not all benchmarks are created equal march 2014

Not All Benchmarks

Are Created Equal

1

Tuesday 25th March 2014

Teach-in Not All Benchmarks Are Created Equal 25 March 2014

Benchmark Proliferation

2

How can we make sense of the apparent proliferation of benchmarks available? Which have merit to be used as benchmarks and which do not?


LDI Hub Liquid Markets Liquid Credit Illiquid Credit Illiquid Markets

Collateral Mgt. Equities (EM, DM) Sterling Credit (IG) Structured Finance Reinsurance

Pooled vs. Seg DGFs Global Credit (IG) Infrastructure Debt Private Equity

Leverage & Liquidity Style Premia HY/Loans Senior Direct Lending Infrastructure

Overlay Strategies Risk Parity ABS Mezzanine Finance Real Estate

CTA Emerging Market Debt Distressed Debt

Global Macro Absolute Return Bonds Senior CRE Debt

Equity Long-Short Total Return Sub-IG

Credit Relative Value

3


Is Alpha Just Beta Waiting to be Discovered?

4

Time

Alpha

Alpha

Equity

Risk

Premium Equity

Risk

Premium Equity Risk

Premium

Alpha Alpha

Other

Market

Risk

Premia Other Market

Risk Premia

Style Premia

Prior to cap-

weighted indices, all

returns were

effectively viewed as

alpha

With the

introduction of

CAPM, the equity

market effect was

separated from

returns

This was then

extrapolated to

include other asset

classes such as

bonds and

commodities

Now we can

separate out a

number of risk

premia with much

less being left as

pure alpha

Source: AQR


What should a benchmark be trying to achieve ?

Liquid Markets

5

• Access/capture the desired market “beta” in the most effective way

• Transparent

• No unintended biases

• Sectors

• Geography

• Issuer

• No unnecessary transaction costs in tracking the index

• Captures evolution in market development

• Different approaches to weighting components

• Market capitalization – retains a lot of the above properties (but not always all)

• Equal weighting/capped

• Risk weighting

• Optimized, eg minimum variance


What characteristics do we look for in forming benchmarks for our clients ?

Liquid Markets

6

• Performance metric for fund management

• Assess the performance of fund managers relative to relevant benchmark net of fees

• Basis for synthetic allocations

• Total Return Swap and Futures exposures

• Take liquidity considerations into account (other things being equal) as this affects pricing

• Liquidity concentrated in market capitalization indices

• Places a high “bar” on non-market capitalization approaches

Teach-in Not All Benchmarks Are Created Equal 25 March 2014 7

Style Premia Case Study


Neil Woodford: Style Premia in Practice

8

- Neil Woodford presents us with an intriguing practical look into style premia investing in the UK.

- His track record is impressive – he has beaten the FTSE All Share over the past 12 years by 3.4% p.a.

- But is this the correct benchmark to use to assess his performance?

0

50

100

150

200

250

300

350

Invesco Perpetual High Income Fund FTSE All Share


Applying Style Premia to Neil Woodford

9

0

50

100

150

200

250

300

350

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Regressed Invesco High Income Fund FTSE All Share

Market Value Momentum Defensive

Portfolio Weights 75% 13% 19% 52%

Source: Deutsche Bank, Invesco,

Bloomberg; Calculations: Redington

Woodford’s performance can broadly be explained by: a lower than 100% weight to the market

(represented by the FTSE All Share) along with allocations to value, momentum and defensive factors.


