TARGET RETIREMENT 2020 FUND

Transcription

1 Fund Objective TARGET RETIREMENT 2020 FUND The Fund seeks to provide investment return, shifting from an emphasis on capital appreciation to an emphasis on income and inflation protection as the Fund approaches and passes its target retirement date. The Fund invests in a diversified mix of asset classes managed by multiple investment managers. Fund Strategy The Fund offers a diversified portfolio with an asset allocation strategy designed for investors expecting to retire around the year The strategy is designed using certain assumptions, including that most Exelon plan participants receive a 401(k) company matching contribution under the plan, either earn pension benefits over their careers or receive additional employer 401(k) contributions in lieu of pension benefits, and typically begin receiving retirement benefits around age 61. You should consider your own expected sources of retirement income when selecting investment funds, including the extent to which these assumptions describe you. The Fund reduces exposure to equities and real estate, and increases exposure to fixed income and certain other investments, as its target retirement date approaches, and for ten years thereafter. The Fund invests in a variety of asset classes including, but not limited to, equities, fixed income, real estate, and cash either through separate accounts or underlying investment vehicles. Information shown is as of 09/30/2017 unless otherwise noted Target Asset Allocation US Large Cap Equity % - 4 investment managers US Small Cap Equity % - 4 investment managers Developed International Markets Equity % - 4 investment manager Emerging Markets Equity % - 2 investment managers US Core Fixed Income % - 5 investment managers High Yield % - 1 investment manager Emerging Markets Debt % - 1 investment manager US Treasury Inflation Protected Securities (TIPS) % - 1 investment manager Real Estate % - 2 investment managers Real Estate Investment Trusts (REITs) % - 1 investment manager Cash % - 1 investment manager Actual allocations may differ from targets due to market and liquidity conditions Target Retirement 2020 Fund Allocation Mix Glide Path (More details can be found at Years to Retirement Retirement Years After Retirement The Target Retirement 2020 Fund (the Fund ) is issued under the Exelon Corporation Defined Contribution Retirement Plans Master Trust. The Fund is a daily priced fund that is managed by multiple underlying investment managers. The Fund is not a registered mutual fund, and interests in the Fund are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency. The Fund is not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. Page 1

2 Return % Return % TARGET RETIREMENT 2020 FUND Accumulative Historical Performance of Fund vs. Benchmark 15% As Of 10/31/ % 5% Fund Benchmark: Target Retirement 2020 Custom Index 0% YTD 1-Year 3-Year 5-Year 10-Year Since Inception 11.86% 13.12% 6.13% N/A N/A 5.42% 11.39% 12.86% 6.30% 8.08% 4.71% 5.71% In general, year-to-date (YTD), 1-year, 3-year, 5-year, 10-year and since Fund inception performance history is shown if available. The Fund s inception date is July 1, Performance history prior to that date is not available for the Fund. Returns shown are net of managing and operating fees borne by Plan investors each month. The Fund s Benchmark is a custom benchmark calculated as a weighted average of the index returns for each of the asset classes held by the Fund. This benchmark best correlates to the performance of the Fund because it represents index returns for all of the underlying asset classes at their target allocations as they have changed over time. An index is an unmanaged portfolio of specified securities and it does not reflect any initial or ongoing expenses. The Fund s portfolio may differ from the securities in the index. This benchmark includes an allocation to the NCREIF ODCE Index which reports its returns only on a quarterly basis. During interim months, a 0% return is assumed for this portion of the benchmark. The Fund s broad market index for purposes of the Department of Labor required participant fee disclosures is the S&P 500 Index. Annual Historical Performance of Fund vs. Benchmark 30% As Of 12/31/ % 10% 0% -10% -20% -30% Fund Benchmark: Target Retirement 2020 Custom Index 7.75% -0.77% N/A N/A N/A N/A N/A N/A N/A N/A 8.11% -0.52% 6.09% 13.39% 13.36% 0.50% 13.98% 24.45% % 8.90% Page 2

