lgima’s index insights · 2019. 11. 6. · msci usa 1.55 20.63 4.14 13.29 10.73 13.22 18.82 12.23...

All “Traditional Weighted” benchmarks above have at least 10 years of actual performance that can be verified by accessing the provider’s website for further information. All “Alternatively Weighted” benchmarks include hypothetical back-tested information in the performance provided for the years where actual performance did not exist. LGIMA has obtained this information from the index provider and recommends that all information be verified on the provider’s website. Index provider information has not been independently verified by LGIMA for its accuracy or completeness, therefore the information obtained from third party sources cannot be guaranteed. Please refer to the disclosures at the end of this presentation for more information.

LGIMA’s Index Insights Q3 2019 Index Market Overview US traditional weighted benchmark performance • US large-cap outperforms mid- and small-cap in Q3 and YTD • Elevated volatility in the most recent 12 months vs. historical averages • S&P 600 reverses 2 straight quarters of underperformance vs. Russell 2000 • Russell 2000 performance vs. S&P 600 can vary in the short term due to mid-cap or junk rallies

Global traditional weighted benchmark performance • Emerging markets (standard and small-cap) were the chief laggards in international markets during Q3 and YTD • Similar to the US, international markets have seen an uptick in volatility in the recent year vs. historical averages • Developed small-cap performed well in Q3 • Frontier markets have been significantly less volatile

1-yr 3-yr 5-yr 10-yrVol Vol Vol Vol

S&P 500 1.70 20.55 4.25 13.39 10.84 13.24 18.69 12.19 11.96 12.57

S&P 400 -0.09 17.87 -2.49 9.38 8.88 12.56 23.67 15.29 14.07 15.10

S&P 600 -0.20 13.46 -9.34 9.33 9.89 13.02 25.08 18.07 16.24 16.74

Russell 1000 1.42 20.53 3.87 13.19 10.62 13.23 19.10 12.32 12.02 12.74

Russell 1000 Growth 1.49 23.30 3.71 16.89 13.39 14.94 20.02 13.30 12.88 13.23

Russell 1000 Value 1.36 17.81 4.00 9.43 7.79 11.46 18.80 12.34 11.92 12.83

Russell 2000 -2.40 14.18 -8.89 8.23 8.19 11.19 24.88 17.21 16.16 17.29

Russell 3000 1.16 20.09 2.92 12.83 10.44 13.08 19.48 12.54 12.18 12.97

Russell 3000 Growth 1.10 22.75 2.70 16.36 13.07 14.74 20.40 13.45 13.00 13.44

Russell 3000 Value 1.23 17.47 3.10 9.24 7.76 11.36 19.16 12.60 12.09 13.05

DJ US Total Market 1.14 20.05 2.81 12.78 10.40 13.09 19.44 12.56 12.25 12.99

MSCI USA 1.55 20.63 4.14 13.29 10.73 13.22 18.82 12.23 12.02 12.65

5-yr 10-yrBenchmark Q3 YTD 1-yr 3-yr

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MSCI ACWI IMI -0.18 15.87 0.48 9.36 6.61 8.45 17.64 11.42 11.86 13.38

MSCI ACWI ex USA IMI -1.72 11.39 -1.84 6.10 3.05 4.66 15.94 11.39 12.57 14.59

MSCI ACWI -0.03 16.20 1.38 9.71 6.65 8.35 17.30 11.30 11.81 13.26

MSCI ACWI ex USA -1.80 11.56 -1.23 6.33 2.90 4.45 15.90 11.39 12.64 14.61

MSCI World 0.53 17.61 1.83 10.21 7.18 9.01 17.42 11.28 11.70 13.06

MSCI World ex USA -0.93 13.57 -0.95 6.49 3.06 4.78 15.53 10.97 12.27 14.39

MSCI World ex USA Small -0.27 12.58 -5.62 5.54 5.14 6.93 17.07 11.92 12.71 14.93

MSCI EAFE -1.07 12.80 -1.34 6.48 3.27 4.90 15.20 10.99 12.33 14.57

Emerging Markets -4.25 5.89 -2.02 5.97 2.33 3.37 18.03 14.02 15.91 17.26

Emerging Markets Small Cap -4.58 1.82 -5.49 1.32 -0.13 3.21 16.36 12.93 14.48 16.84

MSCI Frontier Markets -1.09 10.66 5.87 7.02 -1.28 3.61 8.36 11.08 11.60 12.35

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US alternative weighted benchmark performance • With the recent spike in volatility, the low volatility factors have been the strongest performers • Diversification did not work in the US, as equal-weighted underperformed market cap in Q3

Global Developed ex USA alternative weighted benchmark performance • Like the US, low volatility has been the strongest Q3 performer in international markets • Quality and low volatility have been the best performers over the 1- and 3-year history • Diversification did work in the Developed ex US space as equal-weighted outperformed market cap in Q3 • Low volatility factors substantially reducing volatility over all timelines

Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Please refer to the disclosures at the end of this presentation for more information.


