Legg Mason Total Advantage Funds Wilmington Trust, N.A. YOUR CLIENTS ARE LOOKING FOR A TARGET DATE ADVANTAGE Nine out of 10 retirees and pre-retirees agree that it is important to take steps to avoid major stock market losses right before or right after retirement. 1 But many traditional target fund solutions are not designed to reduce exposure against this type of risk. The right combination of assets to drive growth and help protect wealth in different market environments is critically important for a diverse participant base. The Legg Mason Total Advantage Funds represent an advancement in target date retirement solutions. They are designed to both boost return potential, and manage volatility and market risk, in particular when investors are most vulnerable to large stock market losses: during the five years before and five years after retirement. These collective investment trusts (CITs) also employ a multi-manager approach that offers investors access to Legg Mason managers and a wide array of external managers. QS Investors, the portfolio s subadvisor, is one of Legg Mason s principal institutional asset managers. 1 MassMutual Retirement Savings Risk Study, https://www.massmutual.com/-/media/files/mm%20risk%20study%20report.pdf
A DIFFERENT BREED OF TARGET DATE FUND The Legg Mason Total Advantage Funds are a new breed of target date solution, intelligently designed to elevate the certainty of achieving your investment goals: Boost return potential for investors 1 saving for retirement 2 Seeks to reduce exposure to large market drawdowns* Potential Benefits and Risks of Legg Mason Total Advantage Funds Addresses market and longevity risk using a proprietary glidepath construction methodology that adapts to evolving market conditions Utilizes Tactical Accelerator to take advantage of opportunistic asset allocation tilts Seeks to reduce exposure* during extreme market events Allocates to complementary managers to enhance the risk/return profile of the strategies Controls costs without sacrificing quality by balancing low-fee, passively managed CITs with experienced investment managers in actively managed Legg Mason CITs Includes stable value allocation which seeks to reduce market volatility Your investment in a Fund is not guaranteed. The value of your investment in a Fund could go down as well as up. You can lose money by investing in these Funds, including losses near, at, or after a Fund s target date. There is no guarantee that a Fund will provide adequate income at and through retirement. * In rapidly declining markets, significant losses will likely occur. Conversely, when markets are rapidly accelerating, market appreciation may not be fully realized due to a portfolio s more conservative allocation. All investments involve risk, including loss of principal. There is no guarantee that any investment option will achieve its stated objective. 2
DRIVEN TO ELEVATE THE CERTAINTY OF OUTCOMES Through a unique combination of proprietary features, the Legg Mason Total Advantage Funds work to elevate the certainty of outcomes through a process of adaptive allocation and next-generation diversification in a low-cost CIT structure. Adaptive Asset Allocation Because financial markets are in a constant state of change, these tools are designed to deliver additional value through asset allocation that adapts to evolving market conditions. Retirement Keeper 1 Seeks to help reduce exposure to large market losses in the +/- 5 years around a target retirement date Tactical Accelerator Designed to boost return potential through opportunistic asset allocation Next-Generation Diversification The Funds access a diverse array of investment holdings, managed by 16 highly regarded investment managers. Active/Passive Hybrid investment management approach, combining active styles with low-cost passive investment styles Stable Value Asset Class Seeks to reduce market volatility and create a more stable return pattern Multi-Manager Benefit from diversified asset manager specialization across asset classes 1 Retirement Keeper refers to the Dynamic Risk Management Period of the Strategy. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are rapidly accelerating, market appreciation may not be fully realized due to a portfolio s more conservative allocation. 3
Retirement Keeper Seeks to reduce exposure to large market losses Seeks to reduce exposure to large market drawdowns when investors savings are most vulnerable to large stock market losses: during the five years before and five years after retirement. To help investors better manage their savings in turbulent markets, Retirement Keeper offers a risk-reduction feature designed to reduce exposure from a prolonged drop in equity values. It works by shifting a fund s exposure away from equities when there is a high risk of a steep decline in equity markets, then reallocating back to equities when markets calm. Using signals that have historically shown to be predictors of prolonged negative equity returns, Retirement Keeper forecasts sustained down markets where conditions are deteriorating. Some of the factors utilized include: Recession probability Leading economic indicators Growth of leverage in the economy Broad financial conditions Retirement Keeper and the Investing Glidepath The glidepath shown here highlights a key feature of the Funds. By utilizing Retirement Keeper, the glidepath can adjust to have a higher allocation to equities than peer products, to help address longevity risk. 100 Inflation Other Fixed Income % of portfolio 50 Retirement Keeper Stable Value Equity 0 40 35 30 25 20 15 10 5 0 5 10 15 20 25 30 Years before/after retirement 4 Retirement Keeper refers to the Dynamic Risk Management Period of the Strategy. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are rapidly accelerating, market appreciation may not be fully realized due to a portfolio s more conservative allocation. All investments involve risk, including loss of principal. There is no guarantee that any investment option will achieve its stated objective.
