The 2016 Guide to Institutional ETF Ownership Sebastian Mercado, CFA

Deutsche Bank Markets Research North America United States Date Synthetic & Index Strategy Insights The 2016 Guide to Institutional Ownership Sebastian Mercado, CFA Welcome to Deutsche Bank's institutional ownership landscape guide Our comprehensive fact-driven analysis of the institutional ownership landscape includes over 780,000 positions across all -domiciled s in the last 17 years from almost 6,000 ﬁrms from over 40 countries. Complemented with additional insights from hundreds of meetings and interactions with institutional users from over 20 countries. Featuring, Private Bank/WM, Broker, Mutual, Hedge, Pension, Insurance Company, and groups of special interest such as institutions in retail distribution channels (e.g. wirehouses, RIAs, IBDs, RBDs, TAMPs, Robo-Advisors), Latin American pension funds, and international asset managers. Strategist +1-212-250-8690 Institutional assets grew by $213bn and reached $1.44 trillion in 2016 As of the end of 2016, almost 3,500 institutional investors held more than $1.44 trillion in assets accounting for about 59% of all assets. Investment Adviser remained as the dominant group with $813bn representing 33% of all assets. Meanwhile, Private Bank/Wealth Management followed in a strong second place with $372bn in assets or 15% of total assets. Hedge funds recorded the strongest relative YoY growth in assets Hedge funds saw an increase of 77% in assets to $43.8bn, an increase from 1. to 1.8% in ownership, and an increase of 17% in the number of funds using s., they continued to prefer a reduced sample of ultra liquid s. And had a very sizeable allocation to Financials at the end of the year. Insurance companies and mutual funds grow, brokers and pension funds lag Insurance companies and mutual funds seem to be embracing s more and more and recorded healthy asset growth of 43% and 38%, respectively. While brokers and pension funds saw negative (-4%), and ﬂat (1%) growth, respectively. The decline in brokers reﬂects the recent capital constraints in banks, while the tepid growth in pensions answers to a rotation of users. Asset allocation remains top institutional usage for s, but not the only one Investment advisers and private banks mostly use s as core asset allocation building blocks in multi asset portfolios. Hedge funds and brokers mostly use s for quick access to liquidity, and risk management, and in the case of hedge funds also for tactical asset allocation. Meanwhile, mutual funds, pension funds, and insurance companies use s for completion strategies, tactical satellite positions, or cash management. Distributed on: 12/04/2017 11:57:14 GMT Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the ﬁrm may have a conﬂict of interest that could aﬀect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MCI (P) 083/04/2017. 0bed7b6cf11c

Insights Table Of Contents Introduction... 3 Institutional Ownership Review... 4 Summary... 4 Top institutional users and changes... 5 Usage preferences by institution type... 8 Historical evolution... 13 Investor demographics by ETP Issuer... 17 Institutional Investor Proﬁles... 18... Private Bank/Wealth Management... Broker... Mutual... Hedge... Pension... Insurance Company... 18 22 26 30 33 37 41 Custom Proﬁles... 45 Institutions in Retail Distribution Channels... 45 Latam Pension s... 49 International s... 53 Appendix A: Institutional ownership deﬁnition... 55 Institutional investor deﬁnitions... 55 Institutional ownership data deﬁnition... 56 Appendix B: Other deﬁnitions... 58 ETP Universe Deﬁnitions... 58 Management Style or Product Strategy Deﬁnitions... 58 Product Type Deﬁnitions... 59 Page 2

Insights Introduction Welcome to Deutsche Bank's 2016 institutional ownership landscape guide, our comprehensive fact-driven analysis of the institutional landscape. For this report we mostly focus on holdings as reported by institutional investors on 13F ﬁlings, but we also include some additional sources and custom company classiﬁcations. More speciﬁcally, we processed over 780,000 positions across all -domiciled s in the last 17 years from almost 6,000 ﬁrms from over 40 countries. Complemented with additional insights from hundreds of meetings and interactions we have had with institutional users from over 20 countries. Institutional investors as deﬁned 1 in this report are basically entities that invest over $100 million in 13F securities and exercise investment discretion over those assets. The key to the deﬁnition, however, is the word investment discretion. Investment discretion means full control over the portfolio management process. Some of the institutions using s are the traditional institutions such as pension funds, hedge funds, mutual funds, insurance companies, and endowments. However, the main user base is represented by what we call the new institutions. The new institutions are entities that have been able to evolve from the retail world to the institutional world by unlocking the power of s (e.g. low cost, scalability, liquidity, and access) in order to create a more leveled playing ﬁeld among investors. This process of aggregating retail demand into institutionalcaliber solutions has allowed the democratization of the investment management process. Many of these new institutions can be found among investment advisers, and private banks/wealth management ﬁrms. The main institutional users featured in this report are:, Private Banking/WM, Broker, Mutual, Pension, Hedge, and Insurance Company. And from an user perspective we see investment advisers, and private banks/wm as asset allocator investors, brokers and hedge funds as liquidity seekers, and insurance companies, pension funds, and mutual funds as need-based users. In the ﬁrst section of this report we provide a full review of institutional ownership across the main institutional investor groups. We discuss their usage preferences, diﬀerences among each other, and historical ownership evolution through multiple lenses. The second section of our report provides detailed proﬁles for the main seven institutional investor groups featured in this report. Each proﬁle includes a brief description of their business model, top users, historical ownership evolution, product preferences, and common utilization of s. The last section of the report provides custom proﬁles for groups of special interest such as institutions in retail distribution channels (e.g. wirehouses, RIAs, IBDs, etc.), Latin American pension funds, and international asset managers. These proﬁles use proprietary classiﬁcations, estimations, or alternative sources to help provide an additional perspective to institutional usage. 1 A more detailed definition of institutional ownership can be found in Appendix A. Page 3

Insights Institutional Ownership Review Summary As of the end of 2016, almost 3,500 institutional investors held more than $1.4 trillion in assets accounting for about 59% of all assets. assets held by institutions grew by $213bn or 17% from one year ago, however the relative ownership of institutions slipped by 1. relative to last year ﬁgure due to a slightly faster growth among retail investors during 2016. remained as the dominant group in terms of asset ownership with $813bn representing 33% of all assets. Meanwhile, Private Bank/Wealth Management followed in a strong second place with $372bn in assets or 15% of total assets. Hedge s recorded the strongest relative growth in assets with a 77% from a year ago. Similarly, Insurance Companies and Mutual s also recorded strong relative asset growth with a 43% and 38% increase from 2015, respectively. On the other hand, Pension s were practically ﬂat on growth, and Brokers saw the only decline (-4%) which is consistent with an eﬀort from Banks to free up balance sheet on the back of recent regulation regarding capital requirements. Investor Type # of s Q4 2016 Institutional Investor (3460)* Invest. Adviser (2006) Private Banking (755) Broker (69) Mutual (163) Hedge (352) Pension (55) Insurance Company (29) Other (31) Inst. Investor Total Retail Investor Retail Investor Total Total s AUM $MM % Ownership % Q4 2016 YoY Change $MM 1,482 1,255 1,513 647 764 174 418 473 1,593 812,705 371,616 83,241 57,725 43,788 35,302 23,591 17,800 1,445,769 674,498 335,798 87,065 41,924 24,807 34,808 16,512 16,641 1,232,053 138,208 35,818 (3,824) 15,801 18,981 493 7,080 1,160 213,717 11% -4% 38% 77% 1% 43% 7% 17% 32.9% 15. 3.4% 2.3% 1.8% 1.4% 1. 0.7% 58.5% 1,661 1,708 1,025,138 2,470,907 833,205 2,065,258 191,933 405,650 23% 41.5% 100. Figure 2: Historical ETP Institutional Ownership 9 8 Institutional ETP Ownership Figure 1: Institutional Ownership Summary Q4 '16 7 6 5 4 3 ETV ETN. *Number of ﬁrms in parenthesis. From a historical ownership perspective, s have steadily gained ownership market share for most of the last 14 years. Private Bank/ WM have seen a similar trend of market share gain, but faced a small set back in 2016. Meanwhile, Brokers have been yielding market share steadily since 2007 which is consistent with our previous ﬁndings 2 that assets are mostly held by investors increasingly using s for asset allocation purposes. Outside these three major groups of investors, we highlight the sustained market share gains of Mutual s and Insurance Companies, and last year's signiﬁcant rebound for 2 Sebastian Mercado. "s are owned for Investing, traded for Liquidity", Insights. Deutsche Bank Research. Aug 2016. Page 4

Insights Hedge s; while Pension s have recently slowed down in their usage of s relative to the other minor groups. Figure 3: Historical ownership evolution of main institutional investors 35% 5% Private Bank/WM Mutual Pension Other Broker 3 Institutional Ownership Institutional Ownership Inv. Adviser 25% 15% 5% 4% Hedge Insurance Company 3% 1% As per historical growth trends, assets held by institutions and the number of products used by them have both grown more than 7 and 8 times in the last 10 years, respectively. Similarly, the number of diﬀerent institutional investors using s has almost double during the same period. Figure 4: Historical Institutional Assets and number of s held by institutions 1,800 4,000 1,600 3,500 # s used 1,200 1,000 1,400 1,200 1,000 800 800 600 400 200 400 200 0 Other 3,000 Insurance Co. 2,500 Pension 2,000 Hedge 1,500 Mutual Broker 1,000 Private Bank/WM 500 Inv. Adviser 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0 600 # of s used Inst. Assets $BN 1,400 AUM in BN # of Institutional Investors 1,600 Figure 5: Historical number of institutional investors using s Top institutional users and changes Top institutional users by assets held mostly belong to the and Private Banking groups, with some large Brokers making the top 20 also., institutional assets are highly concentrated with the top 20 owners accounting for 4 of the institutional assets, and the top 250 institutions accounting for about 8 of those assets. Concentration of assets, however, can vary signiﬁcantly from one investor type to another. For example, the top 20 investment advisers account for about 45% of the group assets, while the top 20 insurance companies account for almost the entirety of the institutional assets in that investor segment. A diﬀerent look at average assets per institution within each investor type also provides a diﬀerent perspective in terms of concentration. For instance, leaving Broker Page 5

Insights aside, Pension and Insurance Company have the largest allocations per institution; while Hedge has the smallest asset allocation per institution. Figure 6: Top 20 Institutional holders Q4 2016 Figure 7: Top 20 Institutional ETV holders Q4 2016 Assets Institution Type Merrill Lynch, Pierce, Fenner & Smith, Inc. (Invt Morgan Stanley Smith Barney LLC (Private BankPrivate Banking/WM Wells Fargo Advisors LLC Private Banking/WM UBS Financial Services, Inc. Private Banking/WM Bank of America, NA (Private Banking) Private Banking/WM JPMorgan Chase Bank, NA (Investment Managemen Goldman Sachs & Co. (Private Banking) Private Banking/WM Managed Account Advisors LLC Wells Fargo Bank, NA (Private Banking) Private Banking/WM Advisors Edward D. Jones & Co. LP (Investment Managemen Envestnet Asset Management, Inc. Northern Trust Investments, Inc. PNC Bank, NA (Investment Management) Morgan Stanley & Co. LLC Broker Strategic Advisers, Inc. Ameriprise Financial Services, Inc. (Private BankPrivate Banking/WM Charles Schwab Investment Advisory, Inc. UBS Securities LLC Broker JPMorgan Securities LLC Broker 57,580 56,839 42,973 41,821 40,087 38,176 36,376 31,203 30,801 29,114 26,675 21,207 19,557 19,405 18,080 17,441 14,937 13,981 13,049 12,200 Institution Name 10 Advisors LLC Merrill Lynch, Pierce, Fenner & Smith, Inc. (Invt UBS Securities LLC Broker Investment Management (UK) Ltd. Morgan Stanley Smith Barney LLC (Private BankPrivate Banking/WM Bank of America, NA (Private Banking) Private Banking/WM Wells Fargo Advisors LLC Private Banking/WM Passport Capital LLC Hedge Manager Asset Management Canada Ltd. of s Manager UBS Financial Services, Inc. Private Banking/WM First Eagle Investment Management LLC Paulson & Co., Inc. Hedge Manager Windhaven Investment Management, Inc. Charles Schwab Investment Advisory, Inc. Goldman Sachs & Co. (Private Banking) Private Banking/WM Morgan Stanley & Co. LLC Broker Orbis Investment Management Ltd. Hedge Manager Citigroup Global Markets, Inc. (Investment Manag Susquehanna Financial Group LLLP Broker International Value Advisers LLC 7 6 5 4 3 1500 2000 # of Insitutional Investors 2500 3000 % of Inst. Assets of Top 20 Inst. % of Institutional Assets 8 1000 1,498 966 899 879 778 723 632 552 503 502 499 482 478 464 404 398 333 309 248 222 Figure 9: Inst. asset concentration of top 20 institution by type, and asset allocation per institution Q4 2016 9 500 ETV Assets Figure 8: Institutional asset concentration by Institution Q4 2016 0 Institution Type 10 1,400 9 1,200 8 7 1,000 6 800 5 4 600 3 400 200 Assets / Institution $MM Institution Name 0 Inv. Adv. Priv. Broker Mutual Bank Concentration of top Hedge Pension Insur. Co. Assets / Institution Major asset year-over-year variations The top 25 institution with the largest increases grew their assets by $116bn in 2016; while the 25 institutions with the largest decreases reduced their assets by $67bn during the same period. On the growth side, Edward Jones added the most by growing their assets by $11bn or 71% last year; interestingly, most of the growth happened during Q2 after the announcement of the Department of Labor (DOL) Fiduciary Rule. Similarly, UBS Financial Services, and Wells Fargo Advisors joined the podium with an additional $7.7bn and $7.4bn over the year, respectively. On the ﬂip side, LPL Financial shrank their assets the most with a reduction of $17.3bn (-6) in 2016. Meanwhile, Susquehanna Financial Group, and Managed Account Advisors were the next two top reduction of assets with $9.8bn and $5.0bn, respectively. Page 6

Insights Figure 10: Top 25 institutions with the largest increase in assets Q4 2016 Institution Name Type Edward D. Jones & Co. LP (Investment Management) UBS Financial Services, Inc. Wells Fargo Advisors LLC Ameriprise Financial Services, Inc. (Private Banking) Morgan Stanley Smith Barney LLC (Private Banking) Envestnet Asset Management, Inc. Charles Schwab Investment Advisory, Inc. Bank of America, NA (Private Banking) PNC Bank, NA (Investment Management) Strategic Advisers, Inc. The Northwestern Mutual Life Insurance Co. (Invt Port) JPMorgan Investment Management, Inc. Northern Trust Investments, Inc. Merrill Lynch, Pierce, Fenner & Smith, Inc. (Invt Mgmt) Passport Capital LLC Betterment LLC Raymond James & Associates, Inc. (Invt Mgmt) Wells Fargo Bank, NA (Private Banking) RBC Capital Markets LLC (Investment Management) Creative Planning, Inc. UBS Securities LLC TI-CREF Trust Co., FSB Bridgewater Associates LP JPMorgan Chase Bank, NA (Investment Management) QS Investors LLC Private Banking/WM Private Banking/WM Private Banking/WM Private Banking/WM Private Banking/WM Insurance Company Mutual Manager Hedge Manager Private Banking/WM Broker Hedge Manager assets YoY Chg YoY Chg $MM $MM % 26,675 41,821 42,973 14,937 56,839 21,207 13,981 40,087 19,405 17,441 9,937 11,116 19,557 57,580 3,598 6,761 11,982 30,801 9,194 11,933 13,049 11,044 8,690 38,176 7,015 11,086 7,682 7,389 7,127 6,923 6,160 5,944 5,466 5,349 4,221 4,032 3,962 3,795 3,686 3,593 3,513 3,386 3,153 3,118 3,042 2,892 2,724 2,638 2,537 2,478 71% 23% 21% 91% 14% 41% 74% 16% 38% 3 68% 55% 24% 7% 73786% 108% 39% 11% 51% 34% 28% 33% 44% 7% 55% Figure 11: Top 25 institutions with the largest decrease in assets Q4 2016 Institution Name Type LPL Financial LLC Susquehanna Financial Group LLLP Managed Account Advisors LLC Morgan Stanley & Co. LLC Goldman Sachs & Co. (Private Banking) Windhaven Investment Management, Inc. Commerzbank AG (Broker) First Trust Advisors LP Citigroup Global Markets, Inc. (Investment Management) HSBC Global Asset Management (UK) Ltd. Kalos Management, Inc. New Jersey Division of Investment Mizuho Trust & Banking Co., Ltd. (Investment Management) AFP ProVida SA (Investment Management) SG Americas Securities LLC Credit Suisse Securities (A) LLC (Broker) BNP Paribas Arbitrage SNC Aviance Capital Management LLC Franklin Templeton Investments Corp. York Capital Management Global Advisors LLC Pacific Investment Management Co. LLC Curian Capital LLC WBI Investments, Inc. Impulsora de Fondos Banamex SA de CV The Public Sector Pension Investment Board Private Banking/WM Broker Broker Private Banking/WM Broker Pension Manager Pension Manager Pension Manager Broker Broker Arbitrage Mutual Manager Hedge Manager Pension Manager assets YoY Chg YoY Chg $MM $MM % 10,579 2,368 31,203 18,080 36,376 8,289 567 3,627 11,273 1,799 57 418 135 2,193 2,218 4,412 5,402 1,448 10 340 1,317 441 637 (17,317) (9,833) (5,001) (4,070) (3,968) (2,533) (2,234) (2,203) (2,051) (2,004) (1,852) (1,498) (1,487) (1,473) (1,185) (1,156) (1,134) (905) (882) (806) (760) (679) (653) (613) (573) -6-81% -14% -18% - -23% -8-38% -15% -53% -97% -78% -9-4 -35% -21% -17% -38% -99% -10-69% -10-33% -58% -47% Page 7

