, active management risk, and growth stock risk; dividends are not guaranteed. Foreign investments involve additional risks,

including currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging

markets. The use of derivatives involves additional risk and transaction costs.

Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, tax risk, political and economic risk, derivatives risk, income risk, and

other investment company risk. As interest rates rise, bond prices fall. Credit risk refers to an issuer’s ability to make interest payments when due. Below investment

grade or high yield debt securities are subject to liquidity risk and heightened credit risk. Foreign investments involve additional risks as noted above.

Nuveen Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen Investments, Inc.

Page 20: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

Index Definitions

20

GP

P-1

0P

RE

D-0

816

1

8825

-IN

V-Y

-01/1

7

The Barclays Global Aggregate Bond ex U.S. Index measures the performance of non-U.S. global bonds. It includes government, securitized and corporate sectors.

The Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable and dollar denominated. The index covers the U.S. investment grade

fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities and asset-backed securities.

The Consumer Price Index (CPI) is an inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing,

electricity, food, and transportation.

Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of a company's profitability.

Gross domestic product (GDP) is a primary indicator used to gauge the health of a country's economy. It represents the total dollar value of all goods and services

produced over a specific time period. Real GDP is adjusted for inflation. Nominal GDP is not adjusted for inflation.

The MSCI World Index ex-U.S. Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of

developed markets minus the United States.

The Russell 1000® Index is a stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index, which represents about 90% of the total

market capitalization of that index.

The S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy.

The West Texas Intermediate (WTI) Index is used as a benchmark for pricing much of the world’s crude oil production.

Page 21: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

Large Cap Equity Series

21

Page 22: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

Important Information

22

This presentation includes information on strategies that may be available within different product types: institutional and retail managed accounts and mutual funds.

Financial Advisers should understand the differences of each product type — especially the impact of fees, which may affect performance when evaluating investment

products. It is important to review your client’s investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.

This information represents the opinion of Nuveen Asset Management, LLC, and is not intended to be a forecast or guarantee of future events or results. It is not intended

to provide specific advice and should not be considered investment advice of any kind. Information was obtained from sources we believe to be reliable, but are not

guaranteed as to their accuracy or completeness. This report contains no recommendations to buy or sell specific securities or investment products. All investments carry

a certain degree of risk, including possible loss of principal. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an

investment style or manager.

Large Cap Equities Series Risk: Risks may include: equity security risk, large cap stock risk, non-diversification risk, smaller company risk, growth stock risk, and value

stock risk. Non-U.S. investments involve additional risks, including currency fluctuation, political and economic instability, lack of liquidity and differing legal and

accounting standards. A portfolio's use of futures contracts involves transaction costs and the potential for negative impact on performance. A portfolio engaging in

frequent trading of securities may result in taxable gains to investors and involve trading costs that may impact fund performance. A portfolio’s use of short selling is a

form of leverage and involves additional expense and risks including market loss and increased volatility of returns.

Investing in securities involves risk of loss that clients should be prepared to bear. There is no assurance that an investment will provide positive performance over any

period of time. Past performance is no guarantee of future results and different periods and market conditions may result in significantly different outcomes.

Nuveen Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen Investments, Inc.

Page 23: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

23

Large Cap Equity Series Overview

One investment process is applied to nine strategies in U.S. large cap equities.

Alternative strategies are not available as retail managed accounts.1 Positions for Retail Managed Accounts range from 45 to 60.

Active share is calculated by MorningstarDirect and represents the proportion of portfolio holdings that differ from those in the benchmark index. This information should not be considered investment advice of any kind. Investing in securities involves risk of loss that clients should be prepared to bear. There is no assurance that an investment will provide positive performance over any period of time.

BENCHMARK

HOLDINGS

RANGE

TRACKING

ERROR RANGE

ALPHA/

MARKET CYCLE

(TARGET)

BETA RANGE

(TARGET)

ACTIVE SHARE

RANGE

(TARGET)

TRADITIONAL

Large Cap Value R1000 Value 90 – 1201 3% – 6% 200 – 300 bp 70% – 80%

Large Cap Core R1000 90 – 1201 3% – 6% 200 – 300 bp 70% – 80%

Large Cap Growth R1000 Growth 90 – 1201 3% – 6% 200 – 300 bp 70% – 80%

SPECIALTY

Core Dividend R1000 90 – 1201 3% – 6% 200 – 300 bp 70% – 80%

Concentrated Core R1000 ~20 n/a 200 – 400 bp 85% – 95%

Stable Growth R1000 Growth 40 – 60 3% – 6% 200 – 300 bp 65% – 75%

ALTERNATIVE

Large Cap Core Plus R1000 ~100 long/~100 short 5% – 8% 300 – 500 bp 1.0 n/a

Equity Long/Short R1000 ~100 long/~100 short n/a 300 – 500 bp 0.4 to 1.0 (0.7) n/a

Equity Market Neutral T-bills ~100 long/~100 short n/a 400 – 600 bp -0.2 to +0.4 (0.1) n/a

Page 24: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

24

Themes and Sector Highlights

Source: FactSet, as of 6/30/16. See nuveen.com holdings pages for more information. Holdings are for informational purposes only and should not be deemed as a recommendation to buy or sell any specific securities or securities in the

industries shown above. This information should not be considered investment advice of any kind. Investing in securities involves risk of loss that clients should be prepared to bear. There is no assurance that an investment will provide

positive performance over any period of time.

Thoughts on Themes and Overweights

THEMES

Pro

- Risk-On

- Free cash flow

- Unit growth

- Cyclical

Con

- Risk-Off

- Bond-like equities

- Sectors requiring

pricing power

- Defensive

EXAMPLE OVERWEIGHTS

Technology - Apple

- Qualcomm

Health Care - McKesson

- Gilead Sciences

Consumer - Lowe’s

- CBS

Financials - MasterCard

- Discover Financial

Industrials - Delta Airlines

- Southwest Airlines

Page 25: 2016 Investment Outlook - CFA Institute Presentations/doll_10061… · 2016 Investment Outlook October 2016 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Presentation By: Robert

Glossary

25

Alpha is the measure of the incremental return generated from active portfolio management.

Active share represents the proportion of portfolio holdings that differ from those in the benchmark index.

Alternative strategies have more investment flexibility, such as the ability to take short positions.

Basis point is one one-hundredth of one percentage point, or 0.01%. For example, 25 basis points equals 0.25%.

Beta is a measure of the variability of the change in the share price for a fund in relation to a change in the value of the fund’s market benchmark. Securities with betas

higher than 1.0 have been, and are expected to be, more volatile than the benchmark; securities with betas lower than 1.0 have been, and are expected to be, less

volatile than the benchmark.

Tracking error is the divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark.

The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with

higher price-to-book ratios and higher forecasted growth values.

The Russell 1000® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with

lower price-to-book ratios and lower expected growth values.

The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes

approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92%

of the U.S. market.

A Treasury bill (T-bill) is a short-term debt obligation backed by the U.S. government with a maturity of less than one year.

1813

3-IN

V-Q

-10/

16