Major Style Premia Families Cutting Across Liquid Markets

10

Need to be able to go long, go short and to leverage across multiple asset classes

•Involves buying assets that recently outperformed peers and selling those that recently underperformed

•For example: go long stocks with highest 3 month return, go short stocks with lowest 3 month return

Momentum

•Consists of buying low-risk, high-quality assets and selling high-risk, low-quality assets

•For example: go long high return-on-equity stocks, go short low return-on-equity stocks

Defensive

•Buying assets that are “cheap” relative to their fundamental value and selling “expensive” assets

•For example: go long lowest price-to-book stocks, go short highest price-to-book stocks

Value

•Implies buying high-yielding assets and selling low-yielding assets

•For example: go long highest yielding currencies, go short lowest yielding currencies

Carry


Style Premia Decomposition of A Fundamental Index

11

Market Value Momentum Defensive

Portfolio Weights 100% 21% 8% 0%

Mostly market exposure gained along with some value and momentum style premia

Is this the most effective way of gaining these exposures ?

0

50

100

150

200

250

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Regressed RAFI Fundamental Index Source: Deutsche Bank, Research Affiliates,

Bloomberg; Calculations: Redington


What characteristics do we look for in forming benchmarks for our clients ?

Multi-Asset

12

• Diversified Growth Fund

• Static / Dynamic / Total Return / Absolute Return

• Risk Parity

• Fully Systematic / Systematic with active overlay

• “Traditional” comparison often used is either “equity returns with lower volatility” or simple 60/40 equity

bond asset mix which has a number of shortcomings

• Allocations are more dynamic

• Much greater range of assets/strategies employed

• Credit

• Options

• Illiquid assets

• Commodities

• Global interest rates / FX

• Relative value (market neutral)

• Risk control

Is it possible to create a multi-asset benchmark suitable for assessing these products ?


Conclusions

13

• Access/capture the desired market “beta” in the most effective way

• Transparent

• No unintended biases

• No unnecessary transaction costs in tracking the index

• Captures evolution in market development

• Market capitalization indices satisfy a lot of these requirements (although not necessarily all of them, all of the

time)

• Makes market cap logical starting point

• Although there are situations when an alternative is more appropriate

• Be cognisant of tilts being introduced by new indices – are they just giving largely market exposure with small

style tilts ?

Teach-in Not All Benchmarks Are Created Equal 25 March 2014 14

Disclaimer

For professional investors only. Not suitable for private customers.

The information herein was obtained from various sources. We do not guarantee every aspect of its accuracy. The information is for your private information and is for discussion purposes only. A variety of market factors and assumptions may affect this analysis, and this analysis does not reflect all possible loss scenarios. There is no certainty that the parameters and assumptions used in this analysis can be duplicated with actual trades. Any historical exchange rates, interest rates or other reference rates or prices which appear above are not necessarily indicative of future exchange rates, interest rates, or other reference

rates or prices. Neither the information, recommendations or opinions expressed herein constitutes an offer to buy or sell any securities, futures, options, or investment products on your behalf. Unless otherwise stated, any pricing information in this document is indicative only, is subject to change and is not an offer to transact. Where relevant, the price quoted is exclusive of tax and delivery costs. Any reference to the terms of executed transactions should be treated as preliminary and subject to further due diligence. This presentation may not be copied, modified or provided by you , the Recipient, to any other party without Redington Limited’s prior written permission. It may also not be disclosed by the Recipient to any other party without

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Contact

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msci.com ©2014. All rights reserved. msci.com msci.com

Not All Benchmarks are Created Equal: Building Better Benchmarks – The MSCI Way

Altaf Kassam – Managing Director

msci.com ©2014. All rights reserved. 16 msci.com 16 msci.com

I. Introduction to MSCI

II. Not All Benchmarks Are Created Equal

III. Building Better Benchmarks

IV. Evolution of Benchmarks

V. Appendix

Presentation Overview


I. Introduction to MSCI

msci.com ©2014. All rights reserved.

MSCI is More Than Indexes

MSCI provide investors with world-class, investment decision support tools

• Indexes • Risk and Portfolio Analytics • Corporate Governance

Research & Innovation

Index Analytics

2012 2010 2013 2004 2004 1969

http://www.investorforce.com/


II. Not All Benchmarks Are Created Equal


Why should anyone care about benchmarks?

