Benchmarking Target-Date Funds: Art or Science?

Transcription

1 Benchmarking Target-Date Funds: Art or Science? Jeremy Stempien Director of Investments Morningstar Investment Management Chicago, Illinois 2013 Morningstar. All Rights Reserved. These materials are for information and/or illustration purposes only. Morningstar Investment Management is a division of Morningstar, Inc., which includes Morningstar Associates, LLC, Morningstar Investment Services, Inc., and Ibbotson Associates, Inc., all registered investment advisors and wholly owned subsidiaries of Morningstar, Inc. All investment advisory services described herein are provided by one or more of the registered investment advisor subsidiaries. The Morningstar name and logo are registered marks of Morningstar. This presentation includes proprietary materials of Morningstar. Reproduction, transcription or other use, by any means, in whole or in part, without the prior, written consent of Morningstar is prohibited. The opinions expressed in this presentation are those of the speaker. The International Society and International Foundation disclaims responsibility for views expressed and statements made by the program speakers. 6B-1

2 Agenda Brief Overview of the Target Date Market Place Selecting a Target Date Benchmark Qualitative Factors Quantitative Measures Using a Target Date Benchmark 1 6B-2

3 Overview of the Target Date Market Place 2 6B-3

4 (millions) $20,000 Growing Target Date Fund Flows (retail) $15,000 $10,000 $5,000 $0 -$5,000 3 Source: Morningstar Direct, For illustrative purposes only. 6B-4

5 (millions) $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Growing Target Date AUM (retail) 4 Source: Morningstar Direct, For illustrative purposes only. 6B-5

6 Target Date Fund Series Growth (retail) Target Date Fund Series Source: Morningstar Direct, For illustrative purposes only. 6B-6

7 Growing in Importance $500,000,000,000 $450,000,000,000 Assets Under Management $400,000,000,000 $350,000,000,000 $300,000,000,000 $250,000,000,000 $200,000,000,000 $150,000,000,000 $100,000,000,000 $50,000,000,000 $0 6 Fidelity Investments T. Rowe Price Vanguard BlackRock Wells Fargo Advantage Other Source: Morningstar Direct, For illustrative purposes only. 6B-7

8 Market Share of Open-End Target Date AUM 100% 80% 60% 40% Fidelity Vanguard T. Rowe Price Wells Fargo BlackRock Other 20% 0% 7 Source: Morningstar Direct, For illustrative purposes only. 6B-8

9 The Growing Importance of Target Date Funds $545 billion today Registered Funds (Morningstar Investment Management Estimate)* $1 trillion during 2014 At historical growth rate (Morningstar Investment Management Estimate)* $1.7 trillion by 2015 and 60% of DC asset A 2010 McKinsey & Company Study $3.7 trillion by 2020 and 48% of DC asset A 2011 Casey Quirk estimate * Estimate as 6/30/ B-9

10 Draw of Target Date Funds for Plan Sponsors Fiduciary obligations Government endorsed QDIA Institutionally managed Access to sophisticated asset classes Low participant interaction required 9 6B-10

11 Goal of Target Date Funds Variety of views by plan sponsors Provide a pre-determined income replacement ratio Provide an appropriate level of equity & appropriate asset allocation Get more conservative over time Have employees feel confident about their retirement picture 10 6B-11

12 Plan Sponsors Are Becoming Paternalistic Just 4% of employers are very confident their employees will retire with adequate retirement assets 1 62% of employees consider themselves accidental investors 2 Reluctant to invest/save Lack confidence More plans offering do-it-for-me plan features Obligated to ensure reasonable plan costs Shrinking core investment plan options 11 1: AllianceBernstein Research, : AonHewitt 6B-12

13 Selecting a Target Date Benchmark 12 6B-13

14 Glide Path of Hypothetical Fund Family Relative to Index Series 100 Equity Exposure (%) Aggressive Index Series Hypothetical Target-Date Series Conservative Index Series Age 13 6B-14

