Traditional Asset Flows Report Second Quarter 2016

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1 Traditional Asset Flows Report Second Quarter 2016 September 15, 2016 Summary This report shows the flow of institutional funds across regions, universes and products based on data reported to evestment by institutional asset managers around the world. As with recent past quarters, large industry-wide outflows in 2Q are evidence of investors seeking opportunities in alternative investments or holding onto cash. Highlights The institutional asset management industry reported net outflows of $120 billion in 2Q 2016, following outflows of $75.1 billion in 1Q. US-domiciled accounts reported $114 billion in outflows in 2Q, while accounts domiciled in Canada, Japan and Latin America saw inflows. The full extent of the Brexit vote may still not be evident.

2 Institutional Outflows Continue in 2Q The institutional asset management industry reported net outflows of $120.0 billion in 2Q 2016 after outflows of $75.1 billion in the first quarter. Once again, industry wide outflows are evidence of investors seeking opportunities in alternative investments or holding onto cash. Following outflows of $1.1 billion during the first quarter, fixed income products reported net inflows totaling $13.0 billion. Equity strategies reported net outflows of $110.1 billion, marking the 13th consecutive quarter of net outflows for the asset class. Balanced/multi-asset products recorded net outflows totaling $21.2 billion during the second quarter, marking three consecutive quarters of net outflows for the asset class. Second quarter inflows into fixed income markets were driven by US bonds, which reported net inflows of $38.8 billion. US short duration bonds reported inflows of $16.6 billion in the second quarter, the largest of any US fixed income universe. Through the first half of the year, US bonds have reported inflows of $55.8 billion. Global fixed income continues to see outflows from institutional investors. Global fixed income strategies reported net outflows of $12.2 billion in the second quarter. Domestic and global stocks reported significant investor outflows in 2Q US equity reported outflows of $72.1 billion, while global stocks recorded outflows of $5.1 billion. Passively managed equity, both US and non-us, continued to attract institutional assets in 2Q As a whole, passively managed equities reported inflows of $4.0 billion, while actively managed equities reported net outflows of $111.1 billion. The full extent of the Brexit vote may not be evident in second quarter asset flow figures. More fallout of the vote will be apparent in third quarter asset flows. In the second quarter, UK fixed income reported inflows of $4.9 billion, while UK stocks reported outflows of $6.2 billion. To this point, European strategies outside of the UK were hit the hardest. Europe ex-uk equity reported outflows of $16.8 billion, while Europe ex-uk fixed income reported outflows of $17.5 billion. Investors remain bullish on international equity markets. The evestment ACWI ex-us Equity universes reported inflows of $6.1 billion, while the EAFE Equity universe reported inflows of $1.7 billion in the second quarter. US core and core plus fixed income reported large inflows from investors following a year of net outflows. The evestment US Core Fixed Income universe reported inflows of $9.9 billion, or 1.2%. The evestment US Core Plus Fixed Income universe reported inflows of $4.2 billion, or 0.6%. Low vol equity strategies continue to see significant growth from institutional investors. Second quarter inflows totaled $3.5 billion, bringing the net inflow total to $18.2 billion over the last four quarters. Institutional AUM in low vol equity reached an all-time high of $162.3 billion in 2Q After a period of significantly decreased search activity in the evestment database and first quarter outflows, global unconstrained bonds reported net inflows of $1.7 billion in the second quarter. Over the last four quarters, the universe has reported inflows of $5.4 billion. ESG-focused strategies have attracted a lot of search activity in the evestment database in recent quarters. While interest in ESG has been evident in search activity and media coverage, ESG-focused strategies had yet to see inflows until the second quarter of Q 2016 inflows totaled $1.8 billion, following eight consecutive quarters of net outflows. Emerging markets equities reported net outflows for the fifth consecutive quarter. Outflows from the universe over the last year have totaled $28.2 billion. Despite outflows, public and corporate pensions have allocated an additional $2.9 billion to emerging markets equity since 2Q 2015.

3 Investment Flows by Account Domicile United States: US domiciled accounts reported $114.0 billion in outflows. Outflows were once again driven by redemptions from US equity strategies. US domiciled accounts redeemed $94.9 billion from US equities, and global equities reported outflows of $15.4 billion. US bonds saw the largest inflows during the second quarter reporting inflows of $37.6 billion following outflows of $4.7 billion in the first quarter. Europe: Investors in Europe were net sellers in 2Q 2016 with outflows totaling $40.8 billion. Outflows were led by $17.5 billion redeemed from global fixed income following outflows of $17.1 billion in the first quarter. European bonds saw the largest inflows during the second quarter reporting inflows of $7.1 billion. United Kingdom: UK domiciled investors were net sellers during 2Q 2016 with outflows of $13.5 billion. Outflows from UK domiciled investors were led by $5.6 billion redeemed from global equities. UK investors favored UK bonds in the second quarter, leading to inflows of $5.8 billion. Canada: Canadian domiciled investors reported inflows of $10.8 billion during 2Q Inflows were led by $4.7 billion from Canadian equities, following outflows of $1.2 billion in the first quarter. EAFE equities saw the largest outflows in the second quarter with $631 million. Africa/Middle East: Investors domiciled in Africa and the Middle East were net sellers during 2Q 2016 with net outflows totaling $15.8 billion. Redemptions were led by $4.6 billion in net outflows from global bonds. Australia: Australian domiciled investors recorded net outflows of $7.0 billion in the second quarter. Outflows from Australian investors were driven by $2.7 billion redeemed from Australian fixed interest and $2.2 billion redeemed from Australian equities. Japan: Japanese investors were net buyers in the second quarter of 2016 with net inflows of $14.4 billion, following inflows of $24.4 billion in 1Q As in the last 5 consecutive quarters, US bonds were the recipient of the largest flows from Japanese investors. US bonds reported inflows of $4.4 billion in the second quarter of Asia ex-japan: Asia ex-japan investors had net outflows of $6.1 billion in 2Q Global bonds reported outflows of $4.2 billion in the second quarter, following outflows of $1.0 billion in the first quarter. Hong Kong: Hong Kong domiciled investors reported net outflows of $11.4 billion in 2Q Following outflows of $6.9 billion in 1Q 2016, investors in Hong Kong reported outflows from US equity totaling $13.0 billion. Latin America: Investors domiciled in Latin America reported inflows of $1.7 billion in the second quarter. Singapore: Investors domiciled in Singapore reported outflows of $1.8 billion during 2Q Outflows were led by $1.1 billion flowing out of Asia Pacific equities in the second quarter, following outflows of $991 million in the first quarter.