Insights Usage preferences by institution type Diﬀerent institutions use s in diﬀerent ways, and a closer look at the concentration of their assets per product can provide further insights into their usage. In general, we talk about investors or traders wanting to use s for asset allocation, cash management, or risk management. Thus, and Private Banking tend to meet the investor criteria and focus mostly on using s as core asset allocation tools; in addition, they have a low level of concentration relative to other investor types suggesting that they are more likely to use a larger number of s given their preference for ﬁnding the right exposure. Hedge, Insurance Company, Broker, and Pension have a high level of concentration as they tend to focus on a few large and very liquid products. Hedge and Broker are traders and mostly use s as liquidity tools for tactical allocation or risk management, although brokers also perform other activities which require them to hold a larger number of s. Pension, and Insurance Company are investors, but they use s in an asset allocation or cash management setting as a tactical satellite instrument, cheap core, or for completion strategies; and given the size of their allocations, they usually prefer large s with suﬃcient liquidity and TERs on the low end. Mutual funds are somewhere in between in terms of usage; some use s as core building blocks for multi asset portfolios, while others only use s for cash management purposes. Figure 12: Concentration of /ETV holdings per institutional investor Q4 '16 10 Cummulative ETP Asset Concentration 9 8 7 6 5 Full Universe Invest. Adviser Broker Hedge Insurance Co. 4 3 0 20 40 60 Top 100 s/etvs All Institutions Private Banking Mutual Pension 80 100 Furthermore, a quick look at the top 30 s and ETVs owned by investor type provides further details into the usage diﬀerences. For example, the top 3 s owned by insurance companies all track the S&P 500, ultra liquid ETPs abound among hedge funds and brokers, international equity allocations are more relevant among pension funds, and core building blocks and large s dominate among investment advisers and private banks. Page 8

Insights Figure 13: Top 30 /ETV holdings by institutional investor type Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Full Universe SPY ($224.8bn) IVV ($90.6bn) VTI ($69.6bn) EFA ($59.7bn) VOO ($56.5bn) VWO ($43.9bn) QQQ ($41.8bn) AGG ($41.6bn) VEA ($40.2bn) IWM ($38.7bn) IWD ($34.9bn) IJH ($34.7bn) VNQ ($32.6bn) IWF ($32.4bn) BND ($31.4bn) GLD ($30.6bn) VTV ($27.1bn) LQD ($27.0bn) IJR ($26.5bn) EEM ($26.0bn) VUG ($23.0bn) XLF ($22.5bn) VIG ($22.4bn) TIP ($21.3bn) BSV ($19.6bn) HYG ($18.9bn) MDY ($18.8bn) IEMG ($17.8bn) VYM ($17.6bn) XLE ($17.6bn) All Institutions SPY ($167.0bn) IVV ($53.1bn) EFA ($43.9bn) IWM ($37.2bn) AGG ($30.4bn) VOO ($28.9bn) VEA ($28.6bn) VWO ($27.1bn) IWD ($22.9bn) IJH ($22.7bn) VTI ($21.9bn) BND ($20.6bn) EEM ($20.0bn) IWF ($19.8bn) VNQ ($18.2bn) LQD ($18.2bn) QQQ ($17.2bn) IJR ($16.0bn) VTV ($15.6bn) HYG ($15.1bn) XLF ($14.9bn) IEMG ($13.9bn) VUG ($13.2bn) TIP ($12.9bn) GLD ($12.2bn) IEFA ($12.1bn) IWB ($11.9bn) BSV ($11.3bn) MDY ($10.8bn) XLE ($10.8bn) Invest. Adviser SPY ($65.6bn) IVV ($30.2bn) EFA ($29.1bn) AGG ($22.7bn) VEA ($16.5bn) IWD ($15.9bn) BND ($15.6bn) IWM ($15.1bn) IJH ($14.4bn) VOO ($14.1bn) VTI ($12.6bn) IWF ($12.6bn) VWO ($12.5bn) LQD ($11.9bn) VTV ($11.2bn) HYG ($9.8bn) TIP ($9.6bn) VUG ($9.6bn) IWB ($8.7bn) IEMG ($8.6bn) IJR ($8.5bn) IEFA ($8.0bn) BSV ($7.5bn) EEM ($7.4bn) VNQ ($7.3bn) QQQ ($6.4bn) XLF ($6.4bn) GLD ($6.2bn) IWR ($5.8bn) CSJ ($5.7bn) Private Banking SPY ($36.5bn) IWM ($11.2bn) IVV ($9.9bn) VEA ($9.7bn) EFA ($8.8bn) VNQ ($8.2bn) VWO ($7.7bn) VTI ($7.2bn) IWF ($6.6bn) IJR ($6.6bn) IJH ($6.5bn) AGG ($6.2bn) VOO ($5.9bn) IWD ($5.4bn) QQQ ($4.7bn) MDY ($4.2bn) XLF ($3.7bn) IWR ($3.6bn) IEFA ($3.4bn) IVW ($3.4bn) BND ($3.2bn) IEMG ($3.2bn) VUG ($3.1bn) VCSH ($3.0bn) XLK ($3.0bn) VTV ($3.0bn) VB ($3.0bn) VIG ($2.9bn) VO ($2.9bn) DBEF ($2.9bn) Broker SPY ($27.7bn) IWM ($5.1bn) XLP ($2.2bn) GDX ($2.0bn) XLU ($1.9bn) QQQ ($1.9bn) XLE ($1.6bn) GLD ($1.4bn) FXI ($1.3bn) XLF ($1.3bn) XLV ($1.1bn) HYG ($1.1bn) EFA ($1.0bn) XLK ($1.0bn) VOO ($1.0bn) IYR ($0.9bn) EEM ($0.9bn) XOP ($0.8bn) GDXJ ($0.8bn) EWZ ($0.7bn) XLI ($0.7bn) IBB ($0.6bn) BKLN ($0.6bn) JNK ($0.5bn) VTI ($0.5bn) DIA ($0.5bn) VEA ($0.4bn) EWJ ($0.4bn) MDY ($0.4bn) TLT ($0.4bn) Mutual Hedge SPY ($12.8bn) SPY ($13.0bn) EFA ($2.5bn) EEM ($4.3bn) QQQ ($2.1bn) VWO ($3.4bn) VOO ($1.7bn) IWM ($1.9bn) VWO ($1.7bn) GLD ($1.8bn) IVV ($1.6bn) XLF ($1.8bn) JNK ($1.1bn) QQQ ($1.1bn) VEA ($1.1bn) GDX ($1.0bn) VTI ($1.0bn) LQD ($0.7bn) IWD ($1.0bn) HYG ($0.7bn) TIP ($1.0bn) VOO ($0.6bn) IWM ($0.9bn) FXI ($0.5bn) GDX ($0.9bn) EFA ($0.5bn) EWJ ($0.8bn) XLV ($0.5bn) VNQ ($0.8bn) EWZ ($0.5bn) IEMG ($0.7bn) TLT ($0.5bn) AGG ($0.7bn) KRE ($0.4bn) BND ($0.6bn) XLI ($0.4bn) HYG ($0.6bn) BSV ($0.4bn) IEFA ($0.6bn) XLY ($0.4bn) BKLN ($0.6bn) DXJ ($0.3bn) LQD ($0.6bn) XLE ($0.3bn) XLK ($0.6bn) IBB ($0.3bn) XLE ($0.4bn) GDXJ ($0.3bn) BSV ($0.4bn) XOP ($0.3bn) XLF ($0.4bn) MDY ($0.3bn) BNDX ($0.4bn) IEMG ($0.3bn) IWS ($0.4bn) XLP ($0.3bn) BNDS ($0.4bn) EWJ ($0.3bn) XLI ($0.4bn) XLU ($0.3bn) Pension Insurance Co. SPY ($6.0bn) IVV ($4.3bn) EEM ($3.0bn) SPY ($3.0bn) VOO ($2.9bn) VOO ($2.3bn) IWM ($2.2bn) LQD ($1.8bn) IVV ($1.4bn) IJH ($0.7bn) VNQ ($1.2bn) VEA ($0.6bn) XLF ($1.0bn) VWO ($0.6bn) XLY ($0.9bn) BND ($0.6bn) DBJP ($0.9bn) IJR ($0.4bn) VTV ($0.8bn) EFA ($0.4bn) GDX ($0.7bn) AGG ($0.4bn) IJH ($0.7bn) VNQ ($0.4bn) EWY ($0.6bn) HYG ($0.3bn) VT ($0.6bn) IWB ($0.3bn) EWT ($0.6bn) VEU ($0.2bn) QQQ ($0.5bn) QQQ ($0.2bn) EWG ($0.5bn) SCHF ($0.2bn) EWJ ($0.5bn) IWD ($0.2bn) IEMG ($0.5bn) EEM ($0.2bn) VTI ($0.4bn) BSV ($0.2bn) VWO ($0.4bn) VYM ($0.2bn) XLV ($0.4bn) XLV ($0.2bn) EWZ ($0.4bn) VGT ($0.1bn) EFA ($0.3bn) MUB ($0.1bn) XLK ($0.3bn) IXC ($0.1bn) HYG ($0.3bn) CSJ ($0.1bn) SHE ($0.3bn) F ($0.1bn) XLU ($0.3bn) TLT ($0.1bn) GLD ($0.2bn) EWC ($0.1bn) VX ($0.2bn) CIU ($0.1bn) Asset class and equity markets All investor types allocate over 8 to equity s, with the exception of investment advisers which allocate about 75%, and have the largest allocation to ﬁxed income s. Private banks, mutual funds, and insurance companies also have a signiﬁcant allocation to ﬁxed income s. Pension funds allocate more than 95% to equity s, while hedge funds allocate the most (3-5%) to commodity (mostly Gold) ETVs. In terms of equity markets allocations, all investors assign the majority of their equity assets to the, but allocations range from the low 6 for pension funds to about 8 in the case of brokers. Conversely, pension funds have the most signiﬁcant non- allocation, while hedge funds have the largest allocation to emerging markets; such distribution of assets highlights the importance these two groups of investors assign to s as access products. Page 9

Insights Figure 15: Institutional Investor allocation by Market focus Q4 2016 () 10 10 9 9 Inst. Assets Market Share Inst. ETP Assets Market Share Figure 14: Institutional Investor /ETV allocation by Asset Class Q4 2016 8 7 6 5 4 3 Inv. Adviser Priv. Bank Broker Mutual Commodity Hedge 8 7 6 5 4 3 Pension Insurance Co. Inv. Adviser Priv. Bank Other Asset Class Broker DM Mutual Hedge EM Global Pension Insurance Co. equity sectors Sector equity investing can be measured by the allocations made to sectordiversiﬁed vs. sector-speciﬁc s. Thus we ﬁnd that mutual funds have the largest allocation to sector-speciﬁc s (~4), and therefore are the most likely to employ sector s. Meanwhile, insurance companies prefer mostly diversiﬁed sector exposure as suggested by the low allocation to sector funds (~). Within sector products, investors also have diﬀerent preferences. For example, as of the end of last year hedge funds preferred Financials, insurance companies preferred Real Estate, brokers had a more even distribution with a larger allocation to Energy relative to the other groups of investors, and pension funds had a larger weight assigned to Consumer Discretionary relative to other institutions. 10 10 9 9 Inst. Assets Market Share Inst. Assets Market Share Figure 16: Institutional Investor allocation by Sector Q4 2016 ( ) 8 7 6 5 4 3 Inv. Adviser Priv. Bank Broker Mutual Sector Diversified Hedge Sectors Pension Insurance Co. Telecom Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. 5 Industrials 4 Healthcare 3 Energy Technology Financials Inv. Adv. Priv. Bank Broker Mutual Hedge Pen. Insur. Co. Real Estate equity size and style Institutions have a clear preference for Large Cap s, however those investors using these funds as core building blocks for asset allocation are also more likely to use Broad, Mid Cap, and Small Cap products such as in the case of investment advisers and private banks. Furthermore, those institutions using s for liquidity, or eﬃcient market access such as brokers, hedge funds, and pension funds are less likely to use Mid Cap vehicles. Style investing seems popular almost exclusively within the asset allocator groups as suggested by the -plus allocations of investment advisers and private banks. Mutual s also have some relevant allocation (~15%) to style s, Page 10

Insights however the usage in this case would be more likely as a cash management tool given that many mutual funds follow growth, value, or income-oriented strategies. Meanwhile, style investing is almost inexistent among brokers, hedge funds, and pension funds. Figure 17: Institutional Investor allocation by Size & Style Q4 2016 ( ) 10 Inst. Assets Market Share Inst. Assets Market Share 10 9 8 7 6 5 4 3 9 8 7 6 5 4 3 Inv. Adviser Priv. Bank Broad Broker Large Cap Mutual Hedge Mid Cap Inv. Adviser Pension Insurance Co. Small Cap Priv. Bank Broker Blend Value Mutual Growth Hedge Pension Insurance Co. Dividend Fixed income sectors and expense ratios In terms of ﬁxed income sector allocations we highlight insurance companies which had almost 6 invested in Corporates at the end of last year, and hedge funds with the largest allocation to Treasuries (>). From a cost perspective, the bulk of the assets (60-7) of institutional investors is concentrated in products that charge less than 20bps, and in the case of insurance companies this amount even reaches over 8 of the ETP assets. Hedge funds and pension funds seem less sensitive to prices relative to other investors, but this is probably because of their higher allocation to international markets, particularly emerging markets. Inst. Assets Market Share 10 Convertible 9 International 8 Senior Loans 7 Preferred 6 Securitized 5 EM debt 4 Municipal 3 Inflation Treasury Aggregate Inv. Adv. Priv. Bank Broker Mutual Hedge Pen. Insur. Co. Corporates Figure 19: Institutional Investor /ETV allocation by TER Q4 2016 10 Inst. ETP Assets Market Share Figure 18: Institutional Investor allocation by Fixed Income Sector Q4 2016 9 8 7 6 5 4 3 Inv. Adviser <0. Priv. Bank Broker 0.-0.4% Mutual 0.4%-0.6% Hedge 0.6%-0.8% Pension Insurance Co. >0.8% index providers and /ETV issuers When it comes to equity index providers we highlight the large allocations (>6) to S&P Dow Jones of brokers and insurance companies, while pension funds have the largest allocation (~3) to MSCI. Page 11