15 Selecting a Target Date Benchmark Selecting a Target Date Benchmark Thomas Idzorek, CFA, Global Chief Investment Officer Morningstar Investment Management Jeremy Stempien, Senior Consultant Ibbotson Associates Nathan Voris, Consultant Ibbotson Associates September 30, 2011 a Morningstar company Available: B-15

16 40 Act Target Date Benchmarking Practices Primary Prospectus Benchmark Number of Fund Series Number of Funds S&P Blended Benchmark 5 43 Barclays Capital US Aggregate Bond 8 32 Russell S&P Target Date 4 27 Morningstar Lifetime Moderate 2 16 Dow Jones Target Year 2 15 Dow Jones Real Return Portfolio Target 2 15 MSCI US Broad Market 1 10 Dow Jones US Total Full Cap 1 7 Russell Morningstar Lifetime Aggressive 1 5 Morningstar Lifetime Conservative 1 5 Wilshire Bank of America/Merrill Lynch US Treasuries 1-3 Year 1 4 Barclays US Intermediate-term Bond 1 2 Dow Jones Moderately Conservative 1 1 Russell 1000 Value 1 1 No listed primary benchmark in Morningstar Direct Total Source: Morningstar Direct as of 12/31/2012 6B-16

17 Common Benchmarking Practices Single Index-Relative to Benchmark Inappropriate for Target Maturity Funds Custom Benchmark Ignores Asset Allocation Decision Blended Index Ignores Asset Allocation Decision Peer Group (Universe) Benchmark Not investable 16 6B-17

18 Target Maturity Benchmarks No Universally Accepted Benchmark Characteristics Constituents / Opportunity Set: No universally accepted standard Weighting Scheme: No universally accepted standard 17 6B-18

19 Return % Historical Annual Risk and Return Graph: 2/2001 1/ Standard Deviation 4 - US Equity Indexes 3- US Bond Indexes Indexes Indexes Index 18 For illustrative purposes only. Not to be used to assess the exact risk/return relationship between indexes. Indexes shown are unmanaged and not available for direct investment. Past performance is not a guarantee of future results. 6B-19

20 Selecting a Target Date Benchmark Qualitative Factors adding to the CFA Institute s Characteristics of a good benchmark ) Quantitative Measures of Goodness of Fit Average Absolute Stock-Bond Glide Path Differential Average Historical Tracking Error Average Forward-Looking Tracking Error 19 6B-20

21 Qualitative Factors: Adding to the CFA Institute s Characteristics of a good benchmark Unambiguous Investable Measurable Appropriate Reflective of current investment opinions Specified in advance Robust overall glide path methodology Robust opportunity set of individual asset classes Robust methodology for determining the detailed intra-stock and intra-bond asset class allocations CFA Institute s Characteristics of a Good Benchmark Morningstar s Characteristics of a Good Target Maturity Benchmark 20 6B-21

22 Target Date Index Comparisons: Overview Index Data Start Date No. of Asset Classes Year Increments To or Through Reconstitute /Rebalance S&P Target Date Series May Annual/Monthly Dow Jones Global Jan Through Semi-annual Dow Jones US Target Jan Through Semi-annual Dow Jones Real Return Target Date Series Morningstar Lifetime Allocation (w/risk tracks) Dec Semi-annual Dec Through Annual/Quarterly 21 Source: Internal Morningstar Investment Management analysis based on information collected 6B-22

