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Spängler IQAM Bond Corporate
Investment Counsel Since 1933
1
Spängler IQAM Invest
I. Corporate Overview
II. Team, Philosophy, & Process
III. Spängler IQAM Bond Corporate
IV. Economic and Investment Environment
V. Client Service Update
VI. Appendix
Agen
da
2
Depth, Breadth & ExperienceCo
rpor
ate
Ove
rvie
w
Absolute Return Opportunistic Fixed Income
Multi-Sector Relative Return Global Core Plus
Global Core/Non-U.S. Core
Long Duration
U.S. Core Plus
U.S. Core
Short/Intermediate Duration
Cash / Short Duration Single-Sector Relative ReturnEmerging Markets Debt
Investment Grade Credit
Stable Value
U.S. Municipal
Inflation Strategies
Securitized Strategies
Solutions
Liability Driven Investing
Insurance Client Strategies
Sustainable Investing (ESG/SRI)
SB/Standish Overview/Q42016/1-10-17/BR
Absolute FX
Investment Strategies and Solutions
1933Standish founded
147.7 billion USD in assets under management1
185 employees2
131 investment professionals located in U.S., U.K. and Singapore2
U.S., regional and global mandates
Clients in 40 countries and territories
Source: Standish as of December 31, 2016.1 Assets under management (AUM) as of December 31, 2016. This figure includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation or The Bank of
New York Mellon; High Yield assets managed by personnel of Alcentra NY, LLC acting as dual officers of Standish; and Mortgage assets managed by personnel of Amherst CapitalManagement LLC acting as dual officers of Standish. Standish, Dreyfus, Alcentra and Amherst Capital are registered investment advisers. Standish, Dreyfus, Alcentra and The Bank of NewYork Mellon are wholly-owned subsidiaries of The Bank of New York Mellon Corporation. Amherst Capital is a majority-owned subsidiary of The Bank of New York Mellon Corporation.
2 Includes shared employees of Standish Mellon Asset Management (UK) Limited and MBSC Securities Corporation, both affiliates of Standish Mellon Asset Management Company LLC(“Standish”), BNY Mellon Investment Management Singapore Pte. Limited who provide non-discretionary research services to Standish US and employees of Alcentra NY, LLC and AmherstCapital Management LLC acting as dual officers of Standish.In addition, Standish is also supported by BNY Mellon Asset Management Operations LLC (“BNYM AM Ops”) which is a legally separate entity that provides services related to all aspects ofIT and operations, including front, middle and back office services.
U.S. Municipal Infrastructure Debt
3
Investment Resources
1 Employee of Standish Mellon Asset Management (UK) Ltd who provides investment management and trading services as shared employees of Standish U.S.2 Employee of Alcentra NY, LLC who provides research and trading services for High Yield and multi-sector strategies; 3Employee of BNY Mellon Investment Management Singapore Pte. Ltd who
provides non-discretionary research services to Standish US. 4Via service agreement with Alcentra Limited 5Employee of Amherst Capital Management LLC who provides research and trading services for dedicated Mortgage and multi-sector strategies.Note: Some investment professionals perform the same role on more than one product team. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
David Leduc, CFAChief Executive Officer & Chief Investment Officer
David Horsfall, CFADeputy Chief Investment Officer
Raman Srivastava, CFADeputy Chief Investment Officer
Vincent ReinhartChief Economist
MULTI-SECTORSTRATEGIES
GLOBAL & OPPORTUNISTIC CURRENCY U.S. CORE/CORE PLUS U.S. SHORT DURATION
David Leduc, CFARaman Srivastava, CFA
David Horsfall, CFA
Brendan Murphy, CFAThant Han1
Nate Hyde, CFA
Federico Garcia Zamora David Bowser, CFADavid Horsfall, CFA
John Hosa, CFAStephen Murphy, CFA
Anthony Honko
Amy LowenSara Cummins
SINGLE-SECTOR STRATEGIES
EMERGING MARKET DEBT RATES & INFLATION CORPORATE CREDIT U.S. MUNICIPAL
Javier MurcioFederico Garcia Zamora
Josephine Shea
Robert Bayston, CFAThant Han1
Nate Pearson, CFA
David Morse, CFAChris Barris2
Christine Todd, CFADaniel Rabasco, CFA
Thomas Casey
Daniel Marques, CFAJeffrey Burger, CFA
SOLUTIONS LIABILITY DRIVEN INVESTING INSURANCE CLIENT STRATEGIES STABLE VALUE SUSTAINABLE INVESTING
Andrew Catalan, CFAMatthew Fontaine, CFA
Max Guimond, CFA, FRM
Christine Todd, CFAJames Kaniclides, CFA
Laura Lake, CFAAmanda Abdella, CFA
Eric Baumhoff, CFABradley Bennett
Linda Lam, CFA, CPAJonathan Mauceli, CFA
Stephan Bonte, CFADaniel Marques, CFAJeffrey Burger, CFA
RESEARCHCORPORATE CREDIT SOVEREIGN & CURRENCY MORTGAGES/ SECURITIZED U.S. MUNICIPAL
David Morse, CFADiana Belman, CFA
Maura Caporale, CFABenjamin Li, CFA
Jonathan Earle, CFA
Beth FioreJoseph Chiurri, CFA
Chris Barris2
Kevin Cronk, CFA2
Clark Orsky, CFA2
Stephen Sylvester2
Andrew Sieurin, CFA2
Josephine Shin2
Tim Raeke2
Robert Davis2
Frank Longobardi2Andrew Fahey2
Young Kwon2
Ashley Taylor2
Vinnie Ruschioni2
Prakash Gopalakrishnan3
Milena Ianeva1Rebecca Braeu, PhD, CFA
Rowena Geraghty1
Javier Murcio Aninda Mitra3
Federico Garcia ZamoraNicholas Tocchio
Nate Pearson, CFA
Karen Gemmett, CFA5
Steven Brinkley5
Marcos Duque, CFAEric Seasholtz, CFA5
Sandeep Bordia5
Jasraj Vaidya5
Daniel Barton, CFADavid Mann, CFA
Maureen Newman, CFAMark Ryan
Andy Shin, CFAScott Zerneri
SPECIALIZED TRADINGAmy Koch Flynn, CFA
Global Head of Fixed Income TradingRATES & CURRENCY EMERGING MARKETS MORTGAGES/SECURITIZED CORPORATE CREDIT U.S. MUNICIPAL
Michael Piersol, CFA Ryan Lambert, CFA
Patrick Savery
Sally Bartunek, CFARyan Lambert, CFA
Michael Piersol, CFA Ian Barnes1
Jeffrey Nutt, CFA5
Bryan SteeleMichael Lynch, Jr.Christopher Frisoli
Ian Barnes1
Michael Cunningham, CFA2
Amy Lattimore4
Thomas Frangione2
Michael Bandar, CFAPaul Rockwood, CFA
Alisa Fitzgerald
David SwallowTyler Doyle
Christopher Dial
PORTFOLIO ANALYTICS ACTUARIAL ANALYSIS RISK MANAGEMENT
RATES & CURRENCY EMERGING MARKETSMORTGAGES/SECURITIZED
CORPORATE CREDIT LDI INSURANCE Colyar Pridgen, CFA, FSA, EARyan Miller, ASA
Michael Faloon, CFA, FRMDavid Kingsley, IACCP
Nicholas Sambuco, CAIAJames EddyPaul Correia
Douglas Reich, CFASung Choi
Jim Hagerty Mitchell Szelc
Bart Stires, CFAAustin Jennings
Joseph EisenbiesPatrick Gillis
Victor Tavares, CFAWilliam Newton, CFA
Adam Pischel Joseph Pasquale, CFAVinnie Ruschioni2
James Plunkett Francis Cifrino
Corp
orat
e O
verv
iew
SB/Standish Overview/Q42016/1-10-17/BR
4
Global Credit TeamTe
am, P
hilo
soph
y &
Pro
cess
David Morse, CFADirector of Investment Grade Credit
