A new direction in Retirement Investing
Target date funds have been increasing in popularity since their introduction in the early 1990 s. The idea that an individual can make one simple choice and be afforded a portfolio which automatically glides from aggressive to conservative according to a specific date sounds ideal......so ideal that by 2007 it became customary that investors automatically defaulted into these investment vehicles based on one criteria, their date of birth. But what happens when the financial markets move in different directions? When financial markets perform well investors chase risk which is driven by greed. When the markets perform poorly those same investors abandon greed, replace it with fear, and are shaken out of the marketplace. PrudentPath brings direction and discipline to retirement investing. These ideal target date vehicles fail to address the basic fact that real-world investor behavior does not exist in a vacuum and is driven by the emotions of fear and greed. 03
3D Asset Management has partnered with Newfound Research to approach target date fund construction and management in a unique way. 3D Asset Management Risk-Based Target Date Newfound Research Founded in 2006, 3D Asset Management is an Founded in 2008 when data from their models independent global investment manager who was first licensed, Newfound Research is a partners with financial advisors to deliver the benefits Boston-based registered investment adviser and of Exchange-Traded Funds (ETFs) to individual quantitative asset manager focused on rules- investors and retirement plan participants. Through based, outcome-oriented investment strategies. rigorous portfolio construction and monitoring, 3D Newfound specializes in tactical asset and risk builds diversified portfolios that attempt to control management and has pioneered the research and cost, manage risk and simplify global investing. use of dynamic, volatility-adjusted momentum 3D enables financial advisors to more efficiently models. In the last five years, Newfound s models manage client relationships by providing effective and value-creating solutions. Strategic Tactical have been utilized to help drive the investment decisions for billions of dollars in assets. Working together to integrate a tactical process into a strategic portfolio ModelxChange Mid Atlantic Trust Company (MATC), with the assistance of other companies within the Mid Atlantic Capital Group family, is pleased to offer the ModelxChange platform, the first of its kind to allow 401(k) professionals to seamlessly incorporate investment models into a retirement plan, all through a single, web- based interface. ModelxChange is ideal for those Professional Money Managers, Investment Advisors, and Plan Record Keepers who want to stay on the forefront of the 401(k) marketplace by providing plan sponsors and participants a cutting edge managed account solution. 05
The 3D/Newfound PrudentPath Target Date Series is designed around a glide path that isn t static. As with most target date funds, our glide path becomes more conservative over time. But unlike most target date funds, our glide path has the flexibility to increase or decrease equity exposure along the way. It is the ability to react to real world scenarios and market movements that can help investors invest with confidence and peace of d. The strategic component of the PrudentPath portfolios imizes equity exposure in positive market conditions. The graph below illustrates the imum and imum exposures to risk assets, mostly global equities, that may be deployed in each target date fund. Equity Allocation % 100 90 80 70 60 50 40 30 20 10 0 2055 2045 2035 2030 2025 2020 2015 The tactical component of the PrudentPath portfolios alters equity exposure based on market conditions. Defensive Allocation % 100 90 80 70 60 50 40 30 20 10 0 2055 2045 2035 2030 2025 2020 2015 The composition of the defensive sleeve is based on where each portfolio lies along the glide path. The graph above illustrates the imum exposure to fixed income and that portion of the fixed income allocation that may be deployed to cash in each target fund. 07
A tactical process integrated into a globally diversified strategic portfolio Example Allocations Over Time 3D/Newfound PrudentPath 2015 Index The PrudentPath methodology is built upon a strategically invested, globally diversified portfolio of Exchange-Traded Funds (ETFs) that incorporates US and foreign equity, fixed income and alternative asset classes ( Core Portfolio ). Like a traditional target date fund, the glide path that a participant s investment allocation follows is structured to reduce exposure to equities, or risk assets, as the participant nears retirement. Unlike a traditional target date fund, PrudentPath provides for tactical shifts across the strategically allocated base glide path with the goal of limiting negative performance when equity markets are declining for an extended period, such as in 2008. The signals for these tactical shifts are provided by Newfound Research, based on their proprietary quantitative methodology. Through the utilization of an absolute and relative exposure model structured by Newfound Research that incorporates the 3D portfolio as a strategic core, a new form of glide path has been achieved; one that allows for defensive re-allocation to take place in order to tactically protect a participant s retirement savings in adverse market conditions. Tactical signals may dictate a shift from equities to bonds and/or cash (safety exposure). The flexibility of the tactical shifts in allocation increases as the participant nears retirement so that the imum amount of potential protection is afforded during the final decade of a participant s accumulation phase. S&P 500 Return 36% -33% 42% 2% 55% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Upside Downside Upside Downside Participation Protection Participation Protection Upside Participation 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Years to Retirement 40 35 30 25 20 15 10 5 0 Equity Fixed Income Cash Morningstar Lifetime Moderate 2015 Equity Glide Path Maximum Equity Exposure 100% 100% 100% 99% 97% 94% 86% 72% 50% Minimum Equity Exposure 50% 41% 33% 25% 16% 8% 0% 0% 0% Maximum Fixed Income Exposure 50% 58% 67% 75% 83% 91% 100% 100% 100% Minimum Fixed Income Exposure 0% 0% 0% 0% 2% 6% 13% 27% 50% The 3D/Newfound PrudentPath Series indices are back tested prior to 4/23/14. Hypothetical sleeve allocations shown above cover the time period from July 1, 2004 to March 31, 2014. Past performance does not guarantee future results. See disclaimers on page 11 for more information on back tested indices as well as a definition of the Morningstar Lifetime Moderate 2015 index. Minimum Safety Exposure 0% 0% 0% 1% 3% 6% 14% 28% 50% 09
