The New Rate Regime Managing Income and Income Volatility

Transcription

1 The New Rate Regime Managing Income and Income Volatility The content of this presentation is presented for general information purposes only. Nothing contained herein should be considered a recommendation or advice to purchase or sell any security. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and it should not be relied on as such or be the basis for an investment decision. The statements and opinions expressed are those of Columbia Management Investment Advisers, LLC and are as of the date of this presentation. All information is historical and not indicative of future results, and subject to change. This presentation may include estimates, projections and other forward-looking statements. Due to numerous factors, actual events may differ substantially from those presented. Columbia Management Investment Advisers, LLC assumes no duty to update any such statements. Past performance does not guarantee future results. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. Investment products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC. For broker/dealer or institutional use only. May 1, 2017 CT-MK (4/17) CET Exp. 8/15/17

2 The New Rate Regime The New Rate Regime Investors May Need to Consider a New Approach to Generating Income The best case today is rates remain stubbornly low, but there is the risk that a new reliance on fiscal stimuli create budget strains that drive inflation and rates higher. Sourcing income and managing potential income volatility in this new rate regime presents unprecedented challenges for both fixed-income and equity investors. Fixed income investors need to consider that interest rates are just one part of fixed-income investing; credit quality, currency exposure, and inflation present new opportunities and risks. Equity investors, who turn to dividends for income need to identify companies that are able to initiate and grow dividends, and importantly investors need to pay attention to factors that are harbingers of potential dividend reductions. 2

3 The New Rate Regime An Unprecedented Experience In the U.S. Treasury Bond market Bond yields rose from under 2% in 1941 to almost 15% in 1982 and then fell back down to under 2% in Never before had bonds seen such a range. 16% 14% U.S. 10 Year Bond Yields %, U.S. Govt. 10-year yields 12% 10% 8% 6% 4% 2% 0% Source: U.S. Treasury, Irrational Exuberance, Robert Shiller, March 2000, Columbia Threadneedle Investments. Data as of 12/30/2016. Past performance is not a guarantee of future results. 3

4 The New Rate Regime Regime Change 1979 Paul Volker s Saturday Night Massacre During Paul Volcker s confirmation hearing in July 1979, the soon-to-be U.S. Federal Reserve chairman made his intentions clear. With inflation soaring 11%, Volcker pledged to make fighting inflation his top priority Inflation %, YoY, 1/31/ /30/2016 CPI (%, YoY) (12-m moving average) ' 70 ' 73 ' 76 ' 79 ' 82 ' 85 ' 88 ' 91 ' 94 ' 97 ' 00 ' 03 ' 06 ' 09 ' 12 ' 15 U.S. Germany UK Japan Source: OECD, data as of 12/30/2016, Columbia Threadneedle Investments 4

5 The New Rate Regime Regime Change 1979 Paul Volker s Saturday Night Massacre As a result of the new focus and the restrictive targets set for the money supply, the federal funds rate reached a record high of 20% in mid-1980 Central Banks Key Policy Rates %, 1/31/1970 1/31/ Key policy rates (%) '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 U.S. Germany ECB UK Japan Source: Bank of Japan, Bundesbank, Bloomberg, data as of 1/31/2017. Columbia Threadneedle Investments. Note that data for Germany is available from and ECB starts from 1998 onwards. US is effective monthly average Fed Funds rate. 5

6 The New Rate Regime The New Rate Regime After the Zero Interest Rate Policy After the 2008 financial crisis, the focus for most of the developed world was to reignite growth, rather than having to manage inflation. With current very low/near zero levels, it would seem the best case is interest rate stability, with the risk of higher interest rates if inflation picks up. Government Bond 10-year Yield %, 1/31/1970 1/31/2017 Govt. 10-year Yield (%) '53 '56 '59 '62 '65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 '16 U.S. 10Y Yield Germany 10Y Yield UK 10Y Yield Japan 10Y Yield Source: OECD, data as of 1/31/2017, Columbia Threadneedle Investments. Past performance is not a guarantee of future results. 6

7 The New Rate Regime The New Rate Regime After the Zero Interest Rate Policy Expectations now are that monetary policy has effectively reached its limits, and fiscal policy needs to be the tool to stimulate growth. But with already large budget deficits, concerns arise that these stimulative fiscal policies could well prove ineffective in stimulating growth and/or have a far greater inflationary than growth impact. 2.0 General Government Deficit % of GDP, General Govt. Deficit, % of GDP '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 Source: OECD, data as of 12/31/2015, Columbia Threadneedle Investments. U.S. Germany UK Japan 7

8 The New Rate Regime The New Rate Regime After the Zero Interest Rate Policy The fall in bond yields produced a prolonged bull market in bonds Return on 10-year bond, 10-yr CAGR 18% 16% 14% 12% 10% 8% 6% 4% 2% Return on 10-year bond 10-yr CAGR, % '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 U.S. Germany UK Japan Source: OECD, data as of 12/30/2016, Columbia Threadneedle Investments. Past performance is not a guarantee of future results. 8