David Morse, CFADirector of Investment Grade Credit
CREDIT COMMITTEECREDIT COMMITTEE MACROECONOMIC RESEARCH COMMITTEEMACROECONOMIC RESEARCH COMMITTEE
David Horsfall, CFADeputy Chief Investment Officer
David Horsfall, CFADeputy Chief Investment Officer
Vincent ReinhartChief Economist
Vincent ReinhartChief Economist
Investment Team ResourcesInvestment Team Resources
Michael Lynch, Jr.Christopher Frisoli
Ian Barnes1
Sally Bartunek, CFARyan Lambert, CFA
Michael Piersol, CFAMike Cunningham, CFA2
Amy Lattimore4
Tom Frangione2
Michael Lynch, Jr.Christopher Frisoli
Ian Barnes1
Sally Bartunek, CFARyan Lambert, CFA
Michael Piersol, CFAMike Cunningham, CFA2
Amy Lattimore4
Tom Frangione2
TradingTrading
David Morse, CFADiana Belman, CFA
Maura Caporale, CFABenjamin Li, CFA
Jonathan Earle, CFABeth Fiore
Joseph Chiurri, CFAChris Barris2
Kevin Cronk, CFA2
Clark Orsky, CFA2
Prakash Gopalakrishnan3
Stephen Sylvester2
Andrew Sieurin, CFA2
Josephine Shin2
Vinnie Ruschioni2
Robert Davis2
Frank Longobardi2
Andrew Fahey2
Milena Ianeva1
Tim Raeke2
Young Kwon2
Ashley Taylor2
David Morse, CFADiana Belman, CFA
Maura Caporale, CFABenjamin Li, CFA
Jonathan Earle, CFABeth Fiore
Joseph Chiurri, CFAChris Barris2
Kevin Cronk, CFA2
Clark Orsky, CFA2
Prakash Gopalakrishnan3
Stephen Sylvester2
Andrew Sieurin, CFA2
Josephine Shin2
Vinnie Ruschioni2
Robert Davis2
Frank Longobardi2
Andrew Fahey2
Milena Ianeva1
Tim Raeke2
Young Kwon2
Ashley Taylor2
ResearchResearch
David Morse, CFADavid Horsfall, CFADavid Morse, CFA
David Horsfall, CFA
Portfolio Management
Portfolio Management
Joseph Pasquale, CFAVictor Tavares, CFA
William Newton, CFAVinnie Ruschioni2
Joseph Pasquale, CFAVictor Tavares, CFA
William Newton, CFAVinnie Ruschioni2
Portfolio Analytics/Quant Research
Portfolio Analytics/Quant Research
1 Employee of Standish Mellon Asset Management (UK) Ltd who provides investment management and trading services as shared employees of Standish U.S.2 Employee of Alcentra NY, LLC who provides research and trading services for High Yield and multi-sector strategies; 3Employee of BNY Mellon Investment Management Singapore Pte. Ltd who
provides non-discretionary research services to Standish US. 4Via service agreement with Alcentra Limited Note: Some investment professionals perform the same role on more than one product team. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
SB/IGC/Q42016/1-23-17/BR
5
Global Credit Assets Under Management 1Te
am, P
hilo
soph
y &
Pro
cess
1 Source: Standish. Assets under management (AUM) as of December 31, 2016. This figure includes assets managed by Standish personnel acting as dual officers of The DreyfusCorporation or The Bank of New York Mellon; high yield assets managed by personnel of Alcentra NY, LLC acting as dual officers of Standish; and Mortgage assets managed by personnelof Amherst Capital Management LLC acting as dual officers of Standish. Standish, Dreyfus, Alcentra and Amherst Capital are registered investment advisers. Standish, Dreyfus, Alcentraand The Bank of New York Mellon are wholly-owned subsidiaries of The Bank of New York Mellon Corporation. Amherst Capital is a majority-owned subsidiary of The Bank of New YorkMellon Corporation.
Global Credit AUM (in USD billions)
Global Credit $26.4
Dedicated Global Credit
$9.7
Multisector Global Credit
$16.7
TotalGlobal Credit
AUM $26.4
TotalFirm AUM
$148.1
SB/IGC/Q42016/1-23-17/BR
6
Investment Philosophy – Global Credit
We believe: Success in managing corporate bond portfolios demands both a strong defense, against the negative
return/risk asymmetry of individual credits, and a strong offense, focused on the market’s least efficient quality tiers.
Effective fundamental credit research requires both top-down and bottom-up expertise.
Seeking higher risk-adjusted returns requires a team of experienced credit analysts to identify stable-to-improving credits, avoid deteriorating credits and exploit inefficiencies in certain sectors of the corporate bond market.
Investment professionals located in three major time zones in order to uncover investment opportunities
Robust Risk Management is key to long-term investment success.
Team
, Phi
loso
phy
& P
roce
ss
SB/IGC/Q42016/1-23-17/BR
7
Investment Grade Model as of 1/31/17
-200
-100
0
100
200
300
400
500
600
700
Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Spre
ad (
bp)
Investment Grade Actual Spread Investment Grade Spread Residuals Investment Grade Fair Spread
Investment Grade Model
Proprietary Investment Grade Corporate model seeks to explain the current level of option adjusted spreads of the Barclays Credit Corp Index.
Factors:
− Capacity Utilization
− Net Percentage of Senior Loan Officers reporting tightening standards
− Ratio of CAPEX vs. Depreciation Expense
− Implied Volatility (VIX)
Source: Standish as of January 31, 2017. For illustrative purposes only. Sector models are run monthly and are subject to change.
Actual Spread (1/31/17) 121
Model Fair Value 135
Residual -14.4
Standard Deviation -0.4
1/31/17 1/31/16 ChangeVariable Impact
Capacity Utilization%(-1) 75.5 75.4 0.10 -1Net % of Respondents Tightening Stds. - C&I Loans, Large/Medium 1.5 8.2 -6.70 -6
Ratio of CAPEX vs. Depreciation Expense 1.6 1.7 -0.10 -11
Implied Volatility (VIX) 12.0 20.2 -8.20 -31
R2 81%
Variable Levels
Team
, Phi
loso
phy
& P
roce
ss
8
Fundamental Credit Research
► Understand key players, industry evolution, likely successful business models
► Employ proprietary valuation models to help set portfolio industry weights
► Participate in key industry events and visit companies
► Conduct one-on-ones with key senior management
► Apply financial and scenario analysis to individual issuers
► Compare resulting internal valuations to third-party and market views
► Examine company's liquidity and access to capital
► Review issuer's capital structure for bonds offering best risk/return profiles
► Review key covenants ► Develop asset valuation / recovery analysis
► Credit team’s diversified, model portfolio► Proprietary ratings and credit momentum
1 = Rapidly improving credit
2 = Improving credit
3 = Stable credit
4 = Deteriorating credit
5 = Rapidly deteriorating credit
ManagementManagement
Key Financial MeasuresKey Financial Measures
Financial FlexibilityFinancial Flexibility
Bondholder ProtectionBondholder Protection
BEST IDEASBEST IDEAS
Industry Structure & Dynamics
Industry Structure & Dynamics
Key Inputs
Standish Internal Credit Rating
Source: Standish . For illustrative purposes only.
