Chasing Certrainty in Uncertain Times

CHASING CERTAINTY IN UNCERTAIN TIMES4TH ANNUAL MUNICIPAL AND GLOBAL BOND FORUM

WEDNESDAY, 28 OCTOBER 2015 THE HARVARD CLUB35 WEST 44TH STREETNEW YORK, NY 10036

2

4th Annual Municipal and Global Bond Forum: Chasing Certainty in Uncertain Times DATE: TIME: LOCATION:

Wednesday, October 28, 2015 9:00 AM – 5:15 PM The Harvard Club 35 West 44th Street New York, NY 10036

MORNING SESSION AGENDA: GLOBAL BONDS 2.0 8:30 – 9:00 AM REGISTRATION

9:00 – 9:15 AM

OPENING REMARKS Heather McArdle, Director, Fixed Income Indices, S&P Dow Jones Indices

9:15 – 9:45 AM

KEYNOTE SPEAKER: Paul Sheard, Executive Managing Director; Chief Global Economist, Standard & Poor’s Ratings Services

9:45 – 10:30 AM A SIMPLER MARKET: WHAT’S DRIVING BOND TRANSPARENCY Regulatory changes meant to increase transparency in the bond market have been implemented. Are they enough and are they working? What role do ETFs play in transparency? Does more transparency lead to better price execution? Moderator: Aaron Kuriloff, Reporter, The Wall Street Journal Panelists:

David Blitzer, Ph.D., Managing Director, Chairman of the Index Committee, S&P Dow Jones Indices

Chuck Mounts, Head of Research & Design Group, S&P Dow Jones Indices Mariana F. Bush, CFA, Senior Analyst, CEF & ETP Research, Wells Fargo Peter Kovacs, Head of NYSE Bonds, NYSE Group

10:30 – 10:45 AM NETWORKING BREAK

10:45 – 11:30 AM ADDRESSING THE HEADLINES: IS LIQUIDITY CHANGING FOR THE WORST? Everyone talks about liquidity, but what does it mean in practical terms? Are trading volumes the best measure of liquidity, and what other factors need to be considered? Is the high-yield corporate bond market at risk? Moderator: Joe Rennison, Reporter, The Financial Times Panelists:

David Krein, Head of Research, MarketAxess Marty Fridson, Chief Investment Officer, Lehmann, Livian, Fridson Advisors LLC Yakov Amihud, Professor of Entrepreneurial Finance, New York University

11:30 – 12:15 PM WALKING ON EGGSHELLS: WHAT TO DO ABOUT DURATION? Fed rate policy limbo paired with recent dramatic price movements have made the bond market hard to navigate. We’ll discuss how duration-targeted investments may help to reduce market sensitivity while maintaining return. Moderator: Kevin Horan, Director, Fixed Income Indices, S&P Dow Jones Indices Panelists:

Jordan Farris, Director, ETF Product Development, Guggenheim Investments A. Seddik Meziani, Professor of Finance, Department of Economics, Finance & Real Estate,

Montclair State University—Feliciano School of Business Robert E. Cusack, Portfolio Manager, WhaleRock Point Partners, LLC

12:30 – 12:45 PM

CLOSING REMARKS J.R. Rieger, Managing Director, Fixed Income Indices, S&P Dow Jones Indices

3

AFTERNOON SESSION AGENDA: MUNICIPAL BONDS—SHOW ME THE MUNI

1:30 – 2:00 PM REGISTRATION

2:00 – 2:15 PM

OPENING REMARKS J.R. Rieger, Managing Director, Fixed Income Indices, S&P Dow Jones Indices

2:15 – 3:00 PM BONDS VS FUNDS: SHOULD LIQUIDITY DRIVE YOUR BUYING DECISION? Taking into account muni liquidity and the efficiency of retail trades, we’ll debate the role that liquidity should play in decision-making. Moderator: Chip Barnett, Senior Market Reporter, The Bond Buyer Panelists:

Peter Hayes, Managing Director, Head of Municipal Bonds Group, BlackRock Chris Alwine, Principal, Head of Municipal Bond Group, Vanguard

3:00 – 3:45 PM IS PUERTO RICO THE FIRST DOMINO? Now that Puerto Rico has defaulted, what is next? Where are the new stress points for the muni market? Moderator: Michelle Kaske, Reporter, Bloomberg News Panelists:

Thomas Metzold, Managing Director, Head of Capital Markets, National Public Finance Guarantee Corporation

Timothy T. Ryan, CFA, Senior Vice President, Portfolio Manager, Nuveen Asset Management

3:45 – 4:00 PM NETWORKING BREAK

4:00 – 4:45 PM ASSET ALLOCATION SWEET SPOT: EFFECTIVELY USING MUNI BOND ETFs Is there a place for munis in core asset allocations? Can laddering defend against “zombie” rates? Panelists will explore these questions. Moderator: Antony Courtney, Head of U.S. RIA Channel Management, S&P Dow Jones Indices Panelists:

J.R. Rieger, Managing Director, Fixed Income Indices, S&P Dow Jones Indices Brian Lockhart, CFP, Chief Investment Officer, Peak Capital Management, LLC Matthew L. Forester, Chief Economist/Market Strategist, NewSquare Capital Stephen Winterstein, Managing Director of Research & Chief Strategist, Municipal Fixed

Income, Wilmington Trust Investment Advisors, Inc.

4:45 – 5:15 PM PERSPECTIVES ON FUNDING INFRASTRUCTURE NEEDS THROUGH THE MUNI BOND MARKET Closing Keynote Speaker: Richard Ravitch, former New York State Lieutenant Governor

5:15 – 6:15 PM COCKTAIL RECEPTION

4th Annual Municipal and Global Bond Forum: Chasing Certainty in Uncertain Times DATE: TIME: LOCATION:

Wednesday, October 28, 2015 9:00 AM – 5:15 PM The Harvard Club 35 West 44th Street New York, NY 10036

MORNING SESSION AGENDA: GLOBAL BONDS 2.0 8:30 – 9:00 AM REGISTRATION

9:00 – 9:15 AM

OPENING REMARKS Heather McArdle, Director, Fixed Income Indices, S&P Dow Jones Indices

9:15 – 9:45 AM

KEYNOTE SPEAKER: Paul Sheard, Executive Managing Director; Chief Global Economist, Standard & Poor’s Ratings Services

9:45 – 10:30 AM A SIMPLER MARKET: WHAT’S DRIVING BOND TRANSPARENCY Regulatory changes meant to increase transparency in the bond market have been implemented. Are they enough and are they working? What role do ETFs play in transparency? Does more transparency lead to better price execution? Moderator: Aaron Kuriloff, Reporter, The Wall Street Journal Panelists:

David Blitzer, Ph.D., Managing Director, Chairman of the Index Committee, S&P Dow Jones Indices

Chuck Mounts, Head of Research & Design Group, S&P Dow Jones Indices Mariana F. Bush, CFA, Senior Analyst, CEF & ETP Research, Wells Fargo Peter Kovacs, Head of NYSE Bonds, NYSE Group

10:30 – 10:45 AM NETWORKING BREAK

10:45 – 11:30 AM ADDRESSING THE HEADLINES: IS LIQUIDITY CHANGING FOR THE WORST? Everyone talks about liquidity, but what does it mean in practical terms? Are trading volumes the best measure of liquidity, and what other factors need to be considered? Is the high-yield corporate bond market at risk? Moderator: Joe Rennison, Reporter, The Financial Times Panelists:

David Krein, Head of Research, MarketAxess Marty Fridson, Chief Investment Officer, Lehmann, Livian, Fridson Advisors LLC Yakov Amihud, Professor of Entrepreneurial Finance, New York University

11:30 – 12:15 PM WALKING ON EGGSHELLS: WHAT TO DO ABOUT DURATION? Fed rate policy limbo paired with recent dramatic price movements have made the bond market hard to navigate. We’ll discuss how duration-targeted investments may help to reduce market sensitivity while maintaining return. Moderator: Kevin Horan, Director, Fixed Income Indices, S&P Dow Jones Indices Panelists:

Jordan Farris, Director, ETF Product Development, Guggenheim Investments A. Seddik Meziani, Professor of Finance, Department of Economics, Finance & Real Estate,

Montclair State University—Feliciano School of Business Robert E. Cusack, Portfolio Manager, WhaleRock Point Partners, LLC

12:30 – 12:45 PM

CLOSING REMARKS J.R. Rieger, Managing Director, Fixed Income Indices, S&P Dow Jones Indices

4

INDEX-RELATED EVENTS, THOUGHT LEADERSHIP AND RESEARCH AVAILABLE AT WWW.SPDJI.COM

4th Annual Municipal and Global Bond Forum: Chasing Certainty in Uncertain Times OCTOBER 28, 2015

CHRIS ALWINE, CFA Principal, Head of Municipal Bond Group Vanguard Christopher W. Alwine is a principal and Head of the Municipal Bond Group at Vanguard. Mr. Alwine joined Vanguard in March of 1990 and has over twenty years of investment experience. Mr. Alwine leads a team of 30 investment professionals who manage over $120 billion in client assets. His team manages 13 municipal bond funds. Mr. Alwine has served in multiple roles throughout his career in the fixed income group. His experience includes trading, portfolio management and credit research. His portfolio management experience spans both taxable and municipal markets as well as active and index funds. Mr. Alwine also is a member on the investment committee at Vanguard that is responsible for developing macro strategies for the firm’s internally managed fixed income funds. Mr. Alwine holds a Bachelor’s of Business Administration from Temple University and an MS in Finance from Drexel University. He is a Chartered Financial Analyst.

YAKOV AMIHUD Professor of Entrepreneurial Finance New York University Yakov Amihud is Ira Rennert Professor of Entrepreneurial Finance at the Stern School of Business, New York University. His research focuses on the effects of asset liquidity on value and expected return, and on the design and evaluation of securities markets' trading methods. He is the coauthor of Market Liquidity (Cambridge University Press, 2013). On these topics, Amihud has done consulting work for the NYSE, AMEX, CBOE, CBOT, and other securities markets. He has published more than seventy research articles in professional journals and in books, and edited and co-edited five books on topics such as LBOs, bank M&As, international finance, and securities market design. His research also includes the evaluation of corporate financial policies, mergers and acquisitions, initial public offerings, objectives of corporate managers, dividend policy, and law and finance.






CHIP BARNETT Senior Market Reporter The Bond Buyer Chip Barnett is a journalist with almost 40 years of experience. He started his professional career at the Gannett Newspapers in Westchester County, N.Y., working his way up from back-shop compositor to Senior News Editor. Barnett later worked for Thomson Reuters in Manhattan, covering state and local government finance as a Reporter and later Executive Editor for TM3.com and as Editor in Charge of Municipal Finance for Reuters news. Later, he was the Editor of Municipal Finance Today at SourceMedia. Barnett has also worked for DebtWire/Municipals, covering distressed municipalities around the United States, and has written about commercial and residential real estate in South Florida and the Midwest for both The Real Deal and Globe Street. Barnett is currently Senior Market Reporter for The Bond Buyer.

DAVID BLITZER, PH.D Managing Director and Chairman of the Index Committee S&P Dow Jones Indices David M. Blitzer is managing director and chairman of the Index Committee with overall responsibility for index security selection, as well as index analysis and management. Prior to becoming Chairman of the Index Committee, Dr. Blitzer was Standard & Poor’s Chief Economist. Before joining Standard & Poor's, he was Corporate Economist at The McGraw-Hill Companies, S&P's parent corporation. Prior to that, he was a Senior Economic Analyst with National Economic Research Associates, Inc. and did consulting work for various government and private sector agencies including the New Jersey Department of Environmental Protection, the National Commission on Materials Policy and Natural Resources Defense Council. Dr. Blitzer won the 2012 William F. Sharpe Indexing Lifetime Achievement Award. He is the author of Outpacing the Pros: Using Indices to Beat Wall Street’s Savviest Money Managers (McGraw-Hill, 2001) and What’s the Economy Trying to Tell You? Everyone’s Guide to Understanding and Profiting from the Economy (McGraw-Hill, 1997). In the year 2000, Dr. Blitzer was named to SmartMoney magazine’s distinguished list of the 30 most influential people in the world of investing, which ranked him seventh, and in the year 1998, Dr. Blitzer received the Blue Chip Economic Forecasting Award for most accurately predicting the country’s leading economic indicators for four years in a row. A well-known speaker at investing and indexing conferences, he is often quoted in the national business press, including the New York Times, Wall Street Journal, USA Today, Financial Times, and various other financial and industry publications and is frequently heard on local and national television and radio. A graduate of Cornell University with a B.S. in engineering, Dr. Blitzer received his M.A. in economics from the George Washington University and his Ph.D. in economics from Columbia University.

5






CHIP BARNETT Senior Market Reporter The Bond Buyer Chip Barnett is a journalist with almost 40 years of experience. He started his professional career at the Gannett Newspapers in Westchester County, N.Y., working his way up from back-shop compositor to Senior News Editor. Barnett later worked for Thomson Reuters in Manhattan, covering state and local government finance as a Reporter and later Executive Editor for TM3.com and as Editor in Charge of Municipal Finance for Reuters news. Later, he was the Editor of Municipal Finance Today at SourceMedia. Barnett has also worked for DebtWire/Municipals, covering distressed municipalities around the United States, and has written about commercial and residential real estate in South Florida and the Midwest for both The Real Deal and Globe Street. Barnett is currently Senior Market Reporter for The Bond Buyer.

DAVID BLITZER, PH.D Managing Director and Chairman of the Index Committee S&P Dow Jones Indices David M. Blitzer is managing director and chairman of the Index Committee with overall responsibility for index security selection, as well as index analysis and management. Prior to becoming Chairman of the Index Committee, Dr. Blitzer was Standard & Poor’s Chief Economist. Before joining Standard & Poor's, he was Corporate Economist at The McGraw-Hill Companies, S&P's parent corporation. Prior to that, he was a Senior Economic Analyst with National Economic Research Associates, Inc. and did consulting work for various government and private sector agencies including the New Jersey Department of Environmental Protection, the National Commission on Materials Policy and Natural Resources Defense Council. Dr. Blitzer won the 2012 William F. Sharpe Indexing Lifetime Achievement Award. He is the author of Outpacing the Pros: Using Indices to Beat Wall Street’s Savviest Money Managers (McGraw-Hill, 2001) and What’s the Economy Trying to Tell You? Everyone’s Guide to Understanding and Profiting from the Economy (McGraw-Hill, 1997). In the year 2000, Dr. Blitzer was named to SmartMoney magazine’s distinguished list of the 30 most influential people in the world of investing, which ranked him seventh, and in the year 1998, Dr. Blitzer received the Blue Chip Economic Forecasting Award for most accurately predicting the country’s leading economic indicators for four years in a row. A well-known speaker at investing and indexing conferences, he is often quoted in the national business press, including the New York Times, Wall Street Journal, USA Today, Financial Times, and various other financial and industry publications and is frequently heard on local and national television and radio. A graduate of Cornell University with a B.S. in engineering, Dr. Blitzer received his M.A. in economics from the George Washington University and his Ph.D. in economics from Columbia University.

