NVIT Investor Destinations Funds

Transcription

1 NVIT Investor Destinations Funds Nationwide VIT Quarterly Asset class: Allocation Share class Class II Strategy Overview The NVIT Investor Destinations Funds (NVIT ID Funds) consist of seven risk-based funds-of-funds that invest in a mix of equity and fixed income asset classes. The risk levels of the NVIT ID Funds range from the Conservative Fund (a portfolio targeting 20% equity/80% fixed income) to the Aggressive Fund (targeting 90% equity/10% fixed income). The Funds are designed as single source investments for broad diversification to help variable insurance product owners save for their retirement. The NVIT ID Funds invest in a mix of actively- and passively-managed underlying mutual funds and ETFs which are sub-advised for Nationwide by a wide variety of global investment management firms. NATIONWIDE'S MARKET REVIEW Equity markets fell for the first quarter since the third quarter of 2015, as investors adopted a glass half empty approach despite healthy fundamentals. Last year saw an unprecedented lack of volatility, with investors looking beyond stressful headlines, choosing instead to believe in the synchronized global growth environment. Optimism continued in January following the passage of the tax bill, with the S&P 500 ( S&P 500 ) returning 5.7%, the best monthly return in nearly two years. That was followed by declines in February and March that were the weakest since January February saw the first 10% correction for the S&P 500 in two years, with the fastest move from a record high to a correction on record. Explanations for the weakness and volatility included valuations, inflation fears, rising interest rates, trade concerns and potential regulation in the technology sector. Despite the heightened concerns, economic data continue to suggest healthy growth, and corporate profit expectations continue to accelerate. folio management Nationwide Fund Advisors (NFA) Christopher C. Graham Chief Investment Officer Fund tenure since 2016 Keith P. Robinette, CFA Senior Director of Asset Strategies Fund tenure since 2017 Andrew Urban, CFA Senior Director of Asset Strategies Fund tenure since 2017 For the first quarter, the S&P 500, Dow Jones Industrial Average and NASDAQ Composite returned -0.8%, -2.0 and +2.6% respectively. Growth stocks substantially outperformed value and small caps outperformed large. Leading sectors included consumer discretionary, technology and telecom, while consumer staples, energy and materials lagged. During the quarter, the Federal Open Market Committee (FOMC) raised their Federal Funds target rate by 0.25%, with an expectation for two additional hikes for For the first time since the Fed began publishing the dot plot (summary of economic projections), the market s expectations for hikes are greater than Fed estimates. The market remains below the Fed expectations for 2019 and 2020, however. Interest rates were sharply higher for the quarter, as inflation expectations adjusted higher. The 10-year Treasury yield rose by 0.31% to 2.74%, while the 2-year yield jumped by 0.35%, resulting in a slight flattening of the yield curve. Credit spreads 1

