EVESTMENT WEBINAR. Investor and Consultant Sentiment Toward Fixed Income

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1 EVESTMENT WEBINAR Investor and Consultant Sentiment Toward Fixed Income

2 Agenda Current interest- rate environment How investors are responding Peer benchmarking with investment and consultant sentiment

3 Peter Laurelli, CFA Global Head of Research Morgan Steadwell Analyst, Public Plans John Alexander, CFA Client Success Director Consultants

4 CURRENT INTEREST- RATE ENVIRONMENT

5 Rising consistently since 2017 Federal Funds Target Range Upper Limit Source: Board of Governors of the Federal Reserve System (US)

6 Yield Curve Continues to Flatten Change in US Treasury Yield Curve

7 Spreads narrowing since 2015 Spread between 10- and 2-Year Rates Source: Federal Reserve Bank of St. Louis

8 PROJECTED FIXED- INCOME RETURNS

9 Consultant Capital Markets Assumptions: Intermediate Term NEPC 5-7 Yr Projections RVK 10 Yr Projections Source: evestment Public Plan IQ

10 Consultant Capital Markets Assumptions: Long-Term NEPC 30 Yr Projections AON 30 Yr Projections Source: evestment Public Plan IQ

11 CASE STUDY 1 INVESTORS ARE SHORTENING DURATION

12 Ohio Bureau of Worker s Compensation Seeking Intermediate Duration Source: evestment Public Plan IQ

13 Asset Flows Favoring Shorter Duration Fixed Income Q1 evestment Universe Public Plan Assets (M) Q Public Plan Flows (M) Q1 Universe Rank US Passive Short Duration Fixed Income $ 14, , US Interm Duration Fixed Income $ 34, , Q2 $ 1 $ 2 Public Plan Assets (M) Q Public Plan Flows (M) Q2 Universe Rank US Passive Short Duration Fixed Income $ 14, $ 5, US Short Duration Fixed Income $ 44, $ 2, US Long Duration Fixed Income $ 73, $ (5,729.24) 240 Source: evestment

14 CASE STUDY 2 INVESTORS INCREASING ALLOCATIONS TO CREDIT + INFLATION HEDGES

15 Los Angeles County ERA (LACERA) Increasing Credit Allocation and U.S TIPS Source: evestment Public Plan IQ

16 US TIPS Allocations Have Increased Since % 1.10% 1.00% 0.90% 0.80% 0.70% 0.60% Q Q Q Q Q Q TIPS proportion of Public Plan Traditional Portfolios Rolling Average Source: evestment

17 Bank Loan AUM Doubled in Five Years 500, , , , , , , , ,000 50,000 0 Q Q Q Q Q Q ,000 30,000 25,000 20,000 15,000 10,000 5,000 0 All Institutional AUM Net Flow- All Institutional Public Plan AUM (right) Net Flow - Public Plans (right) Source: evestment

18 Bank Loan Allocations Increasing Significantly for Public Plans 1.10% 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% Q Q Q Q Q Q Bank Loans proportion of Public Plan Traditional Portfolios Rolling Average Source: evestment

19 EMERGENCE OF PRIVATE DEBT

20 The Role of Private Credit

21 PEER BENCHMARKING WITH INVESTOR AND CONSULTANT SENTIMENT

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