23 Target Date Index Comparisons: Asset Classes Index S&P Target Date Series Dow Jones Global Dow Jones US Target Dow Jones Real Return Target Date Series Morningstar Lifetime Allocation (w/risk tracks) Asset Classes Stocks: US Large, US Mid, US Small, Int l Equities, Emerging Mkts, US REITs Bonds: Core Fixed Income, Short Term Treasuries, TIPS Stocks: US Large Cap Growth, US Large Cap Value, US Mid Cap Growth, US Mid Cap Value, US Small Cap Growth, US Small Cap Value, Europe/Canada, Asia/Pacific, Emerging Markets Bonds: US Government Bond, US Corporate Bond, US Mortgage Bond, Majors (ex US), 1-3 month T-bill Stocks: US Large Cap Growth, US Large Cap Value, US Mid Cap Growth, US Mid Cap Value, US Small Cap Growth, US Small Cap Value Bonds: US Government Bond, US Corporate Bond, US Mortgage, 1-3 month T-bill Stocks: Global Equities, Global REITs Bonds: US Agg. Bonds, US TIPS Other: Commodities Stocks: US Large Cap Growth/Value/Core, US Mid Cap Growth/Value/Core, US Small Cap Growth/Value/Core, Non-US Dev., Emerging Markets Bonds: Long-Term Core Bonds, Intermediate-Term Bonds, Short-Term Bonds, Global Government, Emerging Market Bonds, TIPS, Cash Other: Commodities Number of Asset Classes Source: Internal Morningstar Investment Management analysis based on information collected 6B-23

24 Case Study: Fidelity Freedom Funds 23 6B-24

25 Fidelity Freedom Funds: Key Philosophies Glide Path Philosophy Please note that with the exception of the Freedom Income Fund, each fund's asset allocation strategy becomes increasingly conservative as it approaches the target date and beyond. Intra-Stock / Intra-Bond Methodology At Fidelity, we spent three years perfecting our dynamic asset allocation rolldown technique before ever using it in the marketplace, and we believe our technique is the most effective in the industry. Our closely protected, nonlinear technique strives to maximize returns during a shareholder's accumulation years and minimize downside risk after retirement. Asset Classes Large-cap Equity, Small-cap Equity (Growth tilt), Non-US Developed, Non- US Developed Small Cap, Emerging Markets, REITs, Commodities, TIPS, High Yield Bonds, Emerging Markets Bond, Intermediate-term Bond, Floating Rate Notes 24 Source: Fidelity Freedom Funds Prospectus and Fidelity Web Site as of January B-25

26 Quantitative Measures: Finding the Best Fit Benchmark Family Average Absolute Stock-Bond Glide Path Differential Average Historical Tracking Error Average Forward-Looking Tracking Error 25 6B-26

27 Goodness of Fit: Average Glide Path Differential Glide Path of Hypothetical Fund Family Relative to Index Family 100 Equity Exposure (%) Target Date Benchmark Hypothetical Fund Family For illustration only. Age 6B-27

28 Goodness of Fit Average Glide Path Differential Fidelity Freedom Fund Family Relative to Index Families 27 Source: Glide paths are estimated by Morningstar Investment Management using information collected in March 2011 from Dow Jones website, S&P website, and Morningstar databases. Thomas Idzorek, Jeremy Stempien, and Nathan Voris, Selecting a Target Date Benchmark, April, For illustration only. 6B-28

29 Average Absolute Stock-Bond Glide Path Differential Fidelity Freedom Funds Fidelity Freedom Fund Morningstar Lifetime Allocation Index - Aggressive Morningstar Lifetime Allocation Index - Moderate Morningstar Lifetime Allocation Index - Conservative S&P Target Date Indexes DJ Target Date DJ Real Return Target Date Indexes DJ US Target Date * * * 6.85* 6.85* 11.77* Income Average * Target date indexes did not exist for these target dates; thus, the stock-bond split was inferred from corresponding near-dated indexes from the same index family. Source: Glide paths are estimated by Morningstar Investment Management using information collected in March 2011 from Dow Jones website, S&P website, and Morningstar databases 6B-29

30 Goodness of Fit: Average Historical Tracking Error Glide Path of Hypothetical Fund Family Relative to Index Family Example: Equity Exposure (%) Identify 20XX Hypothetical Fund Family Time-Series Identify 20XX Target Date Benchmark Time-Series Calculate Historical Tracking Error Target Date Benchmark Hypothetical Fund Family For illustration only. Age 6B-30