2 deteriorated slightly in the quarter, resulting in the Bloomberg Barclays U.S. Aggregate Bond returning -1.5% for the quarter. International stocks were mixed for the quarter, with the MSCI EAFE returning -1.5% and the MSCI Emerging Markets returning +1.4% in the quarter. PERFORMANCE REVIEW For the first quarter of 2018, all seven NVIT ID Funds posted negative returns, though the Conservative, Moderately Conservative, Balanced, and Aggressive Funds each outperformed their respective category on a relative basis. Among underlying investments, 10 of the 13 underlying funds and ETFs posted negative returns during the quarter, though eight underlying funds outperformed their respective category on a relative basis. Each of the NVIT ID Funds performance details are below: The NVIT ID Conservative Fund posted a return of -0.69%, outperforming both its prospectus benchmark, the Bloomberg Barclays US Aggregate Bond (BbgBarc US Agg Bond ), and Morningstar Category - US Insurance Fund Allocation 15% to 30% Equity by 80 basis points (bps) and 22 bps respectively. The NVIT ID Moderately Conservative Fund posted a return of -0.79%, outperforming both its prospectus benchmark, the BbgBarc US Agg Bond, and Morningstar category - US Insurance Fund Allocation 30% to 50% Equity by 67 bps and 35 bps respectively. The NVIT ID Balanced Fund posted a return of -0.87%, underperforming its prospectus benchmark, the Russell 3000 (Russell 3000), but outperforming its Morningstar category - US Insurance Fund Allocation 30% to 50% Equity by -23 bps and 27 bps respectively. The NVIT ID Moderate Fund posted a return of -0.92%, underperforming both its prospectus benchmark, Russell 3000, and Morningstar category - US Insurance Fund Allocation 50% to 70% Equity by -28 bps and -21 bps respectively. The NVIT ID Capital Appreciation Fund posted a return of -0.92%, underperforming both its prospectus benchmark, Russell 3000, and Morningstar category - US Insurance Fund Allocation 50% to 70% Equity by -28 bps and -21 bps respectively. The NVIT ID Moderately Aggressive Fund posted a return of -0.92%, underperforming both its prospectus benchmark, Russell 3000, and Morningstar category - US Insurance Fund Allocation 70% to 85% Equity by -28 bps and 7 bps respectively. The NVIT ID Aggressive Fund posted a return of -0.81%, underperforming its prospectus benchmark, Russell 3000, but outperforming its Morningstar category - US Insurance Fund Allocation 85%+ Equity by -17 bps and 20 bps respectively. CONTRIBUTORS The Nationwide Contract had the largest contribution to performance across the suite. The Contract was one of three underlying investments to post a positive return during the quarter, with the other two being the Nationwide Maximum 2

3 Diversification US Core Equity ETF and the Nationwide Risk-Based International Equity ETF. The higher relative to the Nationwide Contract led to the largest contribution to performance across the suite. DETRACTORS With 10 of the 13 underlying funds posting negative returns, most funds were detractors from fund performance during the quarter. Domestic large cap, mid cap, and small cap equities detracted from performance, however, the most significant detractor from performance was the NVIT Bond Fund. This fund is the largest fixed income allocation across the suite and posted a return of -1.53% for the quarter. NVIT ID Con NVIT ID Mod Con NVIT ID Balanced NVIT ID Mod NVIT ID Cap App NVIT ID Mod Agg NVIT ID Agg Underlying Investment NVIT S&P % % % % % % % Nationwide Ziegler Equity Inc Nationwide Risk-Based U.S. Equity ETF 1.5% 1.5% 1.5% 1.5% Nationwide Maximum Diversification U.S. Core Equity ETF 3.5% 3.5% 3.5% NVIT Mid Cap % % % NVIT Small Cap 7.0% 9.0% NVIT International % % % % Nationwide Risk-Based International Equity ETF NVIT Bond 29.0% % % Nationwide Core Plus Bond % % % Nationwide Inflation-Prot Secs Nationwide Contract % % NVIT Short Term Bond 1 7.0% The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown. MARKET ENVIRONMENT After a strong start to the year in January, equity volatility increased in February and March with the first 10% market correction since early Equity indices ended the period slightly lower for the quarter but volatility remained elevated, though down from February levels. The overall upward trend of the market is still intact, but the first quarter was considerably choppy. A strong economic backdrop continues to support the bull market, but talk of trade wars and uncertainty surrounding Fed rate hikes drove most major equity and fixed income indices negative this quarter. The negative returns on these indices hindered fund performance across the suite, as the NVIT ID funds predominantly invest in passive index funds. Given current business cycle positioning, we believe the suite is well-positioned moving forward. OUTLOOK Despite the choppy markets to date, the fundamental backdrop remains 3

4 supportive for equity returns. U.S. economic growth is expected to accelerate to 2.9% this year from 2.3% in 2017 per Nationwide Economics estimates, with 2.3% inflation compared to 2.1% last year. We expect to see continued higher rates on the short and long ends of the curve, with three Fed Funds rate hikes and a 10-year yield of around 3.1% by the end of 2018, per Nationwide Economics. Beyond the economic backdrop, the benefit of the tax plan and the falling dollar are driving corporate profits higher, with the S&P 500 expected to grow earnings by roughly 19% in 2018, providing a healthy environment for continued equity returns. 4

5 Average annual total returns (%) NVIT Investor Destinations Conservative Class II BBgBarc US Agg Bond Blended Benchmark* Allocation 15% to 30% Equity Category * 15% Russell 3000 ; 5% MSCI EAFE ; 40% BBgBarc US Agg Bond ; 35% BBgBarc US Govt/Credit 1-3 Yr ; 5% Citigroup 3-Month US T-Bill NVIT Investor Destinations Moderately Conservative Class II BBgBarc US Agg Bond Blended Benchmark* Allocation 30% to 50% Equity Category * 30% Russell 3000 ; 10% MSCI EAFE ; 35% BBgBarc US Agg Bond ; 25% BBgBarc US Govt/Credit 1-3 Yr Performance returns assume the reinvestment of all distributions. Returns for periods less than one year are not annualized. Total returns reflect a contractual expense limitation for direct annual Fund expenses for all classes for certain periods since inception, without which returns would have been lower. Performance numbers do not reflect and would be reduced by the insurance-related fees and charges of the variable product. Please consult the variable product prospectus for information about these fees and charges. To obtain the most recent standardized performance, go to nationwide.com/variable-annuities.jsp. The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. NVIT Funds are not sold to individual investors. These investment options are underlying subaccounts and cannot be purchased directly by the public. They are only available through variable products issued by life insurance companies. When evaluating the purchase of a variable annuity product, your clients should be aware that variable annuity products are long-term investment vehicles designed for retirement purposes and will fluctuate in value; and investing involves market risk, including possible loss of principal. 5

6 NVIT Investor Destinations Balanced Share class QTD YTD 1-year 3-year 5-year Since inception Class II Russell Blended Benchmark* Allocation 30% to 50% Equity Category * 35% Russell 3000 ; 15% MSCI EAFE ; 30% BBgBarc US Agg Bond ; 20% BBgBarc US Govt/Credit 1-3 Yr NVIT Investor Destinations Moderate Class II Russell Blended Benchmark* Allocation 50% to 70% Equity Category * 45% Russell 3000 ; 15% MSCI EAFE ; 25% BBgBarc US Agg Bond ; 15% BBgBarc US Govt/Credit 1-3 Yr Inception date for all funds is 12/12/2001 except NVIT Investor Destination Balanced and NVIT Investor Destination Capital Appreciation which were launched 3/24/2009. Performance returns assume the reinvestment of all distributions. Returns for periods less than one year are not annualized. Total returns reflect a contractual expense limitation for direct annual Fund expenses for all classes for certain periods since inception, without which returns would have been lower. Performance numbers do not reflect and would be reduced by the insurance-related fees and charges of the variable product. Please consult the variable product prospectus for information about these fees and charges. To obtain the most recent standardized performance, go to nationwide.com/variable-annuities.jsp. The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. NVIT Funds are not sold to individual investors. These investment options are underlying subaccounts and cannot be purchased directly by the public. They are only available through variable products issued by life insurance companies. When evaluating the purchase of a variable annuity product, your clients should be aware that variable annuity products are long-term investment vehicles designed for retirement purposes and will fluctuate in value; and investing involves market risk, including possible loss of principal. 6

7 NVIT Investor Destinations Capital Appreciation Share class QTD YTD 1-year 3-year 5-year Since inception Class II Russell Blended Benchmark* Allocation 50% to 70% Equity Category * 50% Russell 3000 ; 20% MSCI EAFE ; 20% BBgBarc US Agg Bond ; 10% BBgBarc US Govt/Credit 1-3 Yr NVIT Investor Destinations Moderately Aggressive Class II Russell Blended Benchmark* Allocation 70% to 85% Equity Category * 55% Russell 3000 ; 25% MSCI EAFE ; 15% BBgBarc US Agg Bond ; 5% BBgBarc US Govt/Credit 1-3 Yr Performance returns assume the reinvestment of all distributions. Returns for periods less than one year are not annualized. Total returns reflect a contractual expense limitation for direct annual Fund expenses for all classes for certain periods since inception, without which returns would have been lower. Performance numbers do not reflect and would be reduced by the insurance-related fees and charges of the variable product. Please consult the variable product prospectus for information about these fees and charges. To obtain the most recent standardized performance, go to nationwide.com/variable-annuities.jsp. The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. NVIT Funds are not sold to individual investors. These investment options are underlying subaccounts and cannot be purchased directly by the public. They are only available through variable products issued by life insurance companies. When evaluating the purchase of a variable annuity product, your clients should be aware that variable annuity products are long-term investment vehicles designed for retirement purposes and will fluctuate in value; and investing involves market risk, including possible loss of principal. 7

8 NVIT Investor Destinations Aggressive Class II Russell Blended Benchmark* Allocation 85%+ Equity Category * 60% Russell 3000 ; 30% MSCI EAFE ; 10% BBgBarc US Agg Bond Inception date for all funds is 12/12/2001 except NVIT Investor Destination Balanced and NVIT Investor Destination Capital Appreciation which were launched 3/24/2009. Performance returns assume the reinvestment of all distributions. Returns for periods less than one year are not annualized. Total returns reflect a contractual expense limitation for direct annual Fund expenses for all classes for certain periods since inception, without which returns would have been lower. Performance numbers do not reflect and would be reduced by the insurance-related fees and charges of the variable product. Please consult the variable product prospectus for information about these fees and charges. To obtain the most recent standardized performance, go to nationwide.com/variable-annuities.jsp. The results shown represent past performance; past performance does not guarantee future results. Current performance may be lower or higher than the past performance shown, which does not guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. NVIT Funds are not sold to individual investors. These investment options are underlying subaccounts and cannot be purchased directly by the public. They are only available through variable products issued by life insurance companies. When evaluating the purchase of a variable annuity product, your clients should be aware that variable annuity products are long-term investment vehicles designed for retirement purposes and will fluctuate in value; and investing involves market risk, including possible loss of principal. Expenses Fund Name Share class Gross Fee (%) Net Fee (%) Inception Date NVIT ID Conservative Class II /12/2001 NVIT ID Moderately Conservative Class II /12/2001 NVIT ID Balanced Class II /24/2009 NVIT ID Moderate Class II /12/2001 NVIT ID Capital Appreciation Class II /24/2009 NVIT ID Moderately Aggressive Class II /12/2001 NVIT ID Aggressive Class II /12/2001 The expense ratios are as shown in the most recent prospectus. Expenses include underlying fund expenses. Please see the Fund's prospectus for more details. 8

9 Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution Not insured by any federal government agency May lose value Important Disclosures This material is not a recommendation to buy, sell, hold, or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Investors should work with their financial professional to discuss their specific situation. Investors should carefully consider a fund s investment objectives, risks, fees, charges and expenses before investing any money. To obtain this and other information on Nationwide Funds, please call to request a summary prospectus and/or a prospectus, or download a summary prospectus and/or a prospectus at nationwide.com/mutualfunds. Please read it carefully before investing. Variable products are sold by prospectus. Both the product and underlying fund prospectuses can be obtained by visiting or by writing to Nationwide Life Insurance Company, PO Box , Columbus, OH Before investing, carefully read and consider the fund s investment objectives, risks, charges, expenses, and other important information contained in this and the underlying funds prospectuses. Principal Risks: Investing in mutual funds involves risk, including the possible loss of principal. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. There is no assurance that the investment objective of any fund will be achieved. The NVIT Investor Destinations Funds are designed to provide diversification across a variety of asset classes, primarily by investing in underlying funds and exchange traded funds (ETFs). In addition to the expenses of the NVIT Investor Destinations Funds, each investor is indirectly paying a proportionate share of the applicable fees and expenses of the underlying funds and ETFs. Each Fund is subject to different levels of risk, based on the types and sizes of its underlying asset class allocations and its allocation strategy. Each Fund s underlying funds and ETFs may be subject to specific investment risks, including but not limited to: stock market risk (equity securities); default risk and interest rate risk (bonds); and currency fluctuations, political risks, differences in accounting and limited availability of information (international securities). Please refer to the most recent prospectus for a more detailed explanation of each Fund s principal risks. Nationwide Asset Management, LLC provides asset allocation consulting services to Nationwide Fund Advisors (NFA); NFA makes allocation and fund selection decisions. Each Fund may invest in the Nationwide Contract, which is a fixed interest contract issued by Nationwide Life Insurance Company (Nationwide Life), an affiliate of the Fund s investment adviser, Nationwide Fund Advisors. Neither the Fund, the Adviser, Nationwide Life nor any of its affiliates guarantee a Fund s performance or that a Fund will provide a certain level of income. If Nationwide Life becomes unable to meet the contract terms, a Fund that invests in the Nationwide Contract may lose money from unpaid principal or unpaid or reduced interest. The financial health of Nationwide Life may have a greater impact on the value of a Fund that invests in it. Asset allocation is the process of spreading assets across several different investment styles and asset classes. The purpose is to potentially reduce long-term risk and capture potential profits across various asset classes. There is no assurance that the investment objective of any fund (or that of any underlying fund) will be achieved or that a diversified portfolio will produce better results than a nondiversified portfolio. Diversification does not guarantee returns or insulate an investor from potential losses, including the possible loss of principal. Market es: Market index performance is provided by a third-party source Nationwide Funds Group deems to be reliable. es are unmanaged and have been provided for comparison purposes only. No fees or expenses have been reflected. Individuals cannot invest directly in an index. MSCI EAFE : An unmanaged, free float-adjusted, market capitalization-ed index that is designed to measure the performance of large-cap and mid-cap stocks in developed markets as determined by MSCI; excludes the United States and Canada. Bloomberg Barclays US Aggregate Bond : An unmanaged, market value-ed index of U.S. dollar-denominated, investment-grade, fixed-rate, taxable debt issues, which includes Treasuries, government-related and corporate securities, mortgage -backed securities (agency fixed-rate and hybrid adjustable -rate mortgage pass-throughs), asset-backed securities and commercial mortgage-backed securities (agency and non-agency). Bloomberg Barclays U.S. Government/Credit 1-3 Year : An unmanaged index that measures the performance of non-securitized component of the U.S. Aggregate with maturities of 1-3 years, including Treasurys, government-related issues and corporates. Citigroup 3-Month US Treasury Bill (T-Bill) : An unmanaged index that is generally representative of 3-month Treasury bills; consists of an average of the last 3-month Treasury bill issues (excluding the current month-end bill). Russell 3000 : An unmanaged index that measures the performance of the 3,000 largest U.S. companies in the investable U.S. equity universe. S&P 500 : An unmanaged, market capitalization-ed index of 500 stocks of leading large-cap U.S. companies in leading industries; gives a broad look at the U.S. equities market and those companies stock price performance. MSCI Emerging Markets : An unmanaged, free float-adjusted, market capitalization-ed index that is designed to measure the performance of large-cap and mid-cap stocks in emerging-country markets as determined by MSCI. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell es. The Fund is not sponsored, endorsed, or promoted by Russell, and Russell bears no liability with respect to any such funds or securities or any index on which such funds or securities are based. Russell is a trademark of Russell Investment Group Morningstar. 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. Nationwide Funds distributed by Nationwide Fund Distributors LLC (NFD), member FINRA, Columbus, OH. NFD is not affiliated with any subadviser contracted by Nationwide Fund Advisors (NFA), with the exception of Nationwide Asset Management, LLC (NWAM). Nationwide Investment Services Corporation (NISC), member FINRA. NFD is not an affiliate of Morningstar, Inc. Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company Nationwide STAY nationwidefunds.com Shareholders: Intermediaries: MFM-1666AO.17 (04/18)