Q2 2020 Index Market Overview - lgima.com · Environmental and socially responsible weighted benchmark performance • Climate indexes continue outperformance across all time periods

LGIMA’s Index Insights Q2 2020 Index Market Overview

US traditional weighted benchmark performance • Growth continues to outperform value • Mid-cap is the best performer for Q2 • Small-cap outperforms large-cap in Q2 in risk on environment • Growth indexes in positive territory YTD • Russell 2000 outperforms S&P 600 aided by a larger mid-cap bias • Diversification worked as equal weight outperforms

3-yr 10-yr 3-yr 10-yr

Sharpe Ratio Sharpe Ratio Vol VolS&P 500 20.54 -3.08 7.51 10.73 10.73 13.99 0.59 1.00 16.95 13.42

S&P 400 24.07 -12.78 -6.70 2.39 5.22 11.34 0.14 0.69 21.88 16.69

S&P 600 21.94 -17.85 -11.29 0.56 4.48 11.24 0.07 0.65 23.40 18.22

Russell 1000 21.82 -2.81 7.48 10.64 10.47 13.97 0.57 0.98 17.40 13.71

Russell 1000 Growth 27.84 9.81 23.28 18.99 15.89 17.23 0.98 1.17 17.64 14.00

Russell 1000 Value 14.29 -16.26 -8.84 1.82 4.64 10.41 0.10 0.73 18.09 14.15

Russell 2000 25.42 -12.98 -6.63 2.01 4.29 10.50 0.13 0.60 22.93 18.60

Russell 3000 22.03 -3.48 6.53 10.04 10.03 13.72 0.54 0.95 17.69 13.96

Russell 3000 Growth 27.99 8.98 21.94 18.21 15.23 16.92 0.93 1.13 17.91 14.24

Russell 3000 Value 14.55 -16.74 -9.42 1.41 4.41 10.23 0.08 0.71 18.38 14.38

DJ US Total Market 22.09 -3.50 6.41 9.97 9.97 13.68 0.53 0.95 17.72 13.98

MSCI USA 21.76 -2.17 8.42 11.03 10.76 14.09 0.60 1.00 17.18 13.56

5-yr 10-yrBenchmark Q2 YTD 1-yr 3-yr

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Global traditional weighted benchmark performance • US continues to be strongest performing region • Small-cap outperforms large-cap • Emerging Markets now outperform World ex USA out to 5 years

3-yr 10-yr 3-yr 10-yr

Sharpe Ratio Sharpe Ratio Vol VolMSCI ACWI IMI 19.83 -7.06 1.17 5.55 6.11 9.10 0.31 0.64 16.72 14.26

MSCI ACWI ex USA IMI 16.96 -11.24 -4.74 0.96 2.30 5.11 0.04 0.36 16.27 15.30

MSCI ACWI 19.22 -6.25 2.11 6.14 6.46 9.16 0.34 0.65 16.26 14.03

MSCI ACWI ex USA 16.12 -11.00 -4.80 1.13 2.26 4.97 0.05 0.36 15.94 15.21

MSCI World 19.36 -5.77 2.84 6.70 6.90 9.95 0.38 0.71 16.26 13.85

MSCI World ex USA 15.34 -11.49 -5.42 0.84 2.01 5.43 0.02 0.39 15.49 14.96

MSCI World ex USA Growth 17.89 -3.11 4.25 5.93 5.29 7.36 0.36 0.53 14.29 14.31

MSCI World ex USA Value 12.35 -19.96 -15.14 -4.42 -1.46 3.36 -- 0.25 17.45 16.20

MSCI World ex USA Small 21.66 -12.87 -3.20 0.53 3.56 7.26 0.03 0.48 18.75 16.32

MSCI EAFE 14.88 -11.34 -5.13 0.81 2.05 5.73 0.02 0.41 15.17 15.06

Emerging Markets 18.08 -9.78 -3.39 1.90 2.86 3.27 0.10 0.24 18.52 17.88

Emerging Markets Small Cap 27.14 -12.74 -8.82 -2.95 -1.38 1.78 -- 0.16 21.44 18.57

MSCI Frontier Markets 14.75 -15.77 -11.17 -1.77 -0.13 3.51 -- 0.28 17.69 13.85

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Benchmark Q2 YTD 1-yr 3-yr 5-yr 10-yr

Source: Morningstar Direct, Bloomberg, LGIMA All “Traditional Weighted” benchmarks above have at least 10 years of actual performance that can be verified by accessing the provider’s website for further information. LGIMA has obtained this information from the index provider and recommends that all information be verified on the provider’s website. Index provider information has not been independently verified by LGIMA for its accuracy or completeness, therefore the information obtained from third party sources cannot be guaranteed. Please refer to the disclosures at the end of this presentation for more information.