ESG ConsiderationsESG Considerations
Team
, Phi
loso
phy
& P
roce
ss
► Evaluate ESG relevant investment criteria (financial strength, competitive position, etc.)
► Utilize company filings, MSCI research and Bloomberg data as sources for ESG research
SB/IGC/Q42016/1-23-17/BR
9
Outlook & Strategy – Global CreditTe
am, P
hilo
soph
y &
Pro
cess
Economic expansion is more assured around a flatterpath of potential output.
A Fed catching up to a strengthening economy willstruggle to pick up the pace of tightening andtolerate an overshoot of inflation.
The ability and willingness of central banks to resistrate hikes may be tested.
Implications for Global Credit StrategiesKey Features of Economic Landscape
Commodity prices remain supported by globaleconomic growth and relatively tame changes in theforeign exchange value of the dollar.
A more assured economic expansion, driven in the US byfiscal stimulus expected with a republican president andcongress, should be supportive for corporate creditfundamentals. With this backdrop, investment gradevaluations are modestly attractive.
Portfolios remain duration neutral as market expectations,Fed agenda (both perceived and actual), andmacroeconomic trends have led to erratic yield curvebehavior.
We believe technicals will remain supportive for credit,particularly within the U.S. as foreign investors, limited tozero or negative yields domestically, look to this market insearch for yield.
We remain overweight in Energy exposure, particularly inMidstream companies, which should benefit from higher,more stable oil prices.
1 This is not an exhaustive list. For a more comprehensive list of the risks associated with investing in foreign markets, please refer to the disclosures in the back of the presentation.Note: As of December 31, 2016. Portfolio holdings are subject to change at any time.
SB/IGC/Q42016/1-23-17/BR
10
Total Return as of 2/28/2017
YTD (%) 1 Year (%) 3 Year (%) Annualized
5 Year (%) Annualized
Since Inception (%)¹ Annualized
Spängler IQAM Bond Corporate Fund (Gross) 0.99 7.33 3.48 4.87 5.61
Spängler IQAM Bond Corporate Fund (Net) 0.73 6.49 2.34 3.81 4.49
Merrill Lynch EMU Corporate Index 0.53 4.47 3.59 4.75 N.A.
Value Added (Gross) 0.46 2.86 -0.11 0.12 N.A.
Value Added (Net) 0.20 2.02 -1.25 -0.94 N.A.
Market Value as of 2/28/2017: 148,417,796 (EUR)1 Inception Date: 09/01/1999
Portfolio PerformanceSp
ängl
er IQ
AM B
ond
Corp
orat
e
Source: Spängler as of February 28, 2017
11
Calendar Year 2016 Portfolio Attribution (Gross of Fees)
Total Performance AttributionFactors Value Added (bps)
Yield Curve, FX Allocation, & Hedging 36Sector Selection (15)Security Selection 102 Total 123
Contributions By Sector Issuer Selection Positive/Negative Contributors
Issuer Sector
Positive ContributorsFinancial Inst. Banking -6.1% 7 bps (3) bps XSTRATA CANADA FIN. CORP BasicFinancial Inst. REITS 2.2% 2 bps 6 bps EL PASO ENERGY CORP EnergyLocal Authority -0.6% 1 bps 0 bps RWE AG ElecIndustrial Consumer Cyc 3.1% 1 bps 17 bps ANHEUSER-BUSCH INBEV NV Non-CycIndustrial Transportation -2.4% 0 bps 4 bps AT&T INC Comm
Financial Inst. Finance Co 1.2% 0 bps (3) bps
Utility Natural Gas -0.7% 0 bps 2 bps Negative ContributorsAgency Gov Owned, No Guara -8.3% 0 bps (0) bps TALISMAN ENERGY EnergyFinancial Inst. Other -0.3% 0 bps 0 bps PLAINS E&P COMPANY BasicAgency Gov Guarantee 0.0% 0 bps 0 bps GOLDMAN SACHS GROUP BanksOthers -0.1% (0) bps 0 bps ANADARKO PETROLEUM-GLOBAL EnergyFinancial Inst. Brokerage -0.4% (0) bps 0 bps BHP FINANCE LTD BasicIndustrial Technology 1.7% (0) bps (2) bpsAgency Gov Sponsored -0.1% (0) bps 1 bpsUtility Electric 0.4% (0) bps 14 bpsUtility Other -0.5% (0) bps 1 bpsIndustrial Other -0.6% (0) bps (0) bpsIndustrial Communications -1.3% (0) bps 16 bpsIndustrial Energy 1.9% (1) bps 5 bpsABS Other -0.1% (1) bps 0 bpsIndustrial Capital Goods -0.7% (1) bps 15 bpsCovered Mortgage Non-Pfand 0.2% (1) bps 0 bpsFinancial Inst. Insurance 3.3% (1) bps 10 bpsIndustrial Consumer Non Cy 6.9% (4) bps 24 bpsCASH 2.1% (7) bps (0) bpsIndustrial Basic Industry -1.0% (9) bps (3) bps
0.79%
(3) bps(3) bps
9 bps6 bps
(10) bps(10) bps(8) bps
-0.45%
-0.22%
0.05%0.46%1.45%0.01%
11 bps10 bps9 bps
Overweight/ Underweight
0.24%0.33%0.80%
Sector Overweight/ Underweight
Sector Selection Contribution ContributionSecurity Selection
Contribution
Spän
gler
IQAM
Bon
d Co
rpor
ate
12
YTD Portfolio Attribution (Gross of Fees) as of 2/28/2017Sp
ängl
er IQ
AM B
ond
Corp
orat
e
Total Performance AttributionFactors Value Added (bps)
Yield Curve, FX Allocation, & Hedging 17
Sector Selection 5Security Selection 24
Total 46
Contributions By Sector Issuer Selection Positive/Negative Contributors
Issuer Sector Positive Contributors
Financial Inst. Insurance 3.5% 2 bps 3 bps PRUDENTIAL FINANCIAL INC Insur
Agency Gov Owned, No Guara -7.9% 1 bps (1) bps OWENS CORNING Cap G
Financial Inst. REITS 3.1% 1 bps 4 bps AQUARIUS AND INV ZURICH Insur
Industrial Transportation -2.5% 1 bps 0 bps MARATHON PETROLEUM CORP EnergyIndustrial Communications -2.0% 1 bps 1 bps ENTE NAZIONALE PER L'ENERGI Elec
Industrial Consumer Cyc 1.6% 0 bps 1 bps