4 Investment Flows by Account Type Corporate: Corporate accounts had net outflows of $18.8 billion in the second quarter following outflows of $11.7 billion in 1Q Outflows were led by $15.4 billion flowing out of US equities, following outflows of $10.1 billion in the first quarter. Inflows were led by $5.7 billion flowing into UK bonds. Public Funds: Public funds had net outflows of $19.5 billion during 2Q 2016, following outflows of $3.5 billion during the first quarter. Outflows were driven by US equities with net outflows of $12.1 billion, following outflows of $13.5 billion in the first quarter. Japanese equities received the largest inflows from public funds reporting inflows of $1.7 billion. Insurance: Insurance accounts had net outflows of $7.0 billion in the second quarter after inflows of $10.8 billion in 1Q Outflows were driven by European and US bonds. European bonds reported outflows of $3.2 billion while US fixed income reported outflows of $1.9 billion during 2Q Defined Contribution: DC plans recorded net outflows of $10.6 billion in the second quarter of 2016 after inflows of $3.4 billion in 1Q Outflows from DC plans were led by $6.1 billion flowing out of US equities in 2Q For the second consecutive quarter, inflows were led by assets flowing into US bonds which saw $2.4 billion in inflows in 2Q 2016 and $4.2 billion in inflows in 1Q Foundations and Endowments: Foundations and endowments were net sellers in 2Q 2016 with outflows of $11.1 billion. Foundations and endowments were net sellers of US bonds and equities, resulting in net outflows in 2Q 2016 of $5.2 billion from US equities and $3.2 billion from US bonds. Union/Multi-Employer: Union/multi-employer accounts recorded net outflows of $4.3 billion in 2Q Union/multiemployer accounts were net sellers of US equities during 2Q 2016, with net outflows of $2.1 billion, following outflows of $1.3 billion in 1Q US bonds reversed positions with inflows of $1.3 billion in the second quarter, following outflows of $1.4 billion in the first quarter. Sovereign Wealth Funds: Sovereign wealth funds were net sellers in 2Q 2016 with outflows of $15.8 billion following outflows of $10.4 billion in the first quarter. Redemptions were led by $6.9 billion in net outflows from US equities in 2Q 2016, which had net outflows of $835 million in the first quarter. Health Care: Health care accounts recorded outflows of $2.1 billion during 2Q 2016, following outflows of $3.0 billion in the first quarter. Outflows were led by $701 million redeemed from US bonds in the second quarter.

5 LOCATIONS Atlanta London +1 (877) (0) New York Sydney +1 (212) (0) australia@evestment.com Dubai Hong Kong asia@evestment.com MEDIA CONTACTS Mark Scott Jamie Letica evestment Corporate Communications Cognito (US) mscott@evestment.com jamie.letica@cognitomedia.com +1 (678) (646) Natalie Chan Francesa Bliss Ryan Communications (Asia) Cognito (UK) natalie@ryancommunication.com francesca.bliss@cognitomedia.com (0) ABOUT EVESTMENT evestment provides a flexible suite of easy-to-use, cloud-based solutions to help global investors and their consultants select investment managers, enable asset managers to successfully market their funds worldwide and assist clients to identify and capitalize on global investment trends. With the largest, most comprehensive global database of traditional and alternative strategies, delivered through leading-edge technology and backed by fantastic client service, evestment helps its clients be more strategic, efficient and informed. For more industry research visit: For archived prior year research reports: For more on evestment visit: DISCLAIMER The data included in this report are a compilation of performance data provided by evestment unless otherwise noted. This report should not be considered to be investment advice and is not a recommendation, endorsement, or solicitation for any investment manager or its services or of any securities referred to herein. All quarterly returns are provided directly by the manager of the product shown. While the information contained herein has been obtained from sources deemed reliable, evestment nor any information provider guarantee that it is accurate or complete or make any warranties with regard to the results that have or may be obtained from its use. evestment Alliance has not made any independent attempt to confirm the accuracy of the data used in the preparation of this publication. Past performance is not an indication of future performance.