6


MARIANA BUSH, CFA Senior Analyst, CEF & ETP Research Wells Fargo Mariana is a closed-end fund (CEF) and exchange-traded tracking product (ETP) senior analyst in ASG, providing Financial Advisors and their clients with individual security recommendations in the CEF and ETP universes. Mariana began her career at Furman Selz in New York as an associate analyst, following technology companies long before the Internet became a household name. She joined the firm in 1991 as an analyst in Investment Strategy for Wachovia Securities. Mariana began following CEFs in 1993, and she assumed coverage of ETPs in the late 1990s. Mariana has been widely quoted. She received her B.S.E. in the Civil Engineering and Operations Research department from Princeton University.

ANTONY COURTNEY Head of U.S. RIA Channel Management S&P Dow Jones Indices Antony Courtney is head of U.S. financial advisor channel management at S&P Dow Jones Indices. The financial advisor channel focuses on increasing financial advisors’ awareness of and preference for index-based solutions. Tony holds responsibility for building relationships in the financial advisor community. In this role, Tony directly connects advisors with the broad resources S&P Dow Jones Indices has to offer. His extensive background in index-based solutions gives him the ability to speak in depth on index construction, methodologies and how indices are used by portfolio managers. Tony has more than 25 years of experience in the investment management industry. In 1991, he joined Voyageur Funds, initiating and covering the State of Florida. In 1995, he took over the New England territory for State Street Research until joining Barclays Global Investors-iShares in 2000. Tony was an integral part of the launch of the iShares ETFs in May of 2000 and directed the New England territory for over five years. In 2007, he took the position of Market Director for Bank of America Investment Services in Providence, Rhode Island. In 2010, Tony joined the channel management team. Tony received his BA in political science from Providence College and attained his CIMA designation from the Wharton School at the University of Pennsylvania in 2002.


ROBERT E. CUSACK Portfolio Manager WhaleRock Point Partners, LLC Bob Cusack has been an investment professional for over 35 years, beginning in public finance investment banking at First Boston Corp. in New York City. At WhaleRock, Bob manages family and institutional portfolios and consults on endowment and insurance company investments and for a large 529 Plan Administrator. Over the course of his finance career, Bob has managed bank and insurance company portfolios and advised a five-star Morningstar municipal bond mutual fund. Prior to joining WhaleRock, he was Chief Investment Officer at Preferred Asset Management LLC, a private wealth advisory he co-founded in 1997. During his 12 year tenure at Preferred, he advised institutional clients and private investors on matters of investment policy, asset allocation, manager selection and strategic investments. An early adopter of Exchange Traded Securities (1993), Bob has appeared on NBC and in print to explain how they may be used to achieve client objectives. He has been a speaker at industry conferences nationally and has written for the business press. Active in civic affairs, Bob serves by gubernatorial appointment on two state boards with finance responsibilities: the Tobacco Settlement Financing Corp. (TSFC), where he has overseen over $1 billion of securitizations, and the Refunding Bond Authority. Bob also is a past trustee of a municipal pension plan noted for its governance and investment performance. He has devoted his efforts to several educational institutions and city government in East Providence, Rhode Island, where he was an elected official. Bob is a 1977 graduate of Fordham University where he majored in Economics, and did graduate studies at the Tuck School of Business at Dartmouth.

JORDAN FARRIS Director, ETF Product Development Guggenheim Investments Jordan is a Director of ETF Business Development focusing on index provider, capital market, and listing exchange relationships as well as ongoing oversight of Guggenheim’s suite of ETFs. Prior to joining Guggenheim Investments, Jordan was a Senior Vice President of Business Development at DirexionShares. In this role, he focused on product implementation within the institutional and tactical client segments in addition to promoting ETF education and strategy throughout the financial industry. Before joining DirexionShares, Jordan performed multiple roles at Northern Trust Global Investments focusing primarily on the ETF segment. Prior to Northern Trust, Jordan spent three years working at Rydex Investments, now a part of Guggenheim Investments, focusing on the ETF and mutual fund segments. Jordan is a graduate of The University of Michigan and has earned his MBA with concentrations in Finance, Analytical Consulting, and Management Strategy from Northwestern University’s Kellogg School of Management. He currently holds series 7 and 66 licenses.





7


ROBERT E. CUSACK Portfolio Manager WhaleRock Point Partners, LLC Bob Cusack has been an investment professional for over 35 years, beginning in public finance investment banking at First Boston Corp. in New York City. At WhaleRock, Bob manages family and institutional portfolios and consults on endowment and insurance company investments and for a large 529 Plan Administrator. Over the course of his finance career, Bob has managed bank and insurance company portfolios and advised a five-star Morningstar municipal bond mutual fund. Prior to joining WhaleRock, he was Chief Investment Officer at Preferred Asset Management LLC, a private wealth advisory he co-founded in 1997. During his 12 year tenure at Preferred, he advised institutional clients and private investors on matters of investment policy, asset allocation, manager selection and strategic investments. An early adopter of Exchange Traded Securities (1993), Bob has appeared on NBC and in print to explain how they may be used to achieve client objectives. He has been a speaker at industry conferences nationally and has written for the business press. Active in civic affairs, Bob serves by gubernatorial appointment on two state boards with finance responsibilities: the Tobacco Settlement Financing Corp. (TSFC), where he has overseen over $1 billion of securitizations, and the Refunding Bond Authority. Bob also is a past trustee of a municipal pension plan noted for its governance and investment performance. He has devoted his efforts to several educational institutions and city government in East Providence, Rhode Island, where he was an elected official. Bob is a 1977 graduate of Fordham University where he majored in Economics, and did graduate studies at the Tuck School of Business at Dartmouth.

JORDAN FARRIS Director, ETF Product Development Guggenheim Investments Jordan is a Director of ETF Business Development focusing on index provider, capital market, and listing exchange relationships as well as ongoing oversight of Guggenheim’s suite of ETFs. Prior to joining Guggenheim Investments, Jordan was a Senior Vice President of Business Development at DirexionShares. In this role, he focused on product implementation within the institutional and tactical client segments in addition to promoting ETF education and strategy throughout the financial industry. Before joining DirexionShares, Jordan performed multiple roles at Northern Trust Global Investments focusing primarily on the ETF segment. Prior to Northern Trust, Jordan spent three years working at Rydex Investments, now a part of Guggenheim Investments, focusing on the ETF and mutual fund segments. Jordan is a graduate of The University of Michigan and has earned his MBA with concentrations in Finance, Analytical Consulting, and Management Strategy from Northwestern University’s Kellogg School of Management. He currently holds series 7 and 66 licenses.





8


MATTHEW L. FORESTER Chief Economist/Market Strategist NewSquare Capital A 20-year veteran in portfolio management, Matt is responsible for the design and management of the firm’s proprietary portfolios. He is a member of the Investment Strategy Committee. Prior to joining NewSquare Capital, Matt was Vice President and Portfolio Manager with Cumberland Advisors, Inc., a registered investment adviser, where he managed the firm’s all-ETF portfolios: U.S. Equity, International Equity, Emerging Markets Equity, and Global Multiple Asset Class. Matt has been a frequent guest commentator on television and radio including Bloomberg, CNNfn, and Comcast CN8. Matt has also been a speaker or panelist for many industry conferences and national conference calls, including the ETF Global Education Conference, Strategic Research Institute ETF Conference, Fidelity Investments, Barclays Global Investors, and a joint session of the Global Interdependence Center and Philadelphia Council for Business Economics at the Federal Reserve Bank of Philadelphia. He has also been a guest lecturer in the MBA program at Rutgers University. Matt holds FINRA Series 7, 24, 53, and 63 licenses. He is a graduate of The Wharton School of Finance, University of Pennsylvania, earning a B.S. in Economics, with concentrations in Finance and Political Science.

MARTY FRIDSON Chief Investment Officer Lehmann, Livian, Fridson Advisors LLC Martin Fridson is “perhaps the most well-known figure in the high yield world,” according to Investment Dealers’ Digest. At brokerage firms including Salomon Brothers, Morgan Stanley, and Merrill Lynch, he became known for his innovative work in credit analysis and investment strategy. For nine consecutive years he was ranked number one in high yield strategy in the Institutional Investor All America Research Survey. Fridson received his B.A. cum laude in history from Harvard College and his M.B.A. from Harvard Business School. He has served as president of the Fixed Income Analysts Society, governor of the CFA Institute, director of the New York Society of Security Analysts, and consultant to the Federal Reserve Board of Governors. The Financial Management Association International named Fridson the Financial Executive of the Year in 2002. In 2000, he became the youngest person ever inducted into the Fixed Income Analysts Society Hall of Fame. A study based on 16 core journals ranked Fridson among the ten most widely published authors in finance in the period 1990-2001. In 2013 Fridson served as Special Assistant to the Director for Deferred Compensation, Office of Management and the Budget, The City of New York. In 2000, The Green Magazine called Fridson’s Financial Statement Analysis “one of the most useful investment books ever.” The Boston Globe said his 2006 book, Unwarranted Intrusions: The Case Against Government Intervention in the Marketplace, should be short-listed for best business book of the decade.


PETER HAYES Managing Director, Head of Municipal Bonds Group BlackRock Peter Hayes, Managing Director, is a member of Americas Fixed Income within Alpha Strategies. He is head of the Municipal Group and a member of the Americas Fixed Income Executive Team. He leads the Municipal Bond Operating Committee which oversees municipal bond portfolio management, research and trading activities, and is a member of the firm's Global Operating Committee. Mr. Hayes' service with the firm dates back to 1987, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006. At MLIM, he was head of the short term tax-exempt trading desk, and managed the CMA Tax-Exempt Fund and other short term municipal bond portfolios. Prior to joining MLIM, Mr. Hayes was a trader for Shawmut Bank. Mr. Hayes earned a BA degree in economics from the College of the Holy Cross in 1981.

KEVIN HORAN Director, Fixed Income Indices S&P Dow Jones Indices Kevin Horan is director, Fixed Income Indices, at S&P Dow Jones Indices, and is responsible for executing tactical and strategic actions focused on building the commercial success of fixed income indices. In coordination with the client coverage team, Kevin interfaces with clients and prospective clients in order to identify and communicate client-driven needs. He implements and coordinates the tasks needed to ensure the smooth and timely launch of new S&P Dow Jones fixed income indices, and supports the indices by providing oversight of content used in marketing materials. Kevin has almost 30 years of fixed income product knowledge in an indexing, marketing, sales, and trading capacity. Prior to joining S&P Dow Jones Indices, Kevin spent eighteen years at Merrill Lynch, most recently as director of Bank of America Merrill Lynch’s global bond indices. His responsibilities included managing client relationships and developing global bond and custom indices, along with their related analytics. Before that, Kevin worked for Salomon Brothers in its New York General Sales Division. Kevin holds a master’s degree in finance from Fordham University, a bachelor’s of science degree from The Pennsylvania State University and a Product Management Certificate from the UC Berkeley Center for Executive Education.

MICHELLE KASKE Reporter Bloomberg News Michelle Kaske is the lead reporter covering Puerto Rico at Bloomberg News. Prior to Bloomberg, she was a reporter at The Bond Buyer from 2006-2011, where she also covered Puerto Rico. Kaske is a graduate of Columbia University's Graduate School of Journalism. She has a B.A. in English Literature from DePaul University in Chicago.





9


PETER HAYES Managing Director, Head of Municipal Bonds Group BlackRock Peter Hayes, Managing Director, is a member of Americas Fixed Income within Alpha Strategies. He is head of the Municipal Group and a member of the Americas Fixed Income Executive Team. He leads the Municipal Bond Operating Committee which oversees municipal bond portfolio management, research and trading activities, and is a member of the firm's Global Operating Committee. Mr. Hayes' service with the firm dates back to 1987, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006. At MLIM, he was head of the short term tax-exempt trading desk, and managed the CMA Tax-Exempt Fund and other short term municipal bond portfolios. Prior to joining MLIM, Mr. Hayes was a trader for Shawmut Bank. Mr. Hayes earned a BA degree in economics from the College of the Holy Cross in 1981.

KEVIN HORAN Director, Fixed Income Indices S&P Dow Jones Indices Kevin Horan is director, Fixed Income Indices, at S&P Dow Jones Indices, and is responsible for executing tactical and strategic actions focused on building the commercial success of fixed income indices. In coordination with the client coverage team, Kevin interfaces with clients and prospective clients in order to identify and communicate client-driven needs. He implements and coordinates the tasks needed to ensure the smooth and timely launch of new S&P Dow Jones fixed income indices, and supports the indices by providing oversight of content used in marketing materials. Kevin has almost 30 years of fixed income product knowledge in an indexing, marketing, sales, and trading capacity. Prior to joining S&P Dow Jones Indices, Kevin spent eighteen years at Merrill Lynch, most recently as director of Bank of America Merrill Lynch’s global bond indices. His responsibilities included managing client relationships and developing global bond and custom indices, along with their related analytics. Before that, Kevin worked for Salomon Brothers in its New York General Sales Division. Kevin holds a master’s degree in finance from Fordham University, a bachelor’s of science degree from The Pennsylvania State University and a Product Management Certificate from the UC Berkeley Center for Executive Education.

MICHELLE KASKE Reporter Bloomberg News Michelle Kaske is the lead reporter covering Puerto Rico at Bloomberg News. Prior to Bloomberg, she was a reporter at The Bond Buyer from 2006-2011, where she also covered Puerto Rico. Kaske is a graduate of Columbia University's Graduate School of Journalism. She has a B.A. in English Literature from DePaul University in Chicago.





10


PETER KOVAKS Head of NYSE Bonds NYSE Group Peter Kovacs is Head of NYSE Bonds, the leading exchange for U.S. corporate bonds. He joined NYSE Group in November 2010 as head of sales and relationship management for NYSE Bonds and was appointed to his current role in February 2015. Prior to joining NYSE Group, Kovacs was Head of BondDesk Institutional at BondDesk Group. Prior to BondDesk, Kovacs was in charge of fixed income product development for HarrisDirect (formerly CSFBdirect and DLJdirect). Kovacs earned a B.A. from the University of Delaware and is Series 7, 63, 24 and 53 licensed.

DAVID KREIN Head of Research MarketAxess David Krein joined as Head of Research at MarketAxess in August 2014. Mr. Krein is responsible for spearheading the firm’s market research and analysis for the institutional credit markets. MarketAxess Research leverages the firm’s extensive real-time and historical fixed-income trade data, as well as market data from FINRA TRACE and Trax®, to develop market insights that help inform trading and execution strategy. Mr. Krein joined MarketAxess from NASDAQ OMX Global Indexes where he was Head of Research. In this capacity, he led the research and development of index methodologies across asset classes, which were used as benchmarks for active and passive investment funds globally. Prior to this, he held a senior position in product development and analytics at S&P Dow Jones Indices. He also founded DTB Capital to develop trading and investment products for derivatives exchanges and the OTC marketplace within equity, commodity and multi-asset class portfolios. Before establishing DTB Capital, Mr. Krein spent more than 10 years in various trading, structuring and technology positions at leading investment banks, including UBS and Merrill Lynch. Mr. Krein has been an active member of the professional investment management and wealth management communities. He has spoken at key industry conferences, and has authored several articles for specialized publications including The Journal of Indexes, The Journal of Wealth Management and the Investment Management Consultant Association’s The Monitor. He is also a member of the Review Board for The Journal of Indexes. Mr. Krein earned an MBA with Honors from The University of Chicago Graduate School of Business and a bachelor’s degree in mechanical engineering with Distinction from Cornell University.