Mkt

Cap S&P 500 1.70 20.55 4.25 13.39 10.84 13.24 18.69 12.19 11.96 12.57

S&P 500 Low Vol 5.80 26.46 19.86 14.49 13.37 14.54 12.73 9.04 9.38 9.35SciBeta USA Low Vol 3.75 23.46 12.25 14.15 12.82 15.02 15.13 10.09 9.72 10.00MSCI USA Min Vol 4.28 24.15 14.83 14.59 13.67 14.52 13.06 9.12 9.16 9.34MSCI USA Risk Weighted 2.33 22.91 8.97 12.80 11.18 14.15 17.93 11.52 11.13 11.42MSCI USA Value 1.86 17.07 4.71 10.04 8.30 11.50 17.54 11.75 11.48 12.24FTSE RAFI US 1000 1.69 18.13 1.79 10.62 8.66 12.15 19.88 13.11 12.36 13.36SciBeta USA Value 2.51 19.26 2.08 10.01 9.00 12.57 19.56 12.45 11.66 12.34MSCI USA Quality 2.52 24.79 7.64 15.96 13.18 14.83 19.11 12.54 12.16 12.18SciBeta USA Quality 3.96 22.85 7.16 13.41 12.04 14.89 18.55 12.00 11.45 12.10MSCI USA Momentum 0.88 20.97 2.13 17.35 14.65 16.19 17.16 12.42 11.74 12.63SciBeta USA Momentum 2.85 23.17 3.71 12.50 10.12 13.48 18.90 11.95 11.22 12.57

Yld MSCI USA High Div Yield 3.41 16.35 6.70 11.73 10.70 13.95 16.03 10.70 10.57 10.61

MSCI USA Equal Weighted 0.77 20.71 2.95 11.06 9.26 13.18 21.17 13.35 12.92 13.89Russell 1000 Equal Weighted -0.29 19.55 0.96 10.55 8.83 13.19 22.56 14.15 13.63 14.83S&P 500 Equal Weighted 0.77 20.10 3.40 11.05 9.46 13.41 20.70 13.14 12.63 13.81

3-yr 5-yr 10-yrBenchmark Q3 YTD 1-yr

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Cap MSCI World ex USA -0.93 13.57 -0.95 6.49 3.06 4.78 15.53 10.97 12.27 14.39

MSCI World ex USA Min Vol 1.37 13.42 4.79 6.66 6.49 7.55 10.59 8.35 8.85 9.91

SciBeta Dev ex USA Low Vol 0.47 12.92 1.42 6.43 5.84 7.94 12.85 9.74 10.11 11.60

MSCI World ex USA Value -1.44 8.79 -4.31 5.38 1.01 3.37 15.44 11.48 13.13 15.22

FTSE RAFI Developed ex USA 1000 -1.36 9.23 -4.83 6.35 2.19 3.60 16.91 12.03 13.30 16.02

SciBeta Dev ex USA Value -1.67 8.50 -5.41 5.30 3.36 5.20 16.61 11.78 12.49 14.73

MSCI World ex USA Quality -0.47 18.31 4.61 7.95 4.95 7.01 15.13 11.11 11.63 13.73SciBeta Dev ex USA Quality -0.03 12.43 -1.77 6.42 5.30 7.49 15.33 10.85 11.21 13.04

SciBeta Dev ex USA Momentum -0.16 12.48 -4.96 4.92 4.66 7.62 15.52 11.71 11.56 13.28

MSCI World ex USA Momentum -1.09 16.01 -1.50 6.35 4.54 6.65 15.65 11.39 11.38 13.52

Yld MSCI World ex USA High Dividend Yield 0.61 14.32 2.23 5.94 1.49 4.68 15.52 11.25 12.22 14.62

Eql

MSCI World ex USA Equal Weighted -0.77 11.18 -3.62 6.02 4.18 5.39 16.34 11.11 12.29 14.03