9 The New Rate Regime The New Rate Regime After the Zero Interest Rate Policy The risk today is that with bond yields so low, a modest uptick in yield would produce negative returns 10 Year Bond Starting Yield 10-Year Bond Returns Assuming change in yield One year return assuming change in yield of bp +50bp +75bp +100bp 1.00% -0.2% -2.3% -4.3% -6.3% 1.50% 0.4% -1.7% -3.7% -5.6% 2.00% 0.9% -1.1% -3.1% -5.0% 2.50% 1.4% -0.5% -2.4% -4.3% 3.00% 2.0% 0.0% -1.8% -3.7% 3.50% 2.5% 0.6% -1.2% -3.0% 4.00% 3.0% 1.2% -0.6% -2.3% 4.50% 3.6% 1.8% 0.2% -1.7% 5.00% 4.1% 2.3% 0.6% -1.0% Source: Columbia Threadneedle Investments. Past performance is not a guarantee of future results. 9

10 The New Rate Regime Bond Market Opportunities Managing Interest Rate Risk in Context Interest rates are just one part of fixed-income investing. There are three other sources of risk and return: credit quality, currency exposure, and inflation Bond Market Risk Factor Returns by Calendar Year % * 20% 10% 0% -10% -20% -30% * Duration Credit Inflation Currency * Credit factor returns were % in 2008 and 59.85% in These data points were truncated to fit on the chart. Sources: Bloomberg Barclays Indices and Columbia Management Investment Advisers, LLC as of December 31, Updated annually. Past performance is not a guarantee of future results. 10

11 The New Rate Regime Bond Market Opportunities Managing Interest Rate Risk in Context For most domestic, investment-grade bond indices most of the risk comes from duration, or interest rate risk. Treasury inflation protected securities (TIPS) and investment-grade corporate bonds have much of their return still derived from duration. High-yield bonds and bank loans derive most of their volatility from credit risk; duration risk is low. In international markets, currency risk drives a significant portion of the volatility profile. Source: BlackRock Solutions 12/31/16. Holdings are subject to change. 11

12 The New Rate Regime Equity Market Opportunities Sustainable Dividends for Income Dividends are an important part of total return, and historically, have proven to be a consistent source of returns throughout each decade Average Annualized Return (%) S&P 500 Index returns by dividend & capital appreciation, 's 1940's 1950's 1960's 1970's 1980's 1990's 2000's S&P 500 income return S&P 500 capital appreciation 1930's 1940's 1950's 1960's 1970's 1980's 1990's 2000's / /2016 S&P 500 total return 0.3% 8.9% 19.2% 7.7% 5.7% 17.4% 18.1% -1.0% 12.7% 9.6% % of return from dividends N/A 66.6% 29.3% 43.1% 72.0% 27.5% 15.6% N/A 17.5% 42.7% Source: Ned Davis Research as of December 31, 2016, updated annually. Past performance is not a guarantee of future results. 12

13 The New Rate Regime Equity Market Opportunities Sustainable Dividends for Income During a period of rising rates, middle-to-lower-yielding stocks, i.e., companies that could potentially deliver dividend growth, historically have outperformed Excess Returns of Dividend-Paying Universe by Quintile In Periods of Declining Rates In Periods of Rising Rates Weekly excess returns 0.25% 0.15% 0.05% -0.05% -0.15% 0.12% 0.23% 0.06% -0.14% -0.12% -0.17% Weekly excess returns 0.25% 0.15% 0.05% -0.05% -0.15% 0.16% -0.10% 0.08% 0.07% 0.17% -0.25% -0.25% -0.35% No Q1 (high Dividend Div. Yield) Q2 Q3 Q4 Q5 (high Div. Yield) -0.35% -0.28% No Q1 (high Dividend Div. Yield) Q2 Q3 Q4 Q5 (high Div. Yield) Source:: FactSet, Fidelity Investments, as of June 30, Excess returns represent average weekly returns by dividend quintile above or below the return of the Russell 1000 Index, from June 30, 2012 to June 30, Past performance does not guarantee future results. 13

14 The New Rate Regime Equity Market Opportunities Sustainable Dividends for Income Over the long-term, dividend growers and initiators have outperformed the S&P 500 index 7680 S&P 500 stock returns by dividend policy 1/31/ /31/ Monthly Return (log scale) '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Dividend Growers & Initiators Non-Dividend Paying Stocks S&P 500 Geometric Equal-Weighted Total Return Index Source: Ned Davis Research as of December 31, 2016, updated annually. Past performance is not a guarantee of future results. There is no guarantee that these trends will continue. This information is intended for illustrative purposes only. It is not intended to be representative of specific portfolio holdings. Dividend Growers & Initiators represents those companies in the S&P 500 Index that have either grown their cash dividend or initiated one over the last 12 months. Non Dividend-Paying Stocks are those in the Index that have not paid dividends in the last 12 months. 14