Utility Natural Gas -1.1% 0 bps (0) bps Negative ContributorsUtility Other -0.5% 0 bps (0) bps ELECTRICITE DE FRANCE Gov No GFinancial Inst. Finance Co 0.9% 0 bps (0) bps TIME WARNER INC CommIndustrial Energy 2.4% 0 bps 3 bps ANHEUSER-BUSCH INBEV NV Non-CycN/A 0.0% SOUTH CAROLINA E + G ElecFinancial Inst. Banking -0.1% 0 bps 6 bps GE CAPITAL CORP Fin Co. Industrial Technology 1.8% 0 bps 0 bpsOthers -0.1% 0 bps 0 bpsAgency Gov Guarantee 0.0% 0 bps 0 bpsAgency Gov Sponsored 0.1% (0) bps 1 bpsLocal Authority -0.5% (0) bps 0 bpsUtility Electric 0.4% (0) bps (1) bpsIndustrial Other -0.5% (0) bps 0 bpsABS Other -0.1% (0) bps 0 bpsIndustrial Capital Goods -1.0% (0) bps 1 bpsFinancial Inst. Other -0.3% (0) bps 0 bpsIndustrial Consumer Non Cy 2.1% (0) bps (2) bpsFinancial Inst. Brokerage -0.4% (0) bps (0) bpsIndustrial Basic Industry -0.8% (0) bps 1 bpsCASH 1.8% (1) bps (0) bps
SectorOverweight/ Underweight
Sector Selection
ContributionContribution
Security Selection
Contribution
2 bps2 bps
2 bps
Overweight/ Underweight
0.64%0.59%
0.64%
0.29%
(1) bps(1) bps
1 bps
1 bps
(1) bps(1) bps(1) bps
1.08%
0.05%
0.00%0.32%0.18%0.43%
13
Portfolio Characteristics as of 2/28/2017
Characteristics Top 10 Overweight Corporate Issuers by CTDPortfolio Index S&P Rating1 Portfolio Index Difference
Yield to Maturity 1.83% 0.82% 1 AT&T INC. BBB+ 0.14 0.02 0.13OAS 138 bps 126 bps 2 ANHEUSER-BUSCH INBEV NV. A- 0.16 0.05 0.11Average Duration 5.49 years 5.38 years 3 GOLDMAN SACHS GROUP INC. BBB+ 0.12 0.01 0.10Average Maturity 7.83 years 5.84 years 4 MICROSOFT CORP. AAA 0.10 0.00 0.10Average Quality A- BBB+ 5 BANK OF AMERICA CORP. BBB+ 0.10 0.01 0.09
6 BNP PARIBAS. A 0.10 0.01 0.09
7 BERKSHIRE HATHAWAY INC. AA 0.09 0.00 0.09
Quality Distribution (%) 8 MORGAN STANLEY. BBB+ 0.11 0.02 0.09
9 CREDIT SUISSE GROUP AG. BBB+ 0.09 0.01 0.08
10 SCANA CORP. BBB+ 0.08 0.00 0.08Total of Top 10 1.10 0.14 0.961M oody's or Fitch if S&P not available
Relative Industry Weights by CTDIndex Weight (CTD)
Duration/Yield Curve Exposure
Portfolio Over/Underweight (CTD)
0.00.0
47.240.6
11.7
0.5 1.2
43.040.0
12.5
3.6
0%
10%
20%
30%
40%
50%
B & BelowBBBBBAAAAAA
Index Portfolio
0.290.21
0.190.170.17
0.150.13
0.100.10
0.050.01
0.00-0.01-0.01-0.01-0.01-0.01-0.02-0.02
-0.04-0.04
-0.10-0.35
-0.72
-0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40
CONSUMER_NON_CYCL 0.7INSURANCE 0.3
BANKING 1.3TECHNOLOGY 0.1
ENERGY 0.3CONSUMER_CYCLICAL 0.3
REITS 0.2ELECTRIC 0.2
COMMUNICATIONS 0.5FINANCE_COMPANIES 0.0
GOVERNMENT_SPONSORED 0.0GOVERNMENT_GUARANTEE 0.0
CAPITAL_GOODS 0.2UTILITY_OTHER 0.0
FINANCIAL_OTHER 0.0LOCAL_AUTHORITIES 0.0
WHOLE_BUSINESS 0.0INDUSTRIAL_OTHER 0.0
BROKERAGE_AM_EXCH 0.0NATURAL_GAS 0.1
BASIC_INDUSTRY 0.2TRANSPORTATION 0.2
OWNED_NO_GUARANTEE 0.5FUTURES 0.0
6.4
19.622.3
29.2
22.2
0.3
11.1
26.9
19.0
27.9
11.5
3.6
0%
10%
20%
30%
40%
10+7-105-73-51-30-1 yr
Index Portfolio
Spän
gler
IQAM
Bon
d Co
rpor
ate
Source: Spängler as of February 28, 2017
14
Portfolio Risk as of 2/28/2017
Factor Partition Summary 2 3 4 Contribution to TEV
Contribution to TEV
Isolated TEV
Systematic Beta
Total 114.9 114.9 1.0Systematic 96.5 105.3 1.0
Credit IG Spreads 106.7 124.6 0.4
Credit HY Spreads -1.3 5.0 0.0
Emerging Markets Spreads 0.1 2.3 0.0
Curve -4.3 14.1 0.6
Securitized Spreads 0.0 0.0 0.0
Govt Agency Spreads -0.2 1.1 0.0
Foreign Exchange -0.1 5.0 0.0
Swap Spreads -4.4 37.9 0.0
Idiosyncratic 14.1 40.3 -
Credit default 4.3 22.3 -
N P Q R S T
Factor Net Exp. % of TE Var TEV Contrib. Ticker / ID Iss. Port Net MW% OASD Idio TEV Ind. Cum.USD FIN Banking 1.6 20.7 23.8 RABOBK 2 0.5 0.1 14.7 14.7
USD Ultra High Grade Industrials 1.2 13.3 15.3 INTNED 2 0.1 0.1 12.0 19.0
USD Ultra High Grade Financials 1.1 11.9 13.7 MET 1 0.6 0.1 10.0 21.4
USD 10Y key rate 0.5 -9.5 -11.0 AXASA 2 0.7 0.1 9.0 23.2
USD FIN Life and Health Insurance 0.6 7.6 8.8 OC 1 0.4 0.0 7.3 24.4
USD 20Y key rate -0.3 5.5 6.3 MSFT 1 0.4 0.1 7.3 25.4
USD IND Wirelines 0.3 4.5 5.2 VW 2 -0.1 0.0 6.9 26.4
USD IND Midstream 0.2 4.3 5.0 FOXA 1 0.5 0.1 6.7 27.2
USD FIN Reits 0.4 4.2 4.8 MPC 1 0.3 0.0 6.4 28.0
USD IND Technology 0.3 3.9 4.4 ASSGEN 0 -0.6 0.0 6.2 28.6
Contribution to Tracking Error Volatility Idiosyncratic Risk
-20
0
20
40
60
80
100
120
Spän
gler
IQAM
Bon
d Co
rpor
ate
15
U.S. Treasury Rates Rose Dramatically Following the Election
Source: Bloomberg as of December 31, 2016
Econ
omic
and
Inve
stm
ent E
nviro
nmen
t
Treasury Yield Curve Change
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y
Yiel
d (%
)
Maturity
12/31/2016
9/30/2016
12/31/2015
SB/LDI/Q12017/1-6-17/BR
16
Treasury Markets Model
3m LIBOR 2s 5s 10s 30s 2s-10s 2s-30s1.00 1.19 1.93 2.45 3.07 1.26 1.88
1.64 2.83 3.76 4.66 2.13 3.021.11 1.89 2.64 1.53
1.23 1.53 2.17 2.60 3.13 1.06 1.60
Curve SummaryCurrent MarketModel Fair ValueModel Fair Value Incorporating Fed QE6 Month Forwards
Standish Fair Value Model Factors:ISM PMI IndexSurvey of Professional Forecasters CPI Forecast (-6)Fed Fund Rate3-month LIBOR minus Fed Funds RateNet foreign purchase (12-month total post 2005)Fed Stock (%)Source: Bloomberg and Standish as of December 31, 2016
Current54.72.140.750.21
Net Foreign Purchases 4319.9%
Fed FundsLIBOR–Fed Funds
Fed Stock (%)
VariablesISMSurvey of Prof. Forecasters
10-Year Treasury Current and Fair Value Model
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
Fair value includes Fed buying effects, 2.64%
Actual, 2.45%
Fair value excludes Fed buying effects (original model), 3.76%
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Sector Model Summary
Source: Standish as of December 31, 2016. For illustrative purposes only. Forecast information is not intended to predict future events, but rather to demonstrate the investment process of the firm in utilizing its models and market views in constructing its client portfolios. Sector models are run monthly and are subject to change. Refer to Disclosure in Appendix.
