How to Improve Your Investing Results in 2017 and BeyondDoug FabianExecutive Vice President, Business Development

June 10, 2017

About Mercer AdvisorsThis information is for educational purposes and should not be considered investment advice. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.

H O W T O I M P R O V E Y O U R I N V E S T I N G R E S U L T S

H O W T O I M P R O V E Y O U R I N V E S T I N G R E S U L T S

A Family Office Approach

Total wealth manager offering the following in-house services:

• Investment management

• Comprehensive financial planning

• Estate & legacy planning

• Asset protection

• Tax planning, management, and preparation

• Corporate trustee

• Retirement income, distribution, and benefits planning

Investor Behavior: At the Heart of Investing Results

Next Steps for Improving Your Results

Innovation in the Exchange-Traded Fund (ETF) World

Agenda

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Investor Behavior:The Evidence is in…

“The investor’s chief problem – and even his worst enemy –is likely to be himself.”

– Benjamin Graham

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Successful Investing is Difficult

Sources > Indexes include: REITS: NAREIT Equity REIT Index; EAFE: MSCI EAFE; Oil: WTI Index; Bonds: Barclays Capital U.S. Aggregate Index; Homes: median sale price of existing single-family homes, Gold: USD/troy oz.; Inflation: CPI. Average asset allocation investor return is based on a Dalbar Inc. analysis, which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. Returns are annualized (and total return, where applicable) and represent the 20-year period ending December 31, 2016 to match Dalbar’s most recent “Quantitative Analysis of Investor Behavior, 2017”.

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Average Investor Underperformance

Source > Dalbar Inc. Returns are annualized and represent the 20-year period ending December 31, 2016 to match the Dalbar’s “Quantitative Analysis of Investor Behavior, 2017”.

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Why the Average Investor Underperforms

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Next Steps for Improving Your Results

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What rate of return are you striving to achieve?

Which asset allocation model will best position you to achieve your goals?

What cash flow objectives would you like to attain?

What are the tax consequences of your individual accounts?

Which investment vehicles offer the right solution for your current needs?

Helping Clients Improve Their Results

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Investment Philosophy

• Quantitative

• Multi-Factor, Long-Short

• Scientific, Academic

The Science of Investing: Beyond Indexing

Recent Advances:

• More factors (“Betas”)

• Implementation (“Mix” vs. ”Integration”)

• Risk Factors vs. Asset Classes

Today’s Multi-Factor CAPM includes:

• Equity (MKT)

• Size (SMB)

• Price (HML)

• Momentum (UMD)

• Quality (QMJ)

• Profitability (RMW)

• Growth

• Safety (BAB)

• Payout Ratio (Yield) (CMA)

Evolution of Quantitative Finance

1964: Capital Asset Pricing Model (Equity Premium)Ø𝐸 𝑅# = α + β# 𝑀𝑅𝑃 + ε#Ø𝑅, ≈ 0.65

1993: Fama – French Three-Factor Model (Value & Size Premia)Ø𝐸 𝑅# = α + β# 𝑀𝑅𝑃 + ℎ# 𝐻𝑀𝐿 +𝑠# 𝑆𝑀𝐵 + ε#Ø𝑅, ≈ 0.85

1997: The Carhart Four-Factor Model (Momentum Premium)Ø𝐸 𝑅# = α + β# 𝑀𝑅𝑃 + ℎ# 𝐻𝑀𝐿 +𝑠# 𝑆𝑀𝐵 + 𝑢# 𝑈𝑀𝐷 + ε#Ø𝑅, ≈ 0.90

2014-2016: Asness, Frazzini, Fama, & French (Quality Premium)Ø𝐸 𝑅# = α + β# 𝑀𝑅𝑃 +ℎ# 𝐻𝑀𝐿 +𝑠# 𝑆𝑀𝐵 + 𝑢# 𝑈𝑀𝐷 + 𝑞# 𝑄𝑀𝐽 + ε#Ø𝑅, ≈ 0.95

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Risk Factors Strong Worldwide

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Sources > Dimensional Fund Advisors, AQR Capital Management, S&P 500 Index, MSCI World ex US Index, MSCI Emerging Markets Index, Fama/French libraries. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book. Indices are not available for direct investment; their performance does not reflect the expense associated with the management of an actual portfolio. Data as of December 31, 2016.

Frequency of Outperformance

1Profitability is a measure of current profitability, based on information from individual companies’ income statements.Sources > Dimensional Fund Advisors, AQR Capital Management, Fama/French libraries. Based on rolling annualized returns. Rolling multi-year periods overlap and are not independent. This statistical dependence must be considered when assessing the reliability of long-horizon return differences. Indices are not available for direct investment.

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Exchange-Traded Funds

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Multi asset

Factor driven

International dividend

High income

Emerging markets

ETF Innovations

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Just One Thing…

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Create a balance sheet for your liquid assets

Determine optimal asset allocation for each account

Identify the timeline needs for each account

Choose your preferred investment vehicle

Inventory your cash

Develop a watch list

Action Items

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Thank you.

m e r c e r a d v i s o r s. c o m

Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.