3 Annual Total Expenses of Fund Total annual operating expenses, including asset-based fees, are the annual operating expenses and other asset-based charges that reduce the Fund s rate of return. These expenses may include management fees charged to the Fund investors, as well as custodial expenses, legal expenses and other administrative expenses of the Fund. Fund expenses are generally accrued daily; any difference between accrued and actual expenses will be charged to the Fund. Annual Expenses as Assets And $ per $1,000 invested as of 12/31/2016 Fund 0.370% $3.70 Operating expenses shown in this table are historical amounts charged against the Fund s assets in the prior calendar year. Future expenses and fees may vary based on various factors. Fund Characteristics Number of Holdings 15,839 Total Net Assets ($M) 1,011.2 M Portfolio Turnover (%) 77.4% Average Market Cap ($B) 88.4 B Price to Earnings 26.9 Price to Book 4.0 Price to Sales 3.4 Average Nominal Maturity (Years) 12.0 Average Duration (Years) 5.8 Average Coupon (%) 4.3% Yield to Maturity (%) 3.1% Fund Underlying Manager Targeted Allocation US Large Cap Equity BlackRock US Equity Index Legal & General LSV Asset Management T. Rowe Price US Small Cap Equity BlackRock Russell 2000 Index Strategy Boston Partners Brown Capital Management LLC Matarin Developed International Markets Equity Acadian Asset Management LLC BlackRock MSCI EAFE Equity Index Franklin Templeton Investment Counsel LLC Morgan Stanley Investment Management 5.41% 5.59% 4.44% 8.69% 1.54% 1.86% 0.96% 0.96% 1.37% 3.90% 2.11% 3.17% Fund Underlying Manager Targeted Allocation (continued) Emerging Markets Equity BlackRock Emerging Markets Index BlackRock Emerging Markets Opportunities US Core Fixed Income BlackRock US Debt Index EARNEST Partners LLC JP Morgan Core Plus Pacific Investment Management Company (PIMCO) Pugh Capital Management Inc High Yield MacKay Shields LLC Emerging Markets Debt Goldman Sachs Asset Management LP US Treasury Inflation Protected Securities (TIPS) NISA Investment Advisors LLC Real Estate JP Morgan Investment Management Inc Security Capital Real Estate Investment Trusts (REITs) Morgan Stanley Investment Management (REIT) Cash Northern Trust Fund Top 10 Holdings Below are the Fund s top 10 holdings. This Fund has significantly more than 10 holdings; these top holdings simply give a snapshot of the fund's largest investments. US TREASURY NOTES DTD 04/15/ % US TREASURY INFL INDEXED NOTES 0.125% % APPLE INC 0.54% FNMA SINGLE FAMILY MORTGAGE 4% 30 YEARS SETTLES NOVEMBER FNMA SINGLE FAMILY MORTGAGE 3.5% 30 YEARS SETTLES DECEMBER 0.53% 0.49% US TREASURY INFL INDEXED NOTES 0.125C % US TREASURY INFL INDEXED NOTES 0.375% DTD 07/15/ % 4.44% 3.11% 5.86% 5.29% 5.44% 6.92% 5.54% 3.54% 7.46% 4.32% 0.48% 2.24% 2.40% 0.46% MICROSOFT CORP 0.45% US TREASURY INFL INDEXED NOTES 0.125% % TENCENT HOLDINGS LTD 0.43% Page 3

4 Fund Industry Sectors This breakdown of equity holdings by sector is based on the Thomson Reuters Business Classification (TRBC) groupings. The additional category Non Classified Equity is used for any holdings that are not categorized. % of Equities Financials 30.3% Consumer Non-Cyclicals 19.6% Technology 13.7% Industrials 9.9% Consumer Cyclicals 9.8% Telecom Services 5.6% Energy 4.6% Basic Materials 4.3% Utilities 2.0% Not Classified Equity 0.2% Fund Bond Types Bonds are grouped into different types based on who issued the bond such as corporation or government and certain characteristics of the bond such as asset-backed or tax-exempt. % of Fixed Income Govt Agency Notes/Bonds 37.5% Corporate Notes/Bonds 36.1% Mortgage Backed Securities 20.5% Asset Backed Securities 4.8% Municipal Bonds 1.0% Convertible Bond 0.1% Fixed Income Other 0.0% Fund Maturity Breakdown Maturity is the length of time between the issue of a bond, note or other fixed income security and the date on which it becomes payable in full. Most bonds are issued with a fixed maturity date. The shorter the maturity, the more predictable and less risky the investment. Interest rates are generally higher for longer maturities but have more risk. < 1 Year (ultra short term) 1-3 Years (short term) 3-5 Years (short/intermed.) 5-10 Years (intermediate) Years (long-term) Years (long term) > 30 Years (long term) Other (no specified maturity) Fund Credit Quality % of Fixed Income 8.3% 14.4% 27.2% 36.4% 8.6% 3.3% 0.0% 1.8% Credit ratings measure the borrower's creditworthiness and provide an international framework for comparing the credit quality of issuers and bonds. The top credit rating issued by the main agencies Standard & Poor's, Moody's and Fitch, is AAA. AAA to AA is considered high credit quality, A to BBB is medium, and anything below BBB is low. AAA through BBB are often referred to as investment-grade bonds and all others, BB and lower, are considered high-yield or junk bonds. Some bonds are not rated. % of Fixed Income AAA Bonds 43.2% AA Bonds 6.5% A Bonds 6.3% BBB Bonds 15.4% BB Bonds 7.4% B Bonds 7.2% CCC Bonds 2.1% CC Bonds 0.1% C Bonds 0.0% D Bonds 0.0% Not Rated 11.8% Page 4