15 The New Rate Regime Equity Market Opportunities Sustainable Dividends for Income Investors have felt the pain before a dividend cut is announced The impact of a dividend cut Source: Wolfe Research Accounting & Tax Policy Research; Company filings; Bloomberg; Standard & Poor s; FactSet; Columbia Management Investment Advisers, LLC as of 12/31/16. Note: Universe includes Russell 3000 companies, ex <$250M market capital companies since Measurement date from 5 days after the cut announcement. Past performance is not a guarantee of future results. There is no guarantee that these trends will continue. This information is intended for illustrative purposes only. It is not intended to be representative of specific portfolio holdings. 15

16 The New Rate Regime OPTION B Equity Market Opportunities Sustainable Dividends for Income ESG has aligned with performance Doing WELL while doing GOOD Classifying sustainability factors that are material or immaterial according to the specific industry for the company has historically produced better investment results Past performance does not guarantee future results Source: Corporate Sustainability: First Evidence on Materiality, Mozaffar Khan, George Serafeim, Aaron Yoon, Working Paper , Harvard Business School (2015). 16

17 The New Rate Regime Equity Market Opportunities Sustainable Dividends for Income While over the long term Dividend Growers & Initiators have outperformed the S&P 500, using metrics of dividend sustainability along with ESG factors has helped materially Index Performance Pre-Inception (11/30/2005 4/30/2016) Live Performance (5/31/2016 3/31/2016) 200% 170% 140% 110% 80% 1 Beta Advantage Sustainable U.S. Equity Income 100 Index (Gross) 2 Beta Advantage Sustainable U.S. Equity Income 100 Index (Net) Dividend Growers & Initiators S&P 500 Geometric Equal-Weighted Total Return Index 50% 20% -10% -40% -70% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 230% 200% 170% 140% 110% 80% 50% 20% -10% -40% -70% May-16 Sep-16 Jan % 178% 122% 73% 1 Does not reflect the current ESGS expense ratio (0.35%), any transaction costs or expenses, which could reduce returns. 2 Reflects the current ESGS expense ratio (0.35%), as calculated by CMIA, but does not reflect any transaction costs and expenses, which could reduce returns. Source: Dividend Growers & Initiators, S&P 500 Geometric Equal-Weighted Total Return Index sourced from Ned Davis Research; Beta Advantage Sustainable U.S. Equity Income 100 Index sourced from Bloomberg, data as of 3/31/2016; monthly returns. Past performance is not a guarantee of future results. There is no guarantee that these trends will continue. This information is intended for illustrative purposes only. It is not intended to be representative of specific portfolio holdings. Dividend Growers & Initiators represents those companies in the S&P 500 Index that have either grown their cash dividend or initiated one over the last 12 months. Index returns are for illustrative purposes only and do not represent actual fund performance. The Columbia Sustainable U.S. Equity Income ETF (the ETF ) is a relatively new product and any performance prior to the date of index inception (5/3/2016) is hypothetical. The pre-inception index performance for the Beta Advantage Sustainable U.S. Equity Income 100 Index (the Index ) is based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance and cannot account for all financial risk that may affect the actual performance of the ETF. The actual performance of the ETF may vary significantly from the pre-inception performance of the Index. The pre-inception performance of both the Index and of the S&P 500 Index performance reflects the reinvestment of dividends. Indexes are unmanaged and one cannot invest directly in an index. Current performance data may be higher or lower than actual data quoted. For the most current index performance data and to receive the methodology of the Index, to the extent that it is publically available, please call Fund performance for ESGS is only available since Fund inception on 6/13/2016; for the standardized performance of ESGS, please see page

18 Columbia Sustainable Equity Income ETFs Columbia Sustainable U.S. Equity Income ESGS Columbia Sustainable International Equity Income ESGN Columbia Sustainable Global Equity Income ESGW For institutional use only Columbia Management Investment Advisers, LLC. All rights reserved. 18

19 Columbia Sustainable Equity Income ETFs Sustainable Equity Income: A Multi-Factor Approach Reliable Income. Responsible Companies. By utilizing best practices developed through years of active management, we aim to provide consistent income by identifying dividend paying companies with the financial stability and consistent cash flow to support their payouts NOTE: The ETFs in this presentation are all passively managed. 19

20 Columbia Sustainable Equity Income ETFs Beta Advantage Sustainable Equity Indices Each index is based on a similar construction process, identifying factors that provide income, quality and sustainability Eligible Universe Stock Selection Final Construction Sustainable companies with minimum dividend yield Additional factors focused on income and quality Beta Advantage Sustainable Equity Income Indices All publicly traded companies (excluding REITs) incorporated in the appropriate MSCI benchmarks U.S., Global and International With initial factors incorporated: ESG rating of BBB or better according to MSCI Research Dividend yield of 1% or better Composite Factor created based on: Income Related Metrics Dividend yield Dividend growth Dependability and Quality Free cash flow or net income 12-mo and 36-mo periods Sector and/or region neutral, as appropriate Factors used to create raw scores U.S. and International Indices: Top 100 names ranked by average of Composite Factor and Dividend Yield scores Global Index: Combination of top 100 U.S. and top 100 international Step-down weighting of portfolio with #1 ranked company at 1.5% and #100 at 0.5% Reconstitutes and rebalances quarterly Source: MSCI, December Note: The Global Index is a combination of the U.S. and International indices, with the overall weighting to the U.S. names equal to the % securities belonging to MSCI USA Index in the MSCI World Value Index and the overall weighting to the International names equal to the % securities belonging to MSCI World ex USA Index in the MSCI World Value Index. 20

21 Columbia Sustainable Equity Income ETFs Columbia Sustainable U.S. Equity Income ETF Ticker: ESGS Key Statistics Top 10 Industry Weights Sector Weights (GICS) ETF Ticker (NYSE) ESGS Oil & Fuel 8.71% Bloomberg Index Ticker M2CXCTA Food Products 6.73% Fund Inception Date 6/13/2016 Insurance 5.49% Expense Ratio 0.35% Tech Hardware Storage 5.41% Health Care 5.9% Materials 5.5% Telecom Services 1.5% Industrials 18.4% Holdings 99 Specialty Retail 5.11% Average Market Cap $ 54.68B Capital Markets 5.03% Utilities 8.8% Median Market Cap $ 25.37B Aerospace & Defense 4.93% Total Constituent DTV $ 26.27B Machinery 4.88% Energy 10.7% Financials 12.9% Price/Earnings Ratio (Trailing) 18.74x Chemicals 4.48% Price/Book Ratio 2.58x Electric Utilities 3.57% Index Dividend Yield 2.65% Consumer Staples 11.6% Info Tech 12.1% Consumer Disc 12.6% S&P 500 Dividend Yield 2.02% Source: MSCI, Bloomberg, Columbia Threadneedle Investments as of March 31, The Columbia Sustainable U.S. Equity Income ETF seeks investment results that correspond (before fees and expenses) to the price and yield performance of the Beta Advantage Sustainable U.S. Equity Income 100 Index. Weightings subject to change. Past performance does not guarantee future results. The MSCI ESG Quality Peer Rank reflects the MSCI ESG Quality Score for the ETF as compared to a universe of 216 Mutual Funds and ETFs in the Equity US Income Lipper Global Classification as of April 30, The ESG Quality Score measures the ability of underlying holdings to manage key medium to long-term risks and opportunities arising from environmental, social, and governance factors. The Columbia Sustainable U.S. Equity Income ETF receives a high score of 6.3 out of 10, and has 23% exposure to ESG leaders and 0% exposure to ESG laggards. It ranks in the 100 th percentile within the Equity Global Income peer group and in the 79 th percentile within the global universe of all funds in coverage. 21

22 Columbia Sustainable Equity Income ETFs Columbia Sustainable International Equity Income ETF Ticker: ESGN Key Statistics Top 10 Country Weights Sector Weights (GICS) ETF Ticker (NYSE) ESGN Japan 31.72% Bloomberg Index Ticker M1CXCTB United Kingdom 14.96% Utilities 4.6% Fund Inception Date 6/13/2016 France 13.63% Expense Ratio 0.45% Spain 7.40% Holdings 99 Canada 4.87% Average Market Cap $ 18.71B Netherlands 4.78% Health Care 5.0% Information Tech 5.7% Telecom Services 5.9% Industrials 21.0% Median Market Cap $ 10.71B Australia 4.68% Total Constituent DTV $ 9.65B Italy 4.01% Price/Earnings Ratio (Trailing) 15.32x China 3.80% Price/Book Ratio 1.57x Germany 1.85% Index Dividend Yield 3.37% Materials 7.3% Financials 10.3% Energy 10.6% Consumer Staples 10.6% Consumer Disc 15.7% MSCI EAFE Dividend Yield 3.07% Source: MSCI, Bloomberg, Columbia Threadneedle Investments as of March 31, The Columbia Sustainable International Equity Income ETF seeks investment results that correspond (before fees and expenses) to the price and yield performance of the Beta Advantage Sustainable International Equity Income 100 Index. Weightings subject to change. Past performance does not guarantee future results. The MSCI ESG Quality Peer Rank reflects the MSCI ESG Quality Score for the ETF as compared to a universe of 626 Mutual Funds and ETFs in the Equity Global Ex US Lipper Global Classification as of April 30, The ESG Quality Score measures the ability of underlying holdings to manage key medium to long-term risks and opportunities arising from environmental, social, and governance factors. The Columbia Sustainable International Equity Income ETF receives a high score of 7.0 out of 10, and has 48% exposure to ESG leaders and 0% exposure to ESG laggards. It ranks in the 98 th percentile within the Equity Global ex US peer group and in the 95 th percentile within the global universe of all funds in MSCI ESG Fund Metrics coverage. 22

23 Columbia Sustainable Equity Income ETFs Columbia Sustainable Global Equity Income ETF Ticker: ESGW Key Statistics Top 10 Country Weights Sector Weights (GICS) ETF Ticker (NYSE) ESGW United States 58.66% Bloomberg Index Ticker M1CXCTC Japan 13.13% Fund Inception Date 6/13/2016 United Kingdom 6.20% Health Care 5.5% Telecom Services 3.3% Expense Ratio 0.40% France 5.65% Holdings 198 Spain 3.07% Materials 6.3% Industrials 19.5% Average Market Cap $ 39.76B Netherlands 2.31% Median Market Cap $ 18.91B Canada 2.02% Utilities 7.1% Total Constituent DTV $ 35.92B Australia 1.94% Price/Earnings Ratio (Trailing) 17.16x Italy 1.66% Price/Book Ratio 2.02x China 1.57% Index Dividend Yield 2.95% Information Tech 9.4% Energy 10.7% Consumer Staples 11.2% Financials 11.8% Consumer Disc 3.9% MSCI World Dividend Yield 2.43% Source: MSCI, Bloomberg, Columbia Threadneedle Investments as of December 31, The Columbia Sustainable International Equity Income ETF seeks investment results that correspond (before fees and expenses) to the price and yield performance of the Beta Advantage Sustainable International Equity Income 100 Index. Weightings subject to change. Past performance does not guarantee future results. The MSCI ESG Quality Peer Rank reflects the MSCI ESG Quality Score for the ETF as compared to a universe of 214 ETFs as of April 30, The ESG Quality Score measures the ability of underlying holdings to manage key medium to long-term risks and opportunities arising from environmental, social, and governance factors. The Columbia Sustainable Global Equity Income ETF receives a high score of 6.6 out of 10, and has 33% exposure to ESG leaders and 0% exposure to ESG laggards. It ranks in the 98 th percentile within the Equity Global Income peer group and in the 86 th percentile within the global universe of all funds in MSCI ESG Fund Metrics coverage. 23

24 Columbia Sustainable Equity Income ETFs Columbia Sustainable Equity Income Suite ESGS ESGN ESGW Fund Columbia Sustainable U.S. Equity Income ETF Columbia Sustainable International Equity Income ETF Columbia Sustainable Global Equity Income ETF Fund objective Investment strategy Seeks investment results that, before fees and expenses, closely correspond to the performance of respective custom index Each Fund uses a passive approach that seeks to replicate the performance of the index. The index applies a systematic, rules-based multi-factor model and provides exposure to companies that offer competitive and sustainable levels of income, as well as competitive total return. Each index will also screen companies based on environmental, social and governance (ESG) practices. Vehicle Passive ETF Passive ETF Passive ETF Primary index (tracking) Beta Advantage Sustainable U.S. Equity Income 100 Index Beta Advantage Sustainable International Equity Income 100 Index Beta Advantage Sustainable Global Equity Income 200 Index Secondary benchmark (Universe) Tertiary benchmark (Comparable) Projected Morningstar Category Projected Morningstar Strategic Beta Attributes MSCI USA Index MSCI World ex USA Index MSCI World Index MSCI USA Value Index MSCI World ex USA Value Index MSCI World Value Index US ETF Large Value US ETF Foreign Large Value US ETF World Stock Dividend Screened/ Weighted, Quality, Multi factor Rebalance Quarterly Quarterly Quarterly Number of Holdings Fees 35 bps TER 45 bps TER 40 bps TER Derivative usage Broad equity market futures for cash equitization purposes Broad equity market futures for cash equitization purposes Broad equity market futures for cash equitization purposes Distribution Frequency Quarterly Quarterly Quarterly 24

25 Appendix Beta Advantage Sustainable Equity Income Indices For institutional use only Columbia Management Investment Advisers, LLC. All rights reserved. 25

26 Beta Advantage Sustainable Equity Income Indices Beta Advantage Sustainable Equity Income Indices Screen/Factor What? Why? Screen Dividends Exclude Stocks w/ Dividends <1% Equity Income portfolio REITs Exclude REITs Better suited for a dedicated REIT strategy ESG Score Exclude stocks w/ Score of BB or worse Smoother earnings, less likely to face litigation or dividend cuts Factor Income Related (50%) Dividend Yield (sector neutral) Dividend Growth (sector neutral) Dividend paying stocks outperform over time; but don t want to concentrate in high yielding sectors Dividend growers both outperform and provide sustainable income Free Cash Flow / Indicated Dividends (non Financials/Utilities) Free Cash Flow is the best indicator of ability to outperform and grow dividend Quality Metrics (50%) Net Income / Indicated Dividends (Financials & Utilities) Financials & Utilities have unique business models, and Net Income is a more reliable factor of quality Scored on both a trailing 12 month & 3-Year Average Looking at both a recent & 3-year period is a more holistic approach 26