Insights With regards to ETP issuers, liquidity seekers such as brokers and hedge funds prefer GA; meanwhile investment advisers, private banks, pension funds, and insurance companies prefer allocating between 4 to 5 in their products. Figure 21: Institutional Investor /ETV allocation by Issuer Q4 2016 10 10 9 9 Inst. ETP Assets Market Share Inst. Assets Market Share Figure 20: Institutional Investor allocation by Index Provider Q4 2016 () 8 7 6 5 4 3 Inv. Adviser S&P Dow Jones Priv. Bank Broker FTSE Russell Mutual MSCI CRSP Hedge Pension Insurance Co. Nasdaq OMX 8 7 6 5 4 3 Inv. Adv. Other Providers Priv. Bank Broker Mutual Hedge Pen. Insur. Co. Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Product type and management style3 At the end of 2016, brokers, and hedge funds owned mostly Pseudo Futures () s (~7), while pension funds also allocated a signiﬁcant portion of their assets (5) to them. Insurance companies allocated about 6 of their assets to Cash Management () s, while Investment advisers and private banks had a more balanced allocation among Asset Allocation (), Cash Management, and Pseudo Futures s. Finally, with the exception of the negligible allocation of brokers, Leverage and Inverse s registered practically non-existent allocations among institutional investors. From a management style perspective among equity s, most institutions allocated around 9 to Beta products, while investment advisers and private banks allocated about 7 to Beta products and 3 to Smart Beta products. Figure 22: Institutional Investor ETP allocation by Product Type Q4 2016 Figure 23: Institutional Investor allocation by Management Style Q4 2016 () 10 Inst. Assets Market Share Inst. ETP Assets Market Share 10 9 8 7 6 5 4 3 9 8 7 6 5 4 3 Inv. Adviser Priv. Bank Broker Mutual Hedge Pension Insurance Co. LevInv Inv. Adviser Priv. Bank Beta Broker Mutual Smart Beta Hedge Pension Insurance Co. Active 3 Refer to Appendix B for a definition of product types, and management styles. Page 12

Insights Historical evolution Asset class and equity markets Institutional ownership (IO) in and s has been on an uptrend for most part of the last decade. However we saw a small set back during 2016. Furthermore, s have registered the highest (>6) institutional ownership in recent years, overtaking s with institutional ownership levels just below 6. Institutional ownership within equity s across markets has been steadily on the rise over most of the last 15 years. Emerging Markets have the highest IO at 65%, followed by Intl Developed Markets (61%), the (57%), and Global (5) s. Figure 24: Historical Inst. ETP Ownership by Asset Class 6 Commodity Figure 25: Historical Inst. Ownership by Market () Other Asset Class 8 Institutional Ownership Institutional ETP Ownership 7 5 4 3 7 6 5 4 3 DM EM Global equity sectors According to IO levels we can identify two groups as of the end of 2016. The ﬁrst group with IO levels in the range of 54%-6 included Real Estate, Financials, Technology, Energy, Healthcare, and Telecom. The second group included Industrials, Consumer Staples, Consumer Discretionary, Utilities, and Materials with IO levels in the range of 69%-74%. 8 9 7 8 6 5 4 3 Real Estate Financials Technology Energy Healthcare Telecom Institutional Ownership Institutional Ownership Figure 26: Historical Inst. Ownership by Sector () 7 6 5 4 3 Industrials Cons. Disc. Utilities Materials Cons. Staples Page 13

Insights equity size and style Institutional ownership within size segments has been dominated by Small Cap s which recorded an IO level of 64% at the end of last year, followed by Large Caps with 6, and Mid Cap with 58%. In the meantime, farther in the distance there were Broad s with an IO of 46% suggesting a higher retail appetite in this segment. Within Style s, institutional ownership for Growth and Value were converging with Blend at about 58% towards the end of last year; while Dividend s with an IO of 36% clearly signaled retail preference. 8 7 7 6 Institutional Ownership Institutional Ownership Figure 27: Historical Inst. Ownership by Size and Style () 6 5 4 3 Broad Large Cap Mid Cap 5 4 3 Small Cap Blend Value Growth Dividend Fixed income sectors Most sector s exhibit an institutional bias from an ownership perspective with most of them registering ownership levels between 55% and 75%. The only exception was Preferred, which only had an IO level of 35%, suggesting these s tend to be mostly a retail product. 8 10 7 9 6 5 4 3 Corporates Aggregate Inflation Municipal Treasury Institutional Ownership Institutional Ownership Figure 28: Historical Inst. Ownership by Sector () 8 7 6 5 4 EM debt Securitized Preferred Senior Loans International Convertible 3 Commodity, Alternatives, and expense ratios Diversiﬁed Broad commodity ETPs had an IO level of 6 at the end of 2016, while Volatility, and Precious Metals products were just over 5, and below 4 owned by institutions, respectively. Page 14

Insights From a cost perspective, lower cost buckets tend to have a higher institutional ownership. The bucket including ETPs under 20bps has an IO level of about 6, while the next two buckets (20-40bps and 40-60bps) have IO levels of 58% and 53%, respectively. In addition, the most expensive bucket (>80bps) with an IO level of 31% tends to be mostly dominated by retail investors. On the other hand, the bucket of 60-80bps has the highest institutional ownership at 61%, but this is also the bucket that includes most of the Emerging Market vehicles which are also the ones with the highest IO levels. Figure 29: Historical Inst. ETP* Ownership by select Comdty and Alt sectors 6 9 8 Precious Metals Diversified Broad Cmdty Volatility Institutional ETP Ownership Institutional ETP Ownership 7 Figure 30: Historical Inst. ETP Ownership by TER 5 4 3 <0. 0.-0.4% 0.4%-0.6% 0.6%-0.8% >0.8% 7 6 5 4 3. *Volatility includes ETNs. index providers and /ETV issuers s tracking indices from S&P Dow Jones, FTSE Russell, and MSCI have high institutional ownership levels just above 6, while s tracking indices from Nasdaq OMX and CRSP have a larger retail component. Institutional ownership levels can vary signiﬁcantly from one issuer to another. For example, among the top 5 issuers by ETP assets, 67% of the assets invested in GA ETPs were in the hands of institutional investors at the end of last year; while only 43% of the assets in Charles Schwab s were in institutional hands. However, we still highlight the growth in institutional ownership in Charles Schwab s from back in 2013. Figure 31: Historical Inst. Ownership by Index Provider () Figure 32: Historical Inst. ETP Ownership by Issuer (Top 5) 9 8 Institutional ETP Ownership Institutional Ownership 8 7 6 5 4 3 S&P Dow Jones MSCI Nasdaq OMX FTSE Russell CRSP 7 Charles Schwab PowerShares 6 5 4 3 Page 15

Insights Product type and management style From a product type perspective, Pseudo Futures s have historically registered the largest institutional ownership levels. In fact, as of the end of last year s recorded an IO level of 69%, followed somewhat in the distance by (56%) and (54%) s. Meanwhile, Leverage and Inverse s with an IO level closer to remained primarily a retail vehicle compared to other products. Historical institutional ownership trends also suggest that institutions have preferred Beta products over Smart Beta products, although institutional interest as measured by IO levels has risen for both historically. Figure 33: Historical Inst. ETP Ownership by Product Type 7 6 5 4 3 Figure 34: Historical Inst. Ownership by Management Style () LevInv 7 Institutional Ownership Institutional ETP Ownership 8 6 5 4 3 Beta Smart Beta Active Page 16

Insights Investor demographics by ETP Issuer On one hand, understanding the mix of investors per ETP issuer can provide further insights into ETP usage, and liquidity. While, on the other hand, the investor demographics can also help understand the ETP issuer distribution channels, and product scalability and liquidity potential. In our experience, retail investors, investment advisers, and private banks tend to behave more like investors, that is they focus on the right exposure, tend to use a broader range of products, and usually employ ETPs as core or satellite asset allocation building blocks. Brokers and hedge funds, on the other hand, are liquidity seekers and behave like traders, focusing on the most liquid products and holding ETPs for shorter periods of time. Pension funds, mutual funds, and insurance companies are more selective investors, focusing on ETPs of larger size and abundant liquidity which they use for asset allocation or cash management. At the end of 2016, almost all of the top 15 ETP issuers by institutional assets had at least 9 in the hands of asset allocators such as retail, investment advisers, and private banks. The three exceptions were and VanEck Vectors which had a high component of brokers and hedge funds, and Deutsche AM which had a large pension fund allocation. In addition, Flexshares had a very high institutional ownership, but most of it was in the hands of investment advisers which ultimately corresponded primarily to FlexShares' aﬃliate Northern Trust Investments. Charles Schwab s also exhibited a distinctive feature in their demographics, where almost the entirety of the assets were in the hands of asset allocators, which is not surprising considering that the majority of their assets come from accounts using Schwab custody. Figure 35: Investor market share of ETP assets by Issuer Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares 3 4 5 6 7 8 9 10 ETP asset market share by Investor Type Retail Inv. Adv. Priv. Bank Broker Mutual Hedge Pen. Insur. Co. Other Page 17

Insights Institutional Investor Proﬁles Investment advisers are a broad group, thus it is no surprise they are the group with the largest number of institutions using s, and the largest asset ownership. First and foremost, investment advisers are investors, and therefore tend to have longer time horizons. They provide custom or oﬀ-the-shelf solutions to meet client objectives, which in many cases take the form of multi asset diversiﬁed portfolios of diﬀerent risk proﬁles. Their clients can be both retail or institutional. The delivery of these solutions can take the form of mutual funds, separately managed accounts (SMA), or collective investment trusts (CIT). Although investment advisers come in every size, from large asset managers and wirehouses with hundreds of billions of dollars under management down to a small Registered (RIA) with just over one hundred million dollars, the majority does not enjoy the accessibility to markets and ﬁnancial instruments of larger traditional institutions (e.g. pension funds, endowments, etc). Therefore s provide a great path to scalability and institutionalization, which ultimately results in a more leveled ﬁeld among advisers. Investment advisers mostly use s as core investment, the top holdings include very cheap products which usually track plain-vanilla Beta equity and bond indices tracking major model portfolio building blocks. The presence of many and ishares Core s supports this observation. Investment advisers tend to run simple asset allocation model portfolios which tend to be very scalable, and don t experience signiﬁcant turnover, therefore clean asset class exposure and cost tend to be key on the selection of products. Liquidity is an important factor, but not a deciding one; for example, for broad emerging markets exposure the cheaper options (VWO and IEMG) are both preferred over the most liquid one (EEM). Investment advisers are more likely to use s as the main implementation vehicle in their portfolios, rather than just as an auxiliary tool employed to fulﬁll other secondary objectives. For this reason, they are also more likely to allocate a larger part of their assets to s which makes them a very relevant institutional investor group despite the lower absolute dollar allocations per adviser. Furthermore, because they usually focus on ﬁnding the best exposure to represent their investment views they are more likely to use a larger number of s across multiple asset classes, product types, and management styles. For example, investment advisers exhibit some of the largest allocation to ﬁxed income s among institutions, while also having signiﬁcant allocations to multiple equity markets, sectors, styles, sizes, and smart beta strategies. Page 18

Insights Assets $M 57,580 38,176 31,203 29,114 26,675 21,207 19,557 19,405 17,441 13,981 11,982 11,933 11,273 11,044 9,859 9,194 8,308 8,289 7,945 7,469 900,000 1600 800,000 1400 700,000 1200 600,000 1000 500,000 800 400,000 600 300,000 200,000 400 100,000 200 # of s used Institution Name Merrill Lynch, Pierce, Fenner & Smith, Inc. (Invt Mgmt) JPMorgan Chase Bank, NA (Investment Management) Managed Account Advisors LLC Advisors Edward D. Jones & Co. LP (Investment Management) Envestnet Asset Management, Inc. Northern Trust Investments, Inc. PNC Bank, NA (Investment Management) Strategic Advisers, Inc. Charles Schwab Investment Advisory, Inc. Raymond James & Associates, Inc. (Invt Mgmt) Creative Planning, Inc. Citigroup Global Markets, Inc. (Investment Management) TI-CREF Trust Co., FSB Milliman Financial Risk Management LLC RBC Capital Markets LLC (Investment Management) Financial Management, Inc. Windhaven Investment Management, Inc. Edelman Financial Services LLC Bancorp Asset Management, Inc. Figure 37: Historical Assets and # of s used - Inv. Adviser Inst. Assets $MM Figure 36: Top 20 Inv. Adviser by Assets 0 - Assets # s used Figure 38: Top 30 ETPs owned by Inv. Adviser Rank Ticker 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 SPY IVV EFA AGG VEA IWD BND IWM IJH VOO VTI IWF VWO LQD VTV HYG TIP VUG IWB IEMG IJR IEFA BSV EEM VNQ QQQ XLF GLD IWR CSJ Struc- Product Asset Class ture Type Sector ETV Broad Broad Corporates Corporates Inflation Broad Real Estate Financials Precious Metals Corporates Commodity Market Issuer DM DM EM EM DM EM PowerShares TER 0.09% 0.04% 0.33% 0.05% 0.09% 0. 0.06% 0. 0.07% 0.05% 0.05% 0. 0.15% 0.08% 0.5 0. 0.08% 0.15% 0.07% 0.08% 0.09% 0.69% 0.1 0. 0.4 0. 0. Assets held $MM 65,572 30,158 29,143 22,667 16,537 15,938 15,622 15,075 14,405 14,077 12,614 12,582 12,472 11,894 11,235 9,764 9,640 9,604 8,674 8,622 8,504 7,959 7,468 7,392 7,302 6,386 6,353 6,243 5,784 5,737 total % AUM $MM Owned 224,820 90,620 59,665 41,555 40,169 34,879 31,443 38,727 34,715 56,485 69,556 32,389 43,948 27,041 27,101 18,891 21,348 23,010 16,883 17,807 26,462 15,774 19,575 26,034 32,603 41,793 22,477 30,629 14,213 11,111 29% 33% 49% 55% 41% 46% 5 39% 41% 25% 18% 39% 28% 44% 41% 5 45% 4 51% 48% 3 5 38% 28% 2 15% 28% 41% 5 Page 19

Insights Figure 40: Historical allocation of assets by Market () - Inv. Adviser 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. ETP Assets Market Share Figure 39: Historical allocation of ETP assets by asset class - Inv. Adviser Commodity 10 9 8 7 6 5 4 3 Other Asset Class DM EM Global 10 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 41: Historical allocation of assets by Sectors () - Inv. Adviser Telecom 9 Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. 5 Industrials 4 Healthcare 3 Energy Technology Financials 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Sectors 2001 Sector Diversified 2000 Real Estate 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 42: Historical allocation of assets by Size and Style () - Inv. Adviser Broad Large Cap Mid Cap Small Cap 10 9 8 7 6 5 4 3 Blend Value Growth Dividend Page 20

Insights Figure 43: Historical allocation of assets by Sector () - Inv. Adviser 10 Inst. ETP Assets Market Share Convertible 9 International 8 Senior Loans 7 Preferred 6 Securitized 5 EM debt 4 Municipal 3 Inflation Treasury 10 9 8 7 6 5 4 3 Aggregate <0. Corporates 0.4%-0.6% 0.6%-0.8% >0.8% Figure 46: Historical allocation of ETP assets by Issuer Inv. Adviser 10 10 9 9 2016 2015 ers 2000 2014 S&P Dow Jones 2013 3 2012 FTSE Russell 2011 4 2010 3 5 2009 MSCI 2008 4 6 2007 CRSP 2006 5 7 2005 6 8 2004 Nasdaq OMX 2003 7 2002 Other Providers 8 Inst. ETP Assets Market Share Inst. Assets Market Share Figure 45: Historical allocation of assets by Index Provider () - Inv. Adviser Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim Inv. VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Figure 47: Historical allocation of ETP assets by Product Type - Inv. Adviser Figure 48: Historical allocation of assets by Management Style () - Inv. Adviser Inst. Assets Market Share 10 Inst. ETP Assets Market Share 0.-0.4% 2001 Inst. Assets Market Share Figure 44: Historical allocation of ETP assets by TER - Inv. Adviser 9 8 7 6 5 4 3 10 9 8 7 6 5 4 3 LevInv Beta Smart Beta Active Page 21