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Model R-squared Sector Actual Fair Value
Attractiveness Score (Stand. Dev.)
79% EM Local Bond Yield (%) 6.79 6.51 1.085% 10y Bund Rate (%) 0.29 0.04 0.489% 10yr AGB 2.76 2.70 0.175% Implied Rate Volatility (bps) 84 87 0.587% European Corp. Bonds (bps) 123 106 0.581% European High Yield Bonds (bps) 379 346 0.283% Emerging Markets (bps) 365 374 -0.187% ABS OAS 0.59 0.70 -0.296% Mortgage Pass Throughs (bps) 94 97 -0.294% Asian Credit Spread (bps) 237 224 0.494% 10y Treasury Interest Rates (%) 2.45 2.64 -0.473% 10y TIPS break-even CPI (%) 1.97 1.93 -0.295% 2s-10s Treasury Yield Slope (%) 1.26 1.53 -0.677% 6m G10 FX Carry TR (%) 4.48 4.87 0.190% High Yield Bank Loan Spread (bps) 380 404 -0.383% US Investment Grade Credit (bps) 123 148 -0.785% 10y Gilt Rate (%) 1.24 1.49 -0.684% Long Corporate OAS (bps) 164 178 -0.6
Current Fair Value
-6
-4
-2
0
2
4
6
Stan
dard
Dev
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Current Value Forecast Value Total Relative Score
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European Corporate Index: Spread & Yield
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Eurporean Corporate Bond Indices - Spread & Yield
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
80
90
100
110
120
130
140
150
160
170
180
12/31/2015 11/2/2016 3/24/2016 5/5/2016 6/16/2016 7/28/2016 7/9/2016 10/19/201611/30/2016 12/1/2017 2/23/2017
Effe
ctiv
e Yi
eld
% E
uroe
pan
Corp
orat
e Bo
nd In
dex
Opt
ion
Adj
uste
d Sp
read
Vs G
over
nmen
t Bon
ds (B
asis
Poi
nts)
European Corporate Index (ER00) Financials
Industrials Utilities
European Corporate Index - Effective Yield (RHS)
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Source: Bank of America Merrill Lynch Indices
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US Corporate Spreads & US Credit Curve
1 Source: Bloomberg Barclays as of December 31, 2016; 2Source: Bloomberg Barclays as of December 31, 2016. Spread on the Bloomberg Barclays US Corporate 10+ Years Index less the spread on the Bloomberg Barclays US Corporate 7-10 Year Index; 3Source: Standish and Bloomberg Barclays as of November 30, 2016; 4Source: Standish and Barclays as of December 31, 2016
US Corporate Curve2
(80)
(60)
(40)
(20)
0
20
40
60
80
basi
s poi
nts
Actual Spread (12/31/16) 164Model Fair Value 178Residual -15Standard Deviation -0.6
Variable Levels:4
12/31/16 12/31/15 ChangePMI New Order Inventory Difference 13.2 5.3 7.9US Capacity Utilization 75.0 75.7 -0.730-Year Treasury Yield 3.1 3.0 0.0VIX Index 14.0 18.2 -4.26 Month S&P500 Return(%) 6.7 -0.9 7.6
R^2 = 85%
US Corporate Spreads1
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
basi
s poi
nts
OAS = 123Bps Avg = 165Bps
+1 STD = 258Bps -1 STD = 71Bps
Investment Grade Long Corporate Model as of 12/31/20163
0
100
200
300
400
500
600IG Long Corp OAS Model Fair Value
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Measures of Credit Fundamentals
U.S. Earnings Payout Ratio
0%5%
10%15%20%25%30%35%40%45%
U.S. EBITDA Margin %
15%
17%
19%
21%
23%
25%
27%
29%
31%
U.S. EBITDA/Interest
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
14.0x
15.0x
Source: JPMorgan U.S. Liquid Index (JULI) as of September 30, 2016
U.S. Net Leverage
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
2.20x
2.40x
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Moody’s Upgrade/Downgrade Ratio
Source: Moody’s as of October 31, 2016
United States
-180
-135
-90
-45
0
45
90
# of
upg
rade
s/do
wng
rade
s
Downgrades Upgrades
United States
0.000.501.001.502.002.503.003.504.004.50
Ratio
US Ratio
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Corporate Default Rate Trend
Trailing 12-Month Issuer-Weighted Spec-Grade Default Rates
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0% Global_Actual Global_Baseline_Forecast Average
Tech/Telecom Bubble Burst
GlobalBanking Crisis
Source: Moody’s as of November 30, 2016
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New Corporate Bond Issuance Trend
Source: Bloomberg Barclays as of December 31, 2016
Investment Grade Gross Issuance
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
billi
ons
US Europe
High Yield Gross Issuance
$0
$50
$100
$150
$200
$250
$300
$350
$400
billi
ons
US Europe
US Investment Grade 15+ Year
$0
$50
$100
$150
$200
$250
$300
billi
ons
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Key Market Indicators
Standish Fair Value Model Factors:ISM PMI IndexCore CPI 24 month changeFed Fund Rate3-month LIBOR minus Fed Funds RateNet foreign purchase (12-month total post 2005)
S&P 500 Level and P/E Ratio
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
0
500
1,000
1,500
2,000
2,500
S&P
500
P/E
Ratio
S&P
500
Leve
l
Price P/E Ratio
VIX Index
0
10
20
30
40
50
60
70
VIX
Leve
l
US 30-Year Treasury Rate
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Rate
%
Current: 3.07Standish Model Fair Value: 4.66
MOVE Index
0
50
100
150
200
250
MO
VE L
evel
Source: Bloomberg as of December 31, 2016
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Spängler’s Relationship with Standish Team
Information Resources on www.standish.com Macro Musings
Our economists and macroeconomic analysts provide updates on global trends, market data, policies and more.
White PapersStandish's thought leadership provides insight into the global bond market environment.
CommentariesOur senior investment professionals present our thoughts and ideas on the economic trends facing fixed income markets.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
Clie
nt S
ervi
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pdat
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Portfolio Management TeamDavid Morse, CFADirector of Investment Grade Credit [email protected]
Follow Standish on Twitter
@StandishIM
Client Service TeamPatrick Lyn, CFA, CPA, CICManaging Director of Non-U.S. Client &Consultant [email protected]
Simon SurteesClient Portfolio [email protected]
Brian ZukowskiClient Service [email protected]
26
Investment Process Overview
The Investment Team assesses relative value, makes sector allocation decisions and selects
among “best ideas,“ all while adjusting for risk budget and client preferences.