27 Beta Advantage Sustainable U.S. Equity Income 100 Index (Includes Pre-Inception Index Performance) Index Performance 200% 150% 100% 50% 0% Pre-Inception (11/30/2005 5/2/2016) Beta Advantage Sustainable U.S. Equity Income 100 Index (Gross) 1 Beta Advantage Sustainable U.S. Equity Income 100 Index (Net) 2 S&P 500 Index (Gross) 1 S&P 500 Index (Net) 2 250% 200% 150% 100% 50% Since Inception (5/3/2016 3/31/2017) 0% 205% 194% 140% 131% -50% 11/30/2005 2/28/2007 5/31/2008 8/31/ /30/2010 2/29/2012 5/31/2013 8/31/ /30/ % 5/3/ /3/2016 3/3/ Does not reflect the current ESGS expense ratio (0.35%), any transaction costs or expenses, which could reduce returns. 2 Reflects the current ESGS expense ratio (0.35%), as calculated by CMIA, but does not reflect any transaction costs and expenses, which could reduce returns. Source: MSCI, CMIA, Bloomberg data as of March 31, Index returns are for illustrative purposes only and do not represent actual fund performance. The Columbia Sustainable U.S. Equity Income ETF (the ETF ) is a relatively new product and any performance prior to the date of index inception (5/3/2016) is hypothetical. The pre-inception index performance for the Beta Advantage Sustainable U.S. Equity Income 100 Index (the Index ) is based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance and cannot account for all financial risk that may affect the actual performance of the ETF. The actual performance of the ETF may vary significantly from the pre-inception performance of the Index. The pre-inception performance of both the Index and of the S&P 500 Index performance reflects the reinvestment of dividends. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data and to receive the methodology of the Index, to the extent that it is publically available, please call Fund performance for ESGS is only available since Fund inception on 6/13/2016; for the standardized performance of ESGS, please see page

28 Beta Advantage Sustainable International Equity Income 100 Index (Includes Pre-Inception Index Performance) Index Performance 200% 150% 100% Pre-Inception (11/30/2005 5/2/2016) Beta Advantage Sustainable International Equity Income 100 Index (Gross) 1 Beta Advantage Sustainable International Equity Income 100 Index (Net) 2 MSCI EAFE Index (Gross) 1 MSCI EAFE Index (Net) 2 200% 150% 100% Since Inception (5/3/2016 3/31/2017) 160% 148% 50% 50% 53% 45% 0% 0% -50% 11/30/2005 2/28/2007 5/31/2008 8/31/ /30/2010 2/29/2012 5/31/2013 8/31/ /30/ % 5/3/ /3/2016 3/3/ Does not reflect the current ESGN expense ratio (0.45%), any transaction costs or expenses, which could reduce returns. 2 Reflects the current ESGN expense ratio (0.45%), as calculated by CMIA, but does not reflect any transaction costs and expenses, which could reduce returns. Source: MSCI, CMIA, Bloomberg data as of March 31, Index returns are for illustrative purposes only and do not represent actual fund performance. The Columbia Sustainable International Equity Income ETF (the ETF ) is a relatively new product and any performance prior to the date of index inception (5/3/2016) is hypothetical. The pre-inception index performance for the Beta Advantage Sustainable International Equity Income 100 Index (the Index ) is based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance and cannot account for all financial risk that may affect the actual performance of the ETF. The actual performance of the ETF may vary significantly from the preinception performance of the Index. The pre-inception performance of both the Index and of the MSCI EAFE Index performance is net of withholding taxes and reflects the reinvestment of dividends. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data and to receive the methodology of the Index, to the extent that it is publically available, please call Fund performance for ESGN is only available since Fund inception on 6/13/2016; for the standardized performance of ESGN, please see page

29 Beta Advantage Sustainable Global Equity Income 200 Index (Includes Pre-Inception Index Performance) Index Performance 200% 150% Pre-Inception (11/30/2005 5/2/2016) Beta Advantage Sustainable Global Equity Income 200 Index (Gross) 1 Beta Advantage Sustainable Global Equity Income 200 Index (Net) 2 MSCI World Index (Gross) 1 Since Inception (5/3/2016 3/31/2017) 200% 150% 175% 163% 100% 2 MSCI World Index (Net) 100% 90% 82% 50% 50% 0% 0% -50% 11/30/2005 2/28/2007 5/31/2008 8/31/ /30/2010 2/29/2012 5/31/2013 8/31/ /30/ % 5/3/ /3/2016 3/3/ Does not reflect the current ESGW expense ratio (0.40%), any transaction costs or expenses, which could reduce returns. 2 Reflects the current ESGW expense ratio (0.40%), as calculated by CMIA, but does not reflect any transaction costs and expenses, which could reduce returns. Source: MSCI, CMIA, Bloomberg data as of March 31, Index returns are for illustrative purposes only and do not represent actual fund performance. The Columbia Sustainable Global Equity Income ETF (the ETF ) is a relatively new product and any performance prior to the date of index inception (5/3/2016) is hypothetical. The pre-inception index performance for the Beta Advantage Sustainable Global Equity Income 200 Index (the Index ) is based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance and cannot account for all financial risk that may affect the actual performance of the ETF. The actual performance of the ETF may vary significantly from the preinception performance of the Index. The pre-inception performance of both the Index and of the MSCI World Index performance is net of withholding taxes and reflects the reinvestment of dividends. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data and to receive the methodology of the Index, to the extent that it is publically available, please call Fund performance for ESGW is only available since Fund inception on 6/13/2016; for the standardized performance of ESGW, please see page