Insights Private Bank/Wealth Management Private Banks or Wealth Management institutions are also investors, and therefore tend to have longer time horizons. In many ways they are very similar to investment advisers, and they can also serve retail and institutional clients. However, the diﬀerence would be that private banks/wm tend to focus on high net worth retail clients, and usually would oﬀer ﬁnancial and investment advice in conjunction with other wealth related services such as accounting and tax services, retirement planning, and legal and estate planning. In addition, due to the nature of their clients, custom solutions tailored to the client's overall ﬁnancial needs are more common than in the case of investment advisers. Nevertheless oﬀ-the-shelf solutions are also available. These solutions are most likely available via SMAs, but could also be available in other forms such as mutual funds. For Private Banks, s oﬀer a myriad of ﬂavors to meet the diﬀerent requirements of their clients, making the task of creating diversiﬁed custom portfolios much more manageable - particularly when investment advice is not the only focus. Private banks, like investment advisers, also use s mostly as core investments; however, given the more tailored nature of their business model, management of model portfolios may be less concentrated and therefore less scalable. On the other hand, the need to meet speciﬁc client requirements opens the door to a larger variety of asset classes. This is observed clearly by the presence of multiple and ishares Core products, the presence of Real Estate, Dividend, Growth/Value, Currency Hedged, and sector-tilt (QQQ) s among the top 30 ETPs owned by them as a group. Portfolio turnover is probably slightly higher than investment advisers, but still relatively low. Clean asset class exposure and cost continue to be key on the selection of products. And while large products with suﬃcient liquidity are still preferred, liquidity is not a deciding factor. Because private banks are more likely to use s for asset allocation as a primary objective, and due to the unique requirements of their clients, private banks are more likely to be open to explore non-traditional strategies (e.g. smart beta, value-based, or theme investing). While, at the same time, the relatively lower concentration of assets of the business model yields smaller dollar allocations. Page 22

Insights Assets $M 56,839 42,973 41,821 40,087 36,376 30,801 14,937 10,579 3,712 3,602 3,564 2,786 2,559 1,980 1,295 1,183 1,054 991 898 879 400,000 1400 350,000 1200 300,000 1000 250,000 800 200,000 600 150,000 400 100,000 # of s used Institution Name Morgan Stanley Smith Barney LLC (Private Banking) Wells Fargo Advisors LLC UBS Financial Services, Inc. Bank of America, NA (Private Banking) Goldman Sachs & Co. (Private Banking) Wells Fargo Bank, NA (Private Banking) Ameriprise Financial Services, Inc. (Private Banking) LPL Financial LLC First Republic Investment Management, Inc. Nomura Securities Co., Ltd. (Private Banking) SunTrust Banks, Inc. (Wealth Management) Veritable LP Robert W. Baird & Co., Inc. (Private Wealth Management) SCS Capital Management LLC Pinnacle Advisory Group, Inc. Ballentine Partners LLC Brinker Capital, Inc. Aspiriant LLC William Blair & Co. LLC (Investment Management) Sullivan, Bruyette, Speros & Blayney LLC Figure 50: Historical Assets and # of s used - Priv. Bank/WM Inst. Assets $MM Figure 49: Top 20 Private Bank/WM by Assets 200 50,000-0 Assets # s used Figure 51: Top 30 ETPs owned by Priv. Bank/WM Rank Ticker 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 SPY IWM IVV VEA EFA VNQ VWO VTI IWF IJR IJH AGG VOO IWD QQQ MDY XLF IWR IEFA IVW BND IEMG VUG VCSH XLK VTV VB VIG VO DBEF Struc- Product Asset Class ture Type Sector Real Estate Broad Financials Broad Corporates Technology Market Issuer DM DM EM DM EM DM PowerShares Deutsche AM TER 0.09% 0. 0.04% 0.09% 0.33% 0.1 0.05% 0. 0.07% 0.07% 0.05% 0.05% 0. 0. 0.25% 0. 0.08% 0.18% 0.06% 0.08% 0.07% 0.08% 0.08% 0.09% 0.08% 0.35% Assets held $MM 36,489 11,156 9,890 9,731 8,812 8,165 7,703 7,163 6,639 6,575 6,485 6,153 5,898 5,425 4,709 4,244 3,737 3,600 3,398 3,376 3,242 3,182 3,082 3,023 2,987 2,985 2,973 2,881 2,878 2,861 total % AUM $MM Owned 224,820 38,727 90,620 40,169 59,665 32,603 43,948 69,556 32,389 26,462 34,715 41,555 56,485 34,879 41,793 18,798 22,477 14,213 15,774 14,835 31,443 17,807 23,010 15,775 14,119 27,101 16,195 22,364 16,521 7,802 16% 29% 11% 24% 15% 25% 18% 25% 19% 15% 16% 11% 23% 17% 25% 2 23% 18% 13% 19% 21% 11% 18% 13% 17% 37% Page 23

Insights Figure 52: Historical allocation of ETP assets by asset class - Priv. Bank/WM Figure 53: Historical allocation of assets by Market () - Priv. Bank/WM 10 Inst. Assets Market Share Inst. ETP Assets Market Share 10 9 8 7 6 5 4 3 9 8 7 6 5 4 3 Commodity Other Asset Class DM EM Global 10 10 Telecom 9 9 Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. Inst. Assets Market Share Inst. Assets Market Share Figure 54: Historical allocation of assets by Sectors () - Priv. Bank/WM 8 7 6 5 4 3 5 Industrials 4 Healthcare 3 Energy Technology Financials 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Sectors 2001 Sector Diversified 2000 Real Estate Figure 55: Historical allocation of assets by Size and Style () - Priv. Bank/WM 10 Inst. Assets Market Share Inst. Assets Market Share 10 9 8 7 6 5 4 3 9 8 7 6 5 4 3 Broad Large Cap Mid Cap Small Cap Blend Value Growth Dividend Page 24

Insights Figure 56: Historical allocation of assets by Sector () - Priv. Bank/WM 10 10 Inst. ETP Assets Market Share Convertible 9 International 8 Senior Loans 7 Preferred 6 Securitized 5 EM debt 4 3 Municipal Inflation Treasury 9 8 7 6 5 4 3 Aggregate Corporates <0. 0.4%-0.6% 0.6%-0.8% >0.8% Nasdaq OMX 6 CRSP MSCI 3 FTSE Russell ders 2016 2015 2014 2013 2012 2011 2010 2000 3 2009 S&P Dow Jones 4 2008 5 2007 6 2006 4 7 2005 5 8 2004 7 9 2003 Other Providers 8 10 2002 9 Figure 59: History allocation of ETP assets by Issuer Priv. Bank/WM Inst. ETP Assets Market Share Inst. Assets Market Share 10 Inst. ETP As Figure 58: Historical allocation of assets by Index Provider () - Priv. Bank/WM Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim Inv. VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Figure 60: Historical allocation of ETP assets by Product Type - Priv. Bank/WM Figure 61: Historical allocation of assets by Management Style () - Priv. Bank/WM 10 10 Inst. Assets Market Share Inst. ETP Assets Market Share 0.-0.4% 2001 Inst. Assets Market Share Figure 57: Historical allocation of ETP assets by TER Priv. Bank/WM 9 8 7 6 5 4 3 9 8 7 6 5 4 3 LevInv Beta Smart Beta Active Page 25

Insights Broker Brokers are traders by deﬁnition and usually have a very short time horizon or holding period (e.g. from seconds to days). They don't usually take directional views or risk in most of their trades, but rather hedge their positions in order to lock in the bid/ask spread and mitigate the risk of adverse market moves. Their main objective is to provide liquidity to buyers and sellers by either matching them (i.e. agency trades), or by using their own capital to take the opposite side of the trade (i.e. principal trades). Brokers are continually in the search of new liquidity tools and eﬃcient hedging tools that can facilitate their market making activities. Some s can provide massive amounts of liquidity, and can also be very eﬃcient hedging vehicles, and as expected they have become some of the favorite tools among brokers. Furthermore brokers also fulﬁll key roles within the ecosystem such as Authorized Participant (AP), arbitrageurs, Lead Market Makers (LMM), seeder, and security lenders. Authorized Participant: AP is a broker that has entered into a contractual agreement with the sponsor to create and redeem shares in ﬁxednumber sets (e.g 50,000) called creation units. An AP can engage in both in-kind (i.e. securities) and cash creation/redemption activity. Arbitrageur: because s have both a price and a net asset value (NAV), the market interactions in the and the securities underlying the can make the price deviate from the NAV at times. Brokers may monitor such deviations in an attempt to arbitrage any pricing ineﬃciencies contributing to keeping the price of an in line with its NAV. Lead Market Maker: the majority of s have an LMM which is supposed to function as the liquidity source of last resort. LMMs have clearly deﬁned quoting obligations that must be met on an ongoing basis. Seeder: every is launched with a minium level of assets usually equivalent to two creation units (commonly 100,000 shares or about $2 million). sponsors usually work with one or multiple brokers to fund these initial capital commitments. Security Lender: if shares cannot be located, brokers may use their balance sheet to create shares to lend out to clients that desire to borrow the. Although brokers use s for market making (lead, inventory and hedging), security lending, and seeding, many of these activities have become more limited recently due to the new capital requirements and more restricted use of banks balance sheet. This has been noted in the decreasing level of assets held among brokers in the last couple of years. Nevertheless, the list of top 30 products held by brokers continues to be dominated by s that are characterized for being not only the most liquid in the industry, but also in the whole market such as SPY, IWM, QQQ, and others we classify as Pseudo Futures s which are very eﬃcient risk management tools. Moreover, most of these s tend to have the most competitive shorting metrics for their respective asset class or benchmark, and liquid options. Thus, cost is not as relevant for brokers as it is liquidity both on the long and short side. Finally, because there is no portfolio as such, therefore turnover is probably the highest among institutional investors. Page 26

Insights Assets $M 18,080 13,049 12,200 5,019 4,779 4,412 4,302 2,368 2,218 1,758 1,455 1,441 1,375 1,315 943 883 800 752 723 580 1600 120,000 1400 100,000 1200 80,000 1000 60,000 800 600 40,000 400 20,000 # of s used Institution Name Morgan Stanley & Co. LLC UBS Securities LLC JPMorgan Securities LLC Citigroup Global Markets, Inc. (Broker) Barclays Capital, Inc. Credit Suisse Securities (A) LLC (Broker) Jane Street Capital LLC Susquehanna Financial Group LLLP SG Americas Securities LLC Mizuho Securities A, Inc. CIBC World Markets Corp. Flow Traders LLC D. A. Davidson & Co. RBC Dominion Securities, Inc. Old Mission Capital LLC Goldman Sachs International Wells Fargo Securities LLC KCG Americas LLC Wolverine Trading LLC Cutler Group LP Figure 63: Historical Assets and # of s used Broker Inst. Assets $MM Figure 62: Top 20 Broker by Assets 200-0 Assets # s used Figure 64: Top 30 ETPs owned by Broker Rank Ticker 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 SPY IWM XLP GDX XLU QQQ XLE GLD FXI XLF XLV HYG EFA XLK VOO IYR EEM XOP GDXJ EWZ XLI IBB BKLN JNK VTI DIA VEA EWJ MDY TLT Struc- Product Asset Class ture Type Sector ETV Consumer Staples Theme Global VanEck Vectors Utilities PowerShares Energy Precious Metals EM Financials Healthcare Corporates DM Technology Real Estate EM Energy Theme Global VanEck Vectors EM Industrials Healthcare Senior Loans PowerShares Corporates DM DM Treasury Commodity Market Issuer TER 0.09% 0. 0.5 0. 0.4 0.73% 0.5 0.33% 0.05% 0.43% 0.69% 0.35% 0.54% 0.6 0.47% 0.65% 0.4 0.05% 0.17% 0.09% 0.48% 0.25% 0.15% Assets held $MM 27,717 5,092 2,171 1,961 1,921 1,887 1,584 1,438 1,333 1,298 1,085 1,058 1,048 959 954 920 917 815 775 744 652 629 602 539 489 479 443 442 435 425 total % AUM $MM Owned 224,820 38,727 8,294 9,685 6,994 41,793 17,585 30,629 2,902 22,477 13,500 18,891 59,665 14,119 56,485 4,236 26,034 2,370 3,454 4,255 10,172 7,620 7,906 11,986 69,556 14,702 40,169 15,300 18,798 5,150 1 13% 26% 27% 5% 9% 5% 46% 6% 8% 6% 7% 2 4% 34% 2 17% 6% 8% 8% 4% 1% 3% 1% 3% 8% Page 27

Insights Figure 66: Historical allocation of assets by Market () - Broker 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. ETP Assets Market Share Figure 65: Historical allocation of ETP assets by asset class - Broker Commodity 10 9 8 7 6 5 4 3 Other Asset Class DM EM Global 10 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 67: Historical allocation of assets by Sectors () - Broker Telecom 9 Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. 5 Industrials 4 Healthcare 3 Energy Technology Financials 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Sectors 2001 Sector Diversified 2000 Real Estate 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 68: Historical allocation of assets by Size and Style () - Broker Broad Large Cap Mid Cap Small Cap 10 9 8 7 6 5 4 3 Blend Value Growth Dividend Page 28

Insights Figure 69: Historical allocation of assets by Sector () - Broker 10 Inst. ETP Assets Market Share Convertible 9 International 8 Senior Loans 7 Preferred 6 Securitized 5 EM debt 4 Municipal 3 Inflation Treasury Aggregate Corporates <0. 0.4%-0.6% 0.6%-0.8% >0.8% Figure 72: Historical allocation of ETP assets by Issuer Broker 10 9 9 2016 2015 ers 2014 2013 S&P Dow Jones 2012 3 2011 FTSE Russell 4 2010 3 5 2009 MSCI 2008 4 6 2007 CRSP 2006 5 7 2005 Nasdaq OMX 6 8 2004 7 2000 Other Providers 8 Inst. ETP Assets Market Share 10 2003 Figure 71: Historical allocation of assets by Index Provider () - Broker Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim Inv. VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Figure 73: Historical allocation of ETP assets by Product Type - Broker Figure 74: Historical allocation of assets by Management Style () - Broker Inst. Assets Market Share 10 Inst. ETP Assets Market Share 0.-0.4% 2002 Inst. Assets Market Share 10 9 8 7 6 5 4 3 2001 Inst. Assets Market Share Figure 70: Historical allocation of ETP assets by TER Broker 9 8 7 6 5 4 3 10 9 8 7 6 5 4 3 LevInv Beta Smart Beta Active Page 29

Insights Mutual Mutual funds are oﬀ-the-shelf investment solutions oﬀered to meet common client objectives. They are mostly used by retail investors, but also used by institutions - particularly in the retirement market. Mutual funds are investors and usually have mid to long term time horizons. They can focus on a single or multiple asset classes. For a time they had remained skeptic of s, but they have been warming up to them in recent years. In fact, assets held by mutual funds more than tripled in the last 5 years. In addition, we see that more and more mutual funds are adopting s, whether it is as an auxiliary tool in single asset class portfolios or main building block in multi asset portfolios. usage among mutual funds is fairly mixed. We believe that the most common usages of s by mutual funds, in order of popularity, are: cash equitization, liquidity management, and core investment. Our top 30 product sample includes commonly-used active manager benchmarks such as the S&P 500, MSCI EAFE, Russell 2000, NASDAQ-100, etc.; as well as less liquid asset classes such as High Yield Credit, and Senior Loans. Apparently a criteria combination of underlying index exposure, liquidity, and cost seems more relevant than just one of them on their own. Furthermore, a look at the top mutual fund managers suggest that those with their own product suites are more likely to use s as core building blocks in multi asset portfolios (e.g. GA, ); while other mutual fund managers are more likely to use s for cash management and liquidity purposes. Therefore, unless part of a fund of funds portfolio, in general s don t play a structural role in the mutual fund manager portfolio and therefore their usage tends to be more tactical with relatively high turnover of positions. Assets $M 11,116 8,535 5,352 3,012 2,656 2,140 2,083 1,878 1,602 1,556 1,554 1,443 1,179 1,024 916 885 871 774 609 599 70,000 700 60,000 600 50,000 500 40,000 400 30,000 300 20,000 200 10,000 100 - # of s used Institution Name JPMorgan Investment Management, Inc. SSgA s Management, Inc. The Group, Inc. Wilmington Trust Investment Advisors, Inc. AllianceBernstein LP Columbia Management s LLC Psagot Mutual s Ltd. Handelsbanken Fonder AB BMO Asset Management, Inc. American Century Investment Management, Inc. Rafferty Asset Management LLC Wellington Management Co. LLP Thrivent Investment Management, Inc. Catalyst Capital Advisors LLC Voya Investment Management Co. LLC FIL Investment Advisors (UK) Ltd Franklin Advisers, Inc. AGF Investments, Inc. Industrial Alliance Investment Management, Inc. Invesco Canada Ltd. Figure 76: Historical Assets and # of s used Mutual Inst. Assets $MM Figure 75: Top 20 Mutual by Assets 0 Assets # s used Page 30

