Columbia Threadneedle Investments Emerging Market Investor Sentiment Survey Conducted in December 2016 The content of this presentation is presented for general information purposes only. Nothing contained herein should be considered a recommendation or advice to purchase or sell any security. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and it should not be relied on as such or be the basis for an investment decision. The statements and opinions expressed are those of Columbia Management Investment Advisers, LLC and are as of the date of this presentation. All information is historical and not indicative of future results, and subject to change. This presentation may include estimates, projections and other forward-looking statements. Due to numerous factors, actual events may differ substantially from those presented. Columbia Management Investment Advisers, LLC assumes no duty to update any such statements. Past performance does not guarantee future results. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. Investment products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC. January 31, 2017 1697109 Exp. 2/18
Columbia Threadneedle Investments Emerging Market Investor Sentiment Score At the end of 2016, the Columbia Threadneedle Investments Emerging Market Investor Sentiment Score was 627, indicating investors generally have a neutral outlook towards emerging markets (EM) for the next 12 months While sentiment is slightly down (-9%) from 2Q16, it is up 27% from the end of 2015 1000 900 800 700 600 500 400 300 200 100 0 Columbia Threadneedle Investors EM Investor Sentiment Score Trend Columbia Threadneedle Investments EM Investor Sentiment Gauge Neutral 4Q16 Score 0 1000 NOTE: Following 2Q16, this survey was administered biannually, rather than quarterly
EM Investor Sentiment Survey Summary of Results While emerging markets (EM) were up 10.8% in 2016, they underperformed the U.S. following the presidential election, which was reflected in the EM Investor Sentiment Score at the end of 2016 (slightly down from midyear) Key Findings on Emerging Market sentiment: Most respondents currently have either 1-5% (41%) or 5-10% (32%) allocation in emerging markets. 85% of respondents say their current allocation to EM is About the Same or Higher than 12 months ago; only 15% said their allocation was lower, versus 37% of respondents at the end of 2015 Positive was the most common answer (45%) for respondents outlook for EM equities over the next 12 months, up from end of 2015 when Positive was the least common answer (26%) 64% of respondents expect to maintain their EM allocation over the next 12 months and only 28% expect to increase it; this is in contrast to mid 2016, when 46% of respondents expected to increase their allocation Key Findings on Strategic Beta use: 44% of respondents do not use strategic beta funds in their portfolios, although for those who do, the primary reasons they do so is to lower overall fees (28%) and access a specific factor (26%) When evaluating a strategic beta fund, the factors most important to respondents were: Index rules underlying the strategy 60% ranked it as the first or second most important factor Absolute fund performance 49% ranked it as the first or second most important factor In comparison, tracking error and asset manager expertise were ranked as the least important factors 58% of respondents use strategic beta funds as a complement or satellite to a benchmark exposure or to an active manager Source: Bloomberg as of 12/31/2016. Emerging Market performance represented by the MSCI Emerging Markets Index and U.S. performance represented by the S&P 500 Index. From November 9, 2016 December 31, 2016, the MSCI Emerging Markets Index returned -4.13% and the S&P 500 index returned 4.98%.
Section I. Results by question
What is your current emerging market equity allocation as a % of your equity portfolio? Most respondents currently have either 1-5% (41%) or 5-10% (32%) allocation in emerging markets. Current EM Equity Allocation More than 35% Allocation, 3% 25-35% Allocation, 3% No Allocation, 7% 15-25% Allocation, 7% 10-15% Allocation, 8% 1-5% Allocation, 41% 5-10% Allocation, 32%
How does your current allocation compare to 12 months ago? 85% of respondents say their current allocation to EM is About the Same or Higher than 12 months ago. Only 15% said their allocation was lower, versus 37% of respondents at the end of 2015. Change in Allocation vs. 12 Months Ago Higher 16% Lower 15% About the Same 69%
Over the next 12 months, what is your outlook for emerging market equities? Positive was the most common answer (45%) for respondents outlook for EM equities over the next 12 months, up from end of 2015 when Positive was the least common answer (26%). Outlook for EM Equities over next 12 months Negative 20% Positive 45% Neutral 35%
Over the next 12 months, how do you expect your emerging market allocation to change? 64% of respondents expect to maintain their EM allocation over the next 12 months and only 28% expect to increase it This is in contrast to mid 2016, when 46% of respondents expected to increase their allocation Expected change to EM allocation over next 12 months Eliminate 3% Decrease 5% Increase 28% No Change 64%
What are the primary reasons you use strategic beta funds? 44% of respondents do not use strategic beta funds in their portfolios, although for those who do, the primary reasons they do so is to lower overall fees (28%) and access a specific factor (26%) What are the primary reasons you use strategic beta funds? (Select 2) 44% 28% 26% 20% 17% 12% 3% I do not use strategic beta funds in my portfolios Lower overall fees to my clients Access a specific factor (e.g., style, trend, value, etc.) Target an investment outcome (e.g., growth, income, etc.) Access a specific Differentiate my geography/sector practice/portfolios Other (please specify)
When you evaluate strategic beta funds, what factors are important to you? (Rank the following) When evaluating a strategic beta fund, the factors most important to respondents were: Index rules underlying the strategy 60% ranked it as the first or second most important factor Absolute fund performance 49% ranked it as the first or second most important factor In comparison, tracking error and asset manager expertise were ranked as the least important factors Rank 1 2 3 4 5 Cost 17% 26% 33% 19% 5% Index rules underlying the strategy Tracking error to the underlying index 35% 26% 12% 12% 16% 7% 14% 20% 36% 23% Absolute fund performance 26% 23% 14% 14% 23% Asset manager expertise 11% 13% 24% 20% 31% Rank 1 represents the most important factor, while 5 is the least important.
How do you primarily use strategic beta funds in your portfolios? (Select one) 58% of respondents use strategic beta funds as a complement or satellite to a benchmark exposure or to an active manager How do you primarily use strategic beta funds in your portfolios? (Select one) As a core replacement to an active manager 7.3% Other (please specify) 14.5% As a core replacement to a benchmark exposure 20.0% As a complement/satel lite to a benchmark exposure 34.5% As a complement/satel lite to an active manager 23.6%
Demographic Questions Over 67% with >$100mm What are your assets under management? 0% 6% 5% 13% What is the type of firm where you work? 5% 10% 16% Assets under management are self-reported. 45% Independent Registered Investment Advisor (RIA) Independent Wirehouse / Broker-Dealer Pension / Endowment / Foundation / etc. ETF Strategist 45% RIAs Institutional Consultant Other (please specify) 71% with >$10mm Over $1 billion 49% Up to $100 million 33% $100-500 $500 million million - $1 billion 12% What are your ETF assets under 6% management? Over $100 million 48% Up to $10 million 29% $10-50 million 14% $50-100 million 9%
Section II. Methodology
Methodology Conducted December 1, 2016 January 10, 2017 Respondents: 75 asset managers and financial advisors, with over 66% managing more than $100 million in assets EM Investor Sentiment Score calculated based on the answers to question 3: Over the next 12 months, what is your outlook for emerging market equities? Negative outlook scored as 0 points Neutral outlook scored as 500 points Positive outlook scored as 1000 points
Disclosures MSCI Emerging Markets (EM) Index is designed to measure the equity market performance in global emerging markets. S&P 500 Index is a broad-based measure of U.S. stock market performance. Strategic Beta is a category of beta products designed to outperform a market benchmark or provide a specialized exposure. One cannot invest directly in an index. The MSCI information may only be used for your internal use, may not be reproduced or disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an as is basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the MSCI Parties ) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.