30 Partnering with MSCI Columbia Threadneedle Investments partnered with MSCI to be the index provider for the Beta Advantage Sustainable Equity Income Indexes, leveraging their operational capabilities in index management MSCI is a leading index provider, with $10.5 trillion in assets benchmarked to MSCI indexes worldwide 1 Additionally, MSCI has expertise evaluating and rating ESG elements of companies #1 in both assets linked to ESG-themed indexes and # of ESG-themes ETFs launched in MSCI ESG Research has over 150 analysts dedicated to ESG ratings, with over 700 ESG equity & fixed income indexes 3 1 Source: As of December 31, 2015, as reported on March 31, 2016 by evestment, Morningstar and Bloomberg. Data excludes futures and options. 2 Data from Bloomberg as of December 30, 2016, 3 Source: MSCI ESG Research as of March

31 Appendix Important Disclosures For institutional use only Columbia Management Investment Advisers, LLC. All rights reserved. 31

32 Important Disclosures Investors should carefully consider the investment objectives, risks, charges and expenses of a Fund before investing. To obtain a prospectus containing this and other important information, please call or visit columbiathreadneedleetf.com to view or download a prospectus. Read the prospectus carefully before investing. Investing involves risks, including the risk of loss of principal. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. ETFs trade like stocks, are subject to investment risk and will fluctuate in market value. In certain circumstances, a Fund might not be able to dispose of certain holdings quickly or at prices that represent true market value preventing them from tracking the underlying index. There is no assurance that an active trading market for Fund shares will develop or be maintained. International investing involves certain risks and volatility due to potential political, economic or currency instabilities and different financial and accounting standards. Investments in mid-cap companies involve risks and volatility greater than investments in larger, more established companies. ESG factors may cause the Fund to forgo certain investment opportunities and/or exposures to certain industries, sectors or regions. One cannot invest directly in an index. ETF shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The content of this presentation is presented for general information purposes only. Nothing contained herein should be considered a recommendation or advice to purchase or sell any security. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and it should not be relied on as such or be the basis for an investment decision. The statements and opinions expressed are those of Columbia Management Investment Advisers, LLC and are as of the date of this presentation. All information is historical and not indicative of future results, and subject to change. This presentation may include estimates, projections and other forward-looking statements. Due to numerous factors, actual events may differ substantially from those presented. Columbia Management Investment Advisers, LLC assumes no duty to update any such statements. Past performance does not guarantee future results. Columbia Management Investment Advisers, LLC serves as the investment manager to the ETFs. The ETFs are distributed by ALPS Distributors, Inc., which is not affiliated with MSCI, Columbia Management Investment Advisers, LLC or its parent company Ameriprise Financial, Inc Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied 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. Past performance is no guarantee of future results. 32

33 Fund Performance Disclosure Annualized Performance As of March 31, Month (cum.) Since Inception (cum.) Inception Date Expense Ratio Columbia Sustainable U.S. Equity Income ETF (NAV) 5.54% 20.34% 6/13/ % Columbia Sustainable U.S. Equity Income ETF (Market Price) 5.31% 20.54% Beta Advantage Sustainable U.S. Equity Income 100 Index 5.65% 20.74% Columbia Sustainable International Equity Income ETF (NAV) 7.69% 15.48% 6/13/ % Columbia Sustainable International Equity Income ETF (Market Price) 8.20% 18.78% Beta Advantage Sustainable International Equity Income 100 Index 7.84% 16.10% Columbia Sustainable Global Equity Income ETF (NAV) 6.40% 18.38% 6/13/ % Columbia Sustainable Global Equity Income ETF (Market Price) 6.50% 19.90% Beta Advantage Sustainable Global Equity Income 100 Index 6.43% 18.48% Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please call Market price returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times. 33