Key Inputs:Value | Cyclical / Fundamental Factors | Market Sentiment
Macro Scenario Development Global Macro Committee
Monthly Bond Strategy Forum
Standish Outlook Standish Leading Indicators
Proprietary Factor Valuation Models
Factor Risk Opportunities Monthly Portfolio Strategy Meeting Monthly Single-Sector Investment
Meetings Daily Investment Team Meeting Weekly market review or “jam
session”
Security Selection Opportunities Proprietary Ratings Models Proprietary Credit and Trend Ratings
Client Objectives Risk Tolerance Return Objective Opportunity Set Benchmark
ClientPortfolio
Portfolio Construction
Risk Management & Trading Barclays Point CRD / PortTarget
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Investment Process – Industry WeightsTe
am, P
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Pro
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Proprietary ranking model is used to support analysis of industry weightings.
Industry mean-variance analysis and risk parameter constraints aim to identify optimal min/max weightings.
Model incorporates objective and subjective inputs for fundamentals, momentum, and valuation
Research analyst input and discussion integrated into portfolio construction
Fundamentals Momentum Valuation
Leverage Internal Ratings Historical Spreads
Profitability External Ratings Relative Spreads
Business Prospects Sentiment Fair Value
Source: Standish. For illustrative purposes only.Note: Portfolio managers may use some or all of the techniques described in this document.
Industry Leverage ProfitBusiness Prospects
Spread RatioSpread
RegressionSentiment S&P Moody's Fitch Standish
Overall Score
Basics Increasing Unchanged Decreasing Cheap Cheap Negative Negative Negative Negative Negative 5.13Chemicals Unchanged Unchanged Unchanged Fair Cheap Stable Negative Negative Stable Stable 5.75Metals and Mining Increasing Unchanged Decreasing Cheap Fair Negative Negative Negative Negative Negative 4.04Paper Increasing Decreasing Unchanged Cheap Cheap Stable Stable Stable Stable Stable 5.78
Capital Goods Increasing Unchanged Unchanged Rich Fair Stable Stable Stable Stable Stable 3.65Environmental Decreasing Unchanged Unchanged Fair Fair Stable Stable Stable Stable Stable 5.33Aerospace/Defense Increasing Decreasing Unchanged Rich Fair Stable Stable Stable Stable Stable 3.55Building Materials Unchanged Increasing Increasing Cheap Fair Stable Stable Stable Stable Stable 6.43Diversified Manufacturing Increasing Unchanged Unchanged Rich Fair Stable Stable Stable Stable Stable 3.94Construction Machinery Increasing Decreasing Decreasing Rich Rich Stable Stable Negative Stable Stable 1.63
Consumer Cyclical Increasing Unchanged Decreasing Fair Fair Negative Stable Stable Stable Negative 4.12Automotive Increasing Unchanged Unchanged Fair Fair Stable Positive Stable Stable Stable 4.93Retailers Unchanged Unchanged Decreasing Fair Fair Negative Stable Stable Stable Negative 3.60Restaurants Increasing Unchanged Unchanged Rich Fair Positive Stable Stable Negative Positive 4.78Consumer Cyclical Services Increasing Unchanged Unchanged Fair Rich Stable Stable Stable Stable Stable 3.73
Consumer Non-Cyclical Unchanged Unchanged Unchanged Rich Fair Negative Stable Negative Negative Negative 3.71Consumer Products Unchanged Unchanged Unchanged Rich Fair Stable Stable Stable Stable Stable 3.96Healthcare Unchanged Unchanged Unchanged Fair Fair Negative Negative Stable Negative Negative 4.10Pharmaceuticals Increasing Unchanged Unchanged Rich Fair Negative Stable Negative Negative Negative 3.23Tobacco Decreasing Increasing Decreasing Rich Rich Stable Negative Stable Negative Negative 2.69Food and Beverage Unchanged Unchanged Unchanged Rich Fair Stable Stable Negative Negative Stable 4.22
Energy Increasing Decreasing Decreasing Fair Fair Negative Negative Negative Negative Negative 3.82Independent Increasing Decreasing Decreasing Cheap Fair Negative Negative Negative Negative Negative 2.89Integrated Increasing Decreasing Decreasing Rich Fair Negative Negative Negative Negative Negative 1.72Oil Field Services Increasing Decreasing Decreasing Cheap Fair Negative Stable Negative Negative Negative 3.19Refining Unchanged Increasing Unchanged Cheap Fair Stable Stable Stable Stable Stable 6.24Midstream Increasing Unchanged Decreasing Cheap Cheap Stable Stable Negative Stable Stable 5.92
Technology Increasing Unchanged Unchanged Fair Fair Negative Stable Negative Stable Negative 3.79Transportation Increasing Increasing Unchanged Fair Rich Stable Stable Stable Stable Stable 4.46
Railroads Increasing Increasing Unchanged Fair Rich Stable Stable Stable Stable Stable 3.95Airlines Decreasing Increasing Unchanged Cheap Fair Stable Stable Positive Stable Stable 6.67Transportation Services Unchanged Unchanged Unchanged Rich Fair Stable Positive Negative Stable Stable 4.41
Communications Unchanged Unchanged Unchanged Fair Rich Stable Stable Stable Stable Negative 4.45Wirelines Unchanged Unchanged Unchanged Fair Rich Stable Stable Negative Stable Stable 4.23Wireless Unchanged Unchanged Unchanged Fair Fair Stable Stable Stable Stable Stable 4.79Cable/Satellite Increasing Unchanged Unchanged Fair Fair Stable Stable Stable Stable Stable 4.78Media/Entertainment Increasing Unchanged Unchanged Fair Fair Stable Stable Stable Stable Negative 4.43
Utility Unchanged Increasing Unchanged Fair Cheap Stable Stable Stable Stable Stable 6.00Electric Unchanged Unchanged Unchanged Fair Cheap Stable Stable Stable Stable Stable 6.07Natural Gas Increasing Increasing Unchanged Fair Fair Stable Stable Stable Stable Stable 5.06
Financial Institutions Unchanged Unchanged Unchanged Fair Fair Stable Stable Stable Stable Stable 4.91Banking Unchanged Unchanged Unchanged Fair Fair Stable Stable Stable Stable Stable 4.89Brokerage Asset Managers Exchanges Unchanged Decreasing Unchanged Fair Fair Stable Stable Stable Stable Stable 4.87Finance Companies Increasing Unchanged Unchanged Fair Cheap Stable Negative Negative Stable Stable 5.59Insurance Unchanged Decreasing Unchanged Cheap Fair Negative Negative Negative Negative Stable 4.63
Life Increasing Decreasing Unchanged Cheap Fair Stable Stable Stable Stable Stable 5.32P&C Unchanged Decreasing Unchanged Fair Fair Stable Stable Stable Stable Stable 4.72Health Insurance Unchanged Decreasing Unchanged Fair Fair Negative Negative Negative Negative Stable 3.62
REITs Unchanged Unchanged Unchanged Cheap Cheap Stable Stable Stable Stable Stable 6.77Apartment REITs Decreasing Unchanged Unchanged Fair Cheap Stable Stable Positive Positive Stable 6.61Healthcare REITs Unchanged Unchanged Unchanged Cheap Cheap Stable Positive Stable Negative Stable 6.70Office REITs Decreasing Unchanged Unchanged Fair Cheap Stable Stable Stable Stable Stable 6.18Retail REITs Unchanged Unchanged Unchanged Fair Cheap Stable Stable Stable Stable Stable 6.05Other REITs Decreasing Unchanged Increasing Cheap Cheap Positive Positive Positive Stable Positive 8.42
Fundamentals Valuation Momentum / Outlook
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Credit Committee Years ofExperience
David Morse, CFA 14
David Bowser, CFA 29
Andrew Catalan, CFA 31
Matthew Fontaine, CFA 30
David Horsfall, CFA 27
Maura Caporale, CFA 18
Diana Belman, CFA 17
Benjamin Li, CFA 24
Investment Process – Credit Committee
Sample Research Reports
Information provided is for illustrative purposes only to show Standish’s investment process and is not to be relied upon as advice or interpreted as a recommendation.