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Emerging Markets alternative weighted benchmark performance • Value has been the worst performer in Q3 and YTD • Each factor exhibits lower volatility than market cap over the past 12 months • Diversification did not work in emerging markets as equal weighted underperformed market cap in Q3

Environmental and Socially Responsible weighted benchmark performance • Climate funds show good results vs. market cap, with reduced volatility

Fixed income benchmark performance • Long Treasuries outperform over time periods up to 1 year • Investment grade outperforms high yield over time periods up to 1 year


Mkt

Cap MSCI World 0.53 17.61 1.83 10.21 7.18 9.01 17.42 11.28 11.70 13.06

Russell 1000 1.42 20.53 3.87 13.19 10.62 13.23 19.10 12.32 12.02 12.74FTSE Developed 0.50 17.07 1.39 10.07 7.10 8.87 17.53 11.32 11.63 13.11

MSCI World ESG 1.46 18.29 3.95 10.13 7.17 8.86 16.90 10.98 11.41 12.90

MSCI Wld Low Carbon Ldrs 0.60 17.94 1.84 10.35 7.43 17.57 11.35 11.79

MSCI Wld Low Carbon Trgt 0.85 18.29 2.43 10.13 7.30 17.51 11.33 11.76

MSCI World SRI 1.34 19.21 4.59 11.39 8.04 9.02 17.13 11.12 11.58 12.81

Russell 1000 Climate 1.70 21.30 4.40 13.30 10.90 16.80 11.80 12.00

FTSE4Good US 3.08 21.74 5.93 15.09 12.17 13.88 18.42 12.26 12.28 12.71

FTSE Custom Global Developed Component Climate 0.73 17.71 1.90 9.99 7.34 17.56 11.27 11.53


ES

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Mkt

Cap MSCI EM -4.25 5.89 -2.02 5.97 2.33 3.37 18.03 14.02 15.91 17.26

MSCI EM Min Vol -2.81 3.67 -0.92 4.98 1.80 6.20 12.47 10.08 11.88 13.36

MSCI EM Risk Weighted -4.93 4.20 -1.21 3.06 -0.46 3.71 14.32 11.98 13.96 15.45

Sci Beta EM Low Vol -4.72 1.53 -4.61 2.65 0.16 6.04 13.54 11.03 11.85 13.46

MSCI EM Value -6.48 1.84 -5.03 4.81 0.38 1.92 15.99 13.42 16.55 17.62

FTSE RAFI EM -5.39 4.65 -1.50 7.87 3.36 2.97 15.54 14.62 19.05 18.96

SciBeta EM Value -7.20 -0.74 -7.80 3.73 0.25 3.75 15.78 13.12 15.03 16.31

MSCI EM Quality 0.73 10.88 4.11 4.64 2.40 5.42 17.16 13.02 13.75 15.09

SciBeta EM Quality -4.95 2.89 -3.62 3.41 0.38 5.51 14.75 11.89 12.85 14.47

SciBeta EM Momentum -4.57 1.60 -5.77 2.90 -0.98 5.10 13.49 12.06 12.43 15.02

MSCI EM Momentum -1.12 11.55 3.15 9.32 3.52 6.69 15.54 13.93 15.04 16.56

Yld MSCI EM Dividend Yield -4.86 4.21 -2.13 5.97 0.56 2.92 15.25 12.53 16.04 16.65

Eql

MSCI EM Equal Weighted -5.29 4.73 -1.42 2.51 -0.36 2.31 16.78 13.50 15.52 17.45

10-yrBenchmark Q3 YTD 1-yr 3-yr 5-yr

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Barclays Global Agg 0.72 6.32 7.60 1.59 1.99 2.34 4.26 4.62 4.65 4.85

Barclays US Agg 2.27 8.52 10.30 2.92 3.38 3.75 3.78 3.32 3.09 2.95

iBoxx US Investment Grade 3.33 15.69 15.07 4.81 5.22 6.02 6.27 5.15 5.00 4.98

iBoxx US High Yield 1.29 11.56 6.83 5.81 4.97 7.07 6.68 4.23 5.29 6.23

Barclays US TIPS 1.35 7.58 7.13 2.21 2.45 3.46 3.88 3.16 3.64 4.50

Barclays US Treasury 2.40 7.71 10.48 2.24 2.91 3.08 4.69 3.89 3.69 3.63

Barclays US Treasury: Intermediate 1.18 5.22 7.58 1.80 2.19 2.39 2.66 2.43 2.37 2.47