34 Beta Advantage Sustainable Equity Income Indices Index Methodology The Beta Advantage indices are custom indices owned and calculated by MSCI, based on MSCI Parent Indices and aim to reflect the performance of a Columbia Management Investment Advisers, LLC investment approach. The Beta Advantage Sustainable U.S. Equity Income 100 Index is designed to reflect the performance of top US large and mid-cap equities (excluding REITs) ranked and weighted according to a composite factor score based on security dividend yield, dividend growth and cash-based dividend coverage ratios. The percentile score for each factor is defined as sector relative percentile score; it is computed by standardizing the factor descriptor values within each sector group as per the existing Global Industry Classification Standard (GICS) structure. The composite factor score is computed by custom weighting the sector relative percentile scores for each factor. The index also applies MSCI ESG rating screens to exclude stocks with unfavorable corporate management of environmental and social risk factors. The Beta Advantage Sustainable U.S. Equity Income 100 Index is constructed using a fixed number of securities approach. All the constituents of the eligible universe are ranked based on their composite factor score and the 100 securities with the highest composite factor score are selected. A weighing rank is then computed for selected securities as the average of Composite Factor Score rank and the Dividend Yield Factor Score rank. The top 100 securities are then given weights according to its weighting rank; distributed linearly from 1.495% for weighting rank one to 0.505% for the weighting rank 100 at the time of rebalancing. Coinciding with the quarterly and semi-annual index reviews of the MSCI Global Investable Market Indexes, the Index is rebalanced on the last business day of February, May, August and November. The Beta Advantage Sustainable International Equity Income 100 Index is designed to reflect the performance of top large and mid-cap equities (excluding REITs) across Developed Markets excluding US, ranked and weighted according to a composite factor score based on security dividend yield, dividend growth and cash-based dividend coverage ratios. The percentile score for each factor is defined as a sector relative percentile score; it is computed by standardizing the region relative percentile scores within each sector group as per the existing Global Industry Classification Standard (GICS) structure. The composite factor score is computed by custom weighting the sector relative percentile scores for each factor. The index also applies MSCI ESG rating screens to exclude stocks with unfavorable corporate management of environmental and social risk factors. The Beta Advantage Sustainable International Equity Income 100 Index is constructed using a fixed number of securities approach. All the constituents of the eligible universe are ranked based on their composite factor score and the 100 securities with the highest composite factor score are selected. A weighing rank is then computed for selected securities as the average of Composite Factor Score rank and the Dividend Yield Factor Score rank. The top 100 securities are then given weights according to its weighting rank; distributed linearly from 1.495% for weighting rank one to 0.505% for the weighting rank 100 at the time of rebalancing. Coinciding with the quarterly and semi-annual index reviews of the MSCI Global Investable Market Indexes, the Index is rebalanced on the last business day of February, May, August and November. The Beta Advantage Sustainable Global Equity Income 200 Index constituents are selected from the MSCI World Index universe. It is designed to reflect the performance of top 200 large and mid-cap equities (excluding REITs) across all Developed Markets. It is a weighted combination of the Beta Advantage Sustainable U.S. Equity Income 100 Index and the Beta Advantage Sustainable International Equity Income 100 Index in a single composite index. At each rebalancing, Beta Advantage Sustainable U.S. Equity Income 100 Index is assigned weight equivalent to total weight of all the securities belonging to the MSCI USA Index in the MSCI World Value Index and Beta Advantage Sustainable International Equity Income 100 Index the total weight of all securities belonging to the MSCI World ex USA Index in the MSCI World Value Index. Coinciding with the quarterly and semi-annual index reviews of the MSCI Global Investable Market Indexes, the Index is rebalanced on the last business day of February, May, August and November. 34

35 Beta Advantage Sustainable Equity Income Indices Fund Objectives and Definitions Sustainable U.S. Equity Income Investment Objective Columbia Sustainable U.S. Equity Income ETF (the Fund) seeks investment results that, before fees and expenses, closely correspond to the performance of the Beta Advantage Sustainable U.S. Equity Income 100 Index (the Index). Sustainable Global Equity Income Investment Objective Columbia Sustainable Global Equity Income ETF (the Fund) seeks investment results that, before fees and expenses, closely correspond to the performance of the Beta Advantage Sustainable Global Equity Income 200 Index (the Index). Sustainable International Equity Income Investment Objective Columbia Sustainable International Equity Income ETF (the Fund) seeks investment results that, before fees and expenses, closely correspond to the performance of the Beta Advantage Sustainable International Equity Income 100 Index (the Index). The MSCI Europe, Australasia, Far East (EAFE) Index captures large and mid-cap representation across developed markets countries around the world, excluding the U.S. and Canada. The MSCI USA Index is an unmanaged index designed to measure the performance of the large and mid cap segments of the US market. The MSCI World ex USA Index is an unmanaged index which includes countries throughout the world, excluding the U.S. and Canada, in proportion to world stock market capitalization. The index includes all Developed Market countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the USA. The Barclays Global Aggregate Index is an unmanaged broad-based, market-capitalization-weighted index that is designed to measure the broad global markets for U.S. and non-u.s. corporate, government, governmental agency, supranational, mortgage-backed and asset-backed fixed-income securities. The Barclays Investment-Grade Corporate Index includes dollar-denominated debt from U.S. and non-u.s. industrial, utility and financial institution issuers. Subordinated issues, securities with normal call and put provisions and sinking funds, medium-term notes (if they are publicly underwritten) and 144A securities with registration rights and global issues that are SEC-registered are included. Structured notes with embedded swaps or other special features, as well as private placements, floating-rate securities and eurobonds, are excluded from the index. The Barclays U.S. Aggregate Bond Index is a market-value-weighted index that tracks the daily price, coupon, pay-downs and total return performance of fixed-rate, publicly placed, dollar-denominated and non-convertible investment-grade debt issues with at least $250 million par amount outstanding and with at least one year to final maturity. The Barclays U.S. Corporate High Yield Bond Index is composed of fixed-rate, publicly issued, non-investment-grade debt. The Barclays U.S. Government Inflation-linked Bond Index includes publicly issued, U.S. Treasury inflation-protected securities that have at least one year remaining to maturity on index rebalancing date, with an issue size equal to or in excess of $500 million. The S&P 500 Index is a broad-based measure of U.S. stock market performance. The S&P 500 Geometric Equal-Weighted Total Return Index is the equal-weight version of the widely-used S&P 500 Index. The S&P/LSTA Leveraged Loan Index reflects the market-weighted performance of institutional leveraged loans based upon real-time market weightings, spreads and interest payments. 35