5 Fund Geographical Breakdown United States 74.8% Asia Pacific (ex Japan) 6.2% Europe (ex UK) 5.3% Latin America 3.1% United Kingdom 3.1% Japan 2.1% Emerging Markets Europe 1.9% Emerging Markets Asia 1.2% Middle East, North Africa 0.8% Africa (ex N Africa) 0.7% North America (ex US) 0.7% Unclassifed 0.1% All the Fund characteristics and attributes shown in the above sections are calculated using data provided by third party vendors. This data is believed to be reliable, but the information has not been audited and its accuracy and completeness are not guaranteed. Important Fund Information The Fund was created specifically for the Exelon Corporation Defined Contribution Retirement Plans Master Trust. The Fund is a dailypriced fund that is managed by multiple underlying investment managers (see Fund Underlying Managers). The Fund is not a registered mutual fund and interests in the Fund are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency. The Fund is not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. Target allocations change regularly (generally annually) with the asset allocations becoming more conservative through the target retirement date and beyond. The allocation is designed using certain assumptions, including that most Exelon plan participants receive a 401(k) company matching contribution under the plan, either earn pension benefits over their careers or receive additional employer 401(k) contributions in lieu of pension benefits, and typically begin receiving retirement benefits around age 61. You should consider your own expected sources of retirement income when selecting investment funds, including the extent to which these assumptions describe you. Actual allocations may differ from targets due to market and liquidity conditions. Additional information can be found at Underlying Fund Management Acadian Asset Management LLC Franklin Street, Boston MA Acadian specializes in active global and international equity strategies, employing sophisticated analytical models for active stock selection. Acadian s proprietary database covers over 40,000 securities in more than 60 markets worldwide and its extensive research capabilities are used to develop customized investment management solutions for its clients. Acadian has approximately $75.0 billion in assets under management. BlackRock Institutional Trust Company NA - 55 E 52nd Street, New York NY BlackRock was founded in 1988 and today is the world's largest investor and a premier provider of global investment management services. BlackRock has approximately $5.15 trillion in assets under management across equity, fixed income, real estate, liquidity, alternatives and asset allocation/balanced strategies for institutional and retail clients. Boston Partners - One Beacon Street, Boston MA Boston Partners is a provider of value equity investment products that are rooted in fundamental research and are based on a disciplined investment philosophy and process. The firm was started in 1995 and has approximately $78.4 billion in assets under management. Brown Capital Management LLC North Calvert Street, Baltimore MD Brown Capital Management was incorporated in 1983 with a vision to be a focused growth manager across the capitalization range domestically and internationally. With over 30 years of experience, Brown Capital Management provides the credibility and expertise to meet the needs of those committed to serious long term investing. Brown has approximately $8.06 billion in assets under management. EARNEST Partners LLC Peachtree Street NE, Ste 2300, Atlanta GA EARNEST Partners is an independent, employee owned asset management firm currently advising on more than $20 billion in assets for clients around the world. EARNEST Partners manages portfolios for more than 300 clients including corporations, government pension funds, sovereign wealth funds, jointly trusteed plans, endowments and foundations. Franklin Templeton Investments - 1 Franklin Parkway, San Mateo CA The Templeton Global Equity Group has been providing global investment management services for over fifty years. Backed by a world class global research platform, they employ a time tested investment strategy, taking a disciplined, long term approach to value investing in global equity markets and scour the world for the most undervalued companies. Templeton has approximately $135.1 billion in assets under management. Goldman Sachs Asset Management West Street, New York NY Goldman Sachs Asset Management ( GSAM ), is one of four business segments of The Goldman Sachs Group, Inc. GSAM has been providing discretionary