Tactical Accelerator Opportunistic asset allocation The Tactical Accelerator provides the potential to supplement returns and reach long-term savings goals so investors can save enough to avoid outliving their retirement savings. The Tactical Accelerator shifts asset weights in seeking to take advantage of stronger markets and to boost return potential. To achieve this goal, QS Investors actively assesses the likelihood that stocks will outperform bonds based on four key financial indicators. Four key indicators to capture broad financial conditions 1 2 3 4 Valuation Price comparison of the securities market relative to bond yields Growth of leverage in the economy Leverage is often pro-cyclical, positively moving with the overall state of the economy Trends in interest rates Rising interest rates, and the resulting economic slowdown, may lead to stocks underperforming bonds QS Leading Economic Indicator Index Monitors health of the economy as it relates to financial markets STOCKS BONDS QS Leading Economic Indicator Index: geared toward changes in the economic cycle that lead to changes in the market cycle All investments involve risk, including loss of principal. There is no guarantee that any investment option will achieve its stated objective. 5
Active/Passive Control costs without sacrificing quality The Legg Mason Total Advantage Funds seek to combine the benefits of active and passive investment styles with the dual goals of alpha generation and cost controls. Passive managers follow set investment guidelines and objectives, providing both market exposure and a cost-effective way to capture market returns. Active managers have the explicit goal of delivering alpha potential excess return which a passive strategy lacks. Also, the product glidepath is designed to counter market risk, inflation risk and longevity risk. Stable Value Asset Class An additional tool used in seeking to reduce risk Stable value asset class seeks to reduce market volatility and create a more stable return pattern. The Legg Mason Total Advantage solution can offer all plans the benefits of a stable value asset class, which has traditionally been available only to larger institutional plans. Stable value asset class can benefit from returns that are typically in line with mediumduration investment-grade bond funds, but with lower volatility. Because it has a negative correlation to equities, it can be a strong hedge in times of stock market duress. And in a rising interest rate environment, it can compare favorable to a similar-duration bond fund. Duration measures the sensitivity of price (the value of principal) of a fixed-income investment to a change in interest rates. The higher the duration number, the more sensitive a fixed income investment will be to interest rate changes. Investment-Grade Bonds are those rated Aaa, Aa, A and Baa by Moody s Investors Service and AAA, AA, A and BBB by Standard & Poor s Ratings Service, or that have an equivalent rating by a nationally recognized statistical rating organization or are determined by the manager to be of equivalent quality. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are rapidly accelerating, market appreciation may not be fully realized due to a portfolio s more conservative allocation. 6
Multi-Manager Diversified Specialization The Legg Mason Total Advantage Funds provide access to a multiasset and multi-manager approach that offers investors the advantage of diversified asset manager specialization across asset classes. The Funds thoughtful combination of diverse investment managers is delivered through Legg Mason s asset management capabilities and MassMutual s multi-manager approach, providing investors the opportunity to invest in a wide array of complimentary, independent managers. QS Investors, the portfolio s subadvisor, is one oflegg Mason s principal institutional asset managers, with over $21 billion (as of 3/31/18) in retail and institutional mandates. Your clients are looking for a target date advantage With Legg Mason Total Advantage Funds, retirement investors may achieve two simultaneous goals: boosting their return potential and managing volatility and market risk. That is what makes these Funds a new, different breed of target date solution. 7
Brandywine Global Clarion Partners Legg Mason is a leading global investment company committed to helping clients reach their financial goals through long-term, actively managed investment strategies. ClearBridge Investments EnTrustPermal Martin Currie QS Investors RARE Infrastructure Over $754 billion* in assets invested worldwide in a broad mix of equities, fixed income, alternatives and cash strategies A diverse family of specialized investment managers, each with its own independent approach to research and analysis Over a century of experience in identifying opportunities and delivering astute investment solutions to clients Royce & Associates Western Asset LeggMason.com About QS Investors A global equity and multiasset class manager, with $21.6 billion* in total AUM Singular mission is to elevate the certainty of outcomes delivered to investors through a deeper understanding of