AARON KURILOFF Reporter The Wall Street Journal Aaron Kuriloff covers municipal bonds and public finance for The Wall Street Journal in New York. He writes regularly about credit markets, infrastructure, urban development and public policy. Previously, he worked as a reporter at Bloomberg News in New York and The Times-Picayune in New Orleans. The Philadelphia native graduated from Brown University and the Columbia University Graduate School of Journalism. He lives in Brooklyn with his wife and two children.


BRIAN LOCKHART, CFP Chief Investment Officer Peak Capital Management, LLC Brian received his Bachelor of Science degree in Business Administration with a concentration in Financial Management from California Polytechnic State University in San Luis Obispo, California. Brian is a Certified Financial Planner™ practitioner and has served as a portfolio manager since 1994. Peak Capital was an early adopter of ETF’s and Brian regularly presents as an ETF Strategist. An active conference speaker, Brian communicates on topics ranging from portfolio and risk management to alternative investments. He is also actively involved in the non-profit world helping organizations increase their local and global impact. Brian and his wife Cindy have been married for over 25 years and live in Monument, CO where they raised their two children, Caleb and Jennifer.

HEATHER MCARDLE Director, Fixed Income Indices S&P Dow Jones Indices Heather McArdle is director, fixed income indices at S&P Dow Jones Indices. She is responsible for the successful launch and management of global fixed income indices, based on the needs of existing and prospective clients. Heather has over 15 years of fixed income product knowledge in a marketing, sales, and trading capacity. Previously, Heather spent fifteen years at Citigroup, most recently as director of international fixed income trading. Prior to this role, Heather was a VP of emerging markets fixed income at Citi. Heather holds a B.S. in business/economics from the University at Albany.

THOMAS METZOLD, CFA Managing Director, Head of Capital Markets National Public Finance Guarantee Corporation Thomas M. Metzold is managing director and head of Capital Markets of National Public Finance Guarantee Corporation. He is responsible for leading National’s secondary markets business and for coordinating the firm’s outreach to buy and sell-side municipal bond trading desks. Mr. Metzold joined National in 2015 following a 28-year career at Eaton Vance Management, where he was a portfolio manager for approximately $5.5 billion of municipal assets. During his tenure at Eaton Vance, he held positions as a Co-director of Municipal Investments and Senior Municipal Portfolio Advisor. Mr. Metzold is a Chartered Financial Analyst (CFA) and a member of the Association of Investment Management and Research (AIMR), the National Federation of Municipal Analysts and the Boston Municipal Analysts Forum. Mr. Metzold holds an MBA from the State University of New York at Albany and a BS degree in Finance from Siena College.





11


BRIAN LOCKHART, CFP Chief Investment Officer Peak Capital Management, LLC Brian received his Bachelor of Science degree in Business Administration with a concentration in Financial Management from California Polytechnic State University in San Luis Obispo, California. Brian is a Certified Financial Planner™ practitioner and has served as a portfolio manager since 1994. Peak Capital was an early adopter of ETF’s and Brian regularly presents as an ETF Strategist. An active conference speaker, Brian communicates on topics ranging from portfolio and risk management to alternative investments. He is also actively involved in the non-profit world helping organizations increase their local and global impact. Brian and his wife Cindy have been married for over 25 years and live in Monument, CO where they raised their two children, Caleb and Jennifer.

HEATHER MCARDLE Director, Fixed Income Indices S&P Dow Jones Indices Heather McArdle is director, fixed income indices at S&P Dow Jones Indices. She is responsible for the successful launch and management of global fixed income indices, based on the needs of existing and prospective clients. Heather has over 15 years of fixed income product knowledge in a marketing, sales, and trading capacity. Previously, Heather spent fifteen years at Citigroup, most recently as director of international fixed income trading. Prior to this role, Heather was a VP of emerging markets fixed income at Citi. Heather holds a B.S. in business/economics from the University at Albany.

THOMAS METZOLD, CFA Managing Director, Head of Capital Markets National Public Finance Guarantee Corporation Thomas M. Metzold is managing director and head of Capital Markets of National Public Finance Guarantee Corporation. He is responsible for leading National’s secondary markets business and for coordinating the firm’s outreach to buy and sell-side municipal bond trading desks. Mr. Metzold joined National in 2015 following a 28-year career at Eaton Vance Management, where he was a portfolio manager for approximately $5.5 billion of municipal assets. During his tenure at Eaton Vance, he held positions as a Co-director of Municipal Investments and Senior Municipal Portfolio Advisor. Mr. Metzold is a Chartered Financial Analyst (CFA) and a member of the Association of Investment Management and Research (AIMR), the National Federation of Municipal Analysts and the Boston Municipal Analysts Forum. Mr. Metzold holds an MBA from the State University of New York at Albany and a BS degree in Finance from Siena College.





12


A. SEDDIK MEZIANI Professor of Finance, Department of Economics, Finance & Real Estate Montclair State University—Feliciano School of Business Seddik Meziani is a tenured professor of finance at Montclair State University, NJ, the Soliciting Editor of The Journal of Index Investing, and a member of the Research Advisory Board of ETF Global, LLC, an independent advisory firm. He is also an ETF consultant and speaker. He received a PhD from Rensselaer Polytechnic Institute and an MBA from New York University. His expertise covers exchange-traded funds, micro- and small-caps and emerging/frontier markets. He is extensively published in both academic and practitioner journals and is the author of two ETF books: Exchange-Traded Funds as an Investment Option (Palgrave-Macmillan/November 2005) and Exchange-Traded Funds-Conceptual and Practical Investment Approaches (Risk Books/July 2009). He is currently completing another ETF book Exchange-Traded Funds-Investment Practices and Tactical Approaches slated for release by Palgrave-Macmillan in February 2016. His work has been acknowledged on a worldwide list of Seventeen ETF Friendly Professors compiled by Yahoo Finance. He has presented a series of professional seminars to various US and international corporate and governmental entities, including comprehensive educational workshops on ETFs in London, Rome and Muscat, Oman.

CHUCK MOUNTS Global Head of Research & Design S&P Dow Jones Indices Charles “Chuck” Mounts is a managing director and global head of research & design at S&P Dow Jones Indices. With over 25 years of experience in financial markets, Chuck overseas a team of research analysts that combine their market knowledge and analytic skills to design indices and provide thought leadership across asset classes and index strategies. While Chuck has experience across a broad range of markets and products, his knowledge in the global fixed income markets is particularly valuable with the continued build out of the S&P DJI suite of fixed income indices across developed and emerging markets in government, corporate and sub-sovereign bonds, CDS and loans. His analytic and market experience in sovereign and corporate credit should also prove beneficial in further developing and expanding the offering of smart beta indices. Chuck began his career as a bank regulator at the Federal Reserve Bank of New York, and spent the majority of the following two decades as a global credit analysts and a manager of research teams, including stints at Merrill Lynch, Goldman Sachs, Knight Capital and UBS, where he was a head of Global Fixed Income, Currency and Commodity Research for UBS investment bank. In his role as a credit analyst, he achieved eight #1 rankings from institutional investors for his coverage of global banks. During his career Chuck has presented at numerous conferences, been cited in international publications and appeared in the media, including Bloomberg TV. Chuck holds a B.A. from Claremont McKenna College and a Master in Public Policy from Harvard University.


RICHARD RAVITCH Former New York State Lieutenant Governor Richard Ravitch, a former New York State Lieutenant Governor, is a lawyer, businessman, author, and public official who has been engaged in the private and public sectors for more than 50 years. He began his career in the construction business as a principal of the HRH Construction Corporation, where he was responsible, among other things, for supervising the development, financing and building of over 45,000 units of affordable housing in New York, Washington, D.C., Puerto Rico and other locations. In 1975, he was appointed by Governor Hugh Carey to serve as Chairman of the New York State Urban Development Corporation a financing and development agency with 30,000 dwelling units under construction, which had become insolvent and faced the first municipal bankruptcy since the 1930’s. Later in 1975 and during the following year Mr. Ravitch assisted New York City and State officials in resolving the City’s defaults. In 1979, Mr. Ravitch was appointed Chairman and CEO of the Metropolitan Transportation Authority. Mr. Ravitch completely reorganized the MTA, developed a long-term capital plan and budget for a system-wide upgrading of operating equipment, roadbed and signal capabilities, and designed the financing plan for such improvements. Following his MTA service, Mr. Ravitch led an effort to recapitalize The Bowery Savings Bank, once the nation’s largest mutual savings bank, involving its acquisition from FDIC by an investor group and his serving as Chairman and CEO. Subsequently, Mr. Ravitch was retained by the owners of the Major League Baseball clubs to serve as President of the Player Relations Committee to advise them on the creation of a revenue-sharing plan and proposal to the players. The author of So Much to Do: A Full Life of Business, Politics, and Confronting Fiscal Crises (Public Affairs, 2014), Mr. Ravitch recently served as an advisor in the Detroit bankruptcy and also co-chaired the State Budget Crisis Task Force with former Federal Reserve Board Chairman Paul A. Volcker. He is a director of the Volcker Alliance, a nonprofit founded in 2013 by Mr. Volcker to address the challenge of effective execution of public policy and help rebuild public trust in government. A Phi Beta Kappa graduate of Columbia College, Mr. Ravitch also received his LLB from Yale University School of Law.

JOE RENNISON Reporter The Financial Times Joe Rennison is US Capital Markets Reporter for the Financial Times, covering fixed income market structure, securitization, derivatives markets, and a variety of other topics that catch his attention from week to week. He is based in New York. Joe joined the FT from Risk magazine in May 2015, where he wrote extensively on OTC derivatives and the changing market structure as trading migrated to electronic venues and central clearing. Joe has a BSc in Philosophy, Logic and Scientific Method from the London School of Economics.





13


RICHARD RAVITCH Former New York State Lieutenant Governor Richard Ravitch, a former New York State Lieutenant Governor, is a lawyer, businessman, author, and public official who has been engaged in the private and public sectors for more than 50 years. He began his career in the construction business as a principal of the HRH Construction Corporation, where he was responsible, among other things, for supervising the development, financing and building of over 45,000 units of affordable housing in New York, Washington, D.C., Puerto Rico and other locations. In 1975, he was appointed by Governor Hugh Carey to serve as Chairman of the New York State Urban Development Corporation a financing and development agency with 30,000 dwelling units under construction, which had become insolvent and faced the first municipal bankruptcy since the 1930’s. Later in 1975 and during the following year Mr. Ravitch assisted New York City and State officials in resolving the City’s defaults. In 1979, Mr. Ravitch was appointed Chairman and CEO of the Metropolitan Transportation Authority. Mr. Ravitch completely reorganized the MTA, developed a long-term capital plan and budget for a system-wide upgrading of operating equipment, roadbed and signal capabilities, and designed the financing plan for such improvements. Following his MTA service, Mr. Ravitch led an effort to recapitalize The Bowery Savings Bank, once the nation’s largest mutual savings bank, involving its acquisition from FDIC by an investor group and his serving as Chairman and CEO. Subsequently, Mr. Ravitch was retained by the owners of the Major League Baseball clubs to serve as President of the Player Relations Committee to advise them on the creation of a revenue-sharing plan and proposal to the players. The author of So Much to Do: A Full Life of Business, Politics, and Confronting Fiscal Crises (Public Affairs, 2014), Mr. Ravitch recently served as an advisor in the Detroit bankruptcy and also co-chaired the State Budget Crisis Task Force with former Federal Reserve Board Chairman Paul A. Volcker. He is a director of the Volcker Alliance, a nonprofit founded in 2013 by Mr. Volcker to address the challenge of effective execution of public policy and help rebuild public trust in government. A Phi Beta Kappa graduate of Columbia College, Mr. Ravitch also received his LLB from Yale University School of Law.

JOE RENNISON Reporter The Financial Times Joe Rennison is US Capital Markets Reporter for the Financial Times, covering fixed income market structure, securitization, derivatives markets, and a variety of other topics that catch his attention from week to week. He is based in New York. Joe joined the FT from Risk magazine in May 2015, where he wrote extensively on OTC derivatives and the changing market structure as trading migrated to electronic venues and central clearing. Joe has a BSc in Philosophy, Logic and Scientific Method from the London School of Economics.





14


J.R. RIEGER Managing Director, Fixed Income Indices S&P Dow Jones Indices James “J.R.” Rieger is managing director and global head of fixed income at S&P Dow Jones Indices. With over 30 years of fixed income experience, J.R. leads S&P Dow Jones Indices’ global fixed income efforts, overseeing a team of subject matter specialists tasked with the creation and management of fixed income indices around the globe. Under J.R.’s management, S&P Dow Jones Indices has launched a global suite of fixed income indices, which includes a focus on transparency for municipal, corporate, and high-yield bonds, senior loans, commercial paper, sovereign debt, credit default swaps, Sukuk securities, and the Australian bond market. Recent innovations include the S&P 500® Bond Index covering corporate bonds issued by the companies in the S&P 500, the S&P U.S. Aggregate Bond Index, as well as indices that track the global developed sovereign, China onshore, Pan Asia, ESG, Indian, and African bond markets. J.R. serves as the firm’s voice to media outlets on the bond markets, in addition to performance and attribution topics. His research and unique metric innovations are frequently cited in national publications, and he has contributed as a guest on CNBC’s Squawk Box and Bloomberg News. He frequently speaks to industry leaders at conferences around the world on the current state of the global debt markets. Previously, J.R. was vice president, global evaluations at Standard & Poor’s Securities Evaluations, Inc. Active in the financial community, J.R. is a member of the Municipal Bond Club of New York, New York Society of Security Analysts, Municipal Analysts Group of New York, and the National Federation of Municipal Analysts. In 2012, J.R. served as Adjunct Professor at Adelphi University’s Robert B. Willumstad School of Business, teaching Investments for the graduate school program. J.R. holds a B.S. from Widener University and an MBA from Adelphi University.

TIMOTHY RYAN, CFA Senior Vice President, Portfolio Manager Nuveen Asset Management Tim is a portfolio manager for the firm’s SPDR Nuveen Exchange Traded Funds (ETFs) as well as several institutional portfolios. He is also the lead portfolio manager for the Strategic Municipal Opportunities Strategy. He began his municipal career in 1983 in public finance and switched to asset management in 1991 as a research analyst for Scudder, Stevens and Clark. During his asset management career, he has held positions in credit research, trading and portfolio management at various firms including State Street Global Advisors. Tim joined Nuveen Asset Management as a portfolio manager in 2010 when the firm entered into a sub-advisory agreement with State Street Global Advisors. His portfolio management responsibilities have included overseeing a number of mutual funds as well as separately managed accounts for institutions and individuals. Tim earned a B.S. from the University of Wisconsin and a masters of management from the J.L. Kellogg Graduate School of Management at Northwestern University. He also holds the Chartered Financial Analyst designation and is a member of the CFA Institute.


PAUL SHEARD Executive Managing Director; Chief Global Economist Standard & Poor’s Ratings Services Paul Sheard has been Chief Global Economist and Head of Global Economics and Research for Standard & Poor’s Ratings Services since June 2012. Teams that Paul leads are responsible for providing the macroeconomic forecasts and analyses used by Standard & Poor’s analysts during the ratings process, for conducting fixed income research and analyzing credit ratings performance, and for developing credit rating methodologies. He is a member of the Standard & Poor’s Executive Committee and of the Executive Committee of parent company McGraw Hill Financial. Previously, Paul held similar chief economist positions at Nomura Securities in New York and at Lehman Brothers in New York and Tokyo, and earlier he had been Head of Japan Equity Investments at Baring Asset Management. Paul speaks regularly at major conferences around the world and his views are frequently quoted in the international media. He was a member of the World Economic Forum Global Agenda Council on the International Monetary System in 2010-12. Earlier in his career, Paul was on the faculty at the Australian National University (ANU) and at Osaka University, and was a visiting researcher at Stanford University and at the Bank of Japan. Author or editor of several books and numerous articles on the Japanese economy, Paul won the Suntory-Gakugei Prize in the Economics–Politics Division for his book, The Crisis of Main Bank Capitalism. Paul received his bachelor’s degree from Monash University in Australia, a master’s degree in Economics and a Ph.D. from the ANU.

STEPHEN WINTERSTEIN Managing Director of Research & Chief Strategist, Municipal Fixed Income Wilmington Trust Investment Advisors, Inc. Stephen brings almost three decades of municipal fixed income portfolio management experience to his position with Wilmington Trust Investment Advisors. In his current role, Mr. Winterstein is responsible for all municipal fixed income strategy and credit research. Most recently he was managing director of municipal fixed income at PNC Capital Advisors, LLC in Philadelphia for more than 12 years, where he established and led a team of 15 municipal fixed income professionals dedicated to municipal bond management for high-net-worth individuals and institutional clients. Stephen is an active member of the National Federation of Municipal Analysts, the Fixed Income Analysts Society, Inc., and the Municipal Analysts Group of New York, and was the chairperson of the 2011 Municipal Bond Buyers Conference. He is also involved with Standard & Poor’s in the development and refinement of their family of tax-exempt municipal indexes. Mr. Winterstein is a former member of the Advisory Board of Directors for Lumesis, Inc., a Software-as-a-Service (SaaS), cloud-based financial technology company. Until recently, he served as a member of the Board of Directors for the Pennsylvania State System of Higher Education Foundation, Inc. Stephen holds an MBA from Lehigh University and bachelor’s degree in Economics from Millersville University.





15


PAUL SHEARD Executive Managing Director; Chief Global Economist Standard & Poor’s Ratings Services Paul Sheard has been Chief Global Economist and Head of Global Economics and Research for Standard & Poor’s Ratings Services since June 2012. Teams that Paul leads are responsible for providing the macroeconomic forecasts and analyses used by Standard & Poor’s analysts during the ratings process, for conducting fixed income research and analyzing credit ratings performance, and for developing credit rating methodologies. He is a member of the Standard & Poor’s Executive Committee and of the Executive Committee of parent company McGraw Hill Financial. Previously, Paul held similar chief economist positions at Nomura Securities in New York and at Lehman Brothers in New York and Tokyo, and earlier he had been Head of Japan Equity Investments at Baring Asset Management. Paul speaks regularly at major conferences around the world and his views are frequently quoted in the international media. He was a member of the World Economic Forum Global Agenda Council on the International Monetary System in 2010-12. Earlier in his career, Paul was on the faculty at the Australian National University (ANU) and at Osaka University, and was a visiting researcher at Stanford University and at the Bank of Japan. Author or editor of several books and numerous articles on the Japanese economy, Paul won the Suntory-Gakugei Prize in the Economics–Politics Division for his book, The Crisis of Main Bank Capitalism. Paul received his bachelor’s degree from Monash University in Australia, a master’s degree in Economics and a Ph.D. from the ANU.

STEPHEN WINTERSTEIN Managing Director of Research & Chief Strategist, Municipal Fixed Income Wilmington Trust Investment Advisors, Inc. Stephen brings almost three decades of municipal fixed income portfolio management experience to his position with Wilmington Trust Investment Advisors. In his current role, Mr. Winterstein is responsible for all municipal fixed income strategy and credit research. Most recently he was managing director of municipal fixed income at PNC Capital Advisors, LLC in Philadelphia for more than 12 years, where he established and led a team of 15 municipal fixed income professionals dedicated to municipal bond management for high-net-worth individuals and institutional clients. Stephen is an active member of the National Federation of Municipal Analysts, the Fixed Income Analysts Society, Inc., and the Municipal Analysts Group of New York, and was the chairperson of the 2011 Municipal Bond Buyers Conference. He is also involved with Standard & Poor’s in the development and refinement of their family of tax-exempt municipal indexes. Mr. Winterstein is a former member of the Advisory Board of Directors for Lumesis, Inc., a Software-as-a-Service (SaaS), cloud-based financial technology company. Until recently, he served as a member of the Board of Directors for the Pennsylvania State System of Higher Education Foundation, Inc. Stephen holds an MBA from Lehigh University and bachelor’s degree in Economics from Millersville University.





16

CONT

ENTS S&P 500® Bond Index: Simplifying the

U.S. Corporate Bond Market

Fixed Income 2.0: The Globalization of Bond Markets

Actively Managed Fixed Income Funds: How Has Their Performance Persisted?

Digging Deeper Into the U.S. Preferred Market

July 2015: 12-Month Trailing Bond Default Rates

Laddering a Portfolio of Municipal Bonds

Should Municipal Bonds Be Considered “Core”?

Indexology® Blog Bites

17

25

29

34

47

4853

58

17

CONTRIBUTORS

Hong Xie, CFA Director Global Research & Design [email protected]

Aye M. Soe, CFA Senior Director Global Research & Design [email protected]

September 2015

S&P 500® Bond Index: Simplifying the U.S. Corporate Bond Market INTRODUCTION

Since it was first established as an index in 1957, the S&P 500 has been widely adopted by the financial community as the barometer of the large-cap U.S. equity market. As of Dec. 31, 2014, over USD 7.8 trillion is estimated to be benchmarked against the index, with indexed (passively managed) assets making up approximately USD 2.2 trillion. Just as the equity shares of the companies in the S&P 500 represent the performance of domestic large-cap equities, bonds issued by the same companies may be used to gauge the performance of the U.S. corporate bond market.

An index comprising bonds issued by S&P 500 companies could be used to provide a comparison between the equity and bond markets, given that a significant portion of the constituents of the S&P 500 Bond Index are also members of the S&P 500.1 Furthermore, the fact that the constituents are issued by the household names of the S&P 500, which are already familiar to the investing community, allows for a higher degree of transparency and measurability in the opaque bond market, features that should be evaluated as part of the characteristics a good benchmark should possess.2

Against that conceptual backdrop, we introduce the recently launched S&P 500 Bond Index, a corporate bond counterpart of the S&P 500. In this paper, we demonstrate that the S&P 500 Bond Index exhibits characteristics and systematic risk factor exposures that are similar to those of existing broad-based, investment-grade corporate bond indices, and that the index can be effectively used to measure the performance of the sector. Furthermore, our analysis shows that the S&P 500 Bond Index has consistently delivered a higher risk/reward ratio than its peer indices, regardless of the measurement horizon.

1 Based on over 20 years of back-tested data, at each monthly rebalance, approximately 255 companies that are in the S&P 500 issue debt.

As of July 31, 2015, approximately 430 of the S&P 500’s members have debt issuances, totaling around USD 3 trillion in debt outstanding. 2 The CFA Institute curriculum identifies the following as characteristics of a good benchmark:

Unambiguous Investable Measurable Appropriate Reflective of current investment opinions Specified in advance.

18

S&P 500 Bond Index: Simplifying the U.S. Corporate Bond Market September 2015

2

S&P 500 Bond Index Methodology Key Points

The S&P 500 Bond Index is a market-value-weighted index that seeks to measure the performance of USD-denominated corporate debt issued by companies in the S&P 500 (and their subsidiaries). In addition, subindices are available by sector and investment-grade or high-yield segmentation. The S&P 500 Bond Index was launched on July 8, 2015 and is rebalanced on a monthly basis. Index history is available starting from Dec. 30, 1994.

Exhibit 1: Main Eligibility Criteria3

Maturity Greater than or equal to one month

Country of Issuance U.S.

Currency USD

Coupon Type Included Fixed, zero, step-up, fixed to float (at least one month prior to float date)

Credit Rating Must be rated by at least one rating agency of S&P Ratings Services, Moody's, and Fitch

Size A minimum par of USD 250 million for investment-grade bonds

A minimum par of USD 100 million for high-yield bonds

Exclusion Bills, floating-rate issues, STRIPS

Source: S&P Dow Jones Indices LLC. Table is provided for illustrative purposes.

Representing the Broad, Investment-Grade Corporate Bond Market

Over the past 20 years, the U.S. corporate bond market has undergone rapid growth. The total amount of corporate debt outstanding rose dramatically from USD 1.93 trillion at the end of 1994 to USD 7.85 trillion at the end of 20144. Reflecting the growth of the corporate bond sector, the market capitalization of the S&P 500 Bond Index also grew from USD 78 billion as of Jan. 31, 1995, to USD 3.76 trillion as of July 2015 (see Exhibit 2). Similarly, the number of bonds covered by the index rose from 232 to 4,751 during the same period (see Exhibit 3), with the majority of the constituents rated as investment grade.

Exhibit 2: Index Market Cap

Source: S&P Dow Jones Indices LLC. Data as of July 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

3 The detailed methodology of the index can be found at www.spindices.com. 4 The data is obtained from SIFMA (Securities Industry and Financial Markets Association) website.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

US

D B

illio

ns

S&P U.S. Issued Investment Grade Corporate Bond Index

3,763 as of July 2015

S&P 500 Bond Index, 78 as of Jan 1995

19


3

Exhibit 3: Number of Issues in Indices

Source: S&P Dow Jones Indices LLC. Data as of July 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

Compared with the S&P U.S. Corporate Bond Indices, which are designed to measure the performance of the broad-based, USD-denominated corporate bond market and comprise bonds issued by U.S and foreign issuers, the market capitalization of the S&P 500 Bond Index is 52% of the market capitalization of the S&P U.S. Corporate Bond index family, and 71% of that by the U.S. issuers. The comparison highlights that the majority of U.S. corporate bonds are issued by constituents of the S&P 500. Furthermore, the market capitalization of the investment-grade component of S&P 500 Bond Index is 83% of that of the S&P U.S. Issued Investment Grade Corporate Bond Index. Given the large market capitalizations of S&P 500 companies, the S&P 500 Bond Index can be used as a barometer for the performance of a broad universe of U.S. investment-grade corporate bonds.

The representation of the S&P 500 Bond Index within the broad, investment-grade corporate bond universe can be seen in Exhibit 4. The S&P 500 Bond Index and its peer bond indices exhibit comparable exposures to fixed income systematic risk factors. The index has yield, coupon, and duration characteristics that are similar to that of the outstanding, broad-based, investment-grade corporate bond indices.

Exhibit 4: Index Comparison

Category

S&P 500 Bond Index S&P U.S. Corporate Bond Family

S&P U.S. Issued Corporate Bond Family

Investment Grade and High Yield

Investment Grade High Yield

S&P U.S. Issued

Investment Grade

Corporate Bond Index

S&P U.S. High Yield Corporate

Bond Index

S&P U.S. Issued

Investment Grade


S&P U.S. Issued High

Yield Corporate

Bond Index

Market Cap 3,763 3,464 299 5,593 1,709 4,152 1,165 Market Cap as % of S&P U.S. Corporate Bond Family

52 62 17 - - - -

Market Cap as % of S&P. U.S. Issued Corporate Bond Family

71 83 26 - - - -

Yield-to-Worst 3.25 3.09 5.11 3.17 6.74 3.13 6.59

Yield-to-Maturity 3.28 3.11 5.29 3.18 6.98 3.14 6.91

Weighted Coupon 4.41 4.27 5.98 4.24 6.64 4.25 6.69 Weighted Modified Duration 6.59 6.71 5.20 6.33 4.67 6.63 4.73

Source: S&P Dow Jones Indices LLC. Data as of July 31, 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

0

1,000

2,000

3,000

4,000

5,000

6,000

Num

ber o

f Iss

ues

S&P 500 Bond Index

S&P U.S. Issued Investment Grade Corporate Bond Index

20


4

In addition, over long-term investment horizons, such as 10 and 20 years, the S&P 500 Bond Index is closely correlated to its peer indices (see Exhibit 5).

Exhibit 5: Correlation Analysis

10 Year S&P 500 Bond Index

S&P U.S. Investment Grade



Bond Index

S&P U.S. Issued Investment Grade


Barclays U.S. Investment

Grade Corporate Bond Index

S&P 500 Bond Index 1.00 - - - - S&P U.S. Investment Grade Corporate Bond Index 0.99 1.00 - - -

S&P U.S. High Yield Corporate Bond Index 0.68 0.59 1.00 - -

S&P U.S. Issued Investment Grade Corporate Bond Index 0.99 0.99 0.62 1.00 -

Barclays U.S. Investment Grade Corporate Bond Index 0.99 0.99 0.66 0.99 1.00

20 Year S&P 500 Bond Index

S&P U.S. Investment Grade



Bond Index



Barclays U.S. Investment

Grade Corporate Bond Index

S&P 500 Bond Index 1.00 - - - - S&P U.S. Investment Grade Corporate Bond Index 0.99 1.00 - - -

S&P U.S. High Yield Corporate Bond Index 0.61 0.50 1.00 - -

S&P U.S. Issued Investment Grade Corporate Bond Index - - - - -

Barclays U.S. Investment Grade Corporate Bond Index 0.99 0.98 0.56 - 1.00

Source: Barclays Capital, S&P Dow Jones Indices LLC. Data as of July 31, 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance. Note: S&P U.S. Issued Investment Grade Corporate Bond Index does not have 20 years of history.

Characteristics

As the S&P 500 Bond Index is designed to track bonds issued by large-cap, blue-chip, domestic companies, it comes as no surprise that the majority of the index constituents are investment grade. Over the past two decades, approximately 90% of the S&P 500 Bond Index’s market capitalization has resided in investment-grade bonds, with the remaining belonging to high-yield bonds (see Exhibit 6). It is also important to note the weighted average rating of the index, according to Standard & Poor’s Ratings Services, has been stable between A and A- throughout the index’s history.

21


5

Exhibit 6: S&P 500 Bond Index: Investment Grade and High Yield Segments by Market Capitalization

Source: S&P Dow Jones Indices LLC. Data from January 1995 to July 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

The extended low interest rate environment following the 2008 financial crisis has been favorable for corporate debt issuers to borrow money, as shown by the record-high amount of corporate debt issuance and the duration extension of newly issued bonds. At the same time, the prices of U.S. corporate bonds have rallied back to the pre-crisis levels last seen in 2003. The weighted modified duration and the weighted price of the S&P 500 Bond Index have been rising steadily since 2009, reflecting the dynamics of the corporate bond market. Exhibit 7 shows those characteristics of the S&P 500 Bond Index.

Exhibit 7: S&P 500 Bond Index Weighted Modified Duration and Weighted Price

Source: S&P Dow Jones Indices LLC. Data from January 1995 to July 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

70%

80%

90%

100%

High Yield % Investment Grade %

5

6

7

8S&P 500 Bond Index Weighted Modified Duration

80

90

100

110

120S&P 500 Bond Index Weighted Price

22


6

Risk/Return Profile and Performance Attribution

The long-term cumulative performance of the S&P 500 Bond Index is comparable to those of other existing investment-grade corporate bond indices. When measured over different time periods, we noted that the index consistently showed higher returns and lower volatility than other investment-grade bond indices, resulting in higher risk/reward ratios regardless of the investment horizons (see Exhibit8). The risk-efficient manner in which the S&P 500 Bond Index is designed to offer beta exposure to the domestic investment-grade bond universe may potentially offer higher diversification and risk-budgeting opportunities.

Exhibit 8: Historical Risk/Return Profile

Annualized Returns

S&P 500 Bond Index

S&P 500 Investment Grade Corporate

Bond Index

S&P 500 High Yield Corporate

Bond Index



Barclays U.S. Investment Grade


1-Year (%) 1.91 1.81 2.90 1.80 1.49

3-Year (%) 2.70 2.39 5.79 2.46 2.49

5-Year (%) 4.83 4.52 7.83 4.76 4.84

10-Year (%) 5.45 5.16 8.36 5.29 5.37

20-Year (%) 6.41 6.09 9.48 - 6.28

Annualized Risk

3-Year (%) 3.83 3.90 4.22 3.89 4.17

5-Year (%) 3.86 3.93 4.76 3.88 4.29

10-Year (%) 5.58 5.58 8.78 5.42 6.01

20-Year (%) 5.04 5.06 8.84 - 5.42

Risk/Reward Ratio

3-Year 0.70 0.61 1.37 0.63 0.60

5-Year 1.25 1.15 1.64 1.23 1.13

10-Year 0.98 0.92 0.95 0.98 0.89

20-Year 1.27 1.21 1.07 - 1.16

Source: S&P Dow Jones Indices, Barcap. Data as of July 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

The performance of the S&P 500 Bond Index can be further decomposed to highlight the sources or subcomponents of return. For corporate bonds, total return can be decomposed into accrued interest, curve roll down, return due to credit spreads, and yield curve changes. Based on the availability of curve data, we show the performance attribution of the index since 2006 (see Exhibit 9). The data shows that coupon return has been a consistent main driver and a significant source of return over the long-term investment horizon, with spread return and duration return5 showing the tendency to offset each other. However, it should be noted that since the 2008 financial crisis, coupon return has declined noticeably from 6.25% in 2006 to 2.38% as of July 31, 2015, reflecting the prolonged low interest rate environment.

5 We group shift return, twist return, and shape return into one principle subcomponent of duration return.

23


7

Exhibit 9: Performance Attribution for the S&P 500 Bond Index

Source: S&P Dow Jones Indices LLC, FactSet. Data from July 2006 to July 2015. Chart is provided for illustrative purposes. Past performance is not a guarantee of future results. Index information prior to launch date is hypothetical. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

CONCLUSION

While there is no shortage of indices that seek to measure the domestic investment-grade corporate bond sector, the S&P 500 Bond Index makes the meaningful distinction of aiming to track bonds issued by S&P 500 blue-chip companies. Since the constituents are issued by the household names of the S&P 500, which are already familiar to the investing community, a higher degree of transparency and measurability can be achieved. In addition to the aforementioned equity brand recognizability factor, our analysis shows that the S&P 500 Bond Index is representative of a broad-based, USD-denominated, investment-grade corporate bond market in the U.S., and the index can be used to provide insight into the performance of the sector. The index also has exhibited risk-efficient properties, delivering higher returns with lower volatility, compared with the existing investment-grade corporate bond indicesthereby providing potentially higher diversification benefits.

-30%

-20%

-10%

0%

10%

20%

30%

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015July

Spread Duration Roll Down Coupon Return

24


9

PERFORMANCE DISCLOSURES The S&P 500 Bond Index, the S&P 500 Investment Grade Corporate Bond Index, the S&P 500 High Yield Corporate Bond Index (the “Index”) were launched on July 8, 2015. The S&P U.S. Investment Grade Corporate Bond Index and the S&P U.S. High Yield Corporate Bond Index (the “Index) were launched on May 1, 2014. The S&P U.S. Issued High Yield Corporate Bond Index was launched on April 9, 2013. All information presented prior to an index’s Launch Date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect on the Launch Date. Complete index methodology details are available at www.spdji.com.

S&P Dow Jones Indices defines various dates to assist our clients in providing transparency on their products. The First Value Date is the first day for which there is a calculated value (either live or back-tested) for a given index. The Base Date is the date at which the Index is set at a fixed value for calculation purposes. The Launch Date designates the date upon which the values of an index are first considered live; index values provided for any date or time period prior to the index’s Launch Date are considered back-tested. S&P Dow Jones Indices defines the Launch Date as the date by which the values of an index are known to have been released to the public, for example via the company’s public Web site or its datafeed to external parties. For Dow Jones-branded indices introduced prior to May 31, 2013, the Launch Date (which prior to May 31, 2013, was termed “Date of Introduction”) is set at a date upon which no further changes were permitted to be made to the index methodology, but that may have been prior to the Index’s public release date.

Past performance of the Index is not an indication of future results. Prospective application of the methodology used to construct the Index may not result in performance commensurate with the back-test returns shown. The back-test period does not necessarily correspond to the entire available history of the Index. Please refer to the methodology paper for the Index, available at www.spdji.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations.

Another limitation of using back-tested information is that the back-tested calculation is generally prepared with the benefit of hindsight. Back-tested information reflects the application of the index methodology and selection of index constituents in hindsight. No hypothetical record can completely account for the impact of financial risk in actual trading. For example, there are numerous factors related to the equities (or fixed income, or commodities) markets in general which cannot be, and have not been accounted for in the preparation of the index information set forth, all of which can affect actual performance.

Additionally, it is not possible to invest directly in an Index. The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds that are intended to track the performance of the Index. The imposition of these fees and charges would cause actual and back-tested performance of the securities/fund to be lower than the Index performance shown. For example, if an index returned 10% on a US $100,000 investment for a 12-month period (or US$ 10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period on the investment plus accrued interest (or US$ 1,650), the net return would be 8.35% (or US$ 8,350) for the year. Over a three-year period, an annual 1.5% fee taken at year end with an assumed 10% return per year would result in a cumulative gross return of 33.10%, a total fee of US$ 5,375, and a cumulative net return of 27.2% (or US$ 27,200).

251

The fixed income market is redefining itself on a global stage. Enter the next generation: Fixed Income 2.0, a more transparent and level playing field than ever before for this asset class. InSIGHTS recently sat down with J.R. Rieger, Global Head of Fixed Income at S&P DJI, to discuss effectively navigating the globalization of bonds and its potential implications on investor holdings.

FIXED INCOME 2.0THE GLOBALIZATION OF BOND MARKETSINTERVIEW BY THERESA BAGGS

InSIGHTS: Why are we seeing a shift in attention to global fixed income?

J.R. : It’s a combination of two key factors and their effects on the market. The first is an extended period of quantitative easing that has pushed yield down in the U.S. The second is periods of risk on/risk off seen across various regions around the world, like unrest in Greece and Ukraine, which are driving volatility in the equity and commodities markets. Plain and simple, investors are turning to fixed income as a solution because its cash flow and returns have been historically less volatile than other asset classes. In addition, we see a hunger for securities that have higher yield than what is available in U.S. markets. With rates at record lows in the U.S., some investors have abandoned their usual “comfort zone,” opting to venture outside of the domestic market and into higher yielding countries, like Australia and New Zealand, and into even lower credit quality bonds from the emerging market countries in their hunt for yield. This is what we call the globalization of bond markets.

InSIGHTS: What regions are most prominently catching on to this trend?

J.R. : U.S. and European investors have a particular interest in China fixed income because China has opened its doors after all these years to foreign investment. Global investors are attracted to China’s onshore bond market because they have access to quality instruments at a yield that is not readily available at that quality in other markets, and the currency risk in China is less volatile than in other countries. Also sought after, and more readily available to foreign investors, are dim sum bonds, which are denominated in Chinese renminbi but are issued in Hong Kong or other markets outside of mainland China, allowing foreign investors an easier way to gain exposure to Chinese credit and currency risk. Sukuk bonds comply with Shariah (Islamic) law, and they are a fast-growing asset class in Asia.

The ETF market, while more advanced in the U.S. and Europe, is still in its infancy across Asia and Latin America. The ETF market is quickly catching on to these markets, as investors see the appeal of ETFs as a transparent way to access bond market diversification at a low cost. For instance, Mexican legislative changes have categorized fixed income ETFs as “look-through” instruments to resolve pressures on capital solvency requirements and generally favor adoption of fixed income ETFs in insurance portfolios.

J.R. RIEGER Global Head of Fixed Income S&P Dow Jones Indices

This piece originally appeared in the Spring/Summer 2015 edition of InSIGHTS, a quarterly publication from S&P Dow Jones Indices.

26 2

Demand can also be very telling. We’re seeing investor interest in frontier markets such as Africa and the Middle East. India, in particular, has experienced a great deal of attention, and it is expected to be the world’s next fastest-growing economy, surpassing China. But there are tax consequences that make investments in India complex. Until India fits into a more global market model, it will be difficult for those bonds to trade freely on a global scale.

InSIGHTS: Are we also seeing a trend of fixed income ETFs in Europe?

J.R. : Yes, we are seeing a strong ETF trend in Europe, and many fixed income ETFs are available. However, uncertainty surrounding the eurozone has driven some complications in the European markets, resulting in a flight to quality. For instance, Germany and France have very low yield for their debt; investors have flocked in a risk-off mindset to buy those bonds in order to protect themselves from happenings in the market. Other investors need to find yield and are going outside of Europe to find it. When you add up the debt from all eurozone countries, yield is still quite low. What’s interesting is that unpredictability in Europe is somewhat contributing to the globalization of bond markets in the rest of the world because it is pushing investors to find other investments to help meet various strategies.

InSIGHTS: So, how is the globalization of bond markets affecting fixed income as a whole?

J.R. : We are seeing an advent of ETFs crossing over from equities to over-the-counter fixed income markets. ETFs bring an increased level of price transparency to a fixed income investor, much like an equity investment. They change the way individual investors can obtain access to these often difficult-to-understand and opaque markets, and we are seeing this trend around the world. For example, fixed income ETFs are in place in Latin America, and a China fixed income ETF was launched in the U.S. late last year. One of the things I hear when I talk to financial advisors is that they view the bond market as complicated. Well, ETFs un-complicate the bond market because buying an ETF is very much like buying an equity. You have the benefits of price transparency, low transaction cost, and intra-day liquidity, as well as a more efficient way to get access to a diversified portfolio. Investors looking for yield can turn to ETFs and make actionable decisions about getting exposure to those markets, just like buying a stock. That one vehicle is helping to drive globalization of bond markets. Looking at emerging markets’ often-complicated tax structures for investments, an ETF is simpler because investors are buying and selling ETF shares rather than a series of individual bonds.

Comparing the performance of a small-cap value manager to a small-cap value index allows one to better understand the manager’s sources of return beyond and above their exposure to the value and small-cap factors. Lastly, they can also be used in macro-analysis. For example, if stocks with higher momentum or lower dividends, or value stocks, etc. are behaving notably differently, that can provide a valuable insight into the evolving dynamics of the market.

InSIGHTS: What are the challenges of investing in global bond markets, and how are they mitigated?

J.R. : Currency risk is a challenge when looking at bonds globally. The challenge with going global is that investors worry about currency getting weaker or stronger. If a U.S. investor owns bonds in another currency and the U.S. dollar is getting stronger, that’s negative for that investment. To eliminate currency risk, foreign bonds can be issued in one’s domestic currency—for example, U.S. dollar issues in Europe, commonly known as euro-dollar bonds. This is another way bonds are being globalized.

InSIGHTS: What role do indices play in this transformation of the bond market?

J.R. : Indices can be used for both benchmarking and as the basis for investment products, including ETFs. The globalization of bond markets has created a need for more benchmarks in the space. In 2014, S&P Dow Jones Indices started an aggressive build-out of our fixed income offerings globally. Core fixed income is a strategy designed to reduce risk and/or generate income. Indices come into play to track the performance of the core market, i.e., investment-grade sovereign bonds, sovereign inflation-linked bonds, and corporate bonds in both U.S. and global currencies. We launched nearly 700 new indices in 2014 as part of that initiative. Noteworthy, and continuing to be developed, is the S&P Aggregate™ Bond Index Family, which is designed to measure the performance of publicly issued investment-grade debt in various regions around the world. We have launched two indices from this family, the S&P U.S. Aggregate Bond Index and the S&P Canada Aggregate Bond Index, and we intend to launch additional indices from this family later this year. Also worth noting are the S&P Global Developed Sovereign Bond Index, the S&P Global Developed Sovereign Bond Inflation-Linked Index, and the S&P Global Emerging Sovereign Inflation-Linked Bond Index . These indices are designed to track the performance of local currency-denominated securities that are publicly issued by developed and emerging countries for their domestic markets. These indices represent the core fixed income markets globally,

3

allowing for a broad global market comparison and a way to identify global trends precisely by region.

Benchmarking needs also extend beyond core. A big chunk of the “more” is the shift toward alternatively weighted indices. As an index provider, S&P Dow Jones Indices offers ways for investors to look at markets from unique weighting perspectives. This includes sustainability focused options and frontier and emerging market exposure. Multi-asset class strategies allow investors to asset allocate while still looking at their investment holistically. When fixed income is a component to an investment strategy, using asset allocation models with multi-asset class strategies creates an opportunity to include fixed income into the framework of an increasing number of portfolios. Also, as foreign bond markets become more sophisticated and easier to invest in, the necessary tools to measure the performance of these markets is critical. Geopolitical headline news and global economic recovery concerns can cause high volatility in the markets. Indexing allows a way to track volatility, evaluate

trends, and weigh risks in various markets. Indexing can combine different asset classes from different countries around the globe, tailoring to unique investment strategies. It also offers an insightful window into markets that have traditionally been difficult to get timely data from, like emerging and frontier markets.

InSIGHTS: Do you think the globalization of the bond markets has staying power?

J.R. : Absolutely. We are seeing a trend of more access to global markets, not less. Today’s technology allows global markets to communicate and interact in ways we have not seen before. No longer can only large-scale investors have access to markets on the other side of the world. Global investing has now trickled down to the retail investor, allowing them to gain diversification across all time zones, and the global ETF market is one of the main vehicles to support this access.

272

Demand can also be very telling. We’re seeing investor interest in frontier markets such as Africa and the Middle East. India, in particular, has experienced a great deal of attention, and it is expected to be the world’s next fastest-growing economy, surpassing China. But there are tax consequences that make investments in India complex. Until India fits into a more global market model, it will be difficult for those bonds to trade freely on a global scale.

InSIGHTS: Are we also seeing a trend of fixed income ETFs in Europe?

J.R. : Yes, we are seeing a strong ETF trend in Europe, and many fixed income ETFs are available. However, uncertainty surrounding the eurozone has driven some complications in the European markets, resulting in a flight to quality. For instance, Germany and France have very low yield for their debt; investors have flocked in a risk-off mindset to buy those bonds in order to protect themselves from happenings in the market. Other investors need to find yield and are going outside of Europe to find it. When you add up the debt from all eurozone countries, yield is still quite low. What’s interesting is that unpredictability in Europe is somewhat contributing to the globalization of bond markets in the rest of the world because it is pushing investors to find other investments to help meet various strategies.

InSIGHTS: So, how is the globalization of bond markets affecting fixed income as a whole?

J.R. : We are seeing an advent of ETFs crossing over from equities to over-the-counter fixed income markets. ETFs bring an increased level of price transparency to a fixed income investor, much like an equity investment. They change the way individual investors can obtain access to these often difficult-to-understand and opaque markets, and we are seeing this trend around the world. For example, fixed income ETFs are in place in Latin America, and a China fixed income ETF was launched in the U.S. late last year. One of the things I hear when I talk to financial advisors is that they view the bond market as complicated. Well, ETFs un-complicate the bond market because buying an ETF is very much like buying an equity. You have the benefits of price transparency, low transaction cost, and intra-day liquidity, as well as a more efficient way to get access to a diversified portfolio. Investors looking for yield can turn to ETFs and make actionable decisions about getting exposure to those markets, just like buying a stock. That one vehicle is helping to drive globalization of bond markets. Looking at emerging markets’ often-complicated tax structures for investments, an ETF is simpler because investors are buying and selling ETF shares rather than a series of individual bonds.

Comparing the performance of a small-cap value manager to a small-cap value index allows one to better understand the manager’s sources of return beyond and above their exposure to the value and small-cap factors. Lastly, they can also be used in macro-analysis. For example, if stocks with higher momentum or lower dividends, or value stocks, etc. are behaving notably differently, that can provide a valuable insight into the evolving dynamics of the market.

InSIGHTS: What are the challenges of investing in global bond markets, and how are they mitigated?

J.R. : Currency risk is a challenge when looking at bonds globally. The challenge with going global is that investors worry about currency getting weaker or stronger. If a U.S. investor owns bonds in another currency and the U.S. dollar is getting stronger, that’s negative for that investment. To eliminate currency risk, foreign bonds can be issued in one’s domestic currency—for example, U.S. dollar issues in Europe, commonly known as euro-dollar bonds. This is another way bonds are being globalized.

InSIGHTS: What role do indices play in this transformation of the bond market?

J.R. : Indices can be used for both benchmarking and as the basis for investment products, including ETFs. The globalization of bond markets has created a need for more benchmarks in the space. In 2014, S&P Dow Jones Indices started an aggressive build-out of our fixed income offerings globally. Core fixed income is a strategy designed to reduce risk and/or generate income. Indices come into play to track the performance of the core market, i.e., investment-grade sovereign bonds, sovereign inflation-linked bonds, and corporate bonds in both U.S. and global currencies. We launched nearly 700 new indices in 2014 as part of that initiative. Noteworthy, and continuing to be developed, is the S&P Aggregate™ Bond Index Family, which is designed to measure the performance of publicly issued investment-grade debt in various regions around the world. We have launched two indices from this family, the S&P U.S. Aggregate Bond Index and the S&P Canada Aggregate Bond Index, and we intend to launch additional indices from this family later this year. Also worth noting are the S&P Global Developed Sovereign Bond Index, the S&P Global Developed Sovereign Bond Inflation-Linked Index, and the S&P Global Emerging Sovereign Inflation-Linked Bond Index . These indices are designed to track the performance of local currency-denominated securities that are publicly issued by developed and emerging countries for their domestic markets. These indices represent the core fixed income markets globally,

3

allowing for a broad global market comparison and a way to identify global trends precisely by region.

Benchmarking needs also extend beyond core. A big chunk of the “more” is the shift toward alternatively weighted indices. As an index provider, S&P Dow Jones Indices offers ways for investors to look at markets from unique weighting perspectives. This includes sustainability focused options and frontier and emerging market exposure. Multi-asset class strategies allow investors to asset allocate while still looking at their investment holistically. When fixed income is a component to an investment strategy, using asset allocation models with multi-asset class strategies creates an opportunity to include fixed income into the framework of an increasing number of portfolios. Also, as foreign bond markets become more sophisticated and easier to invest in, the necessary tools to measure the performance of these markets is critical. Geopolitical headline news and global economic recovery concerns can cause high volatility in the markets. Indexing allows a way to track volatility, evaluate

trends, and weigh risks in various markets. Indexing can combine different asset classes from different countries around the globe, tailoring to unique investment strategies. It also offers an insightful window into markets that have traditionally been difficult to get timely data from, like emerging and frontier markets.

InSIGHTS: Do you think the globalization of the bond markets has staying power?

J.R. : Absolutely. We are seeing a trend of more access to global markets, not less. Today’s technology allows global markets to communicate and interact in ways we have not seen before. No longer can only large-scale investors have access to markets on the other side of the world. Global investing has now trickled down to the retail investor, allowing them to gain diversification across all time zones, and the global ETF market is one of the main vehicles to support this access.

28

The One to Bond With

An independent formula is taking the lead in fixed income. Synchronize with the team you trust at S&P Dow Jones Indices and accelerate with precise bond signals across traditional, smart beta or multi-asset class indices. Success follows Indexology—fueling ideas whose time is now.

The S&P Aggregate™ and S&P 500 Bond Indices

indexology® shapes investing www.spdji.com/indexology

© 2015 by S&P Dow Jones Indices LLC, a part of McGraw Hill Financial. All rights reserved. S&P®, S&P 500®, Indexology® and S&P Aggregate™ are trademarks of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund. This is not an offer of services in any jurisdiction where S&P Dow Jones Indices does not have the necessary licenses.

29

CONTRIBUTOR

Aye M. Soe, CFA Senior Director Global Research & Design [email protected]

October 2015

Actively Managed Fixed Income Funds: How Has Their Performance Persisted? At the heart of the active management versus passive management debate lies the theoretical underpinning that the average return of both actively and passively managed assets must equal the aggregate market, thereby making it a zero-sum game. Since the costs of active management typically exceed those of passive management, the average actively managed dollar will therefore underperform the average passively managed dollar after accounting for costs (Sharpe 1991). Over the past few decades, the active versus passive debate has inspired many passionate believers on both sides and has shown its staying power as one of the more hotly contested financial theories.

As a way to keep score of the ongoing debate, the S&P Dow Jones Indices started publishing the S&P Indices Versus Active (SPIVA®) Scorecard for the U.S in 2002. The scorecard measures the performance of actively managed domestic equity funds across various market capitalizations and styles, as well as fixed income funds, relative to their respective benchmarks. Results can vary on a year-over-year basis due to market conditions, with indices losing out to active funds in one year but winning in a subsequent year. However, the scorecard shows that over a longer-term investment horizon, most active managers have a difficult time outperforming their respective benchmarks.

During the first six months of 2015, rates rose across the yield curve, while investor risk aversion contributed to wider spreads across most sectors. The negative price impact is reflected in the declines of the longer-term government and investment-grade credit indices, cancelling the gains made six months prior. The one-year performance results show that the majority of fixed income managers across all maturity ranges in the government and credit categories underperformed their respective benchmarks. In particular, active fixed income funds invested in long-term government bonds fared the worst, with nearly 9 out of 10 managers underperforming their respective benchmarks. Over the past 10 years ending June 30, 2015, the majority of the actively managed fixed income funds across all categories studied unperformed their respective benchmarks.

It is important to note that the high-yield bond market is often considered to be best accessed via active investing, as passive vehicles have structural constraints that limit their ability to deal with credit risk. Nevertheless, the 10-year results for the actively managed high-yield fund category show that over 90% of the funds underperformed the broad-based benchmark.

30

Actively Managed Fixed Income Funds: How Has Their Performance Persisted? October 2015

2

While much has been written about the persistence of equity funds, there is little research on the persistence of fixed income funds. We aim to fill that void by initiating a fixed income persistence scorecard. Based on the three-year data ending March 2015, there is a higher level of performance persistence among the top-quartile fixed income funds (see Exhibit 2). Long-term and short-term government bond funds, together with New York municipal debt funds, were the only exceptions in which the results show no performance persistence.

However, over the longer-term, five-year measurement horizon, the results show a significant lack of persistence among nearly all of the top-quartile fixed income categories. Funds investing in short-term, investment-grade bonds were the only group in which a noticeable level of persistence was observed (see Exhibit 3).

Source: S&P Dow Jones Indices LLC, CRSP. Data as of June 30, 2015. Outperformance is based upon equal-weighted fund counts. All index returns used are total returns. Table is provided for illustrative purposes. Past performance is no guarantee of future results.

1 Due to the limited sample size of loan participation funds 10 years ago, we have not calculated the outperformance and the related figures.

Exhibit 1: Percentage of Fixed Income Funds Outperformed by Their Respective Benchmarks

Fund Category Comparison Index One-Year (%) Three-Year (%) Five-Year (%) Ten-Year (%)

Government Long Funds Barclays Long Government 98.82 85.39 97.78 93.33 Government Intermediate Funds

Barclays Intermediate Government 88.89 82.86 70.00 75.56

Government Short Funds Barclays 1-3 Year Government 86.67 80.00 59.09 75.61

Investment-Grade Long Funds Barclays Long Government/Credit 82.93 40.60 91.91 92.93

Investment-Grade Intermediate Funds

Barclays Intermediate Government/Credit 79.62 34.92 40.70 52.57

Investment-Grade Short Funds Barclays 1-3 Year Government/Credit 83.51 34.78 30.23 57.35

High-Yield Funds Barclays High Yield 51.08 77.31 84.31 92.92 Mortgage-Backed Securities Funds

Barclays Mortgage-Backed Securities 58.73 65.63 58.06 77.55

Global Income Funds Barclays Global Aggregate 30.67 35.16 46.43 56.52

Emerging Market Debt Funds Barclays Emerging Markets 90.43 93.94 96.97 81.25

Loan Participation Funds1 S&P/LSTA U.S. Leveraged Loan 100 Index 12.77 50.00 70.00 N/A

General Municipal Debt Funds S&P National AMT-Free Municipal Bond 34.62 32.63 41.11 69.62

California Municipal Debt Funds

S&P California AMT-Free Municipal Bond 28.95 45.71 44.74 87.50

New York Municipal Debt Funds

S&P New York AMT-Free Municipal Bond 41.94 61.29 66.67 94.29

31


3

Exhibit 2: Performance Persistence of Domestic Fixed Income Funds Over Three Consecutive 12-Month Periods

Mutual Fund Category Fund Count at Start (March 2013)

Percentage Remaining in Top Quartile (%)

March 2014 March 2015

Top Quartile

Government Long Funds 22 0.00 0.00

Government Intermediate Funds 8 0.00 0.00

Government Short Funds 11 18.18 9.09

Investment-Grade Long Funds 31 58.06 22.58

Investment-Grade Intermediate Funds 71 49.30 16.90

Investment-Grade Short Funds 22 54.55 31.82

High-Yield Funds 53 54.72 7.55

Mortgage-Backed Securities Funds 16 68.75 25.00

Global Income Funds 30 33.33 20.00

Emerging Markets Debt Funds 15 40.00 13.33

General Municipal Debt Funds 25 16.00 12.00

California Municipal Debt Funds 9 44.44 22.22

New York Municipal Debt Funds 8 12.50 0.00


Percentage Remaining in Top Half (%)

March 2014 March 2015

Top Half

Government Long Funds 44 18.18 13.64

Government Intermediate Funds 16 31.25 25.00

Government Short Funds 21 61.90 47.62

Investment-Grade Long Funds 63 69.84 39.68

Investment-Grade Intermediate Funds 143 60.84 34.97

Investment-Grade Short Funds 44 70.45 50.00

High-Yield Funds 106 66.04 24.53

Mortgage-Backed Securities Funds 31 58.06 41.94

Global Income Funds 59 59.32 44.07

Emerging Markets Debt Funds 30 66.67 56.67

General Municipal Debt Funds 49 44.90 32.65

California Municipal Debt Funds 18 55.56 44.44

New York Municipal Debt Funds 15 40.00 26.67 Source: S&P Dow Jones Indices LLC. Data for periods ending March 31, 2015. Past performance is no guarantee of future results. Table is provided for illustrative purposes.

32


4

Exhibit 3: Performance Persistence of Domestic Fixed Income Funds Over Five Consecutive 12-Month Periods


Percentage Remaining in Top Quartile (%)

March 2012 March 2013 March 2014 March 2015

Top Quartile

Government Long Funds 22 50.00 36.36 0.00 0.00

Government Intermediate Funds 10 50.00 30.00 0.00 0.00

Government Short Funds 11 63.64 36.36 0.00 0.00

Investment-Grade Long Funds 33 33.33 27.27 6.06 0.00

Investment-Grade Intermediate Funds 69 34.78 26.09 13.04 5.80

Investment-Grade Short Funds 21 52.38 42.86 33.33 28.57

High-Yield Funds 49 16.33 10.20 8.16 0.00

Mortgage-Backed Securities Funds 15 46.67 13.33 6.67 6.67

Global Income Funds 27 33.33 7.41 0.00 0.00

Emerging Markets Debt Funds 8 25.00 12.50 12.50 12.50

General Municipal Debt Funds 23 4.35 0.00 0.00 0.00

California Municipal Debt Funds 10 0.00 0.00 0.00 0.00

New York Municipal Debt Funds 8 0.00 0.00 0.00 0.00


Percentage Remaining in Top Half (%)

March 2012 March 2013 March 2014 March 2015

Top Half

Government Long Funds 43 67.44 62.79 6.98 4.65

Government Intermediate Funds 20 70.00 50.00 15.00 15.00

Government Short Funds 22 77.27 63.64 36.36 31.82

Investment-Grade Long Funds 65 53.85 46.15 32.31 23.08

Investment-Grade Intermediate Funds 138 60.14 39.13 30.43 23.19

Investment-Grade Short Funds 41 60.98 53.66 41.46 39.02

High-Yield Funds 98 41.84 25.51 17.35 8.16

Mortgage-Backed Securities Funds 30 63.33 43.33 30.00 23.33

Global Income Funds 54 51.85 29.63 18.52 11.11

Emerging Markets Debt Funds 16 50.00 25.00 18.75 12.50

General Municipal Debt Funds 46 26.09 19.57 10.87 4.35

California Municipal Debt Funds 19 21.05 15.79 10.53 10.53

New York Municipal Debt Funds 17 23.53 11.76 11.76 5.88 Source: S&P Dow Jones Indices LLC. Data for periods ending March 31, 2015. Past performance is no guarantee of future results. Table is provided for illustrative purposes.

33


5

ABOUT S&P DOW JONES INDICES S&P Dow Jones Indices LLC, a part of McGraw Hill Financial, Inc., is the world’s largest, global resource for index-based concepts, data and research. Home to iconic financial market indicators, such as the S&P 500® and the Dow Jones Industrial AverageTM, S&P Dow Jones Indices LLC has over 115 years of experience constructing innovative and transparent solutions that fulfill the needs of institutional and retail investors. More assets are invested in products based upon our indices than any other provider in the world. With over 1,000,000 indices covering a wide range of assets classes across the globe, S&P Dow Jones Indices LLC defines the way investors measure and trade the markets. To learn more about our company, please visit www.spdji.com.

LIKE WHAT YOU READ? Sign up to receive updates on a broad range of index-related topics and complimentary events.

34

CONTRIBUTORS

Phillip Brzenk, CFAAssociate DirectorGlobal Research and [email protected] Soe, CFASenior DirectorGlobal Research and [email protected]

October 2015

Digging Deeper Into the U.S.Preferred Market1: INTRODUCTION TO PREFERRED STOCKS

1.1 What Are Preferred Stocks?

A preferred stock is a hybrid security, blending characteristics of both stocks and bonds. Like common stocks, preferreds represent ownership in a company and are listed as equity in a company’s balance sheet. However, certain characteristics differentiate preferreds from common equity. First, preferreds provide income to investors in the form of dividend payments and typically have higher yields than common stocks. Preferred shareholders have seniority in a company’s capital structure and have a higher claim to company assets in the situation of company liquidation (seeExhibit 1). Preferred shareholders are not privileged to vote on corporate matters, thus having less influence on corporate policy. While common shares offer investors the potential for share price and dividend increases, investors generally look to preferred securities for their high-yielding, stable dividend payments.

Similar to bonds, preferreds are issued at a fixed par value, with most preferreds paying scheduled, fixed dividends. Many preferred securities are rated by independent credit rating agencies with the rating generally lower than bonds since preferreds offer fewer guarantees and claims on assets. While a company risks defaulting if it misses a bond interest payment, it can withhold a preferred dividend payment without facing default risk.

Exhibit 1: General Creditor StandingsAsset Type Class Seniority

Debt

Secured Debt

Unsecured Senior Debt

Unsecured Subordinate Debt

Hybrid-Equity Preferred Shares

Equity Common SharesSource: S&P Dow Jones Indices LLC. Table is provided for illustrative purposes.

As of June 30, 2015, the market size of publicly traded preferred shares in the U.S. was estimated to be USD 241 billion, representing over 400% growth from USD 53 billion in 1990. Despite the impressive growth, the size of the preferred market remains relatively small compared to the USD22.71 trillion equity market.1

1 The figure is based on the float-adjusted market capitalization of the S&P U.S. BMI as of June 30, 2015.

35

Digging Deeper into the U.S. Preferred Market October 2015

2

In terms of trading venue, preferred securities trade in two kinds of markets: exchange listed and over-the-counter (OTC). Exhibit 2 breaks down the current preferred market by trading venue. The majority of preferreds are traded on the New York Stock Exchange (NYSE) and NASDAQ, with a combined market share of approximately 89%. The remaining portion is traded in the OTC market.

Exhibit 2: Preferred Market Size by Exchange

Source: FactSet. Data as of June 30, 2015. Chart is provided for illustrative purposes.

1.2 Types of Preferred Stocks

There are many different kinds of preferreds in the market. A particular share class may include one or more of the following features.

• Cumulative: If the company board defers dividend payment, the dividend amount is accumulated and will be required to be paid in the future. The company is obligated to pay all outstanding dividend payments out to preferred shareholders before paying a dividend to common shareholders.

• Non-cumulative: If a preferred issue is non-cumulative, a company does not have to pay missed dividends. Due to the inherent dividend payment risk in these types of issues, yields are higher versus cumulative shares.

• Convertible: Includes an option for the preferred shareholder to exchange their shares for common shares at a predetermined conversion rate.

• Callable: This provision gives the issuer the right to buy back the shares after a certain date, usually at close to par value.

• Trust: A hybrid security that is taxed like a debt obligation, while still being considered Tier 1 capital on accounting statements.

• Fixed coupon: Most preferred listings have fixed coupon payments, where the dividend amount remains the same for the life of the issuance.

• Variable coupon: The dividend rate is fixed for a time period and then at a reset date, it is changed based on a spread above LIBOR or a similar interest rate.

• Floating coupon: The dividend payment is adjusted on each payment date based on a spread above LIBOR or a similar interest rate. Floating rate preferreds usually have built-in floor and ceiling coupon rates.

11%

5%

84%

US OTC

NASDAQ

NYSE

36


3

For more information on the types of preferred securities, please see “The ABCs of U.S. Preferreds,” S&P Dow Jones Indices, October 2013.

1.3 Three Reasons Companies Issue Preferreds

Companies may issue preferred stocks for a variety of reasons. These are the three most common reasons.

1. Preferred stock issuances give companies a relatively cheap way to acquire additional capital. The preferred market is dominated by banks and related financial institutions, which are required by regulators to have adequate Tier 1 capital to support their liabilities. Tier 1 capital includes common equity, preferred equity and retained earnings. (Note that as per the recently passed Dodd-Frank Act, cumulative preferred and trust preferred securities will eventually be phased out of their Tier 1 capital status.2) Since issuing preferred shares is normally cheaper than issuing common shares and avoids common ownership dilution, banks may issue preferred shares to meet the required capital ratio set by regulators.

2. Preferred shares can be used in balance sheet management. Investors often prefer low debt-to-equity ratios, and issuing preferreds can better help to lower the debt-to-equity ratio than issuing debt. A company in need of additional financing may also be required to issue preferred shares instead of debt to avoid a technical default, which could trigger an immediate call on previously issued bonds or an increase in interest rates on those bonds. A technical default may occur when the debt-to-equity ratio breaches a limit set in a currently issued bond covenant.

3. Preferreds give companies flexibility in making dividend payments. If a company is running into cash issues, it can suspend preferred dividend payments without risk of default. Depending on whether the preferred share class is cumulative or non-cumulative, a company may have to pay previously skipped dividend payments before restarting dividend payments in the future.

1.4 Benefits Offered by Preferred Securities

Preferred stocks can offer investors greater assurances than common shares in terms of both knowing that they will receive the dividend payment and knowing what the dividend amount will be. Since preferred securities are higher in seniority than common equities, dividends must be paid to preferred shareholders before common shareholders. Also, since most preferreds provide a fixed dividend payment, an investor will know what amount to expect at the next payment date. In times of poor performance, a company will be more likely to either cut the common dividend amount or cancel the dividend altogether, rather than cut the preferred dividend amount.

Historically, preferred stocks have offered higher yields than other asset classes including money market accounts, common stocks and corporate bonds (see Exhibit 3). Preferreds also have a tax advantage over bonds, as many preferred dividends are qualified to be taxed as capital gains as opposed to bond interest payments, which are taxed as ordinary income.

2 Source: United States. Office of the Comptroller of the Currency, Treasury, and the Board of Governors of the Federal Reserve System. 2013. “Regulatory Capital Rules: Regulatory Capital, Implementation of Basel III, Capital Adequacy, Transition Provisions, Prompt Corrective Action, Standardized Approach for Risk-weighted Assets, Market Discipline and Disclosure Requirements, Advanced Approaches Risk-Based Capital Rule, and Market Risk Capital Rule.”

37


4

Exhibit 3: Asset Class Yields

Source: S&P Dow Jones Indices LLC, FactSet. Money market yield refers to the 1-year cash deposit rate. Common stock yield is represented by S&P 500. Bond yield is represented by S&P 500 Bond Index. Preferred stock yield is represented by S&P U.S. Preferred Stock Index. Twelve-month asset class yields using data as of June 30, 2015. Chart is provided for illustrative purposes.

In addition to higher yields, preferred stocks have low correlations with other asset classes such as common stocks and bonds, thus providing potential portfolio-diversification and risk-reduction benefits. Exhibit 4 charts the 10-year correlation of preferred securities, as represented by the S&P U.S Preferred Stock Index, to other asset classes. It is important to note that preferred securities exhibit higher correlation with high-yield bonds and equities, which are more sensitive to credit, and lower correlation with municipal bonds, which are more sensitive to interest rate risk.

Exhibit 4: 10-Year Correlation With the S&P U.S. Preferred Stock Index

Source: S&P Dow Jones Indices LLC. Data from June 30, 2005 to June 30, 2015. Returns for domestic equities, international equities and emerging markets equities are represented by the total returns of the S&P 500, S&P Developed x US LargeMid BMI Index, and S&P Emerging Markets LargeMid BMI Index in USD. Returns for high yield corporate bonds, investment grade corporate bonds and municipals are represented by the total returns of the S&P 500 High Yield Corporate Bond Index, S&P 500 Investment Grade Corporate Bond Index and S&P National AMT-Free Municipal Bond Index in USD.Past performance is no guarantee of future results. Chart is are provided for illustrative purposes and reflects hypothetical historical performance. Please

0.48

2.00

3.30

6.50

0%

1%

2%

3%

4%

5%

6%

7%

Money Markets Common Stocks Corporate Bonds Preferred Stocks

0.550.58

0.520.56

0.53

0.29

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

Doemstic Equities International Equities Emerging MarketEquities

High-Yield CorporateBonds

Investment-GradeCorporate Bonds

Municipals


5

see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

38


6

1.5 Potential Risks Involved With Investing in Preferreds

Due to their hybrid nature, the potential risks of preferred securities are related to the interest rate environment, issuer’s credit quality and liquidity.

Interest rate risk: Due to their bond-like fixed dividend payments, preferreds are vulnerable to changes in interest rates. There is an inverse relationship between preferred prices and changes in interest rates. In a rising interest rate environment, preferred stock prices fall as the present value of future dividend payments decreases.

Reinvestment risk: A preferred investor who does not seek high current income in dividend payments would be faced with the risks and associated costs of reinvesting the regular dividend payments. Callable shares carry an even greater reinvestment risk, as there is the potential for the company to redeem the shares. This would force the investor to give up the shares at par, or a specified call price.

Liquidity risk: Preferred shares are less liquid than common shares. Therefore, trading thesesecurities may involve higher market impact costs and bid-ask spread costs.

Credit risk: If a company is facing liquidity problems or poor performance, it may not be able to pay out the dividend to investors. Unlike bondholders, preferred shareholders have little recourse if a company does not pay the dividend.

Sector concentration risk: Financial companies are the primary issuers of preferreds in the U.S. A portfolio of preferred securities would be subject to the sector-specific risk factors of the financial sector.

2: THE S&P U.S. PREFERRED STOCK INDEX

2.1 About the S&P U.S. Preferred Stock Index

The S&P U.S. Preferred Stock Index is designed to serve the investment community’s need for an investable benchmark representing the U.S. preferred stock market. The index comprises U.S.-traded preferred stocks that meet criteria relating to minimum size, liquidity, exchange listing and time to maturity.

With a market capitalization of USD 170 billion, the index represents approximately 71% of the publicly traded U.S preferred market.3

2.2 Index Highlights

• The index is rebalanced on a quarterly basis; changes are effective after the close of trading on the third Friday of January, April, July and October.

• The index is calculated using a modified capitalization-weighted scheme, with a maximum weight of 10% set per issuer.

• The index does not have a fixed number of securities. All eligible securities at each rebalancing date are included in the index. As of June 30, 2015, the index had 300 constituents.

3 Source: S&P Dow Jones Indices LLC, FactSet. Data as of June 30, 2015.

39


7

2.3 Constituent Selection

To be eligible for inclusion in the S&P U.S. Preferred Stock Index, preferred shares must meet the following criteria.

• Exchange listing: The security must trade on the NYSE or NASDAQ stock exchange.

• Type of issuance: Preferred stocks issued by a company to meet its capital or financing requirements are eligible. These include floating and fixed-rate preferreds, cumulative and non-cumulative preferreds, preferred stocks with a callable or conversion feature and trust preferreds.

• Maturity or conversion schedule: The security must not have a scheduled maturity or mandatory conversion within the next 12 months.

• Market capitalization: The security must have a market cap of at least USD 100 million.

• Volume: The security must have a volume traded of more than 250,000 shares per month over the previous six months.

• Different lines of the same issuer: There is no limit to the number of lines of a single company’s preferred stock that are allowed in the index.

• Trust preferred issuer: A minimum of 15 trust preferred issuers must be included in the index. In the event that fewer than 15 trust preferred issuers qualify based on the criteria above, the liquidity constraint is relaxed and the largest stocks are included until the count reaches 15.

2.4 Risk/Return Characteristics

It is worth noting that preferred stocks have generally shown little to no price appreciation potential historically, with the majority of total return coming from dividend payments. The S&P U.S. Preferred Stock Index has had a price return of -18% and a total return of nearly 68% on a cumulative basis over the past 10 years.4

Over the longer-term 10-year investment horizon, preferred securities’ returns have been closer to those of bonds, while retaining higher equity-like volatility. This hybrid nature of the preferred asset class allows for potential diversification benefits which can be observed in its correlation with the traditional asset classes. Over the past 10 years, preferred securities have maintained low correlation (in the range of 0.5 -0.6) with both equities and bonds.

4 Source: S&P Dow Jones Indices. Data as of June 30, 2015. The launch date of the S&P U.S. Preferred Stock Index is Sept. 1, 2006. Past performance is not a guarantee of future results. Some of the data referenced in this chart reflects hypothetical historical performance. Please see the Performance Disclosure at the end of this paper for more information on the inherent limitations associated with back-tested performance.

40


8

Exhibit 5: Historical Risk/Return Profiles of Preferred Securities

Period S&P U.S. Preferred Stock Index S&P 500 Bond Index S&P 500

Annualized Return (%)

1-Year 4.89 1.19 7.42

3-Year 7.14 3.39 17.31

5-Year 8.69 5.19 17.34

10-Year 5.07 5.32 7.89

Annualized Volatility (%)

3-Year 3.98 4.01 8.58

5-Year 6.48 3.94 12.26

10-Year 19.14 5.58 14.68

Sharpe Ratio

3-Year 1.78 0.83 2.01

5-Year 1.33 1.30 1.41

10-Year 0.26 0.94 0.53

Correlation

3-Year - 0.71 0.29

5-Year - 0.54 0.52

10-Year - 0.56 0.55Source: S&P Dow Jones Indices LLC, FactSet. Data as of June 30, 2015. Past performance is no guarantee of future results. Table is provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

2.5 Index Characteristics

Any company is eligible to issue preferred securities, and doing so can give investors another way to invest in their company. However, because financial companies must comply with regulatory capital requirements, the preferred market is dominated by the financial sector. The sector composition breakdown of the S&P U.S. Preferred Stock Index shows the financial sector’s prevalence in the market (see Exhibits 6 and 7). Utilities and consumer discretionary constitute the next largest issuing sectors; however, their share of the preferred market is miniscule compared to that of the financials sector.