The concept of a market portfolio plays an important role in many financial models, including the Capital Asset Pricing Model (CAPM). In theory, the market portfolio should be the portfolio of choice for a truly passive investor 1

Widely used in the investment process in several applications:

Tools for investment research and strategic asset allocation Performance benchmarks for actively managed portfolios Index-linked vehicles to capture the market beta (equity risk premium)

The broad acceptance of market cap weighted indices does not rely on (potentially flawed) academic theories, such as the CAPM; it stems from practical considerations linked to the institutional investment process:

Automatic rebalancing, replicate simple buy and hold strategy Low turnover, implying low transaction / implementation costs High trading liquidity and high (maximum) investment capacity

1 “Global Invested Capital Market”, Hewitt ennisknupp, February 2014


Accuracy, timeliness and transparency

Consistent global framework: no gap, no overlap

Timely reflection of market changes

Transparent methodology and market classification framework

Investability and replicability

Systematic use of buffer zones to reduce turnover

Accurate implementation of corporate events

Stringent short and long term liquidity measures

What Matters Most and How MSCI Builds Better Benchmarks

1. Accurate measures of markets

2. Fair benchmarks for managers

3. Cost effective solutions for index replication

MSCI puts emphasis on: Leading to MSCI indices being:


MSCI has been defining the Equity space for 40+ years D

om

est

ic L

C &

MC

Inte

rnat

ion

al L

C &

MC

Eme

rgin

g M

arke

ts L

C &

MC

Do

me

stic

SC

Inte

rnat

ion

al S

C

EM S

C

Home and size biases

MSCI ACWI

All Country World Index

Do

me

stic

SC

Inte

rnat

ion

al S

C

EM S

C

Removal of home bias

MSCI ACWI IMI

(45 countries)

99% coverage

No GAPS & OVERLAPS

Removal of home and size biases

MSCI EM was

created in 1988

MSCI EAFE was

created in 1969


MSCI Index Families

MSCI Country & Regional Indices

All Country (DM+EM)

Developed Markets (DM)

Emerging Markets (EM)

Frontier Markets (FM)

Domestic

-US

-China

-Australia

Tradable

-Asia APEX

-EM 50

-FM 100

MSCI Size Indices

Large Cap

Mid Cap

Standard (Large + Mid)

Small Cap

SMID (Small + Mid)

IMI (Large+ Mid +

Small)

Micro Cap (DM Only)

All Cap (DM Only)

MSCI Style Indices

Value

Growth

MSCI Sector Indices

Sector

Industry

Sub-industry

Real Estate

MSCI Thematic Indices

Economic Exposure

Agriculture & Food Chain

Commodity Producers

Infrastructure

Faith-Based

- Catholic

- Islamic

MSCI ESG Indices

Best-in-Class

Socially Responsible

Ex-Controversial Weapons

Environmental

MSCI Strategy Indices

Risk Premia

- Value Weighted

- Risk Weighted

- Equal Weighted

- GDP Weighted

- Minimum Volatility

- Factor

- High Div Yield

- Risk Control

- Quality

- Momentum

- Quality Mix

Capped

- 10/40

- 25/50

- Standard Capped

Hedged & Currency

- Hedged

- FX Hedged

- Global Currency

Short & Leveraged (Daily)

Custom Indices

Equity Screening

Custom Weighting

Custom Currencies and

Tax Rates

Custom Delivery and File Format


III. Building Better Benchmarks


Key benefits that make MSCI the number one choice for global institutional investors include:

Emphasis on objectivity, accuracy and transparency:

- Transparent market classification framework

- Comparability of size segments across markets

- Exclusion of non-equity like securities

- Precise methodology to assign companies to markets

Emphasis on investability and replicability:

- Precise free float factors

- Stringent short and long term liquidity measures

- Minimum foreign room requirements

- Effective migration buffer mechanism

- Predictable implementation of corporate events

25

How MSCI Does it


The MSCI Market Classification Framework consists of three criteria: economic development, size & liquidity and market accessibility

In order to be classified in a given investment universe, a country must meet the requirements of all three criteria

The MSCI Market Classification Framework

Criteria Frontier Emerging Developed

A Economic Development

A.1 Sustainability of economic development No requirement No requirement

Country GNI per

capita 25% above the

World Bank high

income threshold* for

3 consecutive years

B Size and Liquidity Requirements

B.1 Number of companies meeting the following Standard Index criteria 2 3 5

Company size (full market cap) ** USD 449 mm USD 898 mm USD 1796 mm

Security size (float market cap) ** USD 33 mm USD 449 mm USD 898 mm

Security liquidity 2.5% ATVR 15% ATVR 20% ATVR

C Market Accessibility Criteria

C.1 Openness to foreign ownership At least some Significant Very high

C.2 Ease of capital inflows / outflows At least partial Significant Very high

C.3 Efficiency of the operational framework Modest Good and tested Very high

C.4 Stability of the institutional framework Modest Modest Very high

* High income threshold for 2010: GNI per capita of USD 12,276 (World Bank, Atlas method)

** Minimum in use for the May 2012 Semi-Annual Index Review, updated on a semi-annual basis


MSCI Country Classification


MSCI Has Captured the Evolution of Markets For 40+ Years

2013


Size Segments: Global Investable Market and All Cap Indices

All Cap

IndicesLarge Cap

Mid Cap

Small Cap

Micro Cap

Total Listed

Equity

Universe

Investable

Equity

Universe

Investable

Market

Indices

Large Cap

Mid Cap

Small Cap

Micro Cap

Indices

Micro Cap

IndicesMicro Cap

Universe


Breadth vs. Coverage: Number and Size

Goal: represent the global equity universe, while keeping the number of securities and size of the smallest security at reasonable levels

Market Cap (in USD)

Largest company 506,035,318,230

5% 9,638,785,576

10% 4,058,595,491

20% 1,562,054,938

30% 792,022,114

40% 474,873,840

50% 302,909,404

60% 192,671,360

70% 122,852,450

80% 74,378,487

90% 40,621,572

Smallest company 1,529

70.2

81.3

90.3

94.4

96.6

97.9 98.8

99.4 99.7 99.9 100.0

65

70

75

80

85

90

95

100

<5% 5 to 10% 10 to 20% 20 to 30% 30 to 40% 40 to 50% 50 to 60% 60 to 70% 70 to 80% 80 to 90% 90 to 100%

Mar

ket

Co

vera

ge (

% o

f fu

ll m

arke

t ca

p)

Global Companies (sorted by full market cap, as % of total)

Global Market Cap and Coverage

Source: MSCI


IV. Evolution of Benchmarks


Yesterday’s Alpha is Today’s Beta

Portfolio Return

Sector Beta

Beta

Alpha

Factor Beta

Alpha

Country Beta

1970s 1980s 2000s

Regional Beta


What Attracts Investors to Factor Investing?

6.5%

7.5%

8.5%

9.5%

10.5%

11.5%

11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0%

An

nu

aliz

ed R

etu

rn

Annualized Risk

Performance Characteristics (June 1988 to June 2013) (Gross Total Return in USD)

LOW RISK & LOW RETURN HIGH RISK & LOW RETURN

Risk Weighted

Quality

High Dividend Yield

HIGH RISK & HIGH RETURNLOW RISK & HIGH RETURN

Minimum VolatilityEqual Weighted

Momentum

MSCI World

Value Weighted


Factor investing is the investment process that harvests risk premia through exposure to factors

A large body of academic research highlights that long term equity portfolio performance can be explained by systematic factors. Some factors represent exposure to systematic risk and have historically earned a long term risk premium

We currently identify six risk premia factors. They are grounded in academic research and have solid explanations as to why they have provided a premium

What is Factor Investing?