Insights Figure 77: Top 30 ETPs owned by Mutual Rank Ticker 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 SPY EFA QQQ VOO VWO IVV JNK VEA VTI IWD TIP IWM GDX EWJ VNQ IEMG AGG BND HYG IEFA BKLN LQD XLK XLE BSV XLF BNDX IWS BNDS XLI Struc- Product Asset Class ture Type Sector Market Issuer Corporates Inflation Theme Real Estate Broad Broad Corporates Senior Loans Corporates Technology Energy Broad Financials Broad Broad Industrials DM EM DM Global DM EM DM Global PowerShares VanEck Vectors PowerShares Assets held $MM TER 0.09% 0.33% 0. 0.05% 0.04% 0.4 0.09% 0.05% 0. 0. 0. 0.5 0.48% 0.1 0.05% 0.06% 0.5 0.08% 0.65% 0.15% 0.09% 0.1 0.25% 0.09% 12,816 2,509 2,079 1,714 1,669 1,611 1,125 1,105 1,025 1,012 966 917 886 826 780 736 659 611 595 561 556 556 550 448 431 430 397 392 376 373 total % AUM $MM Owned 224,820 59,665 41,793 56,485 43,948 90,620 11,986 40,169 69,556 34,879 21,348 38,727 9,685 15,300 32,603 17,807 41,555 31,443 18,891 15,774 7,906 27,041 14,119 17,585 19,575 22,477 6,069 9,110 1,219 10,172 6% 4% 5% 3% 4% 9% 3% 1% 3% 5% 9% 5% 4% 3% 4% 7% 4% 3% 7% 4% 31% 4% 10 9 8 7 6 5 4 3 Figure 79: Historical allocation of assets by Market ()- Mutual Inst. Assets Market Share Inst. ETP Assets Market Share Figure 78: Historical allocation of ETP assets by asset class - Mutual Commodity Other Asset Class 10 9 8 7 6 5 4 3 DM EM Global Page 31

Insights Figure 80: Historical allocation of assets by Sectors () - Mutual Inst. Assets Market Share Inst. Assets Market Share 10 9 8 7 6 5 4 3 10 Telecom 9 Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. 5 Industrials 4 Healthcare 3 Energy Technology Financials 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Sectors 2001 Sector Diversified 2000 Real Estate 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 81: Historical allocation of assets by Size and Style () - Mutual Broad Large Cap Mid Cap 10 9 8 7 6 5 4 3 Small Cap Blend Value Growth Dividend 10 Convertible 9 International 8 Senior Loans 7 Preferred 6 5 4 3 Securitized EM debt Municipal Inflation Treasury Figure 83: Historical allocation of ETP assets by TER Mutual Inst. ETP Assets Market Share Inst. Assets Market Share Figure 82: Historical allocation of assets by Sector () - Mutual 10 9 8 7 6 5 4 3 Aggregate Corporates <0. Page 32 0.-0.4% 0.4%-0.6% 0.6%-0.8% >0.8%

Insights Figure 85: Historical allocation of ETP assets by Issuer Mutual 10 10 9 9 2016 2015 2014 Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim Inv. VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Figure 86: Historical allocation of ETP assets by Product Type - Mutual Figure 87: Historical allocation of assets by Management Style () - Mutual Inst. Assets Market Share 10 Inst. ETP Assets Market Share 2013 2012 ers 2000 2011 S&P Dow Jones 2010 3 2009 FTSE Russell 4 2008 3 5 2007 MSCI 2006 4 6 2005 CRSP 2004 5 7 2003 Nasdaq OMX 6 8 2002 7 2001 Other Providers 8 Inst. ETP Assets Market Share Inst. Assets Market Share Figure 84: Historical allocation of assets by Index Provider () - Mutual 9 8 7 6 5 4 3 10 9 8 7 6 5 4 3 Beta LevInv Smart Beta Active Hedge Hedge funds are traders that seek to implement directional or relative value views around market ineﬃciencies and events (e.g. macroeconomic, geopolitical, or company speciﬁc). They usually seek absolute returns, take long and short positions, and may deal in less liquid securities, or in large concentrated sizes. Recent ownership data suggest that more and more hedge funds are ﬁnding value in using s. In fact, our data suggest that hedge funds use s for gaining quick and eﬃcient asset class access both on the long and short side, similar to futures contracts. In addition, some can hold s for very long periods (>1 year), while many others may hold them for less than 1 day. Nevertheless, the main requirement is enough liquidity (on the long and short side) and size to be able to execute large trades without major market impact, particularly on those asset classes that may be harder to access. Cost is usually not the main criteria for product selection. Finally, the presence of highly liquid products among the top 30 covering diverse asset classes such as equities, ﬁxed income, and commodities supports these views. Particularly, high positions in Gold, Gold miners, High Yield Credit, EM countries, sectors and industries further conﬁrm the eﬃcient access product thesis. Page 33

Insights Bridgewater Associates LP Passport Capital LLC Citadel Advisors LLC Magnetar Financial LLC IndexIQ Advisors LLC Parallax Volatility Advisers LP Two Sigma Advisers LP Lumina Management LLC Investure LLC Slate Path Capital LP Quantitative Investment Management LLC Millennium Management LLC Glen Point Capital LLP JBF Capital, Inc. Millburn Ridgefield Corp. Discovery Capital Management LLC D. E. Shaw & Co. LP MSD Partners LP Main Management LLC Gladius Capital Management LP Assets $M 8,690 3,598 2,411 2,089 1,677 1,214 1,077 821 794 764 728 723 689 685 683 662 640 569 567 533 900 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-800 700 600 500 400 300 # of s used Institution Name Figure 89: Historical assets and # of s used Hedge Inst. Assets $MM Figure 88: Top 20 Hedge by Assets 200 100 0 Assets # s used Figure 90: Top 30 ETPs owned by Hedge Rank Ticker 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 SPY EEM VWO IWM GLD XLF QQQ GDX LQD HYG VOO FXI EFA XLV EWZ TLT KRE XLI BSV XLY DXJ XLE IBB GDXJ XOP MDY IEMG XLP EWJ XLU Struc- Product Asset Class ture Type Sector ETV EM EM Precious Metals Financials Theme Global Corporates Corporates EM DM Healthcare EM Treasury Financials Industrials Broad Consumer Discretion DM Energy Healthcare Theme Global Energy EM Consumer Staples DM Utilities Commodity Market Issuer PowerShares VanEck Vectors WisdomTree VanEck Vectors TER 0.09% 0.69% 0. 0.4 0. 0.5 0.15% 0.5 0.05% 0.73% 0.33% 0.6 0.15% 0.35% 0.09% 0.48% 0.47% 0.54% 0.35% 0.25% 0.48% Assets held $MM 13,032 4,255 3,439 1,898 1,802 1,779 1,095 1,029 672 660 605 532 514 489 469 454 430 412 376 372 350 312 312 302 291 290 285 280 267 256 total % AUM $MM Owned 224,820 26,034 43,948 38,727 30,629 22,477 41,793 9,685 27,041 18,891 56,485 2,902 59,665 13,500 4,255 5,150 3,557 10,172 19,575 10,817 8,000 17,585 7,620 3,454 2,370 18,798 17,807 8,294 15,300 6,994 6% 16% 8% 5% 6% 8% 3% 11% 3% 1% 18% 1% 4% 11% 9% 1 4% 3% 4% 4% 9% 1 3% 4% Page 34

Insights Figure 92: Historical allocation of assets by Market () - Hedge 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. ETP Assets Market Share Figure 91: Historical allocation of ETP assets by asset class - Hedge Commodity 10 9 8 7 6 5 4 3 Other Asset Class DM EM Global 10 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 93: Historical allocation of assets by Sectors () - Hedge Telecom 9 Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. 5 Industrials 4 Healthcare 3 Energy Technology Financials 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Sectors 2001 Sector Diversified 2000 Real Estate 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 94: Historical allocation of assets by Size and Style () - Hedge Broad Large Cap Mid Cap Small Cap 10 9 8 7 6 5 4 3 Blend Value Growth Dividend Page 35

Insights Figure 95: Historical allocation of assets by Sector () - Hedge 10 Inst. ETP Assets Market Share Convertible 9 International 8 Senior Loans 7 Preferred 6 Securitized 5 EM debt 4 Municipal 3 Inflation Treasury Aggregate Corporates <0. 0.4%-0.6% 0.6%-0.8% >0.8% Figure 98: Historical allocation of ETP assets by Issuer Hedge 10 9 9 2016 ers 2000 2015 S&P Dow Jones 2014 3 2013 FTSE Russell 4 2012 3 5 2011 MSCI 2010 4 6 2009 CRSP 2008 5 7 2007 6 8 2006 Nasdaq OMX 2005 7 2004 Other Providers 8 Inst. ETP Assets Market Share 10 2003 Figure 97: Historical allocation of assets by Index Provider () - Hedge Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim Inv. VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Figure 99: Historical allocation of ETP assets by Product Type - Hedge Figure 100: Historical allocation of assets by Management Style () - Hedge Inst. Assets Market Share 10 Inst. ETP Assets Market Share 0.-0.4% 2002 Inst. Assets Market Share 10 9 8 7 6 5 4 3 2001 Inst. Assets Market Share Figure 96: Historical allocation of ETP assets by TER Hedge 9 8 7 6 5 4 3 10 9 8 7 6 5 4 3 Page 36 LevInv Beta Smart Beta Active

Insights Pension Pension funds are traditional institutional investors that manage retirement assets. Pension funds can be part of public or private systems, but notwithstanding they are usually highly regulated. They have one of the longest investment time horizons, and high asset concentration; therefore they tend to have well deﬁned strategic asset allocation budgets. Nevertheless they may engage in tactical asset allocation as well. Furthermore, they have some of the longest and toughest due diligence processes for external managers, but once allocations are approved they tend to come in large sizes. In addition, they tend to be really cost-conscious investors, have very broad mandates arising from their need to be diversiﬁed, and are usually somewhat short-staﬀed for the task at hand. Therefore many pension funds have found a friendly new addition to their toolkit in s. For pension funds s are usually seen as a way to obtain access to diﬀerent asset classes in an eﬃcient way. However, unlike hedge funds, s tend to play a more strategic role in pension portfolios. The better way to describe Pension usage of s is completion. Usually pension funds use s as building blocks for more eﬃcient ﬁnancial markets, or markets that are diﬃcult to access. For example, it is common to see non- based pension funds use s for accessing the market (either via broad or sector exposures), and countries outside their own region (e.g. Latin American pension using Asian country s), or -based pension funds using s for accessing Emerging Markets, speciﬁc factors, or custom exposures. Although pension funds have focused mostly on using equity s, we have recently seen some pick up in the usage of s such as High Yield credit. Given the more strategic nature of s in pension portfolios, turnover tends to be somewhere in between and Mutual. A combination of factors including exposure, liquidity, size, cost, and to some extent speciﬁc index and issuer support, is usually more important than any single selection criterion on its own. Smaller pension funds are more likely to use s as a core investment building block compared to larger pension funds which may have better access to markets, ﬁnancial instruments, or in-house indexing capabilities. Moreover, pension funds haven't seemed as committed to s as other investors such as investment advisers or private banks; for them s are just another useful tool in their toolkit. Thus it is not uncommon to see a speciﬁc pension fund assets ﬂuctuate around changes in key portfolio management personnel, or changes in tactical asset allocation. Pension funds from Latin America, the, Finland, and Israel were among the main users as of the end of last year. Page 37

Insights 40,000 200 Other 35,000 180 Japan 160 Sweden 140 New Zealand 30,000 25,000 120 20,000 100 15,000 80 60 10,000 5,000 - # of s used Inst. Assets $MM Figure 101: Historical Assets and # of s used - Pension South Korea Canada Private Israel 40 Finland 20 Public 0 Latam '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 # s used Figure 102: List of Pension s by country and assets Institution Name Ontario Teachers' Pension Plan Board The Caisse de depot et placement du Quebec The Public Sector Pension Investment Board Canada Pension Plan Investment Board OMERS Administration Corp. Keskinainen tyoelakevakuutusyhtio Varma Keskinainen Elakevakuutusyhtio Ilmarinen Keskinainen Tyoelakevakuutusyhtio Elo Valtion Elakerahasto - The State Pension Keskinainen Elakevakuutusyhtio Etera Clal Gemel Ltd. Amitim Senior Pension s Mizuho Trust & Banking Co., Ltd. (Investment Management) Prima AFP SA (Investment Management) AFP Integra SA (Investment Management) AFP ProVida SA (Investment Management) Gareth Morgan Investments LP Futuro SGFP SA National Pension Service of Korea Tredje AP-fonden AMF Pensionsforsakring AB S Investment Management Ltd. Pension Services Ltd. Lockheed Martin Investment Management Co. The Dow Chemical Co. Pension DuPont Capital Management Corp. Coordinating Investment Fiduciary of Raytheon Master Pension IBM Retirement United States Steel & Carnegie Pension Deere & Co. (Pension & Investments) Honeywell Capital Management LLC ExxonMobil Investment Management, Inc. CenturyLink Investment Management Co. Tennessee Consolidated Retirement System The Retirement Systems of Alabama Pennsylvania Public School Employees Retirement System State of Wisconsin Investment Board Employees Retirement System of Texas Michigan Department of Treasury (Investment Management) New Jersey Division of Investment State Board of Administration of Florida Retirement System New York State Common Retirement California State Teachers' Retirement System State Teachers Retirement System of Ohio South Dakota Investment Council Pension Reserves Investment Management Board Teacher Retirement System of Texas Ohio Public Employees Retirement System Louisiana State Employees' Retirement System The Oregon Investment Council Texas Permanent School Virginia Retirement Systems The California Public Employees Retirement System Illinois State Board of Investment Teachers Retirement System of the State of Kentucky Assets $MM Country / 2016 2015 System Canada 1,446 880 Canada 893 530 Canada 637 1,211 Canada 209 18 Canada 107 41 Finland 3,043 2,685 Finland 1,488 1,387 Finland 991 924 Finland 314 266 Finland 100 79 Israel 4,232 2,279 Israel 1,168 1,071 Japan 135 1,622 Latam 3,011 2,644 Latam 2,618 2,558 Latam 2,193 3,666 New Zealand 453 109 Portugal 0 South Korea 749 646 Sweden 120 285 Sweden 43 178 United Kingdom 93 96 United Kingdom 6 5 Private 1,045 946 Private 795 815 Private 704 329 Private 383 517 Private 272 95 Private 244 198 Private 95 171 Private 77 51 Private 8 27 Private 0 Public 2,528 1,814 Public 810 710 Public 694 389 Public 681 527 Public 672 657 Public 473 613 Public 418 1,917 Public 288 2 Public 270 225 Public 263 Public 216 432 Public 131 130 Public 63 64 Public 59 41 Public 44 24 Public 44 63 Public 33 33 Public 31 58 Public 24 2 Public 21 20 Public 16 7 Public 0 0 YoY Chg $MM % 566 64% 363 69% (573) -47% 191 1075% 65 158% 358 13% 100 7% 67 7% 48 18% 21 26% 1,953 86% 97 9% (1,487) -9 367 14% 60 (1,473) -4 344 315% 0 103 16% (165) -58% (135) -76% (3) -3% 0 8% 99 (20) - 375 114% (134) -26% 177 186% 46 23% (77) -45% 27 53% (19) -7 0 715 39% 100 14% 304 78% 154 29% 15 (141) -23% (1,498) -78% 286 12027% 45 263 (216) -5 1 1% (1) -1% 18 43% 20 8 (19) -3 0 1% (27) -47% 23 1327% 1 6% 8 115% 0 9% Page 38

Insights Figure 103: Top 30 ETPs owned by Pension Rank Ticker 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 SPY EEM VOO IWM IVV VNQ XLF XLY DBJP VTV GDX IJH EWY VT EWT QQQ EWG EWJ IEMG VTI VWO XLV EWZ EFA XLK HYG SHE XLU GLD VX Struc- Product Asset Class ture Type Sector ETV EM Real Estate Financials Consumer Discretion DM Theme Global EM DM EM DM DM EM EM Healthcare EM DM Technology Corporates Theme Utilities Precious Metals Global Commodity Market Issuer Deutsche AM VanEck Vectors PowerShares Assets held $MM TER 0.09% 0.69% 0.05% 0. 0.04% 0.1 0.5 0.08% 0.5 0.07% 0.6 0.11% 0.6 0. 0.48% 0.48% 0.05% 0.6 0.33% 0.5 0. 0.4 0.11% 6,048 2,984 2,891 2,234 1,390 1,197 1,002 930 914 755 734 655 629 587 586 539 529 520 459 443 405 372 360 325 316 314 263 251 232 214 total % AUM $MM Owned 224,820 26,034 56,485 38,727 90,620 32,603 22,477 10,817 2,082 27,101 9,685 34,715 2,848 6,444 2,734 41,793 3,936 15,300 17,807 69,556 43,948 13,500 4,255 59,665 14,119 18,891 271 6,994 30,629 6,407 3% 11% 5% 6% 4% 4% 9% 44% 3% 8% 2 9% 21% 1% 13% 3% 3% 1% 1% 3% 8% 1% 97% 4% 1% 3% 10 9 8 7 6 5 4 3 Figure 105: Historical allocation of assets by Market ( ) - Pension Inst. Assets Market Share Inst. ETP Assets Market Share Figure 104: Historical allocation of ETP assets by asset class - Pension Commodity Other Asset Class 10 9 8 7 6 5 4 3 DM EM Global Page 39

Insights Figure 106: Historical allocation of assets by Sectors () - Pension Inst. Assets Market Share Inst. Assets Market Share 10 9 8 7 6 5 4 3 10 Telecom 9 Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. 5 Industrials 4 Healthcare 3 Energy Technology Financials 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Sectors 2001 Sector Diversified 2000 Real Estate 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 107: Historical allocation of assets by Size and Style () - Pension Broad Large Cap Mid Cap 10 9 8 7 6 5 4 3 Small Cap Blend Value Growth Dividend Inst. Assets Market Share 10 9 8 7 6 5 4 3 Page 40 Convertible International Senior Loans Preferred Securitized EM debt Municipal Inflation Treasury Figure 109: Historical allocation of ETP assets by TER Pension Inst. ETP Assets Market Share Figure 108: Historical allocation of assets by Sector () - Pension 10 9 8 7 6 5 4 3 Aggregate Corporates <0. 0.-0.4% 0.4%-0.6% 0.6%-0.8% >0.8%

Insights Figure 111: Historical allocation of ETP assets by Issuer Pension 10 10 9 9 2016 2015 2014 2013 2012 Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim Inv. VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Figure 112: Historical allocation of ETP assets by Product Type - Pension Figure 113: Historical allocation of assets by Management Style () - Pension Inst. Assets Market Share 10 Inst. ETP Assets Market Share 2011 ers 2010 2009 S&P Dow Jones 3 2008 FTSE Russell 4 2007 3 5 2006 MSCI 2005 4 6 2004 CRSP 2003 5 7 2002 Nasdaq OMX 6 8 2001 7 2000 Other Providers 8 Inst. ETP Assets Market Share Inst. Assets Market Share Figure 110: Historical allocation of assets by Index Provider () - Pension 9 8 7 6 5 4 3 10 9 8 7 6 5 4 3 Beta LevInv Smart Beta Active Insurance Company Insurance companies, whether life, property & casualty, health, or other type, collect and invest premiums in order to meet claims and make a proﬁt. Because of the nature of their business model, insurance companies usually employ an Asset Liability Management (ALM) approach to asset management, and therefore their portfolios tend to be heavily invested in ﬁxed income (e.g. 75%) securities. In addition, the insurance industry is highly regulated and investable vehicles usually need to get approved by the regulator before insurers can invest in them. This, combined with the fact that about 8 of assets were invested in equity vehicles as of the end of last year have resulted in s not been as popular among insurance companies as they have been among other institutional investor types. However, this is changing and s have begun to become more popular among insurers, and are actively being used for cash equitization, liquidity, and core investment building blocks. Furthermore, s benchmarked to the S&P 500 index, and Corporate IG Credit were among their most popular allocations at the end of 2016. Meanwhile, exposure, size, cost, and liquidity combined tend to be the main selection criteria. Turnover of positions is probably similar to that of Mutual Managers. Page 41

Insights Assets $M The Northwestern Mutual Life Insurance Co. (Invt Port) 9,937 National Mutual Insurance Fed. of Agricultural Cooperatives 4,192 Migdal Insurance Co. Ltd. 2,079 Factory Mutual Insurance Co. (Investment Portfolio) 964 Schweizerische Ruckversicherungs-Gesellschaft AG (Invt P 925 Sentry Investment Management LLC 817 Metropolitan Life Insurance Co. (Investment Portfolio) 716 Mandatum Henkivakuutusosakeyhtio Oy 481 The Empire Life Insurance Co. (Investment Portfolio) 424 Symetra Life Insurance Co. (Investment Portfolio) 415 The Dai-ichi Life Insurance Co., Ltd. (Investment Portfolio) 378 The Guardian Life Insurance Co. of America (Invt Portfolio) 322 Fukoku Mutual Life Insurance Co. (Investment Portfolio) 318 XL Group Investments LLC 260 Zurich Life Assurance Plc 260 Liberty Mutual Insurance Co. (Investment Portfolio) 236 Axis Capital Holdings Ltd. (Investment Portfolio) 182 Kemper Corp. (Investment Portfolio) 174 Torchmark Corp. (Investment Portfolio) 135 Prudential Gibraltar Financial Life Insurance Co., Ltd. (IP) 121 450 25,000 400 20,000 350 300 15,000 250 200 10,000 150 # of s used Institution Name Figure 115: Historical Assets and # of s used Insurance Co. Inst. Assets $MM Figure 114: Top 20 Insurance Co. by Assets 100 5,000 50 0 - Assets # s used Figure 116: Top 30 ETPs owned by Insurance Company Rank Ticker 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 IVV SPY VOO LQD IJH VEA VWO BND IJR EFA AGG VNQ HYG IWB VEU QQQ SCHF IWD EEM BSV VYM XLV VGT MUB IXC CSJ F TLT EWC CIU Struc- Product Asset Class ture Type Sector Market Issuer Corporates Broad Broad Real Estate Corporates Broad Healthcare Technology Municipal Energy Corporates Preferred Treasury Corporates DM EM DM Global DM EM Global DM PowerShares Charles Schwab TER 0.04% 0.09% 0.05% 0.15% 0.07% 0.09% 0.06% 0.07% 0.33% 0.05% 0.1 0.5 0.15% 0.11% 0. 0.07% 0. 0.69% 0.09% 0.08% 0. 0.25% 0.47% 0. 0.47% 0.15% 0.48% 0. Assets held $MM 4,277 3,038 2,314 1,807 692 618 590 566 419 399 393 376 328 273 228 225 219 198 191 190 173 155 136 133 130 130 120 116 115 113 total % AUM $MM Owned 90,620 224,820 56,485 27,041 34,715 40,169 43,948 31,443 26,462 59,665 41,555 32,603 18,891 16,883 14,589 41,793 6,874 34,879 26,034 19,575 17,606 13,500 10,320 8,202 1,160 11,111 16,561 5,150 3,490 6,607 5% 1% 4% 7% 1% 1% 1% 1% 1% 3% 1% 1% 1% 1% 1% 1% 11% 1% 1% 3% Page 42

Insights Figure 118: Historical allocation of assets by Market ()- Insurance Co. 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. ETP Assets Market Share Figure 117: Historical allocation of ETP assets by asset class - Insurance Co. Commodity 10 9 8 7 6 5 4 3 Other Asset Class DM EM Global 10 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 119: Historical allocation of assets by Sectors () - Insurance Co. Telecom 9 Materials 8 Utilities 7 Cons. Staples 6 Cons. Disc. 5 Industrials 4 Healthcare 3 Energy Technology Financials 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Sectors 2001 2000 Sector Diversified Real Estate 10 9 8 7 6 5 4 3 Inst. Assets Market Share Inst. Assets Market Share Figure 120: Historical allocation of assets by Size and Style () - Insurance Co. Broad Large Cap Mid Cap Small Cap 10 9 8 7 6 5 4 3 Blend Value Growth Dividend Page 43

Insights Figure 121: Historical allocation of assets by Sector ()- Insurance Co. 10 Inst. ETP Assets Market Share Convertible 9 International 8 Senior Loans 7 Preferred 6 Securitized 5 EM debt 4 Municipal 3 Inflation Treasury Aggregate Corporates <0. 0.4%-0.6% 0.6%-0.8% >0.8% Figure 124: Historical allocation of ETP assets by Issuer Insurance Co. 10 9 9 2016 2015 2014 ers 2000 2013 S&P Dow Jones 3 2012 FTSE Russell 4 2011 3 5 2010 MSCI 2009 4 6 2008 CRSP 5 7 2007 6 8 2006 Nasdaq OMX 2005 Other Providers 7 2004 8 Inst. ETP Assets Market Share 10 2003 Figure 123: Historical allocation of assets by Index Provider ()- Insurance Co. Other Issuers Goldman Sachs ProShares ALPS PIMCO Deutsche AM FlexShares Guggenheim Inv. VanEck Vectors WisdomTree First Trust Charles Schwab PowerShares Figure 125: Historical allocation of ETP assets by Product Type - Insurance Co. Figure 126: Historical allocation of assets by Management Style () - Insurance Co. Inst. Assets Market Share 10 Inst. ETP Assets Market Share 0.-0.4% 2002 Inst. Assets Market Share 10 9 8 7 6 5 4 3 2001 Inst. Assets Market Share Figure 122: Historical allocation of ETP assets by TER Insurance Co. 9 8 7 6 5 4 3 10 9 8 7 6 5 4 3 Page 44 LevInv Beta Smart Beta Active

Insights Custom Proﬁles Institutions in Retail Distribution Channels We have found that, at times, the, and Private Banking/ WM classiﬁcations may not oﬀer enough granularity, or a clear line separating one institution type from the other. Therefore we decided to apply a diﬀerent proprietary classiﬁcation for institutional investors which can provide further insight into usage. Our classiﬁcation is focused on those institutions that many would label as retail investors because of their participation in retail distribution channels. However, the truth is that many of these institutions meet the deﬁnition of institutional investor, have full discretion over their assets, and run centralized model portfolios using investment processes as sophisticated as those employed by any other traditional institution. Furthermore, some even managed a signiﬁcant level of institutional client assets. Thus, in our eyes, we see them as the new institutional investor; a breed that, in part, has been the result of the enabled institutionalization of retail channels. As of the end of 2016, our classiﬁcation covered 330 institutions with $628bn in assets or 43% of all institutional assets. In this group we included the main users among Wirehouses, Registered s (RIA), Independent Broker Dealers (IBD), Regional Broker Dealers (RBD), asset managers, Discount Brokers, Independent Turnkey Asset Management Programs (ITAMP), and Robo-Advisors. Wirehouse: this is a large integrated broker with a national, as opposed to regional, business. A wirehouse relies on a national network of ﬁnancial advisors to deliver multiple services, mostly, to high net worth clients. All wirehouses have a centralized due diligence and approval process for s, as well as their own model portfolio solutions. A large portion of the assets among wirehouses is invested in these model portfolio solutions, which in practice results in large multi asset portfolios of institutional dimensions. Because of the size of the positions, wirehouses tend to prefer large s, with abundant liquidity at a low cost. There are four widely recognized wirehouses in the : Merrill Lynch, Wells Fargo, Morgan Stanley, and UBS. Registered (RIA): RIAs are independent advisers with ﬁduciary duty. They mostly focus on investment advice, but can also provide other wealth management and ﬁnancial planning services. They may target speciﬁc client segments (e.g. by geography, or net worth). And because their size can vary signiﬁcantly from just over $100 million to several billions of dollars, s provide them with scalability and ﬂexibility to implement institutional-caliber solutions. They enjoy high autonomy in terms of investment strategies and product selection. For this reason, they are open to use a larger array of s, but with smaller dollar allocations. In addition, their ﬁduciary nature makes them more cost-conscious and more likely to prefer s over other fund products. Independent Broker Dealer (IBD): IBDs, like wirehouses, deliver their services to "middle America" through a network of ﬁnancial advisors; however, ﬁnancial advisors in the IBD channel act as independent contractors rather than as employees of the ﬁrm as it is the case of wirehouses. And although the home oﬃce at IBDs usually provides a Page 45

Insights structured due diligence process and oﬀers some level of guidance on the selection of s, IBDs can often have more ﬂexibility in the selection of s than wirehouses. In addition, many of them also oﬀer centralized model portfolios. Finally, the lack of a house view enforcement and pressure to oﬀer proprietary products, make IBDs more likely to be open to a broader range of s. Page 46 Regional Broker Dealer (RBD): RBDs are similar to wirehouses, with the main diﬀerence that they focus on a speciﬁc geographic region, as opposed to nation wide coverage. s (AM): this group covers companies that provide asset management solutions which usually take the form of multi asset model portfolios where s are used as key building blocks. Their portfolios can employ an strategic, tactical, or mixed investment approach. This group invests the majority of their assets in s and is usually very active in the industry circuit (e.g. media, conferences, publications). AMs can range in size of assets under management from a couple hundreds of million of dollars to multiple billions under management. In general, they have high autonomy over the usage and selection of products and are very open to a broad range of products. No single criteria is more relevant than another, and as specialists they prefer overall product ﬁt. Large asset managers (e.g. issuers) which provide model portfolios as well as many other solutions are excluded from this group. Discount Broker (DB): DBs are brokers that execute on-line buy and sell orders at a very low cost compared to full-service brokers. DBs don't provide investment advice; although nowadays many DBs oﬀer several model portfolios via automated portfolio management services. Because these models tend to be oﬀ-the-shelf solutions, they use a reduced number of large, very cheap, and liquid s. Independent Turnkey Asset Management Program (ITAMP): Independent (i.e. not aﬃliated with a Bank) TAMPs are fee-based technology platforms used by ﬁnancial advisers, broker dealers, and other institutions to access asset management services. The idea is that a user whose expertize does not lie in the management of investments can hire the services of a ﬁrm specialized in investment management through a TAMP. TAMPs oﬀer several model portfolio solutions, many of which employ s as key building blocks. The concentration of assets, as well as the range of s utilized will depend on the popularity and the quantity of the models being oﬀered. Robo-Advisors: robo advisors or digital advisors are independent SEC registered investment adviser ﬁrms (i.e. ﬁduciary) that build multi asset portfolios using s to meet speciﬁc client objectives by heavily relying in digital investment advice tools. They don't necessarily invest exclusively in s, or completely rule out human advice intervention; however s or passive vehicles,and digital tools remain a key pillar of their business model. Robo-Advisors mostly favor a strategic approach to portfolio management and focus on a reduced number of multi billon dollar s with the cheapest price-tags. Large asset managers that also oﬀer roboadvisory services among other client products are excluded.

Insights Figure 127: Institutions in retail distribution channels Type # of Firms Wirehouse RIA IBD Reg. B/D AM Disc. Broker ITAMP Robo-Advisor Sample Total 4 222 33 8 43 5 10 5 Assets $MM 2016 2015 262,442 238,423 98,435 76,256 75,562 73,739 58,856 38,214 43,787 40,302 40,121 28,078 33,897 24,605 14,675 8,638 627,774 528,256 YoY Change $MM 24,019 22,178 1,823 20,642 3,485 12,043 9,292 6,037 99,519 % of Inst. % Assets 18% 29% 7% 5% 54% 4% 9% 3% 43% 3% 38% 7 1% In recent years, Robo-Advisors have been the fastest growing group in relative terms by growing their assets by 7 in the last year, and an annualized 188% in the last three years. Similarly, most groups have also experienced healthy asset growth, with the exception of IBDs, and s which experienced some headwinds in the last few years. Figure 128: Historical asset trends among institutions in retail distribution channels 60,000 300,000 RIA IBD Reg. B/D 200,000 150,000 100,000 50,000-50,000 Inst. Assets $MM Inst. Assets $MM 250,000 Wirehouse AM Disc. Broker ITAMP Robo-Advisor 40,000 30,000 20,000 10,000 - Page 47

Insights Figure 129: Select Non-RIA institutional investors Institution Name Assets $MM 2016 2015 Wirehouse Merrill Lynch 88,783 90,099 Wells Fargo Advisors 74,998 64,269 Morgan Stanley Wealth Management 56,839 49,916 UBS Wealth Management 41,821 34,139 Regional Broker Dealer (RBD) Edward Jones 26,675 15,589 Raymond James & Associates 11,982 8,596 RBC Wealth Management 9,194 6,076 Stifel Nicolaus 4,362 2,905 Janney Montgomery Scott 3,455 2,396 Robert W. Baird 2,561 2,091 Hilliard Lyons 558 504 Wedbush Securities 69 57 Discount Broker (DB) Fidelity 17,441 13,219 Charles Schwab 13,981 8,037 TD Ameritrade 6,345 5,233 E-Trade 1,523 1,248 Scott Trade 832 342 Independent Turn-key Asset Management Program (ITAMP) Envestnet 21,207 15,047 AssetMark 5,802 4,704 SEI 2,729 1,482 Brinker Capital 1,054 978 Adhesion 913 820 Eqis 905 790 Efficient Advisors 691 459 Sawtooth Solutions 272 Flexible Plan Investments 171 184 WrapManager 152 142 Independent Robo-Advisor Betterment 6,761 3,248 Wealthfront 3,414 2,474 FolioDynamix 1,970 1,329 Personal Capital 1,631 891 Future Advisor 899 696 YoY Chg $MM % (1,316) 10,729 6,923 7,682-1% 17% 14% 23% 11,086 3,386 3,118 1,458 1,059 470 54 12 71% 39% 51% 5 44% 2 11% 2 4,221 5,944 1,112 276 490 3 74% 21% 2 143% 6,160 1,098 1,247 76 92 115 233 272 (13) 11 41% 23% 84% 8% 11% 15% 51% 3,513 940 642 739 203 108% 38% 48% 83% 29% -7% 7% Institution Name Independent Broker Dealer (IBD) - Top 20 Ameriprise Financial LPL Financial Holdings Northwestern Mutual Commonwealth Financial Network Wells Fargo Advisors Financial Network L Raymond James Financial Services Cambridge Investment Research Securities America MetLife Securities Inc. Lincoln Investment Planning AXA Advisors Cetera Advisor Networks First Allied Securities SII Investments Cetera Advisors National Planning Corporation Voya Financial Advisors Ladenburg Thalmann Financial Services In Investment Centers of America Inc. Transamerica Financial Advisors s (AM) - Top 20 Windhaven Investment Management, Inc. ValMark Advisers, Inc. RiverFront Investment Group LLC Swan Global Investments LLC Stadion Money Management LLC CLS Investments LLC Churchill Management Corp. Swan Global Management LLC Synovus Trust Co., NA Members Trust Co. Morningstar Investment Services LLC Horizon Investments LLC Sage Advisory Services Ltd. Co. Efficient Market Advisors LLC Morningstar Investment Management LLC Main Management LLC Clark Capital Management Group, Inc. Nottingham Advisors, Inc. Glovista Investments LLC Astor Investment Management LLC Assets $MM 2016 2015 YoY Chg $MM % 14,937 10,579 9,937 7,363 6,483 5,248 3,376 2,313 1,984 1,609 1,291 1,130 992 871 856 802 764 686 610 517 7,809 27,896 5,905 5,522 5,436 3,916 2,554 1,812 1,311 1,166 1,171 850 933 460 672 737 507 629 399 1,088 7,127 (17,317) 4,032 1,842 1,047 1,332 822 501 673 443 120 279 59 411 184 65 257 57 211 (570) 91% -6 68% 33% 19% 34% 3 28% 51% 38% 33% 6% 89% 27% 9% 51% 9% 53% -5 8,289 3,949 3,378 3,086 3,000 2,271 2,200 1,886 1,613 1,535 1,414 1,367 730 664 578 567 547 541 531 466 10,822 4,269 3,094 2,148 2,548 2,200 1,313 1,288 1,384 767 1,222 760 489 608 562 530 536 435 688 (2,533) (320) 284 938 452 71 887 598 228 1,535 647 145 (30) 175 (30) 5 17 5 95 (222) -23% -8% 9% 44% 18% 3% 68% 46% 17% 84% 1-4% 36% -5% 1% 3% 1% 2-3 Page 48

Insights Figure 130: Top 50 RIA investors by assets Assets $MM 2016 2015 Registered (RIA), Top 1-25 Creative Planning, Inc. 11,933 8,891 Edelman Financial Services LLC 7,945 6,632 United Capital Financial Advisers LLC 5,711 4,485 First Republic Investment Management, I 3,712 2,910 Veritable LP 2,786 2,461 Financial Engines Advisors LLC 2,442 Ronald Blue & Co. LLC 2,403 1,638 HighTower Advisors LLC 2,357 2,175 SCS Capital Management LLC 1,980 2,227 Beacon Capital Management, Inc. 1,747 1,392 Private Advisor Group LLC 1,703 1,074 Alesco Advisors LLC 1,299 1,234 Pinnacle Advisory Group, Inc. 1,295 1,013 Ballentine Partners LLC 1,183 980 Choate Investment Advisors LLC 1,178 1,151 Aspiriant LLC 991 917 Hanson McClain, Inc. 919 515 Sullivan, Bruyette, Speros & Blayney LLC 879 25 Balentine LLC 862 420 Destination Wealth Management, Inc. 859 714 AT s, Inc. 834 906 Bingham Osborn & Scarborough LLC 824 709 Johnson Investment Counsel, Inc. 808 703 Homrich & Berg, Inc. 808 834 Truepoint, Inc. 807 667 Institution Name YoY Chg $MM % 3,042 34% 1,314 1,226 27% 802 28% 326 13% 2,442 765 47% 183 8% (247) -11% 355 26% 629 59% 65 5% 282 28% 203 21% 27 74 8% 404 78% 854 338 442 105% 145 (72) -8% 115 16% 105 15% (26) -3% 140 21% Assets $MM 2016 2015 Registered (RIA), Top 26-50 Gradient Investments LLC 790 513 Honkamp Krueger Financial Services, Inc. 718 Linscomb & Williams, Inc. 715 597 Pekin Singer Strauss Asset Management, 689 12 Wealth Enhancement Advisory Services L 659 295 JMG Financial Group Ltd. 633 448 Brookstone Capital Management LLC 592 454 BKD Wealth Advisors LLC 578 441 The Mather Group, Inc. 554 418 The Milestone Group, Inc. 554 517 Hirtle, Callaghan & Co. LLC 553 408 Adviser Investments LLC 549 406 Sand Hill Global Advisors LLC 531 436 CWM LLC 505 408 MAI Capital Management LLC 487 443 Level Four Advisory Services LLC 474 Grimes & Co., Inc. 472 360 Sequoia Financial Advisors LLC 457 149 Balasa Dinverno Foltz LLC 443 447 Carroll Financial Associates, Inc. 421 240 Miracle Mile Advisors LLC 408 272 Signature Estate & Investment Advisors L 407 324 MCF Advisors LLC 406 334 GenSpring Family Offices LLC 406 360 KLS Professional Advisors Group LLC 405 740 Institution Name YoY Chg $MM % 278 54% 718 118 677 5803% 364 124% 185 41% 138 31% 138 31% 136 33% 37 7% 145 36% 142 35% 95 2 97 24% 44 474 112 31% 308 207% (4) -1% 181 75% 136 5 82 25% 72 2 46 13% (335) -45% Latam Pension s The Latin American pension fund system including Mexico, Chile, Peru, and Colombia is probably the most relevant pension system for s in the world. However, because many of the Latam pension funds are not required to ﬁle 13F forms, their relevance in terms of asset ownership is many times understated. Fortunately much of these data can be sourced from local regulators, thus allowing us to perform a special ownership analysis of this important user group. We estimate that the 25 pension funds in our Latam system held more than $38bn in assets as of the end of 2016, down from a high of almost $55bn on 2014. This represented more than 9% of the $412bn under management in the whole pension system. Pensions in Mexico and Chile continue to be the largest users in absolute terms with $13.9bn and $9.6bn in assets, respectively; however pensions in Peru and Colombia have begun to catch up on the back of healthy growth in usage which took their assets to $7.8bn and $7.2bn at the end of last year, respectively. In relative terms, Chile allocates the smallest portion (<5%) of system assets among country pension systems; while Peru exhibits the highest allocation close to a of its system assets. Colombia and Mexico, on the other hand, allocate, and 11%, respectively. We also notice that smaller pension fund systems, and smaller pension funds, are more likely to allocate a major portion of their assets to s. Page 49

Insights In terms of usage, most Latam pension funds use s for implementing their international equity allocation positions, although some small investments in Latam equity, ﬁxed income, commodity, and even leveraged products have also been seen. However, in general pension funds would invest in s oﬀering exposure to equities in the, Europe, the Paciﬁc, and Emerging Markets. sector equity investing is particularly popular among Latam pensions and, at times, it can be used as a proxy for stock picking. Moreover, s are mostly used tactically as satellite positions, completion, or cash management vehicles. These pension managers are subject to strict regulation, with most countries having speciﬁc approval processes for s. Some of these processes can be particularly challenging for smaller issuers. In addition, in some countries regulation also extends into trading putting a lot of focus on execution costs and settlement processes. Latam pension funds usually make large dollar allocations, and therefore usually prefer large, liquid, and eﬃcient products. Eﬃciency for them translates into a combination of cheap expense ratio, low trading cost, and good performance tracking. Within the international equity allocations, s usually compete for market share head to head against active Mutual s. While funds in some countries such as Mexico, Colombia, and Peru tend to prefer s for international equity exposure, Chilean pensions prefer mutual funds. Figure 131: Historical assets in Latam pension system Colombia Chile % of Total Assets Assets $MM 50,000 14% Peru Mexico 1 40,000 8% 30,000 6% 20,000 4% 10,000 0 Assets as % of Total Assets 60,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Deutsche Bank, Superintendencia de Pensiones, CONSAR, Superintendencia Financiera, Superintendencia de Banca, Seguros y AFP. Data for Peru is as of Oct 2016. Page 50

Insights Chile The Chilean pension system is composed of six diﬀerent pension fund managers (AFPs) with a combined level of assets of more than $175bn at the end of 2016. The largest four AFPs concentrate over 9 of the assets. All of them use s, with AFP Provida holding the largest amount of assets ($3.4bn) as of last October 2016. 4,000 14,000 8% 12,000 10,000 6% 8,000 4% 6,000 4,000 2,000 Pension Assets [$MM] % of Total Assets Pension assets as % of total assets Assets (-listed) 16,000 2008 2009 2010 2011 2012 2013 2014 2015 % of Total Assets 3,500 7% 3,000 6% 2,500 5% 2,000 4% 1,500 3% 1,000 500 1% - Provida - 8% Assets (-listed) 1 18,000 Pension Assets [$MM] Figure 133: assets by Chilean pension fund Oct '16 Pension assets as % of total assets Figure 132: Historical assets in the Chilean pension system Cuprum Habitat Capital Modelo PlanVital 2016 Source: Deutsche Bank, Superintendencia de Pensiones. Data as of Oct 2016. Source: Deutsche Bank, Superintendencia de Pensiones. Colombia The Colombian pension system is composed of four diﬀerent pension fund managers (AFPs) with a combined level of assets of about $64bn at the end of 2016. The largest two AFPs, Porvenir and Proteccion, concentrate over 8 of the assets. All of them use s, with AFP Porvenir holding the largest amount of assets ($3.0bn) as of the end of last year. 3,500 18% Assets (-listed) % of Total Assets 16% 7,000 14% 6,000 1 5,000 4,000 8% 3,000 6% 2,000 4% 1,000-2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Deutsche Bank, Superintendencia Financiera. 18% Assets (-listed) Pension Assets [$MM] 8,000 Pension assets as % of total assets Pension Assets [$MM] 9,000 Figure 135: assets by Colombian pension fund Dec '16 % of Total Assets 3,000 16% 14% 2,500 1 2,000 1,500 8% 6% 1,000 4% 500 - Pension assets as % of total assets Figure 134: Historical assets in the Colombian pension system Porvenir Proteccion Colfondos Old Mutual Source: Deutsche Bank, Superintendencia Financiera. Page 51

Insights Mexico The Mexican pension system is composed of eleven diﬀerent pension fund managers (Afores) with a combined level of assets of more than $130bn as of the end of 2016. The largest four Afores, XXI Banorte, Banamex, Sura, and Profuturo GNP, concentrate almost 7 of the assets. Although we do not have individual level data for the Afores, we estimate that about 75% of their international equity allocation is implemented using s. The Afores allocated 13.9% of their combined portfolio to non-domestic equity as of the end of 2016. 14% Assets (-listed) est. Pension assets as % of total assets Pension Assets (est) [$MM] 25,000 1 % of Total Assets 20,000 15,000 8% 6% 10,000 4% 5,000 Figure 137: Total assets by Mexican pension fund Dec '16 35,000 2016 Total Assets [$] Figure 136: Historical assets in the Mexican pension system Total System Assets 30,000 25,000 20,000 15,000 10,000 5,000-2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Deutsche Bank, CONSAR. Source: Deutsche Bank, CONSAR. assets are estimated. Peru The Peruvian pension system is composed of four diﬀerent pension fund managers (AFPs) with a combined level of assets of about $40bn as of October 2016. The largest three AFPs, Integra, Prima, and Profuturo, concentrate almost the entirety of the assets. All of them use s, with AFP Integra and AFP Profuturo holding $2.9bn each as of the end of last October. 8,000 6,000 15% 4,000 2,000 5% - Pension Assets [$MM] 25% Pension assets as % of total assets % of Total Assets 3 Assets (-listed) Assets (-listed) Pension Assets [$MM] 3,500 3 12,000 10,000 Figure 139: assets by Peruvian pension fund Oct '16 % of Total Assets 3,000 25% 2,500 2,000 15% 1,500 1,000 5% 500 - Pension assets as % of total assets Figure 138: Historical assets in the Peruvian pension system Integra Profuturo Prima Habitat 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Deutsche Bank, Superintendencia de Banca, Seguros y AFP. Data as of Oct 2016 Source: Deutsche Bank, Superintendencia de Banca, Seguros y AFP. Data as of Oct 2016 Page 52