Barclays US Treasury: Long 7.92 19.77 24.79 4.07 6.77 6.87 14.62 11.40 11.18 11.37

EM JPM Emerging Market Global Core 1.56 13.71 11.88 4.44 5.66 6.88 6.41 6.08 5.96 6.82


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REITS, Infrastructure, and Commodity benchmark performance • US real estate and infrastructure outperform market cap in recent times • Commodities fell in Q3 as oil had its second negative quarter in a row • S&P GSCI, with a higher allocation to energy, underperforms BBG Commodity index • YTD, commodities have provided positive return, bucking long term performance

Multi-Factor benchmark performance • SciBeta and FTSE Multi-Factor outperform market cap in US and Developed markets in Q3 • Global SciBeta and FTSE Multi-Factor exhibit lower volatility than market cap across all time periods • Strategies without a low volatility factor exposure and those with higher betas have struggled in recent quarters



BBG Commodity -1.84 3.13 -6.57 -1.50 -7.18 -4.32 10.90 8.12 11.87 13.62S&P GSCI -4.18 8.61 -16.31 1.54 -11.74 -5.43 21.64 15.06 19.64 18.53US Dollar Index 3.38 3.33 4.46 1.35 2.95 2.63 4.12 5.67 6.49 7.45FTSE EPRA Nareit United States 7.59 25.55 18.02 6.58 9.72 12.65 16.09 12.95 14.34 15.63FTSE EPRA Nareit Dv ex US 1.51 14.59 8.86 5.88 5.00 6.47 13.47 10.67 11.34 14.89FTSE EPRA Nareit Global 5.71 22.05 14.79 5.12 7.17 9.65 14.31 11.17 12.06 13.94FTSE Global Core Infrastructure 2.64 20.97 16.30 10.47 7.47 10.20 11.30 8.64 9.41 9.75MSCI ACWI Infrastructure 3.05 15.95 11.77 5.31 3.50 5.59 10.13 8.94 9.72 10.80MSCI USA Infrastructure 8.11 24.00 19.67 9.46 8.42 11.39 11.22 9.15 9.99 10.60


Com

mod


Mkt

Cap MSCI ACWI -0.03 16.20 1.38 9.71 6.65 8.35 17.30 11.30 11.81 13.26

MSCI ACWI Div. Multi-Factor -1.19 13.01 -3.10 8.72 7.10 10.20 19.13 12.47 12.24 13.35SciBeta Global MBMS 4F EW 0.53 15.20 0.83 8.21 6.78 9.58 16.25 10.56 10.37 11.83SciBeta Global HFI 6F EW 0.95 15.24 1.66 8.29 7.74 10.65 15.62 10.25 9.97 11.09FTSE AW Comprehensive Factor 0.11 13.69 0.40 8.03 6.89 10.04 15.44 10.28 10.36 11.82

Mkt

Cap S&P 500 1.70 20.55 4.25 13.39 10.84 13.24 18.69 12.19 11.96 12.57

MSCI USA Div. Multi-Factor 1.14 16.57 -1.67 10.84 9.49 13.68 20.23 13.21 12.37 12.98SciBeta US MBMS 4F EW 2.57 21.69 5.54 11.81 10.39 13.73 18.23 11.47 10.82 11.61SciBeta US HFI 6F EW 3.28 21.44 6.60 11.97 11.52 14.64 17.05 11.02 10.48 10.96Russell 1000 Cmprhnsve Factor 2.29 21.77 4.59 11.50 10.63 14.89 18.92 12.11 11.25 12.38

Mkt

Cap MSCI World ex USA -0.93 13.57 -0.95 6.49 3.06 4.78 15.53 10.97 12.27 14.39

MSCI World ex USA DMF -2.68 9.74 -6.13 5.52 4.27 7.15 17.27 12.08 12.23 14.32SciBeta Dev xUS MBMS 4F EW -0.51 10.86 -3.51 5.35 4.58 6.88 15.04 10.95 11.22 12.96SciBeta Dev xUS HFI 6F EW -0.44 11.14 -2.71 6.10 5.67 8.21 15.01 10.84 11.06 12.63FTSE Dev xUS Cmprhnsve Factor -0.51 10.90 -2.24 5.78 5.47 7.62 14.26 10.27 10.78 12.51