Value Low Size

Quality Momentum

Low Volatility Yield

6 KEY FACTORS


50

100

150

200

250

300

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Risk Weighted/World Value Weighted/World Min Volatility/World Equal Weighted/World

Quality/World Momentum/World High Div Yield/World

Is This a Free Lunch? Cyclicality is a Key Dimension

Relative Performance of Factor Indexes (June 88 – June 2013)


The MSCI Family of Factor Indexes

36

MSCI Return-Based Factor Indexes MSCI Risk-Based Factor Indexes

MSCI Value Weighted Indexes Weighted according to four fundamental variables (Sales, Earnings, Cash Flow, Book Value)

• Semi-annual rebalancing

• Launched in 2010, index history from 31 May 1973 (World)/31 May 1991 (EM)

MSCI Minimum Volatility Indexes Constructed using minimum variance optimization

• Semi-annual rebalancing • Launched in 2008, index history from 31 May 1988 (World) / 31 May 1993

(EM)

MSCI Quality Indexes Weights derived from market cap times a quality score based on D/E, ROE, earnings variability

• Semi-annual rebalancing • Launched in 2012, index history from 28 Nov 1975 (World)/29 May 1992

(EM)

MSCI Risk Weighted Indexes Weights based on the inverse of historical variance

• Semi-annual rebalancing • Launched in 2011, index history from 31 May 1973 (World) / 31 May 1991

(EM)

MSCI Momentum Indexes Weights derived from market cap times a momentum score based on short- and long-term momentum signals

• Semi-annual rebalancing along with conditional rebalancing • Launched in 2013, index history from 31 May 1973 (World) / 31 May 1991

(EM)

MSCI Equal Weighted Indexes Equal allocation across parent index constituents

• Quarterly rebalancing • Launched in 2008, index history from 31 May 1973 (World) / 31 May 1991

(EM)

MSCI Multi-Factor Indexes

MSCI High Dividend Yield* Indexes High dividend yield opportunity set within parent index constituents

• Semi-annual rebalancing • Launched in 2006, index history from 28 Nov 1975 (World) / 29 May 1992

(EM)

MSCI Quality Mix Indexes Combining Quality, Value and Minimum Volatility Strategy Indexes with equal weights

• Semi-annual rebalancing • Launched in 2013, index history from 31 May 1988 (World)/ 31 May 1993

(EM)

* On June 3, 2013, MSCI launched the enhanced HDY Indexes to incorporate additional screens which exclude stocks based on certain “low quality" characteristics and recent 12-month price performance.


V. Appendix


MSCI – The Index That Matters

40+ 99.8% Accuracy rate1

150,000

600+ ETFs are based on

MSCI indices3

7,500 Clients supported across

83 countries

$8.4tn In assets is

benchmarked to MSCI indices2

Years of experience in index calculation and maintenance

1 Accuracy calculated based on number of corrections performed over total number of securities or data points covered. 2 As of September 30, 2012, as published by eVestment, Lipper and Bloomberg on January 31, 2013. 3 As of February 2013.

Indices calculated daily

9,000+ in real-time


How MSCI Does It

Over the last four decades MSCI has been recognized as the preferred index provider for global institutional investors based on:

1. Methodology that promotes a global framework, broad coverage, investability and representativeness, while reflecting our clients’ investment process

2. Construction process that supports data quality, index stability and continuity, with low error rates and low index turnover

3. Innovative new products through thought leadership and research that captures the evolution of investment best practices

4. Superior client service focused on responsiveness and adding value

39


MSCI Investability

MSCI MSCI Rationale

Minimum Equity Universe Size Indexed to 99th percentile of DM universe ($100M)

Objective and dynamic market-based definition

Minimum Equity Universe Size 50% of minimum full market cap size ($50M) Facilitates replication in institutional portfolios

Liquidity Minimum Annualized Traded Value Ratio (ATVR) of 20% for DM 15% for EM

Allows only inclusion of relevant liquid securities and recognizes liquidity differences between DM & EM

Global Minimum Foreign Inclusion Factor 15% in general or (or 1.8 X Standard minimum size)

Ensures meaningful access to publicly owned securities

Free Float Bands 5% bands, free float rounded up to nearest 5%

Captures availability to foreign investors in the most accurate way

Seasoning Minimum of 3 months of trading history; 10 business days for larger IPOs

Reduces volatility impact around small issuances and includes large IPOs to reflect key market changes

40


MSCI : Index Maintenance & Additional Features

MSCI MSCI Rationale

Reconstitution Semi-annual rebalancing + quarterly index reviews (all synchronized)

Frequently and regularly reflects market changes on a timely basis

Buffer Zones Yes (Upper band +50%; lower band -33% of size segment cut-off)

Reduces turnover and reflects managers’ investment processes

Size Indices Yes Offers value and growth segmentation at each size segmentation

Index Structure Country Indices (with the exception of Europe being considered as a single country from an index construction and maintenance perspective)

Reflects the institutional process

Sector Classification Global Industry Classification Standard (GICS®) GICS® is widely adopted by institutional investors

41


Assets Benchmarked to MSCI indices

Over $8.4 trillion in assets are benchmarked to MSCI indexes

Over $60 billion in assets are benchmarked to MSCI Factor Indexes

Assets Benchmarked to Key MSCI Indexes

$ billion Total

Mar-13** Sep-13# Δ

ACWI 1,364 1,714 26%

EAFE 1,496 1,682 12%

EM 1,434 1,364 -5%

World 2,161 2,388 10%

US 190.8 199.6 5%

Europe 281.3 336.9 20%

APAC 415.4 371.8 -11%

Other 363.9 387.1 6%

TOTAL 7,707 8,442 10%


MSCI Factor Indexes as of 30 September 2013

43

Over USD 60 billion in assets benchmarked to MSCI Factor Indexes

Data segregated by index family and region for active and passive funds as of September 30, 2013 and reported as of December 31, 2013 by eVestment, Lipper, Morningstar, Bloomberg and MSCI data

(USD bn) Active Passive Total

All MSCI Factor Indexes 25.9 37.9 63.8

High Dividend Yield 19.8 4.2 24

Minimum Volatility 3.5 19.7 23.2

Equal Weighted 0 8.3 8.3

GDP Weighted 2.3 0.6 2.9

Value Weighted 0 3.3 3.3

Risk Weighted 0.3 1.3 1.6

Momentum 0 0.2 0.2

Quality 0 0.3 0.3

(USD bn) Active Passive Total

Global 25.9 37.9 63.8

Americas 5.5 15.1 20.6

EMEA 20.4 19.1 39.5

Asia 0 3.7 3.7


Why Classification Matters: The Korea example

A developed economy does not imply a developed capital market

Korea’s capital market is not yet at the developed level.

Why does this matter to investors?

Difficulties trading the Korean currency outside Korea

Local currency ONLY during local business hours

Inability to transfer shares between different accounts

operational difficulties + higher portfolios management costs

Korea has been under review by MSCI for 5 years and will stay in Emerging Markets until accessibility issues are resolved

44


Introducing Multi-Factor Indexes

Multi-Factor Indexes blend standardized factor Indexes into a composite index which serves as a benchmark for passive replication

Multi-Factor Indexes may provide investors with a transparent, flexible and cost-effective way to passively seek systematic exposure to premium factors

Market Return

Rules Based & Transparent Implementation

Active Return

Passive Investing

Factor Investing

Active Management

Discretionary Implementation


Allocating to Multiple Factors

1. State objectives for the allocation: risk reduction, enhance returns at market level risk, increase yield, …

2. Select the desired factor exposures based upon:

investment beliefs (value premium, …)

risk/return characteristics (minimum volatility, …)

investibility constraints (size of allocation, shorting, …)