Insights International s One of the reasons we like -listed s when we analyze ﬂows is the geographical diversity of their investor base. Therefore we decided to highlight some of the institutional international asset managers holding s at the end of last year. Our sample of almost 400 institutional asset managers excludes pension funds, brokers, and international subsidiaries of issuers, and as of the end of 2016 accounted for more than $80 billion in assets. Leading our list of users we have asset managers from Canada, Japan, United Kingdom, Switzerland, and Israel. Furthermore, we identify mutual fund providers, insurance companies, sovereign wealth funds, central banks, and private banks among these international users. Most of these investors use s as main building blocks in multi asset portfolios, in completion strategies, or for liquidity purposes. Figure 140: International summary table by country Country # of Firms Canada Japan United Kingdom Switzerland Israel South Korea Sweden France Italy Hong Kong Spain Chile Mexico Australia Singapore Other Sample Total 45 22 43 53 27 2 9 9 7 7 53 20 19 3 6 72 Assets $MM 2016 2015 28,586 20,621 19,340 13,547 5,981 7,503 4,454 4,091 3,443 3,697 3,073 1,760 2,049 349 1,589 1,939 1,522 1,463 1,504 552 1,451 1,789 1,386 2,093 1,276 2,340 1,082 135 853 636 2,825 3,054 80,413 65,570 YoY Change % of Inst. $MM % Assets 7,964 39% 2. 5,792 43% 1.3% (1,522) - 0.4% 363 9% 0.3% (254) -7% 0. 1,313 75% 0. 1,701 488% 0.1% (350) -18% 0.1% 58 4% 0.1% 951 17 0.1% (338) -19% 0.1% (707) -34% 0.1% (1,063) -45% 0.1% 947 70 0.1% 217 34% 0.1% (229) -7% 0. 14,844 5.6% Figure 141: Historical assets in select international asset managers by country 90,000 Inst. Assets $MM 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Other Singapore Australia Mexico Chile Spain Hong Kong Italy France Sweden South Korea Israel Switzerland United Kingdom Japan Canada Page 53

Insights Figure 142: Top 50* international asset managers by Assets Institution Name Country RBC Wealth Management 1832 Asset Management LP National Mutual Insurance Fed. of Agricultural Cooperatives TD Asset Management, Inc. Nomura Securities Co., Ltd. (Private Banking) Nissay Asset Management Corp. Asset Management One Co., Ltd. Psagot Mutual s Ltd. Migdal Insurance Co. Ltd. The Norinchukin Bank (Investment Management) Handelsbanken Fonder AB HSBC Global Asset Management (UK) Ltd. RBC Dominion Securities, Inc. (Investment Management) Mirae Asset Global Investments Co., Ltd. BMO Asset Management, Inc. Banca d'italia (Investment Portfolio) Korea Investment Corp. (Investment Management) Natixis Asset Management SA AMP Capital Investors Ltd. Schweizerische Ruckversicherungs-Gesellschaft AG (Invt Port) FIL Investment Advisors (UK) Ltd Manulife Asset Management (Hong Kong) Ltd. Banque Pictet & Cie SA AGF Investments, Inc. Fiduciary Trust Company of Canada Caixabank Asset Management SGIIC SA Eastspring Investments (Singapore) Ltd. Pictet Asset Management SA Fiera Capital Corp. (Investment Management) CIBC Asset Management, Inc. Industrial Alliance Investment Management, Inc. Schroder Investment Management Ltd. Mizuho Bank Ltd. (Private Banking) Hexavest, Inc. ING Bank NV (Investment Management) Allianz Global Investors Japan Co., Ltd. Mandatum Henkivakuutusosakeyhtio Oy Manulife Asset Management Ltd. Impulsora de Fondos Banamex SA de CV The Empire Life Insurance Co. (Investment Portfolio) Barclays Bank Plc (Private Banking) Harel-Pia Mutual s Ltd. GWL Investment Management The Dai-ichi Life Insurance Co., Ltd. (Investment Portfolio) RBC Private Counsel (A), Inc. Segantii Capital Management Ltd. Fukoku Mutual Life Insurance Co. (Investment Portfolio) JPMorgan Asset Management (UK) Ltd. Baring Asset Management Ltd. BBVA Asset Management SA SGIIC Canada Canada Japan Canada Japan Japan Japan Israel Japan Japan Sweden United Kingdom Canada South Korea Canada Italy South Korea France Australia Switzerland United Kingdom Hong Kong Switzerland Canada Canada Spain Singapore Switzerland Canada Canada Canada United Kingdom Japan Canada Netherlands Japan Finland Canada Mexico Canada United Kingdom Israel Canada Japan Canada Hong Kong Japan United Kingdom United Kingdom Spain Assets $MM YoY Chg 2016 2015 $MM % 9,194 6,076 3,118 51% 4,930 4,023 907 23% Insurance Co. 4,192 2,789 1,403 5 3,766 3,766 Priv. Bank 3,602 3,602 2,262 1,560 702 45% 2,139 2,139 2,083 2,029 54 3% Insurance Co. 2,079 2,079 1,903 1,768 135 8% 1,878 128 1,750 1365% 1,799 3,803 (2,004) -53% 1,799 1,799 1,763 502 1,260 251% 1,602 1,602 Central Bank 1,338 1,203 135 11% Sov. Wealth 1,310 1,258 52 4% 1,204 1,204 1,066 124 942 76 Insurance Co. 925 1,024 (99) - 885 461 424 9 854 193 661 343% Priv. Bank 798 617 181 29% 774 746 27 4% 759 759 753 847 (94) -11% 747 553 195 35% 656 544 112 21% 636 545 91 17% 627 494 133 27% 609 609 603 603 Priv. Bank 582 141 441 31 525 525 494 735 (241) -33% 486 486 Insurance Co. 481 481 477 477 441 1,054 (613) -58% Insurance Co. 424 424 Priv. Bank 416 416 411 458 (47) - 378 378 Insurance Co. 378 378 377 377 Hedge 375 375 Insurance Co. 318 318 315 315 313 313 301 301 Investor Type. *From the 397 international asset managers identiﬁed. Page 54

Insights Appendix A: Institutional ownership deﬁnitions Institutional investor deﬁnitions We classify an investor as an institutional investor according to the SEC deﬁnition of institutional investment manager and the FactSet classiﬁcation for institutional investor types. The SEC provides the following deﬁnition for institutional investment manager: An institutional investment manager is an entity that either invests in, or buys and sells, securities for its own account. For example, banks, insurance companies, and broker/dealers are institutional investment managers. So are corporations and pension funds that manage their own investment portfolios. An institutional investment manager is also a natural person or an entity that exercises investment discretion over the account of any other natural person or entity. For example, an investment adviser that manages private accounts, mutual fund assets, or pension plan assets is an institutional investment manager. So is the trust department of a bank. A trustee is an institutional investment manager, but a natural person who exercises investment discretion over his or her own account is not an institutional investment manager. The FactSet classiﬁcation relevant to holders involves fourteen institutional investor types, out of which, Broker, and Private Banking/WM are the most relevant ones. Mutual Manager, Hedge Manager, and Pension make up the second, albeit distant, group; while the rest of the institutional investor types are less signiﬁcant in terms of assets held. The following ﬁgure presents the deﬁnitions for each of the fourteen investor types. Page 55

Insights Figure 143: FactSet Institutional Investor Type deﬁnitions relevant to s Institutional Investor Type Arbitrage Bank Investment Division Broker Family Office Foundation/Endowment Manager of s Manager of Hedge s Manager Hedge Manager Insurance Company Mutual Manager Definition A financial institution that engages in arbitrage. Such firms look for market inefficiencies and securities that they feel are mis-priced, and then undertake trades that allow them to make risk-free profits. The division within a bank responsible for managing the bank's own portfolio of investments. An institution that introduces two parties in a transaction to each other in exchange for a fee. Sell-side should be chosen as the filer type. A family office is a private company that manages investments and trusts for a single wealthy family. The company's financial capital is the family's own wealth. Non-profit organizations, including universities and religions, whose investment activities support their activities. An Investment firm whose main focus is to manage mutual funds or insurance products that are investing in other mutual funds. The firm researches fund management companies to select funds it will use to construct its portfolios. A fund of hedge funds manager creates funds which invest in several different hadge funds to spread the risks. s of hedge funds select hedge fund managers and construct portfolios based upon those selections. A fund that uses derivative securities and is extremely risky. Typically, these companies are very secretive about their investments. Includes funds that use puts, calls, margins, and shorts, often as "hedges" to reduce risk. The insurer profits by investing the premiums it receives in securities. This firm type is used for the group within the insurance company responsible for managing its investment portfolio. An Investment Advisor provides investment advice and manages a portfolio of securities. A firm will be coded investment advisor if the majority of its asset under management is not coming from the mutual funds they manage. An investment firm with the majority of the assets they manage coming from the mutual funds they manage. A mutual fund raises money from shareholders and reinvests the money in securities. Pension Manager A fund established by a corporation or a government to pay the benefits of retired workers. Private Banking/Wealth Mgmt The area of the bank responsible for managing the investments of high net worth clients. Sovereign Wealth Manager Firm set up to manage the investments of a Sovereign Wealth. Source: FactSet Institutional ownership data deﬁnition The holder data used in this report has been sourced from FactSet s Ownership database called FactSet Global Ownership (formerly known as LionShares). This database is fed primarily with data from the 13F SEC ﬁlings. According to the SEC, Form 13F is a reporting form ﬁled by an institutional investment manager that uses the U.S. mail (or other means or instrumentality of interstate commerce) in the course of its business, and exercises investment discretion over $100 million or more in Section 13(f) securities. s fall within Section 13(f) securities and hence need to be reported. The deadline for reporting each quarterly or annual period is 45 days after the end of the period. For example, the deadline for ﬁling Form 13F for last year end holdings was February 14th, 2017. Our data has been downloaded after February 27th in order to include the most updated ﬁlings for Q4 2016. FactSet also captures data for those institutional holders not required to ﬁle 13F forms through its own collection process. Retail participation in s is measured as the complement of the institutional participation within the total assets. To put it simply, retail ownership is equal Page 56

Insights to the total amount of assets minus the value of the institutional assets as reported in FactSet. We believe that the completeness, quality, and consistency of the institutional data is satisfactory for the purpose of the current study, and we are not aware of any signiﬁcant data issue which could aﬀect the overall ﬁndings of the report. Calculation of Institutional Ownership % The institutional ownership % is calculated by dividing the institutional share holdings as reported for the last quarter of the calendar year by the total number of shares outstanding at the end of the same year. For example, for last year we divided the institutional share holdings as reported for Q4 2016 by the total number of shares outstanding as of December 31st, 2016. In our sample, we covered the full population of s, both historically and as of the end of December 2016. The number of listed s at the end of 2016 was 1,708, while the number of products at the end of year 2000 was 89. Historical changes FactSet usually updates their historical ownership data to account for events such as bankruptcies, mergers, name changes, or investor type changes. Therefore we have downloaded all the historical data together with the most current end of year data to ensure the consistency of institutional ownership historical trends. However, historical changes related to fund objective, index provider, issuing company, structure, total expense ratios, etc. are not taken into consideration when aggregating institutional ownership data for historical trend purposes. In other words, historical trends are based on the historical institutional ownership of the or ETV and the most current classiﬁcation and values available as of the end of last year. Page 57

Insights Appendix B: Other deﬁnitions ETP Universe Deﬁnitions Exchange-Traded Products (ETPs) We deﬁne an exchange-traded product (ETP) as a secure (funded or collateralized) open-ended exchange-traded equity with no embedded optionality and marketwide appeal to investors. This includes exchange traded funds (), and exchange-traded vehicles (ETV). The vast majority of instruments are s (~98% in AUM). Exchange-Traded s (s) s are open-ended funds which are listed on an exchange and oﬀer intra-day dual liquidity to access diversiﬁed investments in a transparent, cheap, and tax eﬃcient way. s indexed to equity and ﬁxed income benchmarks are registered under the investment company act of 1940. Only physical index replication techniques are permissible by this legislation while synthetic replication is not allowed. Exchange-traded vehicles (ETVs) This terminology typically refers to grantor trusts that exist in the market. These instruments track primarily commodity benchmarks. They diﬀer from s in that they are registered under the Securities Act of 1933 and not the Investment Company Act of 1940, hence they are not classed as funds. Vehicles that replicate commodity benchmarks, more often known as pools, and funds targeting alternative index returns are formed under the Commodities Exchange Act and are listed under the 33 Securities Act, and report under 34 Corporate Act. Management Style or Product Strategy Deﬁnitions Beta This is the main group with the largest number of products and assets. Within this category we account for all those s that track an index which employs a market capitalization weighting methodology, and a simple selection methodology usually involving screenings such as minimum market cap and liquidity levels, or proﬁtability levels. s in this group are also referred to as plain-vanilla s. Some examples of indices falling within this category are: S&P 500, S&P 400, S&P 600, MSCI EAFE, MSCI EM, Russell 2000, and Russell 1000, to name a few. Beta+ In this group we include every product that oﬀers any level of leverage or inverse implementation. For example, an oﬀering access to twice the daily returns of the S&P 500 on either direction (long or short) would be classiﬁed under this category. Active Classifying products in this group is still easy; basically if the doesn t track any index then we classify the fund as active. Enhanced Beta (aka Smart Beta) Page 58

Insights This category is reserved for those s that also track an index, but which follow more elaborated strategies. After deﬁning an index universe, there are two main levers that determine most of the risk/return proﬁle of the index: (1) the selection criteria, and (2) the weighting criteria. In their selection process, enhanced beta s usually employ additional screening processes and scoring systems involving multiple factors beyond just minimum market cap and liquidity levels. For example, they could include growth or value scores, dividends paid or dividend yield, earnings, volatility, or momentum screens, to name a few. The weighting methodology of enhanced beta s is usually anything but market cap weighted, it can include simple equal weighting or variations of it, optimized weights, and other metric-speciﬁc weights such as those based on dividends paid, inverse volatility, dividend yield, fundamental multi factor scores, earnings, and revenues, to name a few. An enhanced beta will either have a nontraditional selection methodology, a non-traditional weighting methodology, or a combination of both. Product Type Deﬁnitions Asset Allocation s This group covers all s with exception of levered and inverse products. These are usually good products for market access strategies, portfolio completion, and core positions. They are also eﬃcient building blocks for multi asset strategies. When selecting these products, major emphasis should be set on the desired exposure, tracking eﬃciency, primary liquidity (i.e. the liquidity of the underlying basket), and cost. Cash Management s This group covers a more selected group of s which in addition to being good asset allocation tools, also serves a series of cash management portfolio needs. For example, these products are very good for equitizing cash between transitions, around reporting periods (window dressing), and during tax loss harvesting. These s usually have good liquidity, large fund size, and low cost, all of which makes it easier to execute sizeable short-term transactions, therefore secondary market liquidity and fund size tend to be a more relevant factor compared to asset allocation s. The most popular asset allocation usage of these funds is as core building blocks. Pseudo Futures s This group covers an even more selected sample of s which in addition to being good asset allocation and cash management tools can also be used for fulﬁlling risk management functions such as risk hedging, portable alpha strategies, or tactical shorts. Many times they also trade at a cheaper level than their underlying basket, and oﬀer large amounts of liquidity which can make them attractive for market making activities as well. Secondary and short liquidity (ease to borrow), and fund size tend to be more relevant characteristics at the moment of selecting this type of s. There is usually no more than one pseudo futures per asset class. The most popular asset allocation usage of these funds is among portfolios that require more liquidity given their size or more tactical nature. Page 59

Insights Appendix 1 Important Disclosures *Other information available upon request *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg, and other vendors. Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/disclosuredirectory.eqsr. Aside from within this report, important conﬂict disclosures can also be found at https://gm/db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. Analyst Certiﬁcation The views expressed in this report accurately reﬂect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a speciﬁc recommendation or view in this report. Sebastian Mercado Hypothetical Disclaimer Backtested, hypothetical or simulated performance results have inherent limitations. Unlike an actual performance record based on trading actual client portfolios, simulated results are achieved by means of the retroactive application of a backtested model itself designed with the beneﬁt of hindsight. Taking into account historical events the backtesting of performance also diﬀers from actual account performance because an actual investment strategy may be adjusted any time, for any reason, including a response to material, economic or market factors. The backtested performance includes hypothetical results that do not reﬂect the reinvestment of dividends and other earnings or the deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid. No representation is made that any trading strategy or account will or is likely to achieve proﬁts or losses similar to those shown. Alternative modeling techniques or assumptions might produce signiﬁcantly diﬀerent results and prove to be more appropriate. Past hypothetical backtest results are neither an indicator nor guarantee of future returns. Actual results will vary, perhaps materially, from the analysis. Rating Key rating dispersion and banking relationships Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ), we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock. Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Newly issued research recommendations and target prices supersede previously published research. Regulatory Disclosures Page 60