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Investment Philosophy – Historical “Proof Statement”
Historical Proof Statement – Standish Approach to Corporate Bonds Historically, bond ratings have been unstable even over very short periods, with migrations increasing in the
lower quality tiers.
Baa = BBB; Ba = BB; Caa_C = CCC – C; WR = Withdrawn (e.g. debt, acquisitions, divestitures, etc.)Past performance is no indication of future results
CONCLUSION: Significant incremental return may be available to active managers with the confidence to overweight BBBs and the ability to capture upgrades and avoid downgrades.
Among investment-grade bonds, BBBs (Baas) have exhibited both the most frequent rating changes and the most positive results, with upgrades nearly equaling downgrades.
Because of their disproportionate yield advantage, BBBs have historically outperformed under 2 of 3 possible rating scenarios.
Average One-Year Rating Migrations, 1970-2015Rating Aaa Aa A Baa Ba B Caa Ca-C Default WRAaa 87.48% 8.14% 0.59% 0.06% 0.02% 0.00% 0.00% 0.00% 0.00% 3.71%Aa 0.83% 85.15% 8.45% 0.44% 0.06% 0.04% 0.02% 0.00% 0.02% 4.99%A 0.06% 2.57% 86.60% 5.37% 0.51% 0.11% 0.04% 0.01% 0.06% 4.68%Baa 0.04% 0.16% 4.30% 85.44% 3.74% 0.69% 0.16% 0.02% 0.18% 5.26%Ba 0.01% 0.04% 0.47% 6.17% 76.17% 7.17% 0.68% 0.12% 0.92% 8.25%B 0.01% 0.03% 0.15% 0.45% 4.78% 73.52% 6.49% 0.56% 3.41% 10.60%Caa 0.00% 0.01% 0.03% 0.11% 0.42% 7.02% 66.77% 2.81% 8.52% 14.32%Ca-C 0.00% 0.00% 0.06% 0.00% 0.62% 2.46% 9.47% 39.59% 24.09% 23.71%Source: M oody's as o f December 31, 2015.
Scenario “Probability”Spread
Impact (Bps)Incremental
Return “Probability”Spread
Impact (Bps)Incremental
ReturnDowngrade 6.04% +63 -3.34% 4.62% +264 -16.78%Upgrade 2.63% -4 1.35% 4.49% -18 2.96%No Change 86.60% - 1.07% 85.44% - 1.70%
Single A BBB
Sources: M oody's as o f 12/31/2014 for rating migration probabilities. Barclays POINT data from 1/1/1992 to 12/31/2014 and Standish calculation for spread impact. Incremental Return calculations assume a duration o f 7 years.
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Investment Process – Security SelectionTe
am, P
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Pro
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Standish Proprietary Ratings
S&P Moody’s Fitch Standish1
SampleCorp A- A+ A- A+
Credit Trend Metric
1 or 2 3 4 or 5
Upgrade Candidate Stable DowngradeCandidate
Investable Universe
Barclays U.S. Credit IndexBarclays U.S. Credit Index
TargetIssuers
Fundamental Credit Research
Bondholder ProtectionBondholder ProtectionManagementManagement
Financial FlexibilityFinancial FlexibilityKey Financial MeasuresKey Financial Measures
Eligible CandidatesEligible Candidates
Apply financial and scenario analysis to individual issuers
Compare resulting internal valuations to third-party and market views
Examine company's liquidity and access to capital
Review issuer's capital structure for bonds offering best risk/return profiles
Participate in key industry events and visit companies
Conduct one-on-ones with key senior management
Review key covenants Develop asset valuation/
recovery analysis
1Please see important disclosures at the end of this presentation.
+ New Issues+ New Issues
+ Special Situations+ Special Situations
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Market ForecastMarket Forecast Asset AllocationAsset Allocation Industry WeightsIndustry Weights
Set allocation using CTD
Establish weights using duration x spread (DTS)
Allocate Risk BudgetAllocate Risk Budget
Set portfolio beta target using contribution to duration (CTD)
Establish duration and yield curve positioning
Exploit Idiosyncratic RiskExploit Idiosyncratic Risk
Deteriorating ImprovingStable
AlphaUnderweights
Beta Positions
Alpha Overweights
Proprietary Rating & Credit TrendProprietary Rating & Credit Trend
ValuationValuation
FundamentalsFundamentals
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
Investment Process – Portfolio ConstructionTe
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Deteriorating ImprovingStable
Deteriorating ImprovingStable
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Robust Risk Management - Two Tiered Approach
► Charles River Development Trade Order Management System (CRD)
► Seeks Best Execution – Trade Levels Reviewed Daily
► Performance Exception Reporting
► Counterparty Monitoring
► Independent Compliance group reporting to Chief Compliance Officer
► Fiduciary Committee
► OTC Counterparty/Best Execution Committee
► Operational Review Committee
► GIPS Committee
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
Standish employs a sophisticated set of risk management tools to help ensure the level of active risk in portfolios is consistent with our outlook.
► Proprietary reporting tool
► Accounts vs. desired strategy targets
► Enterprise querying on security attributes
11
22Compliance team and oversight committees maintain focus on seeking best execution and fiduciary responsibilities.