investment and human dynamics Strives to give investors the confidence to stay invested, avoid emotional decisions, and participate in the longterm benefits of the market to achieve their goals Formed in 1999, it became a wholly owned, independently managed affiliate of Legg Mason in 2014 Based in New York City and Boston, serving clients globally * As of March 31, 2018. All investments involve risk, including possible loss of principal. Additionally, there is no guarantee that the options will provide adequate income at and through retirement. Investments: Are NOT Deposits Are NOT FDIC-Insured Are NOT Insured By Any Federal Government Agency Have NO Bank Guarantee May Go Down In Value 2018 Legg Mason Investor Services, LLC. Member FINRA, SIPC. Legg Mason Investor Services, LLC and all entities mentioned above are subsidiaries of Legg Mason, Inc. 797247 RETX46136 5/18 What should I know before investing? All investments involve risk, including possible loss of principal. Equity securities are subject to price fluctuation and possible loss of principal. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. Fixed income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. High-yield bonds possess greater price volatility, illiquidity and possibility of default. In addition to the Funds operating expenses, you will indirectly bear the operating expenses of the underlying funds. The Funds and each underlying fund may engage in active and frequent trading, resulting in higher portfolio turnover and transaction costs. Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The model used to manage a Fund s assets provides no assurance that the recommended allocation will either maximize returns or minimize risks. There is no assurance that a recommended allocation will prove the ideal allocation in all circumstances. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are rapidly accelerating, market appreciation may not be fully realized due to a fund s more conservative allocation. In addition, because the portfolio invests in underlying funds, QS Investors may not be able to shift allocations in time to capture an immediate or sudden spike in the market. Additional risks may include those risks associated with investing in real estate, commodities and private equity. Please see the Funds Investment Policy Statement for more information regarding risks associated with investing in the Funds. While an investor s retirement age is a central component in deciding which series option is right for the investor, other relative factors should also be considered. For instance, an investor s individual circumstances, long-term investment goals and risk tolerance and especially if the investor falls between two retirement years should all be carefully considered. These and other factors, as well as the Funds risks, should be discussed with an investor s financial professional. Wilmington Trust, N.A. Collective Investment Funds are trust company-sponsored collective portfolios; they are not mutual funds. The Funds and units therein are exempt from registration under the Securities Act of 1933, as amended, and the Investment Company Act of 1940. Participation in the Funds is limited primarily to qualified defined contribution plans and certain state or local government plans. Investors should consider the investment policy, objectives, risks, charges and expenses of any pooled investment company carefully before investing. The Additional Fund Information and Principal Risk Definitions contains this and other information about a Collective Investment Trust Fund and is available at https://www.wilmingtontrust.com/repositories/wtc_sitecontent/pdf/principal_risk_definitions.pdf. This document should be read carefully before investing. Investments in the Fund are not insured by the FDIC or any other government agency, are not deposits of or other obligations of or guaranteed by Wilmington Trust or any other bank or entity, and are subject to risks, including possible loss of the principal amount invested. The information in this material has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Opinions, estimates and projections constitute the judgment of Wilmington Trust and are subject to change without notice. This material is for educational purposes only and is not intended as an offer, recommendation or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. There is no assurance that any investment strategy will be successful. Diversification does not ensure a profit or guarantee against a loss. Past performance is no guarantee of future results. Wilmington Trust is a registered service mark. Wilmington Trust Corporation is a wholly owned subsidiary of M&T Bank Corporation. Wilmington Trust Company (operating in Delaware only), Wilmington Trust, N.A., M&T Bank and certain other affiliates provide various fiduciary and non-fiduciary services, including trustee, custodial, agency, investment management and other services. Wilmington Trust, N.A., serves as the Trustee of the Funds. Third-party trademarks and brands are the property of their respective owners. INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE