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STRONGER
Strategies for success
2015 Partner Conference
together
Panel Discussion: Fixed Income Options
Moderator: Greg Woods, VP, BPAS Fiduciary Services, featuring: • Christopher Dillon,
Portfolio Specialist, T. Rowe Price • John Doyle, SVP & Sr. DC Specialist,
American Funds • Anthony Fiore, SVP & National Sales
Manager, Prudential Retirement Investment Solutions Group
• Michael DiMarsico, Senior Vice President, Federated Investors
2015 Partner ConferenceStronger Together 2
WelcomeMeet our Panelists: • Christopher Dillon, Portfolio Specialist U.S. Fixed Income, T. Rowe Price• John Doyle, Senior Vice President for DC, American Funds• Anthony Fiore, SVP of Retirement Investment Sales, Prudential
Investments• Michael DiMarsico, Senior Vice President, Federated Investors
2015 Partner ConferenceStronger Together3
-5%
0%
5%
10%
15%
20%
'58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13
Interest Rates and Inflation
Source: Federal Reserve, BLS, J.P. Morgan Asset Management.Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core CPI inflation for that month except for March 2015, where real yields are calculated by subtracting out February 2015 year-over-year core inflation. All returns above reflect annualized total returns, which include reinvestment of dividends. Corporate bond returns are based on a composite index of investment grade bond performance. Data are as of March 31, 2015.
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Nominal and Real 10-year Treasury Yields
Mar. 31, 2015: 0.25%
Sep. 30, 1981: 15.84%
Mar. 31, 2015: 1.94%
Nominal 10-year Treasury Yield
Real 10-year Treasury Yield
Average(1958 – 2015 YTD) 3/31/15
Nominal Yields 6.24% 1.94%Real Yields 2.48% 0.25%Inflation 3.79% 1.69%
Rising Rate Corp. Bonds S&P 500 1958-1981 3.0% 8.6% Ann. Inflation 5.0% 5.0% Ann. Real Return -2.0% 3.5%
Falling Rate Corp. Bonds S&P 500 1982-2014 9.6% 11.7% Ann. Inflation 3.0% 3.0% Ann. Real Return 6.6% 8.6%
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Interest Rates and Inflation
2015 Partner ConferenceStronger Together4
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Cum. Ann.
EMD USD EMD LCL. EMD LCL. Treas. High Yield EMD LCL. TIPS EMD USD High Yield Muni High Yield EMD USD EMD USD
10.2% 15.2% 18.1% 13.7% 58.2% 15.7% 13.6% 17.4% 7.4% 8.7% 2.5% 111.5% 7.8%
EMD LCL. High Yield TIPS MBS EMD USD High Yield Muni EMD LCL. MBS Corp. Corp. High Yield High Yield
6.3% 11.8% 11.6% 8.3% 29.8% 15.1% 12.3% 16.8% -1.4% 7.5% 2.3% 110.7% 7.7%
Asset Alloc. EMD USD Treas.Barclays
AggEMD LCL. EMD USD Treas. High Yield Corp. EMD USD EMD USD EMD LCL. EMD LCL.
3.1% 9.9% 9.0% 5.2% 22.0% 12.2% 9.8% 15.8% -1.5% 7.4% 2.0% 90.4% 6.7%
TIPS Asset Alloc.Barclays
AggMuni Corp. Corp. Corp. Corp. Asset Alloc. MBS Treas. Corp. Corp.
2.8% 5.7% 7.0% 1.5% 18.7% 9.0% 8.1% 9.8% -1.9% 6.1% 1.6% 71.4% 5.5%
Treas. MBS MBS Asset Alloc. Asset Alloc. Asset Alloc. Asset Alloc. Asset Alloc.Barclays
AggBarclays
AggBarclays
AggAsset Alloc. Asset Alloc.
2.8% 5.2% 6.9% 0.1% 14.7% 7.9% 8.1% 7.4% -2.0% 6.0% 1.6% 70.3% 5.5%
Muni Muni Asset Alloc. TIPS TIPSBarclays
AggBarclays
AggTIPS Muni Asset Alloc. TIPS Muni Muni
2.7% 4.7% 6.7% -2.4% 11.4% 6.5% 7.8% 7.0% -2.2% 5.5% 1.4% 64.4% 5.1%
High YieldBarclays
AggEMD USD Corp. Muni TIPS EMD USD Muni Treas. Treas. Asset Alloc. MBS MBS
2.7% 4.3% 6.2% -4.9% 9.9% 6.3% 7.3% 5.7% -2.7% 5.1% 1.4% 59.0% 4.7%
MBS Corp. Corp. EMD LCL.Barclays
AggTreas. MBS
Barclays Agg
EMD USD TIPS MuniBarclays
AggBarclays
Agg2.6% 4.3% 4.6% -5.2% 5.9% 5.9% 6.2% 4.2% -5.3% 3.6% 1.3% 58.4% 4.7%
Barclays Agg
Treas. Muni EMD USD MBS MBS High Yield MBS TIPS High Yield MBS Treas. Treas.
2.4% 3.1% 4.3% -12.0% 5.9% 5.4% 5.0% 2.6% -8.6% 2.5% 1.1% 53.5% 4.4%
Corp. TIPS High Yield High Yield Treas. Muni EMD LCL. Treas. EMD LCL. EMD LCL. EMD LCL. TIPS TIPS
1.7% 0.4% 1.9% -26.2% -3.6% 4.0% -1.8% 2.0% -9.0% -5.7% -4.0% 53.4% 4.4%
10-yrs. '05 - '14
Fixed Income Sector Returns
Source: Barclays Capital, FactSet, J.P. Morgan Asset Management. Past performance is not indicative of future returns. Fixed income sectors shown above are provided by Barclays Capital unless otherwise noted and are represented by Broad Market: Barclays Capital U.S. Aggregate Index; MBS: Fixed Rate MBS Index; Corporate: U.S. Corporates; Municipals: Muni Bond 10-Year Index; High Yield: U.S. Corporate High Yield Index; Treasuries: Global U.S. Treasury; TIPS: Global Inflation-Linked - U.S. Tips; Emerging Debt USD: J.P. Morgan EMBIG Diversified Index; Emerging Debt LCL: J.P. Morgan EM Global Index. The “Asset Allocation” portfolio assumes the following weights: 20% in MBS, 20% in Corporate,15% in Municipals, 5% in Emerging Debt USD, 5% in Emerging Debt LCL, 10% in High Yield, 20% in Treasuries, 5% in TIPS. Asset allocation portfolio assumes annual rebalancing.Data are as of March 31, 2015.
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Fixed Income Sector Returns