Mkt

Cap MSCI Emerging Markets -4.25 5.89 -2.02 5.97 2.33 3.37 18.03 14.02 15.91 17.26

MSCI EM Div. Multi-Factor -2.37 6.66 -2.40 5.11 2.72 5.14 18.27 13.98 16.08 17.94SciBeta EM MBMS 4F EW -5.63 0.95 -5.22 2.88 -0.27 5.03 14.21 11.96 12.96 14.88SciBeta EM HFI 6F EW -5.70 1.23 -5.72 2.84 0.26 6.44 14.89 11.81 12.45 13.98FTSE EM Comprehensive Factor -3.86 3.71 -2.81 2.71 1.16 5.79 13.80 12.33 14.04 15.30


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Multi-Factor year-by-year returns Back-tested returns vs. live returns • Defensive Strategies with low volatility factor exposure outperformed market cap in Q3, while outperforming

higher beta strategies YTD US and global market cap weighted valuations Chart plots the referenced statistics based on monthly P/B ratios for previous 15 years • US large-cap near historical max whereas mid- and small-cap hover near averages • International valuations below 15-year averages • US growth significantly above average

Sources: LGIMA, MSCI, S&P, Bloomberg as of end of Q3 2019

Yearly Returns MSCI ACWI SciBeta Global MBMS 4F EW MSCI ACWI DMF FTSE AW

Comprehensive FactorSciBeta Global High-Factor Intensity

MBMS 6F EW

2003 33.99 37.52 42.35 38.06 34.922004 15.23 25.21 26.92 27.12 26.722005 10.84 16.15 19.97 20.66 15.562006 20.95 24.77 29.31 26.81 26.492007 11.66 10.08 12.41 14.78 11.302008 -42.19 -38.76 -43.04 -36.84 -33.812009 34.63 31.07 40.39 35.38 28.092010 12.67 19.42 19.29 18.20 20.232011 -7.35 -4.69 -3.86 -2.43 -0.492012 16.13 16.73 16.20 18.22 15.762013 22.80 23.30 26.28 22.08 24.342014 4.16 7.17 7.66 6.49 9.122015 -2.36 0.48 1.61 -0.33 3.042016 7.86 6.03 5.67 6.18 6.112017 23.97 23.41 29.44 25.45 22.862018 -9.42 -10.37 -12.63 -10.43 -9.61

YTD 2019 16.20 15.20 13.01 13.69 15.24Q3 2019 -0.03 0.53 -1.19 0.11 0.95

Live track record

Outperform ACWIUnderperform ACWI


6

Currency summary—MSCI Global Indices • Israeli Shekel was the only positive developed market currency in Q3 • New Zealand Dollar was worst performing developed currency in Q3 • Egyptian Pound was the best performing emerging market currency in Q3 • Brazilian Real and Columbian Peso were the worst emerging currencies in Q3 • All Latin American Emerging currencies down for the quarter

3M YTD 1-yr 3M YTD 1-yr 3M YTD 1-yrMSCI ACWI ex US -1.80% 11.56% -1.23% 0.74% 13.72% 1.34% -2.51% -2.16% -2.54%

MSCI USA 1.55% 20.63% 4.14% 1.55% 20.63% 4.14% 0.00% 0.00% 0.00%

MSCI World ex US -0.93% 13.57% -0.95% 1.75% 15.86% 1.91% -2.62% -2.29% -2.73%

MSCI EAFE -1.07% 12.80% -1.34% 1.75% 15.67% 1.56% -2.75% -2.87% -2.76%

MSCI Canada 0.45% 21.55% 2.96% 1.78% 17.83% 5.46% -1.30% 3.16% -2.37%

MSCI EM -4.25% 5.89% -2.02% -2.07% 7.77% -0.23% -2.16% -1.88% -1.96%

MSCI Frontier Markets -1.10% 10.66% 5.87% -0.23% 11.69% 7.25% -0.71% -1.03% -0.82%

3.38% 3.33% 4.46%US Dollar Index

USD Return % Local Return % Currency Impact %Index

One-year currency risk/return




7

SciBeta USA Factor Indexes Periodic Table Investment Returns Single Factor Indexes based on SciBeta’s diversified multi-strategy scheme methodology • Size has been the chief laggard for the second quarter in a row • Quality is the top performing factor in Q3 • All factors except size beat market cap in Q3