ImplementationImplementation GovernanceGovernance
►PortTarget ►Zeus
► Active risk
► Attribution
► Scenario analysis
► Tail-risk
► Enterprise risk
► Compares active risk of strategies
► Stress tests strategies
► Ensure consistent, active risk exposure of accounts within a strategy
►Barclays POINT®
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Guideline ChecklistAp
pend
ix
Spängler IQAM Bond Corporate
34
Important Disclosures
This information is not provided as a sales or advertising communication. It does not constitute investmentadvice. It is not an offer to sell or a solicitation of an offer to buy any security. Many factors affect performanceincluding changes in market conditions and interest rates and in response to other economic, political, orfinancial developments. Past performance is not a guide to or indicative of future results. Future returns arenot guaranteed and a loss of principal may occur. There can be no assurance that the investment objectivesoutlined in this presentation will be achieved. This information is not intended to provide specific advice,recommendations or projected returns of any particular Standish Mellon Asset Management Company LLC(“Standish”) product. Some information contained herein has been obtained from third party sources and hasnot been verified by Standish. Standish makes no representations as to the accuracy or the completeness ofany of the information herein.The enclosed material is confidential and not to be reproduced or redistributed without the prior writtenconsent of Standish. Any statements of opinion constitute only current opinions of Standish, which are subjectto change and which Standish does not undertake to update. Views expressed are subject to change rapidly asmarket and economic conditions dictate. Portfolio composition is also subject to change.The Firm is defined as Standish Mellon Asset Management Company LLC ("Standish"), a registered investmentadvisor and wholly owned subsidiary of The Bank of New York Mellon Corporation.BNY Mellon Investment Management is one of the world’s leading investment management organizations andone of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms,wealth management organization and global distribution companies. BNY Mellon is the corporate brand ofThe Bank of New York Mellon Corporation and may also be used as a generic term to reference theCorporation as a whole or its various subsidiaries generally. Products and services may be provided undervarious brand names and in various countries by subsidiaries, affiliates, and joint ventures of The Bank of NewYork Mellon Corporation where authorized and regulated as required within each jurisdiction.Standish Mellon Asset Management (UK) Limited, (“Standish (UK)”) is an affiliate of Standish located inLondon, which provides investment management services. Certain employees of Standish (UK) may also act inthe capacity as associated persons of Standish and in such capacity may provide contracted research servicesto Standish.Rankings include assets managed by BNY Mellon Asset Management and BNY Mellon Wealth Management.Each ranking may not include the same mix of firms.This portfolio data should not be relied upon as a complete listing of the Portfolio’s holdings (or top holdings)as information on particular holdings may be withheld if it is in the client’s best interest to do so. Portfolioholdings are subject to change without notice and may not represent current or future portfolio composition.The portfolio date is “as of” the date indicated.There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time youreceive this report or that securities sold have not been repurchased. The securities discussed do not representan account’s entire portfolio and in the aggregate may represent only a small percentage of an account’sportfolio holdings.It should not be assumed that any of the securities transactions or holdings discussed were or will prove to beprofitable, or that the investment recommendations or decisions we make in the future will be profitable orwill equal the investment performance of the securities discussed herein.The allocation distribution and actual percentages may vary from time-to-time. The types of investmentspresented in the allocation chart will not always have the same comparable risks and returns. The actualperformance of the portfolio will depend on the Investment Manager’s ability to identify and accessappropriate investments, and balance assets to maximize return while minimizing its risk. The actualinvestments in the portfolio may or may not be the same or in the same proportion as those shown above.Standish believes giving an proprietary Average Quality Credit rating to the holdings in a portfolio moreaccurately captures its characteristics versus using a single rating agencies ratings. Standish has aratings/number hierarchy whereby we assign a number between 0 (unrated bond) and 21 (S&P or Moody’sAAA) to all bonds in a portfolio based on the ratings of one or more of the rating agencies (with the lower ofthe 2 available agencies ratings prevailing), and then take a weighted numerical average of those bonds (withweighting based on each bonds percentage to the total portfolio assets). The resulting number is thencompared back to the ratings/number hierarchy to determine a portfolio’s average quality. For example, ifMoody’s AAA, S&P AAA= 21, Moody’s A1, S&P A+= 17, Moody’s Baa1 and S&P BBB+=14, Moody’s B1 andS&P B+=7. The numeric average of the 4 equally weighted holdings is 14.75, rounded up to the next wholenumber of 15. 15 converts to an average credit rating of S&P A/Moody’s A2.To the extent the strategy invests in foreign securities, its performance will be influenced by political, socialand economic factors affecting investments in foreign companies. Special risks associated with investments inforeign companies include exposure to currency fluctuations and controls, less liquidity, less developed or lessefficient trading markets, less governmental supervision and regulation, lack of comprehensive companyinformation, political instability, greater market volatility, and differing auditing and legal standards.
Further, investments in foreign markets can be affected by a host of factors, including political or socialconditions, diplomatic relations, limitations on removal of funds or assets or imposition of (or change in)exchange control or tax regulations in such markets. Additionally, investments denominated in a foreigncurrency will be subject to changes in exchange rates that may have an adverse effect on the value, price orincome of the investment.These risks are magnified in emerging markets and countries since they generally have less diverse and lessmature economic structures and less stable political systems than those of developed countries.These benchmarks are broad-based indices which are used for illustrative purposes only and have beenselected as they are well known and are easily recognizable by investors. Comparisons to benchmarks havelimitations because benchmarks have volatility and other material characteristics that may differ from theportfolio. For example, investments made for the portfolio may differ significantly in terms of securityholdings, industry weightings and asset allocation from those of the benchmark. Accordingly, investmentresults and volatility of the portfolio may differ from those of the benchmark. Also, the indices noted in thispresentation are unmanaged, are not available for direct investment, and are not subject to management fees,transaction costs or other types of expenses that the portfolio may incur. In addition, the performance of theindices reflects reinvestment of dividends and, where applicable, capital gain distributions. Therefore, investorsshould carefully consider these limitations and differences when evaluating the comparative benchmark dataperformance.The information regarding the index is included merely to show the general trends in the periods indicatedand is not intended to imply that the portfolio was similar to the index in composition or risk.The strategy may use alternative investment techniques (such as derivatives) which carry additional risks. Thelow initial margin deposits normally required to establish a position in such instruments may permit a highdegree of leverage. As a result, a relatively small movement in the price of a contract may result in a profit orloss that is high in proportion to the amount of funds actually placed as initial margin and may result in adisproportionate loss exceeding any margin deposited. Transactions in over-the-counter derivatives mayinvolve additional risk as there is no exchange on which to close out a position, only the original counterparty.Such transactions may therefore be difficult to liquidate, to value, or to assess the exposure. The strategy mayat times use certain types of investment derivatives, such as options, futures, forwards and swaps. Theseinstruments involve risks different from, and in certain cases, greater than, the risks presented by moretraditional investments.Standish sector models use regression analysis such as multi-linear data inputs, panel data, and probitfunction. Variables that the models take into account are: PMI, US Core CPI, Fed Fund rate, 3-month Libor, 3-month T-bill rate, foreign purchases of US Government bonds, Commodity Indices , Capacity Utilization,Deficit as a percent of GDP, S&P 500 return, Chicago Fed Index, IGOV, US output gap, Europe Core CPI, USunemployment rate, EU unemployment rate, and slope of the yield curve. Assumptions made are that samplesare representative of the population for the inference prediction; regression residuals are approximatelynormally distributed, uncorrelated, and have constant volatility; no high degrees of multi-colinearity in theindependent variables; variable sensitivity remains constant in the short term; and no structural shift in theshort term.BNY Mellon Investment Management is one of the world’s leading investment management organizations andone of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms,wealth management organization and global distribution companies. Standish Mellon Asset ManagementCompany LLC (“Standish”) is a BNY Mellon Investment Management firm. BNY Mellon is the corporate brandof The Bank of New York Mellon Corporation.The comments provided herein are a general market overview and do not constitute investment advice, arenot predictive of any future market performance, are not provided as a sales or advertising communication,and do not represent an offer to sell or a solicitation of an offer to buy any security. Similarly, this informationis not intended to provide specific advice, recommendations or projected returns of any particular product ofStandish Mellon Asset Management Company LLC (Standish). These views are current as of the date of thiscommunication and are subject to rapid change as economic and market conditions dictate. Though theseviews may be informed by information from publicly available sources that we believe to be accurate, we canmake no representation as to the accuracy of such sources nor the completeness of such information. Pleasecontact Standish for current information about our views of the economy and the markets. Portfoliocomposition is subject to change, and past performance is no indication of future performance.
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