Index Insights – Q2 2020

Legal & General Investment Management America 2

US alternative weighted benchmark performance • Size and Momentum were the strongest performers • Quality outperforms across all time periods • Value continues to underperform • As expected, Low Volatility underperforms with the market reversion • Low Volatility exhibits highest spread among providers due to significant methodology differences

3-yr 10-yr 3-yr 10-yr

Sharpe Ratio Sharpe Ratio Vol VolS&P 500 20.54 -3.08 7.51 10.73 10.73 13.99 0.59 1.00 16.95 13.42Value - Relative Composite Average -3.34 -15.69 -17.86 -9.29 -6.40 -3.04 -0.45 -0.27 3.63 1.91Low Vol - Relative Composite Avergage -7.40 -5.73 -8.22 -2.59 -1.24 -0.40 -0.10 0.15 -2.16 -2.30Momentum - Relative Composite Average 2.75 3.21 -1.79 1.20 -0.29 0.61 0.05 0.05 0.90 0.10Quality - Relative Composite Average 0.05 1.13 2.00 1.11 1.03 1.21 0.07 0.11 -0.30 -0.40Size - RelativeComposite Average 3.02 -9.26 -13.47 -6.85 -4.65 -1.59 -0.37 -0.22 4.46 2.35Value - Composite Spread 7.59 19.45 25.27 11.77 7.62 3.14 0.37 0.29 8.83 5.86Low Vol - Composite Spread 11.04 9.92 13.18 8.10 5.59 1.99 0.50 0.15 2.61 1.34Momentum - Composite Spread 7.85 10.72 15.21 8.01 7.36 4.39 0.44 0.32 3.79 0.68Quality - Composite Spread 6.38 12.97 15.39 8.23 5.18 2.20 0.48 0.20 1.39 0.65Size - Composite Spread 4.70 4.69 6.61 4.04 2.62 1.40 0.18 0.12 3.95 2.29


Composites are constructed from the factor index returns from various index providers. The composite spread of a factor is the max-min return.

Global developed ex USA alternative weighted benchmark performance • Momentum was the strongest factor in for Q2 • Low Volatility was the lowest performing factor in Q2 • As expected, Low Volatility underperforms with the market reversion • Tighter spread range in developed ex USA vs US • Dispersion of returns within factor methodologies not as wide as exhibited in the US

3-yr 10-yr 3-yr 10-yr

Sharpe Ratio Sharpe Ratio Vol VolMSCI World ex USA 15.34 -11.49 -5.42 0.84 2.01 5.43 0.02 0.39 15.49 14.96

Value - Relative Composite Average -1.81 -7.95 -9.21 -4.82 -2.36 -0.76 -- -0.07 2.36 1.63

Low Vol - Relative Composite Avergage -6.08 -1.35 -2.10 0.06 1.19 2.03 0.03 0.23 -2.90 -3.05

Momentum - Relative Composite Average 2.69 6.98 7.22 2.92 2.34 2.38 0.19 0.18 -0.62 -0.90

Quality - Relative Composite Average -0.06 3.17 4.82 2.43 2.45 2.13 0.16 0.16 -1.01 -0.91

Size - RelativeComposite Average 2.11 -2.48 -0.50 -1.35 0.84 1.27 0.05 0.08 1.65 0.13

Value - Composite Spread 2.26 2.96 5.67 1.91 1.95 2.33 -- 0.12 1.15 1.70

Low Vol - Composite Spread 5.07 7.08 7.78 3.96 2.97 0.53 0.08 0.13 3.21 3.12

Momentum - Composite Spread 2.29 9.38 9.37 4.97 2.17 1.15 0.33 0.11 1.28 1.24

Quality - Composite Spread 1.40 9.09 11.43 6.04 2.90 1.05 0.42 0.08 1.91 0.44

Size - Composite Spread 3.57 3.20 6.65 2.75 2.40 3.52 0.00 0.20 1.21 1.32


Source: Morningstar Direct, Bloomberg, Scientific Beta, LGIMA Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Please refer to the disclosures at the end of this presentation for more information.



Emerging markets alternative weighted benchmark performance • Momentum and Size were the top performers in Q2 • Value and Low Volatility were the worst performing factors, similar to global trends • Quality underperforms across all tenors, unlike other regions

3-yr 10-yr 3-yr 10-yrSharpe Ratio Sharpe Ratio Vol Vol

MSCI EM 18.08 -9.78 -3.39 1.90 2.86 3.27 0.10 0.24 18.52 17.88

Value - Relative Composite Average -3.36 -10.62 -14.39 -4.86 -2.59 -1.15 -- -0.07 1.40 1.26

Low Vol - Relative Composite Avergage -6.29 -5.60 -10.13 -4.11 -3.25 1.04 -0.03 0.08 -2.55 -2.67

Momentum - Relative Composite Average 8.13 5.35 5.29 2.09 0.01 2.25 0.23 0.12 0.27 -0.67

Quality - Relative Composite Average -1.09 -1.85 -1.85 -1.29 -1.07 0.69 0.05 0.05 -1.14 -1.30

Size - RelativeComposite Average 3.54 -4.87 -8.03 -4.49 -3.68 -0.51 -- -0.03 1.34 0.10

Value - Composite Spread 8.98 5.93 4.90 4.02 5.78 3.75 -- 0.19 4.68 3.50

Low Vol - Composite Spread 11.70 13.88 17.41 9.02 5.84 0.80 0.12 0.06 3.45 2.49

Momentum - Composite Spread 19.20 15.19 22.54 10.92 7.53 4.05 0.26 0.20 3.45 2.13

Quality - Composite Spread 4.34 8.66 16.27 7.42 5.39 1.54 0.19 0.09 1.36 2.57

Size - Composite Spread 11.01 3.16 6.41 3.32 3.37 2.03 -- 0.10 3.62 2.21

10-yrBenchmark Q2 YTD 1-yr 3-yr 5-yr

Environmental and socially responsible weighted benchmark performance • Climate indexes continue outperformance across all time periods • Climate outperforms broader ESG in Q2

3-yr 10-yr 3-yr 10-yr

Sharpe Ratio Sharpe Ratio Vol Vol

Mkt

Cap MSCI World 19.36 -5.77 2.84 6.70 6.90 9.95 0.38 0.71 16.26 13.85

Russell 1000 21.82 -2.81 7.48 10.64 10.47 13.97 0.57 0.98 17.40 13.71FTSE Developed 19.25 -5.89 2.82 6.47 6.85 9.83 0.36 0.70 16.22 13.90

MSCI World ESG 18.68 -4.68 4.77 7.45 7.25 9.92 0.43 0.72 15.70 13.53

MSCI Wld Low Carbon Ldrs 19.55 -5.62 3.14 6.82 7.05 -- 0.38 -- 16.36 --

MSCI Wld Low Carbon Trgt 19.34 -5.56 3.49 6.74 6.94 -- 0.38 -- 16.27 --

MSCI World SRI 19.14 -1.68 8.46 9.92 8.76 10.37 0.59 0.77 15.13 13.28

Russell 1000 Climate 22.30 -1.60 9.10 11.30 10.90 -- -- -- 19.20 --

FTSE4Good US 21.88 -1.39 13.00 13.20 12.44 15.12 0.72 1.07 16.96 13.51

FTSE Custom Global Developed Component Climate 19.78 -5.05 3.90 6.75 7.06 -- 0.38 -- 16.16 --

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Source: Morningstar Direct, Bloomberg, Scientific Beta, FTSE-Russell, LGIMA Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Please refer to the disclosures at the end of this presentation for more information.



Fixed income benchmark performance • Global Agg outperforms US Agg in Q2, but still down longer term • US Agg has highest Sharpe ratios • Emerging Markets rallied in Q2 • Investment Grade continues strong performance

3-yr 10-yr 3-yr 10-yrSharpe Ratio Sharpe Ratio Vol Vol

Barclays Global Agg 3.32 2.98 4.22 3.79 3.56 2.81 0.54 0.49 3.93 4.67

Barclays US Agg 2.90 6.14 8.74 5.32 4.30 3.82 1.09 1.09 3.27 2.94

iBoxx US Investment Grade 9.67 6.12 11.14 7.22 6.59 6.14 0.78 0.97 7.14 5.73

iBoxx US High Yield 7.75 -5.18 -1.29 2.92 4.18 5.97 0.19 0.77 8.09 7.07

Barclays US TIPS 4.24 6.01 8.28 5.05 3.75 3.52 0.90 0.67 3.66 4.42

Barclays US Treasury 0.48 8.71 10.45 5.57 4.07 3.41 0.92 0.77 4.20 3.66

Barclays US Treasury: Intermediate 0.54 5.82 7.07 4.11 2.98 2.56 0.92 0.82 2.61 2.38

Barclays US Treasury: Long 0.25 21.20 25.41 12.04 9.26 7.74 0.87 0.65 11.94 11.57

EM JPM Emerging Market Global Core 12.87 -2.58 1.01 3.67 5.35 6.10 0.23 0.68 10.89 8.39

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REITs, infrastructure and commodity benchmark performance • S&P GSCI beats BBG Commodity in Q2 due to higher energy prices but trails in all other time periods • REITs and Infrastructure underperform market-cap

3-yr 10-yr 3-yr 10-yr

Sharpe Ratio Sharpe Ratio Vol VolBBG Commodity 5.08 -19.40 -17.38 -6.14 -7.69 -5.82 -- -- 12.64 14.15S&P GSCI 10.47 -36.31 -33.90 -8.71 -12.54 -8.53 -- -- 26.76 21.44FTSE EPRA Nareit United States 11.68 -20.69 -15.50 -1.01 3.06 8.51 -- 0.54 19.62 16.84FTSE EPRA Nareit Dv ex US 8.71 -25.65 -19.16 -1.37 0.73 6.60 -- 0.44 18.67 16.15FTSE EPRA Nareit Global 10.48 -23.07 -18.03 -2.51 0.94 6.60 -- 0.45 18.87 15.87FTSE Global Core Infrastructure 8.65 -10.95 -5.35 4.66 6.17 8.92 0.28 0.79 13.46 10.87MSCI ACWI Infrastructure 8.52 -11.63 -5.72 1.24 2.00 5.44 0.03 0.47 12.79 11.52MSCI USA Infrastructure 5.09 -14.17 -5.90 3.07 4.37 8.65 0.17 0.73 13.58 11.44

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Source: Morningstar Direct Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Please refer to the disclosures at the end of this presentation for more information.



Multi-factor benchmark performance • Continued underperformance for multi-factor benchmarks • Multi-factor shows better Sharpe ratios in the 10 year period in the ex US space • Spreads widest in emerging market space • FTSE-Russell best performing family in Q2

3-yr 10-yr 3-yr 10-yr

Sharpe Ratio Sharpe Ratio Vol Vol

Mkt

Cap MSCI ACWI 19.22 -6.25 2.11 6.14 6.46 9.16 0.34 0.65 16.26 14.03

MSCI ACWI Div. Multi-Factor 17.11 -9.35 -2.55 3.37 4.92 9.87 0.18 0.69 16.97 14.26SciBeta Global MBMS 4F EW 16.59 -11.99 -5.72 2.21 4.28 8.85 0.11 0.66 16.43 13.21SciBeta Global HFI 6F EW 15.82 -11.95 -5.67 2.19 4.70 9.74 0.11 0.76 15.87 12.54FTSE AW Comprehensive Factor 18.16 -11.49 -4.93 2.56 4.61 9.49 0.13 0.71 16.36 13.21RAFI Multi-Factor Global 17.09 -12.25 -5.79 2.48 -- -- 0.13 -- 16.32 --Average 16.95 -11.40 -4.93 2.56 4.63 9.49 0.13 0.70 16.39 13.31

Min/Max Spread 2.34 2.91 3.24 1.18 0.63 1.02 0.07 0.09 1.10 1.72

Mkt

Cap S&P 500 20.54 -3.08 7.51 10.73 10.73 13.99 0.59 1.00 16.95 13.42

MSCI USA Div. Multi-Factor 18.09 -8.83 0.12 5.28 6.96 13.21 0.28 0.91 17.98 14.12SciBeta US MBMS 4F EW 18.37 -10.01 -2.45 5.78 7.47 12.70 0.31 0.93 17.66 13.17SciBeta US HFI 6F EW 17.76 -9.61 -1.63 5.84 7.97 13.57 0.32 1.03 16.93 12.57Russell 1000 Cmprhnsve Factor 21.54 -11.17 -3.80 5.00 7.35 13.64 0.27 0.94 19.07 14.13RAFI Multi-Factor U.S. TR 18.79 -10.46 -2.91 6.28 7.16 12.91 0.34 0.93 17.65 13.48

Average 18.91 -10.02 -2.13 5.64 7.38 13.21 0.30 0.95 17.86 13.49Min/Max Spread 3.78 2.34 3.92 1.27 1.01 0.94 0.07 0.12 2.14 1.56

Mkt

Cap MSCI World ex USA 15.34 -11.49 -5.42 0.84 2.01 5.43 0.02 0.39 15.49 14.96

MSCI World ex USA DMF 14.35 -14.08 -9.82 -1.13 1.68 7.04 -- 0.49 16.70 15.14SciBeta Dev xUS MBMS 4F EW 14.39 -13.79 -7.38 -0.56 2.29 6.65 -- 0.49 15.68 13.98SciBeta Dev xUS HFI 6F EW 13.59 -14.21 -8.25 -0.22 2.91 7.62 -- 0.56 15.42 13.66FTSE Dev xUS Cmprhnsve Factor 16.16 -11.20 -5.20 0.89 3.38 7.60 0.02 0.57 15.19 13.49RAFI Multi-Factor Developed ex-U.S 14.58 -13.01 -6.53 0.23 -- -- -- 15.26 --

Average 14.61 -13.26 -7.44 -0.16 2.57 7.23 -- 0.53 15.65 14.07Min/Max Spread 2.57 3.01 4.62 2.02 1.70 0.97 0.00 0.08 1.51 1.65

Mkt

Cap MSCI Emerging Markets 18.08 -9.78 -3.39 1.90 2.86 3.27 0.10 0.24 18.52 17.88

MSCI EM Div. Multi-Factor 16.34 -11.84 -2.93 0.29 1.90 4.05 0.02 0.27 18.63 18.47SciBeta EM MBMS 4F EW 15.26 -14.79 -13.65 -3.43 -1.69 3.00 -- 0.23 17.04 16.00SciBeta EM HFI 6F EW 13.84 -15.23 -14.55 -3.64 -1.43 4.24 -- 0.31 16.54 15.16FTSE EM Comprehensive Factor 17.13 -16.65 -12.88 -3.57 -1.14 3.85 -- 0.27 18.46 16.68

RAFI Multi-Factor Emerging Markets 19.00 -16.15 -12.54 -1.40 -- -- -- -- 18.87 --

Average 16.31 -14.93 -11.31 -2.35 -0.59 3.78 -- 0.27 17.91 16.58

Min/Max Spread 5.16 4.81 11.62 3.93 3.59 1.24 0.00 0.08 2.33 3.31


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Sources: Morningstar Direct, Bloomberg, Scientific Beta, LGIMA Sharpe Ratios intentionally left out when negative, or where data unavailable The FTSE AW Comp performance is hypothetical prior to November 3, 2016. The MSCI ACWI Diversified Multiple-Factor Index performance is hypothetical prior to Feb 17, 2015. SciBeta US MBMS 4F EW, SciBeta Dev xUS MBMS 4F EW, and SciBeta EM MBMS 4F EW performance is hypothetical prior to December 20, 2013. SciBeta US HFI 6F EW, SciBeta Dev xUS HFI 6F EW, and SciBeta EM HFI 6F EW performance is hypothetical prior to March 16, 2018. Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Please refer to the disclosures at the end of this presentation for more information.



US and global market cap weighted valuations Chart plots the referenced statistics based on monthly P/B ratios for previous 15 years

• Growth continues to trade at highest historical levels

• Large-cap US stays above historical averages

• Mid and small-cap US stocks slightly below historical averages

• Global ex US stocks continue to trade below historical P/B values

Source: Bloomberg, MSCI, LGIMA

Currency summary—MSCI global indices • US Dollar weakness aided returns in global benchmarks in Q2 • Brazilian Real was worst performing currency

3M YTD 1-yr 3M YTD 1-yr 3M YTD 1-yrMSCI ACWI ex US 19.22% -6.25% 2.11% 18.27% -5.34% 3.10% 0.94% -0.91% -0.99%

MSCI ACWI ex US 16.12% -11.00% -4.80% 13.90% -9.04% -2.71% 2.22% -1.96% -2.09%

MSCI USA 21.76% -2.16% 8.42% 21.76% -2.16% 8.42% 0.00% 0.00% 0.00%

MSCI World ex US 15.34% -11.49% -5.42% 12.81% -10.34% -4.24% 2.53% -1.15% -1.18%

MSCI EAFE 14.88% -11.34% -5.13% 12.60% -10.53% -4.24% 2.28% -0.81% -0.89%

MSCI Canada 20.17% -12.91% -8.24% 14.99% -8.53% -4.36% 5.18% -4.38% -3.88%

MSCI EM 18.08% -9.78% -3.39% 16.74% -5.50% 1.37% 1.34% -4.28% -4.76%

MSCI Frontier Markets 14.75% -15.77% -11.17% 13.07% -14.36% -9.55% 1.68% -1.41% -1.62%

-1.67% 1.04% 1.31%US Dollar Index

USD Return % Local Return % Currency Impact %Index

Sources: LGIMA, MSCI, Bloomberg as of end of Q2 2020.



One-year currency risk/return

Sources: MSCI, LGIMA, Bloomberg as of end of Q2 2020.



SciBeta USA factor indexes periodic table investment returns Single factor indexes based on SciBeta’s diversified multi-strategy methodology

• Size, high profitability and momentum strongest factors in Q2 across all regions • Low volatility was the worst factor globally as expected in a risk-on environment • Quarter on quarter size went from worst to first and low volatility went from first to worst

Sources: LGIMA, Scientific Beta, Morningstar Direct.



SciBeta developed ex USA Factor indexes periodic table investment returns Single factor indexes based on SciBeta’s diversified multi-strategy methodology

• Size, high profitability and momentum strongest factors in Q2 across all regions • Low volatility was the worst factor globally as expected in a risk-on environment • Reversal of low volatility and size Q1 to Q2

Sources: LGIMA, Scientific Beta, Morningstar Direct. SciBeta US MBMS 4F EW, SciBeta Dev xUS MBMS 4F EW, and SciBeta EM MBMS 4F EW performance is hypothetical prior to December 20, 2013. SciBeta US HFI 6F EW, SciBeta Dev xUS HFI 6F EW, and SciBeta EM HFI 6F EW performance is hypothetical prior to March 16, 2018. Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.



SciBeta emerging markets factor indexes periodic table investments returns Single factor indexes based on SciBeta’s diversified multi-strategy methodology

• Size, high profitability and momentum strongest factors in Q2 across all regions • Low volatility was the worst factor globally as expected in a risk-on environment • Reversal of low volatility and size Q1 to Q2

Sources: LGIMA, Scientific Beta, Morningstar Direct. SciBeta US MBMS 4F EW, SciBeta Dev xUS MBMS 4F EW, and SciBeta EM MBMS 4F EW performance is hypothetical prior to December 20, 2013. SciBeta US HFI 6F EW, SciBeta Dev xUS HFI 6F EW, and SciBeta EM HFI 6F performance is hypothetical prior to March 16, 2018. Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.



Q2 – Index providers update

S&P: The S&P indexes implemented their quarterly review in June. This was the first such review since December 2019, as the review in March was postponed with S&P citing extreme market volatility, market wide circuit breakers and exchange closures.

Scientific Beta: In conjunction with its June index-rebalancing, Scientific Beta introduced several changes to its indices:

• Intangible Book Value: For the Value Factor, intangible capital will now be incorporated into the book value metric. In making this change Scientific Beta referenced the fact that there has been a structural change in the economy and that intangibles are more prominent in the capital structure of companies. This change will affect the stock selection process for Value stocks. This change will also be reflected historically on Scientific Beta Indices (Single and multi-factor).

• Market-Beta Adjustment risk control option: The rebalance frequency is being amended to be implemented monthly (from quarterly). In making this change, Scientific Beta that stated that using a more regular rebalancing schedule means that the market beta of the underlying index is captured better.