31 Goodness of Fit: Average Historical Tracking Error Fidelity Freedom Funds: Annualized Tracking Error Fidelity Freedom Fund Morningstar Lifetime Allocation Index - Aggressive Morningstar Lifetime Allocation Index - Moderate Morningstar Lifetime Allocation Index - Conservative S&P Target Date Indexes DJ Target Date DJ Real Return Target Date Indexes DJ US Target Date 2050* N/A ** * N/A 6.44 N/A N/A N/A N/A N/A Income Average * Target date indexes did not exist for these target dates; thus, the stock-bond split was inferred from corresponding near-dated indexes from the same index family. Source: Glide paths are estimated by Morningstar Investment Management using information collected in March 2011 from Dow Jones website, S&P website, and Morningstar databases 6B-31

32 Goodness of Fit: Average Forward-Looking Tracking Error Glide Path of Hypothetical Fund Family Relative to Index Family Asset Class Allocation % Fund s Asset Allocations Benchmark s Asset Allocations Fund Allocation Benchmark Allocation = Active Asset Allocation (h A ) Forward-Looking Tracking = (h A h AT )^2 where covariance matrix 31 For illustration only. 6B-32

33 Goodness of Fit Forward-Looking Tracking Error Fidelity Freedom Funds: Annualized Tracking Error Fidelity Freedom Fund Morningstar Lifetime Allocation Index - Aggressive Morningstar Lifetime Allocation Index - Moderate Morningstar Lifetime Allocation Index - Conservative S&P Target Date Indexes DJ Target Date DJ Real Return Target Date Indexes DJ US Target Date N/A N/A N/A N/A N/A N/A Income Average Source: The detailed asset allocation exposures are estimated by Morningstar Investment Management using information collected in March 2011 from Dow Jones website, S&P website, and Morningstar databases. 6B-33

34 Selecting a Target Date Benchmark: Fidelity Freedom Fund Family Best Fit Benchmarks Benchmark Family Average Glide Path Differential Average Annual Tracking Error Average Forward- Looking Tracking Error Morningstar Lifetime Allocation Aggressive Morningstar Lifetime Allocation Moderate Morningstar Lifetime Allocation Conservative S&P Target Date Series Dow Jones Global Dow Jones Real Return Target Date Series Dow Jones US Target Source: Summary of information from previous slides. 6B-34

35 Using a Target Date Benchmark 34 6B-35

36 Using a Target Date Benchmark Using a Target Date Benchmark Thomas Idzorek, CFA, Global Chief Investment Officer Morningstar Investment Management Jeremy Stempien, Senior Consultant Ibbotson Associates April 5, 2012 a Morningstar company Available: B-36

37 Quantitative Measures: Finding the Best Fit Benchmark Family the use of target date benchmarks for benchmarking target date funds is significantly more nuanced than traditional benchmarking, requiring greater skill and interpretation, and perhaps most unsatisfyingly, regardless of the skill of the benchmarker, it will not definitively answer the question that investors, plan sponsors, and advisors care about the most: is the glide path of the fund family, including the evolving effective asset allocations, good? 36 6B-37

38 Strait Performance Comparison - Fidelity Freedom Funds (Dec Sept. 2011) Arithmetic Geometric Standard Deviation Sharpe Number of N Periods Mean (%) Mean (%) (%) Ratio Drawdowns Skewness Kurtosis Fidelity Freedom Morningstar Lifetime Mod Difference Fidelity Freedom Morningstar Lifetime Mod Difference Fidelity Freedom Morningstar Lifetime Mod Difference Fidelity Freedom Morningstar Lifetime Mod Difference Fidelity Freedom Morningstar Lifetime Mod Difference Source: Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-38

39 Glide Path Comparison Graph 100% 80% Morningstar Lifetime Moderate Index Equity 60% 40% 20% 0% Fidelity Freedom Funds Income Target Date 38 Source: Morningstar Direct. For illustrative purposes only. 6B-39

40 Beta-Adjusted Performance Comparison - Fidelity Freedom Funds (Dec Sept. 2011) Arithmetic Geometric Standard Deviation Sharpe Number of N Periods Mean (%) Mean (%) (%) Ratio Drawdowns Skewness Kurtosis Fidelity Freedom M* Mod 2050 (Beta-Adjusted) Difference Fidelity Freedom M* Mod 2045 (Beta-Adjusted) Difference Fidelity Freedom M* Mod 2040 (Beta-Adjusted) Difference Fidelity Freedom M* Mod 2035 (Beta-Adjusted) Difference Fidelity Freedom M* Mod 2030 (Beta-Adjusted) Difference Source: Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-40

41 Active Return Decomposition Active Return = a)return of the Effective Asset Allocation of Fund (Beta * Return of the Benchmark) + b)weighted Average Pure (Net of Fee) Alphas of Underlying Funds c)overall Fund Fee Weighted Average Fee of Underlying Funds + d) Other 40 6B-41

42 Underlying Funds Fidelity Freedom 2030 Fund (Dec Sept. 2011) 100% FSHNX FEDCX 90% FSIPX FFIDX FBNDX FSEAX Fund Exposures (%) 80% 70% 60% 50% 40% FDSCX FDSCX FBNDX FMCSX FDVLX FTBFX FIEUX FSRRX FCPGX FSTSX FTHRX FGRIX FOCPX FGOVX FSEAX FJPNX FEQIX FSIGX FCPVX FSOPX 30% FEMSX FDIVX FBGRX FOSFX 20% FAGIX SPHIX 10% FINVX FOHIX FIGSX FDGRX 0% Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 FCSSX FLVSX FDEQX FSAEX FSIGX 41 Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustration only. 6B-42

43 Fidelity Freedom 2030 Sub-Fund Holdings (Dec Sept. 2011) Fund Name Ticker Q Q Fidelity Disciplined Equity FDEQX 9.76% 7.58% Fidelity Growth Company FDGRX 6.59% 7.14% Fidelity Total Bond FTBFX 0.00% 0.00% Fidelity Government Income FGOVX 2.45% 0.00% Total 100% 100% 42 Source: Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-43

44 Asset Class Exposures (%) Effective Asset Allocation Fidelity Freedom 2030 (Dec Sept. 2011) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Cash TIPS Short-term Bonds Intermediate-term Bonds Long-term Bonds Non-US Bonds High Yield Bonds Commodities US REITs Emerging Markets Equity Non-US Developed Equity US Small Cap Value Equity US Small Cap Blend Equity US Small Cap Growth Equity US Mid Cap Value Equity US Mid Cap Blend Equity US Mid Cap Growth Equity US Large Cap Value Equity US Large Cap Blend Equity US Large Cap Growth Equity 43 Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustration only. 6B-44

45 Effective Asset Allocation Fidelity Freedom 2030 (Dec Sept. 2011) Asset Class Q Q U.S. Large Cap Growth Equity 16.18% 10.81% U.S. Large Cap Value Equity 10.90% 10.69% TIPS 0.61% 0.34% Cash 3.57% 2.33% Total 100% 100% 44 Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-45

46 Out/Underperformance of Effective Asset Allocation (Dec Sept. 2011) Asset Class Q Q Average U.S. Large Cap Growth Equity 5.58% % 0.80% U.S. Large Cap Value Equity 8.02% % -0.63% TIPS -1.27% 4.42% 1.78% Cash 1.23% 0.00% 0.37% Return of Effective Asset Allocation Beta Adjusted Morningstar Moderate 2030 Return 6.79% % 0.00% 7.28% % 0.65% Out/Underperformance -0.51% 0.48% 0.06% 45 Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-46

47 Asset Allocation Return Fidelity Freedom 2030 Fund (Dec Sept. 2011) 2% 2% 1% 1% 0% -1% -1% Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Quarterly Active Return Jun-11 Sep Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustration only. 6B-47

48 Quarterly Alphas of Underlying Funds Fidelity Freedom 2030 Fund (Dec Sept. 2011) Fund Name Ticker Q Q Average Fidelity Disciplined Equity FDEQX -0.41% -4.59% -0.92% Fidelity Growth Company FDGRX 1.99% 1.67% 0.53% Fidelity Total Bond FTBFX -0.15% 0.19% 0.04% Fidelity Government Income Weighted Avg FF 2030 Fund Alpha FGOVX 0.11% 0.14% 0.10% -0.32% -0.33% -0.25% 47 Source: Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-48

49 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Quarterly Alphas of Underlying Funds Fidelity Freedom 2030 Fund (Dec Sept. 2011) Quarterly Active Return 48 Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustration only. 6B-49

50 Active Return Decomposition Fidelity Freedom 2030 Fund (Dec Sept. 2011) Q Q Average Geometric Average Fidelity Freedom 2030 Fund 6.58% % 0.45% -0.03% Morningstar Moderate 2030 (Beta Adjusted) 7.28% % 0.65% 0.19% Active Return -0.70% -0.18% -0.20% -0.22% FF 2030 Effective Asset Allocation Return 6.79% % 0.71% 0.26% Morningstar Moderate 2030 (Beta Adjusted) 7.28% % 0.65% 0.19% (a) Asset Allocation Return -0.50% 0.48% 0.06% 0.07% (b) Weighted Avg Sub Fund Alpha Return -0.32% -0.28% -0.25% -0.25% Fidelity Freedom 2030 fund fee (overall) % % 0.19% 0.19% Weighted Average Sub Fund Fees % % 0.19% 0.19% (c) Fees % % % % (d) Other 0.12% -0.39% -0.01% -0.02% 49 Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-50

51 Fidelity Freedom 2030 Fund Active Return Decomposition Active Return = -20 bp a) Return of the Effective Asset Allocation of Fund (Beta * Return of the Benchmark) + b) Weighted Average Pure (Net of Fee) Alphas of Underlying Funds c) Overall Fund Fee Weighted Average Fee of Underlying Funds + d) Other +6 bp -25 bp 0 bp -1 bp 50 6B-51

52 Fidelity Freedom 2030 Fund Cumulative Active Return (Dec Sept. 2011) 2% 1% 0% -1% -2% -3% -4% (a) Asset Allocation Return (b) Weighted Avg Sub-Fund Alpha (c) Fees (d) Other -5% Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Sep Source: Morningstar Direct, Morningstar EnCorr and author calculations. For illustrative purposes only. 6B-52

53 Benchmarking Suggestions 1. Select a benchmark family with a similar a) glide path philosophy, b) asset class representation, and c) intra-stock / intra-bond approach. 2. Refine benchmark selection using best fit criteria. 3. After selecting the best fit benchmark, use a custom beta-adjusted benchmark for performance comparisons. 4. Isolate underlying fund performance by calculating the weighted average alpha of each target date fund. 5. Decompose manager vs. benchmark performance differences into alpha (positive or negative) from underline managers and other. 52 6B-53

54 Fund Performance and Attribution Asset class performance versus basic benchmark performance Measures impact of the asset classes and asset class allocations Net target date fund performance versus asset class performance Measures impact of individual manager allocations Gross target date fund performance versus net performance Measures impact of fees Can add impact measurement from tactical asset allocation 53 6B-54

55 Conclusions Selecting a Target Date Benchmark Qualitative Quantitative Measures of Goodness of Fit Using a Target Date Benchmark Benchmark comparisons won t tell you if glide path is good Appropriate use of a benchmark is very difficult / data intensive Key insights can include value added from: Detailed Asset Allocation Sub-Fund Alphas Fees Other 54 6B-55

56 For Information and/or illustrative purposes only. Not for public distribution Morningstar. All rights reserved. Morningstar Investment Management is a division of Morningstar. Morningstar Investment Management includes Morningstar Associates, Ibbotson Associates, and Morningstar Investment Services; all registered investment advisors and wholly owned subsidiaries of Morningstar, Inc. The information contained in this presentation is the proprietary material of Ibbotson Associates. Reproduction, transcription or other use by any means, in whole or in part, without the prior written consent of Ibbotson Associates, is prohibited. The Morningstar name and logo are registered marks of Morningstar, Inc. The Ibbotson name and logo are registered marks of Ibbotson Associates, Inc. 55 6B-56