Seeking Upside Participation with Downside Protection as illustrated by comparing Annualized Return to Maximum Drawdown The chart below shows back tested model returns and imum drawdowns for the 3D/Newfound PrudentPath Target Dates indices and the Morningstar Lifetime Moderate Allocation indices for the period July 1st, 2004 through April 23, 2014. See additional disclosure on page 11. Annualized Return 14% 12% 10% 8% More return / Less risk 3D/Newfound PrudentPath Indices 2015 2020 2025 2030 2035 2045 2055 Less return / Less risk Less return / More risk 6% 10% 20% 30% 40% 50% 2015 Maximum Drawdown 2020 2025 More return / More risk 2030 2045 2035 Morningstar Lifetime Allocation Moderate Indices 2055 S&P 500 (SPY) Disclaimers 3D Asset Management, Inc. ( 3D ) and Newfound Research, LLC ( Newfound ) began to actively calculate the performance of the model returns and imum drawdowns on April 23, 2014. Performance data prior to April 23, 2014 is back tested and hypothetical and is based on computer simulations and is provided solely for educational and illustrative purposes and not intended for trading, or to be considered as investment advice. Please review the remainder of the important disclosures set forth on this page and at the end of this presentation regarding the exclusion of certain fees, commissions, expenses and other such exclusions from the performance results set forth in this presentation. 3D and Newfound engaged Alpha Performance Verification Services ( Alpha ), an independent performance verification consultant, to exae the procedures used to calculate the hypothetical back tested PrudentPath index performance and provide an opinion of the accuracy of the performance data presented. The verification and performance exaation reports are available on request. This brochure relates to the combination of 3D s strategic global asset allocation models and their aggressive version retirement date glide paths with the rules-based quantitative risk mitigation model managed by Newfound Research. This is not an offer to provide investment advisory services or to sell or a solicitation of an offer to purchase an interest or shares ( Interests ) in any pooled vehicle. The PrudentPath Target Date Series is available for use in qualified plans through Mid Atlantic Trust Company via their proprietary platform, ModelXChange. The ModelXChange platform unitizes portfolios to make them available on multiple open architecture recordkeeping platforms. Past performance (whether actual, hypothetical/back tested or model performance) is not indicative of future performance and investments in equity and fixed income securities do present risk of loss. The ability to replicate the hypothetical or model performance results in actual trading could be affected by market or economic conditions, among other things. Investors should understand that while the performance results may show a general rising trend at times, there is no assurance that any such trends will continue. If such trends are broken, then investors may experience real losses. The hypothetical/back tested performance and model performance results are presented for illustrative and informational purposes only. No one at 3D, Newfound, or any other person managed the products depicted in this presentation over the time period shown in the hypothetical back tested illustrations. No representation is being made that any retirement plan or plan participant account will achieve performance results similar to those shown in this presentation. In fact, there may be substantial differences between back tested performance results and the actual results subsequently achieved by any particular investment program. One of the limitations of back tested performance is that the index generating the results is developed with the benefit of hindsight. As a result, the index theoretically may be changed from time to time to obtain more favorable performance results. There are other factors related to the markets in general or to the implementation of any specific investment program which has not been fully accounted for in the preparation of the hypothetical/back tested performance results, all of these factors may adversely affect actual portfolio management results. The information included in this presentation reflects the different assumptions, views and analytical methods of 3D and Newfound as of the date of this presentation. The comparisons to the Morningstar Lifetime Allocation Moderate Indices and the S&P 500 Index are for illustrative purposes only. The S&P 500 Index was chosen because it is one of the most widely recognized investment benchmarks in existence. The S&P 500 Index contains only large cap US stocks and is not a proxy for the 3D strategies. The Morningstar Lifetime Allocation Moderate Indices were chosen because Morningstar is one of the most proent names in the investment evaluation and benchmarking business and because their Lifetime Allocation Moderate Indices are often used to illustrate sample performance of certain Target Date comgled investment solutions. The 3D strategies are such solutions although they are managed in a unique fashion that may make the Morningstar Lifetime Allocation Moderate Indices less than a perfect set of benchmarks. The Morningstar Lifetime Allocation Index series consists of 13 indices available in three risk profiles: aggressive, moderate, and conservative. All of the indices are built on asset allocation methodologies developed by Ibbotson Associates, a Morningstar company since 2006. The Asset Allocation Indices provide pure asset-class exposure to global equities, global fixed-income, commodities, and Treasury Inflation-Protected Securities (TIPS) by using existing Morningstar indices as allocation building blocks. Dated June 6, 2014 11
For additional information please contact: 3D Asset Management, Inc. 111 Founders Plaza, Suite 1707 East Hartford, CT 06108 (860) 291-1998, option 2 sales@3dadvisor.com www.3dadvisor.com