3. Seek combination benefits:

Diversification through low correlation of active returns

Trading cost reduction through natural crossing

Due Diligence Considerations

1. Investment Beliefs

2. Strategic vs. Tactical Allocations

3. Selection of Individual Factors

4. Global vs. Domestic

5. Optimal Allocation

6. Funding of the Factor Allocation

7. Active vs. Passive Implementation

8. Index and Manager Selection

(methodology, turnover, transparency,

fees, … )

9. Governance and Operational Risk


Considerations for Combining Factor Indexes

Factor Risk Correlation Business Cycle

Value Comparable to market

Low with Momentum and Quality

Pro-cyclical

Momentum Comparable to market

Low with Value, Yield, and Quality

Pro-cyclical

Low Size Higher than market Low with Min Volatility, Yield, and Quality

Pro-cyclical

Quality Lower than market Low with Value, Size, Yield and Momentum

Defensive

Low Volatility Lower than market Low with Value and Momentum

Defensive

Yield Lower than market Low with Size, Quality and Momentum

Defensive


Historically, tracking errors and information ratios for multi-factor Indexes improve substantially compared to standalone factor Indexes

Turnover and cost of replication are reduced due to natural crossing

Potential Benefits of Multi-Factor Indexes

World

StandardQuality

Risk

Weigthed

Value

WeightedMomentum

Multi Factor

Index

Total Return* (%) 4.2 5.3 8.6 5.5 6.9 6.7

Total Risk* (%) 16.3 14.3 14.6 17.2 16.7 14.9

Sharpe Ratio 0.18 0.26 0.47 0.25 0.33 0.34

Annualized Active Return (%) 1.1 4.4 1.2 2.7 2.5

Tracking Error* (%) 4.5 5.6 3.6 9.0 3.0

Information Ratio 0.25 0.79 0.35 0.30 0.83

Max Relative Drawdown Period (months) 52 10 9 19 2

Natural Crossing Benefits

Turnover** (%) 3.1 23.0 22.0 18.3 89.6 32.0

Turnover if implemented as separate mandates --> 40.8

* Annualized in USD for the 05/31/1999 to 09/30/2013 period** Annualized one-way index turnover for the 05/31/1999 to 09/30/2013 period


MSCI 24 Hour Global Client Service

Asia Pacific

China North 10800.852.1032 (toll free)

China South 10800.152.1032 (toll free)

Hong Kong +852.2844.9333

Seoul +798.8521.3392 (toll free)

Singapore 800.852.3749 (toll free)

Sydney +61.2.9033.9333

Tokyo +81.3.5226.8222

Europe, Middle East & Africa

Cape Town +27.21.673.0100

Frankfurt +49.69.133.859.00

Geneva +41.22.817.9777

London +44.20.7618.2222

Milan +39.02.5849.0415

Paris 0800.91.59.17 (toll free)

Americas

Americas 1.888.588.4567 (toll free)

Atlanta +1.404.551.3212

Boston +1.617.532.0920

Chicago +1.312.706.4999

Monterrey +52.81.1253.4020

Montreal +1.514.847.7506

New York +1.212.804.3901

San Francisco +1.415.836.8800

São Paulo +55.11.3706.1360

Stamford +1.203.325.5630

Toronto +1.416.628.1007

[email protected] | www.msci.com


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and is provided for informational purposes only. The Information may not be reproduced or redisseminated in whole or in part without prior written permission from MSCI.

The Information may not be used to create derivative works or to verify or correct other data or information. For example (but without limitation), the Information many not be used to create

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not all benchmarks are created equal march 2014

Economy & Finance

number of risk premia

equity market effect

market capitalization

desired market beta

pure alpha source

minimum variance teachin

neil woodford

benchmark proliferation