investment advisory services since 1989 to institutional investors such as pension funds, endowments, foundations, financial institutions, corporations and governments. GSAM is among the world s largest asset managers, with approximately $1,178 billion in assets under supervision. JP Morgan Investment Management Inc Park Avenue, New York NY J.P. Morgan Asset Management provides asset management services to individuals, advisors and institutions. Their investment professionals are located around the world, providing strategies that span the full spectrum of asset classes. JP Morgan Asset Management is one of the largest asset and wealth managers in the world, with total assets under management of $1.8 trillion which includes approximately $96.4 billion of real estate, infrastructure and maritime assets managed by the Global Real Assets group and $443.3 billion in fixed income assets. Page 5

6 Underlying Fund Management (continued) Legal & General Investment Management - 71 South Wacker, Chicago IL Legal & General Investment Management America, Inc. (LGIMA) was founded in 2006 and specializes in fixed income, liability driven investment (LDI) solutions and index capabilities for the US institutional market. LGIMA is the affiliate of London-based Legal & General Investment Management, one of Europe s largest institutional asset managers and a global investor, with a heritage dating back to LGIMA has approximately $140 billion in assets under management and pension plan, foundation & endowment, union, and public fund clients. LSV Asset Management N Wacker Drive, Chicago IL LSV Asset Management was established in 1994 as a partnership to provide domestic, international, and global value equity investment management services to institutional investors using proprietary quantitative models developed through years of research in value investing, contrarian strategies, and behavioral finance. LSV s roots in these areas of academic research form its core investment philosophy and continue to drive the evolution of the LSV models over time. LSV currently manages approximately $97 billion in value equity portfolios for approximately 350 clients. MacKay Shields LLC Avenue of the Americas, New York NY MacKay Shields was founded in 1938 and is a fixed income focused investment management firm that specializes in the management of income oriented investment strategies. The firm manages assets on behalf of a global clientele which include pension funds, government and financial institutions, family offices, high net worth individuals, endowments and foundations and retail investors. MacKay manages over $94.5 billion in assets. Matarin - One Dock Street, Suite 320, Stamford CT Matarin Capital Management is a 100% employee owned firm established in July 2010 and based in Stamford, CT. Matarin s investment team worked together for many years prior to Matarin. Matarin s US small cap strategy combines a fundamental approach to stock selection and quantitative investing techniques. The firm is an SEC Registered Investment Advisor and firm assets under management are $907 million. Morgan Stanley Investment Management - 25 Cabot Square, Canary Wharf, London E14 4QA Morgan Stanley Investment Management was formed in 1975 and has approximately $417 billion in assets under management with over 585 investment professionals worldwide, and 37 offices in 20 countries. Morgan Stanley Investment Management is a client centric organization dedicated to providing investment and risk management solutions to a wide range of investors and institutions including corporations, pension plans, intermediaries, sovereign wealth funds, central banks, endowments and foundations, governments and consultant partners worldwide. NISA Investment Advisors, LLC South Hanley, Ste 1700, St. Louis MO NISA Investment Advisors, L.L.C. ( NISA ) provides investment management services only to institutional clients with a primary focus on two main product lines: tax exempt, US dollar denominated, investment grade fixed income investments and derivatives overlay for large institutional clients; and US dollar denominated, investment grade fixed income and equity investment management for taxable entities, primarily Nuclear Decommissioning Trusts. Consistent themes across all of NISA s strategies include riskcontrolled asset management, customized strategies and a team oriented approach. NISA has approximately $136 billion in assets under management in securities strategies. Additionally, NISA manages over $70 billion in derivative notional value. NISA began managing assets in April Northern Trust Corporation - 50 LaSalle Street, Chicago IL Northern Trust is a leading provider of asset management, asset and fund administration, fiduciary and banking solutions for corporations, institutions and affluent individuals worldwide. Northern Trust has been managing assets since it was founded in 1889 and has over 125 years of experience providing institutional and personal clients with investment management, trustee and custody services. Northern Trust has approximately $942.2 billion in assets under management. Underlying Fund Management (continued) Pacific Investment Management Company (PIMCO) Newport Center Drive, Newport Beach CA Pacific Investment Management Company LLC ( PIMCO ) was founded in 1971 and is one of the world s largest fixed income managers, with a presence in every major bond market. PIMCO manages the retirement and investment assets for a wide range of institutional and individual investors. PIMCO has approximately $1.47 trillion in assets under management. Pugh Capital Management Inc Pike St #2900, Seattle WA Pugh Capital Management, Inc. was founded in 1991 and is a 100% employee-owned SEC-registered investment advisor. Pugh specializes in active fixed-income portfolio management for institutional investors with assets under management of $4.7 billion. Pugh s goal is to provide clients consistent, above-benchmark returns through a disciplined approach to investment management. Security Capital - 21 S Clark Street, Chicago IL Security Capital Research& Management Incorporated (SC R&M) is a real estate securities investment manager based in Chicago. Formed in 1995, and with over $4.6 billion in assets under management, Security Capital views REITs as real estate and invests in all exchange traded capital tranches (nearly 120 companies and over 570 securities, including REIT common, preferred, convertible debt and senior unsecured debt). T. Rowe Price East Pratt Street, Baltimore MD T. Rowe Price has been offering investors investment management services since With over $810.8 billion in assets under management and a strong balance sheet of approximately $1.9 billion in cash and discretionary sponsored portfolio investment holdings and $1.3 billion in redeemable seed capital investments in sponsored investment portfolios, the firm provides asset management services to clients worldwide. Fund Risks The Fund is not registered under the Securities Act of 1933, and is exempted from investment company registration under the Investment Company Act of Therefore, the Exelon Savings Plan and its participants will not be entitled to the protections under these Acts. Rather, management of these funds is generally subject to regulation under the Employee Retirement Income Security Act of 1974, as amended (ERISA). J.P. Morgan Investment Management Inc. is the asset allocation provider for the Fund. The investment portfolios underlying the Fund are managed by a number of investment managers selected by Exelon. Target allocations change regularly (generally annually) with the asset allocation becoming more conservative through the target retirement date and beyond. The target retirement date for an individual investor is the approximate date when such investor plans to start withdrawing money. The principal value of the Fund is not guaranteed at any time, including at the time of target date and/or withdrawal. Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than original cost. The Fund is not a complete retirement program and there is no guarantee that the Fund will provide sufficient retirement income to an investor. The Fund seeks to achieve the stated objective but there is no guarantee the objective will be met. Investing in these strategies carries a certain amount of risk. There is no guarantee that investing in these strategies will prevent loss of capital. Past performance is no guarantee of future results. Page 6

7 Fund Risks (continued) Many of the underlying accounts are actively managed and subject to the risk that the investment managers' usage of investment techniques and risk analyses to make investment decisions may fail to perform as expected, which may cause the Fund to lose value or underperform investments with similar objectives and strategies or the market in general. Some accounts are passively managed; the investment managers of these accounts do not attempt to manage volatility or take defensive positions in declining markets. This passive management strategy may subject the Fund to greater losses during general market declines than actively managed investments. The Fund may invest in US large capitalization equity securities, US small capitalization equity securities, international/emerging market securities, core fixed income, high yield fixed income, emerging market debt securities, Treasury Inflation-Protected Securities (TIPS), real estate, cash equivalents and/or derivative instruments. There may be unique risks associated with investing in these types of securities as described in the following paragraphs. The value of US large capitalization equity securities, which include common, preferred, and convertible preferred stocks, will fluctuate based on changes in their issuers' financial conditions, as well as overall market and economic conditions, and can decline in the event of deteriorating issuer, market, or economic conditions. US small capitalization equity securities typically carry more risk than equity investments in well-established blue-chip companies since smaller companies generally have a higher risk of failure and historically, smaller companies stock has experienced a greater degree of market volatility than the average stock. Investments in international markets are subject to special currency, political, and economic risks and in general may involve a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the US can raise or lower returns. Also, some overseas markets may not be as politically and economically stable as the United States and other nations. The normal risks of investing in foreign countries are heightened when investing in emerging market equity and fixed income securities, so the Fund s investments in emerging markets could lead to more volatility in the value of the Fund. The economic and political situations may be more volatile than in established economies, and the small size of securities markets and lower trading volume may lead to a lack of liquidity. Also, emerging markets may not provide adequate legal protection for private or foreign investment or private property. Fund Risks (continued) The value of fixed income securities may be susceptible to general movements in the bond market and are subject to risks including interest rate and credit risk. Interest rate risk is the risk that changes in interest rates will affect the security s market value, since the market value of fixed income securities generally falls when interest rates rise. Interest rate risk is generally greater for investments with longer durations or maturities. Credit risk is the risk associated with an issuer or guarantor of a fixed income security; if the issuer s or guarantor s credit quality deteriorates the security s market value can decline in value and the issuer or guarantor may not be able to make timely payments on an obligation. The Fund may invest in fixed income securities that are below investment grade (i.e., high yield bonds) that are generally rated in the fifth or lower rating categories of Standard & Poor s and/or Moody s Investors Service. Although these securities tend to provide higher yields than higher rated securities, there is a greater risk that the securities values will decline principally due to higher credit risk. Treasury Inflation-Protected Securities (TIPS) are securities issued by the US Treasury Department and backed by the full faith and credit of the US government. Interest income will rise with higher inflation and decline when inflation falls. A security backed by the US Treasury is guaranteed only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. Real estate investing may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical area. Real estate investing may be subject to risks including, but not limited to, declines in the value of real estate, risks related to general and economic conditions, changes in the value of the underlying property owned by the Fund, defaults by borrowers, and liquidity risk (the risk that a real estate holding may be difficult to purchase or sell at a given time.) Cash equivalents may include a portfolio of short term fixed income securities issued by the US Government or its affiliates and are subject to risks similar to those of fixed income securities such as credit risk and interest rate risk. Derivatives may involve certain costs and risks including liquidity, interest rate, market, credit and counterparty risks. Liquidity risk is the risk that a security may be difficult to purchase or sell at an advantageous time. Interest rate risk is the risk that changes in interest rates will affect the security s market value. Market risk is the risk that the value of securities will change due to factors affecting securities markets generally or particular industries, or deviate from theoretical values. Credit risk is the risk associated with an issuer or guarantor of a fixed income security. Counterparty risk is the risk that other party in the transaction may not fulfill its contractual obligation. Investing in derivatives could lose more than the amount invested. Page 7