Sources: LGIMA, Scientific Beta, Morningstar Direct


8

SciBeta Developed ex USA Factor Indexes Periodic Table Investment Returns Single Factor Indexes based on SciBeta’s diversified multi-strategy scheme methodology • Low volatility is the only positive returning factor in Q3 • Value continues its run as a below average quintile factor ranking



9

SciBeta Emerging Markets Factor Indexes Periodic Table Investments Returns Single Factor Indexes based on SciBeta’s diversified multi-strategy scheme methodology • All factors underperform market cap • Momentum was the best performing factor after being one of the weakest over the past two quarters • Similar to the international space, Value had the poorest return over the quarter



10

Index Country Classification Update Across the spectrum of index providers, there were various recent announcements concerning country classifications in their respective indices. Details are listed below.

• Scientific Beta – Kuwait on EM watchlist

There were no updates in the Developed space, but in September Scientific Beta announced that Kuwait was added to their watchlist for promotion to Emerging Markets status. In the announcement, Scientific Beta referenced the recent developments in the Kuwaiti market including the introduction of T+3 settlement, adoption of the delivery versus payment process and custodian rejection. Scientific Beta will make a further announcement in December, and if promoted, Kuwait would be added to the EM eligible universe in June 2020.

• FTSE Russell – Romania promoted

In September, FTSE Russell announced the results of their annual country classification review for the FTSE Global Equity Indices. The highlights included Romania’s promotion to Emerging Market status, Tanzania’s promotion to Frontier status and the removal of Argentina from the watchlist for reclassification to Emerging Market status. FTSE Russell cited recent market improvements in both Romania and Tanzania as the basis for promotion. The changes will be effective in September 2020.

• MSCI / S&P Dow Jones

In June, MSCI announced Kuwait’s promotion to Emerging Markets status, contingent on meeting certain conditions. MSCI stated they will issue a final decision by the end of the year.

Contributors Contact LGIMA Follow us on LinkedIn http://www.lgima.com/


mailto:[email protected]?subject=Index%20Insights%20Q1%202019

https://www.linkedin.com/company/1631222/

http://www.lgima.com/

11

DISCLOSURES Disclosures: This is not a solicitation to purchase any product and is not intended as a solicitation to buy or sell any securities or other financial instruments or to provide any investment advice or service. The performance set forth below does not represent the results of actual trading, but rather was achieved by means of the retroactive application of a model designed with the benefit of hindsight. Index provider information has not been independently verified by LGIMA for its accuracy or completeness, therefore the information obtained from third party sources cannot be guaranteed. Accordingly, the information herein should not be relied on in making any investment decision, as an investment always carries with it the risk of loss and the vulnerability to changing economic, market or political conditions, including but not limited to changes in interest rates, issuer, credit and inflation risk, foreign exchange rates, securities prices, market indexes, operational or financial conditions of companies or other factors. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance or that LGIMA’s investment or risk management process will be successful. Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. The use of hypothetical performance is subject to inherent limitations derived from the reliance on historical data and the benefit of hindsight. All trading strategies applied to the analysis were available throughout the performance period. However, the analysis includes certain assumptions where actual performance could be different from the hypothetical performance presented. In order to match the index returns a fund would need to track the security weightings in a way that would exactly match the Index and that the economic and market conditions were sufficient to have allowed effective execution of replicate the risk and return characteristics of the index. There are a number of factors that could reduce our ability to track index positions perfectly, including small position sizes and/or available liquidity in some securities. We estimate the net effects of index- and trading-related factors on the passive components of the strategy would affect performance either favorably or unfavorably depending on the size of the portfolio. A review of the ERI Scientific Beta index methodology has been conducted by: a) comparing in and out of sample performance of the hypothetical back-tested information provided by Scientific Beta; b) testing the returns against the intended factor biases; c) conducting a comparison of similar multi-factor indices to Scientific Beta’s multi-factor index; and d) reviewing the reasonability of portfolio characteristics. The output of the indices appears reasonable given the methodology and targeted portfolio risk biases and opinions expressed herein are as of October 2019 and may change based on market and other conditions. The material contained here is confidential and intended for the person to whom it has been delivered and may not be reproduced or distributed. The material is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. Legal & General Investment Management America, Inc. does not guarantee the timeliness, sequence, accuracy or completeness of information included. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance.

lgima’s index insights · 2019. 11. 6. · msci usa 1.55 20.63 4.14 13.29 10.73 13.22 18.82 12.23...

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