• New Risk Control Option: The Historical Volatility Adjustment risk control option being introduced by Scientific Beta aims to smooth volatility through time. According to Scientific Beta, the objective of this control option is to target a level of volatility that corresponds to the long-term target. Scientific Beta cites three main benefits for this strategy, namely improved market beta conditionality in low and high volatility market regimes, improved Sharpe ratio and downside risk reduction.

FTSE Russell:

RGS/ICB Classification System Update:

• In light of recent disruptions caused by COVID-19, FTSE Russell decided to postpone the switch of the current Russell Global Sectors (RGS) classification system to the new ICB classifications which had been scheduled to have been implemented in June. This will now take effect in the Russell indexes at the September 2020 review.

• FTSE GEIS, which currently uses the ICB classification system will now adapt the new framework at the March 2021 review instead of the previously scheduled September 2020 timeframe.

• The main changes to the current ICB framework include the introduction of a new Real Estate Industry, the renaming of the Oil & Gas Industry to Energy, the expansion of the Telecommunications Industry and the designation of the Consumer Staples and Consumer Discretionary Industries.

MSCI:

• On June 23rd, MSCI announced the results of their annual Market Classification review. Highlights included the promotion of Iceland to Frontier status, a warning on the potential reclassification of Argentina and the acknowledgement of the deterioration in the Turkish market.

• Iceland will be added to Frontier Market status at the May 2021 review. Commenting on the developments in Argentina, MSCI noted that the domestic market was inaccessible to international investors due to stringent capital controls. Argentina is currently only represented by foreign listings.

• With reference to Turkey, MSCI stated that they may launch a consultation on the reclassification of Turkey to Frontier status with MSCI citing restrictions in short selling and stock lending.

• MSCI also reminded investors of the Kuwait promotion to Emerging Market status at the November 2020 review.



Contributors

DISCLOSURES This is not a solicitation to purchase any product and is not intended as a solicitation to buy or sell any securities or other financial instruments or to provide any investment advice or service. The performance set forth below does not represent the results of actual trading, but rather was achieved by means of the retroactive application of a model designed with the benefit of hindsight. Index provider information has not been independently verified by LGIMA for its accuracy or completeness, therefore the information obtained from third party sources cannot be guaranteed. Accordingly, the information herein should not be relied on in making any investment decision, as an investment always carries with it the risk of loss and the vulnerability to changing economic, market or political conditions, including but not limited to changes in interest rates, issuer, credit and inflation risk, foreign exchange rates, securities prices, market indexes, operational or financial conditions of companies or other factors. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance or that LGIMA’s investment or risk management process will be successful. Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. The use of hypothetical performance is subject to inherent limitations derived from the reliance on historical data and the benefit of hindsight. All trading strategies applied to the analysis were available throughout the performance period. However, the analysis includes certain assumptions where actual performance could be different from the hypothetical performance presented. In order to match the index returns a fund would need to track the security weightings in a way that would exactly match the Index and that the economic and market conditions were sufficient to have allowed effective execution of replicate the risk and return characteristics of the index. There are a number of factors that could reduce our ability to track index positions perfectly, including small position sizes and/or available liquidity in some securities. We estimate the net effects of index- and trading-related factors on the passive components of the strategy would affect performance either favorably or unfavorably depending on the size of the portfolio. A review of the ERI Scientific Beta index methodology has been conducted by: a) comparing in and out of sample performance of the hypothetical back-tested information provided by Scientific Beta; b) testing the returns against the intended factor biases; c) conducting a comparison of similar multi-factor indices to Scientific Beta’s multi-factor index; and d) reviewing the reasonability of portfolio characteristics. The output of the indices appears reasonable given the methodology and targeted portfolio risk biases and opinions expressed herein are as of October 2019 and may change based on market and other conditions. The material contained here is confidential and intended for the person to whom it has been delivered and may not be reproduced or distributed. The material is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. Legal & General Investment Management America, Inc. does not guarantee the timeliness, sequence, accuracy or completeness of information included. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance.

Documents

Q2 2020 Index Market Overview - lgima.com · Environmental and socially responsible weighted benchmark performance • Climate indexes continue outperformance across all time periods