Exhibit 6: Historical Sector Composition

Source: S&P Dow Jones Indices LLC. Sector weight data as of December 31 each year. Chart is provided for illustrative purposes.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% Utilities

TelecommunicationServicesInformationTechnologyFinancials

Health Care

Consumer Staples

ConsumerDiscretionaryIndustrials

Materials

Energy

41


9

Exhibit 7: Current Sector Composition

Source: S&P Dow Jones Indices LLC. Weights as of June 30, 2015. Chart is are provided for illustrative purposes.

Exhibit 8 details the composition of the companies issuing preferred shares within the financials sector. The banks and diversified financials industry groups are the largest issuers of preferred shares.

Exhibit 8: Financials Sector Breakdown

Source: S&P Dow Jones Indices LLC. Relative weights within the financial sector as of June 30, 2015. Chart is provided for illustrative purposes.

The coupon offered by preferred securities is a function of not only market interest rates but also its credit quality; the lower the quality of a preferred, the higher the yield. It is important to note that preferred securities may receive lower credit ratings, despite the higher quality of the issuing companies, simply due to their lower placement in the capital structure compared to bonds. While the S&P U.S. Preferred Stock Index does not have a minimum rating requirement, nearly half of all securities in the index are rated at investment grade (‘BBB-’) or higher, as rated by Standard & Poor’s Ratings Services (see Exhibits 9 and 10). The median rating for those preferred shares rated by Standard & Poor’s Rating Services is ‘BBB-’, indicating that more than half of the index constituents are investment grade.

1.78%

1.48%

1.96%

0.17%

1.28%

3.10%

84.27%

0.00%

2.78%

3.19%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Energy

Materials

Industrials

Consumer Discretionary

Consumer Staples

Health Care

Financials

Information Technology

Telecommunication Services

Utilities

52%

23%

10%

15%

Banks

Diversified Financials

Insurance

Real Estate

42


10

Exhibit 9: Ratings Breakdown by Count

Source: Standard & Poor's Ratings Services. Ratings as of June 30, 2015. Chart is provided for illustrative purposes.

Exhibit 10: Ratings Breakdown by Weight

Source: Standard & Poor's Ratings Services. Ratings as of June 30, 2015. Chart is provided for illustrative purposes.

The coupon rate distribution breakdown of the preferred securities shows that over one-third of the index constituents lie within the 6-7% range. The median dividend coupon rate in the index is 6.45% as of June 30, 2015.

Exhibit 11: Coupon Rate Distribution

Source: FactSet. Data as of June 30, 2015. Charts are provided for illustrative purposes.

11

126

99

64

0

20

40

60

80

100

120

140

A- or higher BBB- to BBB+ BB+ or lower Not Rated

4%

42%

33%

21%

A- or higher

BBB- to BBB+

BB+ or lower

Not Rated

7

95103

55

30

10

0

20

40

60

80

100

120

under 5% 5 - 6% 6 - 7% 7 - 8% 8% or higher N/A

43


11

As of June 30, 2015, the S&P U.S. Preferred Stock Index’s yield was 6.52%. With the market downturn in 2008-2009, the index yield rose significantly due to declines in share prices, to a maximum of 16.11% in February 2009. Excluding that time period, the index yield has remained relatively stable between approximately 6% and 8%. The S&P U.S. Preferred Stock Index has consistently had a higher yield than the S&P 500, the S&P 500 Bond Index, and the S&P/BGCantor Current 10-Year U.S.Treasury Index, which yielded 2.01%, 3.27%, and 2.35% as of June 30, 2015, respectively.

Exhibit 12: Historical 12-Month Trailing Yield

Source: S&P Dow Jones Indices LLC, FactSet. Data from Dec. 31, 2004, to June 30, 2015. Past performance is not a guarantee of future results. Chartis provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosures at the end of this documentfor more information regarding the inherent limitations associated with back-tested performance.

3: DETAILED ANALYSIS OF PREFERRED SECURITIES BY RATING AND COUPON TYPE

As we noted in an earlier section, preferred securities can be further broken down by the type of coupon payment and the credit quality. Each type of preferred stock displays distinct risk/return properties. While fixed-rate and investment-grade preferred securities display a fixed-income-like level of volatility, floating-rate and high-yield preferred stocks exhibit significantly higher equity-like volatility. During the financial crisis of 2008, preferred securities experienced higher peak-to-trough drawdowns than equities. Within the asset class, floating-rate and high-yield preferreds suffered the worst with the drawdown levels exceeding 65% or more.

Depending on the investor’s view on the interest rate and credit cycle, the various types of preferred securities can be used to achieve the desired level of credit and duration risk.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

S&P U.S. Preferred Stock Index S&P 500

S&P/BGCantor Current U.S. 10-Year Treasury Index S&P 500 Bond Index

44


12

Exhibit 13: Risk/Return Profiles of Preferred Securities by Rating and Coupon Type

PeriodS&P US

Preferred Stock Index

S&P U.S. Fixed Rate Preferred

Stock Index

S&P U.S. Floating Rate Preferred

Stock Index

S&P U.S. Variable Rate Preferred

Stock Index

S&P U.S. High Yield Preferred

Stock Index

S&P U.S. Investment Grade Preferred

Stock IndexAnnualized Return (%)

1-Year 4.89 5.00 4.78 4.44 5.14 5.44

3-Year 7.14 7.15 7.57 7.37 9.18 4.90

5-Year 8.69 8.71 8.32 8.41 10.07 7.33

10-Year 5.07 5.29 3.05 - 5.66 3.80

Annualized Volatility (%)

3-Year 3.90 3.88 8.74 3.48 3.51 4.81

5-Year 6.53 6.36 13.12 6.08 9.44 5.48

10-Year 19.22 18.68 27.70 25.07 19.11

Risk/Reward Ratio

3-Year 1.83 1.85 0.87 2.12 2.62 1.02

5-Year 1.33 1.37 0.63 1.38 1.07 1.34

10-Year 0.26 0.28 0.11 - 0.23 0.20

Correlation

3-Year - 0.99 0.80 0.88 0.97 0.96

5-Year - 0.99 0.90 0.95 0.96 0.91

10-Year - 0.99 0.86 - 0.69 0.97Source: S&P Dow Jones Indices LLC. Data as of June 30, 2015. Past performance is no guarantee of future results. Table is provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

Exhibit 14: Peak-to-Trough Drawdowns of Preferred Securities by Payment Type and Rating

Source: S&P Dow Jones Indices LLC. Data as of June 30, 2015. Past performance is no guarantee of future results. Chart is provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

-50.95-53.00

-55.07 -53.56

-67.3 -66.63

-52.56

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Equities Variable RatePreferred

PreferredUniverse

Fixed RatePreferred Stock

Floating RatePreferred

High YieldPreferred

Investment GradePreferred

45


13

CONCLUSION

Since gaining popularity in the early 1990s, the preferred share market has undergone significant growth. With the tendency to produce higher yields than other income asset classes, preferred sharescould serve as a potential source of significant current income. In addition, their relatively low correlations with traditional asset classes such as common stocks and bonds may provide potential portfolio-diversification and risk-reduction benefits. However, preferred shares are not without risk. Due to their bond-like features, preferred prices exhibit an inverse relationship to changes in interest rates. Furthermore, in a low interest rate environment, investors may face call risk as well as reinvestment risk. When contemplating using a preferred stock index, such as the S&P U.S. Preferred Share Index, it may be wise to also consider other characteristics such as sector composition and the issuers’ credit quality.

46


15

PERFORMANCE DISCLOSURESThe S&P 500 High Yield Corporate Bond Index was launched on July 8, 2015. The S&P 500 Investment Grade Corporate Bond Index was launched on May 6, 2004. The S&P National AMT-Free Municipal Bond Index was launched on Aug. 31, 2007. The S&P U.S. Preferred Stock Index was launched on Sept. 15, 2006. The S&P 500 Bond Index was launched on July 8, 2015. The S&P U.S Fixed Rate Preferred Stock Index, S&P US Variable Rate Preferred Stock Index, and the S&P U.S Floating Rate Preferred Stock Index were launched on Oct. 25,2013. The S&P U.S. Investment Grade Preferred Stock Index and the S&P US High Yield Preferred Stock Index were launched on July 21, 2014. All information for an index prior to its launch date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect on the launch date. Complete index methodology details are available at www.spdji.com.



Another limitation of using back-tested information is that the back-tested calculation is generally prepared with the benefit of hindsight. Back-tested information reflects the application of the index methodology and selection of index constituents in hindsight. No hypothetical record can completely account for the impact of financial risk in actual trading. For example, there are numerous factors related to the equities (or fixed income, or commodities)markets in general which cannot be, and have not been accounted for in the preparation of the index information set forth, all of which can affect actual performance.


July 2015: 12-Month Trailing Bond Default Rates As of June 30, 2015, the 12-month trailing default rate of the S&P Municipal Bond Index fell to 0.165%, down from 0.170% in December 2014. Of the deals that defaulted in the index in 2015, over 27% were Colorado metropolitan district general obligation bonds.

However, the S&P Municipal Bond High Yield Index saw the default rate rise from 1.26% in December 2014 to 1.3% in June 2015. In comparison, according to Standard & Poor’s Ratings Services Global Fixed Income Research estimates, the June 2015 U.S. speculative-grade corporate bond 12-month default rate was 2.1% (up over 38% in six months). Tracking this data from 2011 reveals a definitive trend: historically, municipal bonds have had a lower propensity to default.

Consideration: The number of deals tracked by the indices decreased for the first time in 2014, as the pace of new issues qualifying for the index did not outpace bonds maturing. Municipal bond issuance trends are not significant enough to change the propensity-to-default comparison with speculative-grade corporate bonds; however, it is important to note that increased muni issuance in 2015 is driving the reduction of the muni default rate, as more deals have defaulted.

The S&P Municipal Bond Index has been a live benchmark since Dec. 31, 2000. The index seeks to track over 85,000 bonds from over 22,000 different issuers, and it represents a market value of more than USD 1.5 trillion. Some unique features of the index are that it is designed to measure bonds throughout their “lifetime,” meaning from issuance to maturity (as of the index rebalancing date, the bond must have a minimum term to maturity or complete call date greater than or equal to one calendar month), and it includes bonds that range in quality from ‘AAA’ to ‘Default.’ By keeping bonds in the benchmark even when a default occurs, the index has become a living timeline, allowing us to track the municipal bond default rate. The vast swath of the municipal bond market tracked by the S&P Municipal Bond Index makes this analysis possible.

Exhibit 1: Bond Default Rates

New Monetary Defaults S&P Municipal Bond Index S&P Municipal Bond High Yield Index

U.S. Speculative Grade Corporate Bonds

Year No. of Deals Entering Default*

Total No. of Deals in Index Default % Total No. of

Deals in Index Default % Default %

2011 46 20,307 0.227 3,032 1.520 1.98

2012 30 20,802 0.144 3,005 1.000 2.60

2013 23 21,523 0.107 2,848 0.807 2.10

2014 35 20,568 0.170 2,769 1.264 1.52

June 2015 37 22,470 0.165 2,835 1.305 2.10 Source: S&P Dow Jones Indices LLC. Standard & Poor’s Ratings Services Global Fixed Income Research. Data as of June 30, 2015. Table is provided for illustrative purposes. Past performance is no guarantee of future results. *Deals in index defaulting on principal and or interest for the first time.

For more information, contact:

Tyler Cling Marina Ioffe

Sr. Manager Index Manager

S&P Dow Jones Indices S&P Dow Jones Indices

[email protected] [email protected]

47

July 2015: 12-Month Trailing Bond Default Rates As of June 30, 2015, the 12-month trailing default rate of the S&P Municipal Bond Index fell to 0.165%, down from 0.170% in December 2014. Of the deals that defaulted in the index in 2015, over 27% were Colorado metropolitan district general obligation bonds.

However, the S&P Municipal Bond High Yield Index saw the default rate rise from 1.26% in December 2014 to 1.3% in June 2015. In comparison, according to Standard & Poor’s Ratings Services Global Fixed Income Research estimates, the June 2015 U.S. speculative-grade corporate bond 12-month default rate was 2.1% (up over 38% in six months). Tracking this data from 2011 reveals a definitive trend: historically, municipal bonds have had a lower propensity to default.

Consideration: The number of deals tracked by the indices decreased for the first time in 2014, as the pace of new issues qualifying for the index did not outpace bonds maturing. Municipal bond issuance trends are not significant enough to change the propensity-to-default comparison with speculative-grade corporate bonds; however, it is important to note that increased muni issuance in 2015 is driving the reduction of the muni default rate, as more deals have defaulted.

The S&P Municipal Bond Index has been a live benchmark since Dec. 31, 2000. The index seeks to track over 85,000 bonds from over 22,000 different issuers, and it represents a market value of more than USD 1.5 trillion. Some unique features of the index are that it is designed to measure bonds throughout their “lifetime,” meaning from issuance to maturity (as of the index rebalancing date, the bond must have a minimum term to maturity or complete call date greater than or equal to one calendar month), and it includes bonds that range in quality from ‘AAA’ to ‘Default.’ By keeping bonds in the benchmark even when a default occurs, the index has become a living timeline, allowing us to track the municipal bond default rate. The vast swath of the municipal bond market tracked by the S&P Municipal Bond Index makes this analysis possible.

Exhibit 1: Bond Default Rates

New Monetary Defaults S&P Municipal Bond Index S&P Municipal Bond High Yield Index

U.S. Speculative Grade Corporate Bonds

Year No. of Deals Entering Default*

Total No. of Deals in Index Default % Total No. of

Deals in Index Default % Default %

2011 46 20,307 0.227 3,032 1.520 1.98

2012 30 20,802 0.144 3,005 1.000 2.60

2013 23 21,523 0.107 2,848 0.807 2.10

2014 35 20,568 0.170 2,769 1.264 1.52

June 2015 37 22,470 0.165 2,835 1.305 2.10 Source: S&P Dow Jones Indices LLC. Standard & Poor’s Ratings Services Global Fixed Income Research. Data as of June 30, 2015. Table is provided for illustrative purposes. Past performance is no guarantee of future results. *Deals in index defaulting on principal and or interest for the first time.

For more information, contact:

Tyler Cling Marina Ioffe

Sr. Manager Index Manager

S&P Dow Jones Indices S&P Dow Jones Indices

[email protected] [email protected]

FIXED INCOME UPDATE

48

CONTRIBUTORS

J.R. RiegerGlobal HeadFixed Income [email protected]

Tyler ClingSenior ManagerFixed Income [email protected]

FIXED INCOME 301 | U.S.

Laddering a Portfolio of Municipal BondsIn any home construction project, chances are a ladder will be used to reach a higher point. One ascends the ladder, rung by rung, until the goal is reached. The concept of the ladder can also apply when constructing a sound municipal bond portfolio. In this paper, we explain the possible risks, potential return, and the diversification potential of using a ladder strategy when investing in bonds.

AN EXAMPLE OF BOND LADDERING

Bond laddering is a strategy that calls for maturity weighting, which involves dividing bond investments among several different bonds with increasingly longer maturities. Municipal bond ladders may be constructed to address both interest rate and reinvestment risk. If interest rates rise, the strategy calls for reinvestment of the funds from bonds that are maturing at the bottom of the ladder into bonds earning higher yields, and these are in turn added to the top of the ladder. If rates fall, this strategy seeks to mitigate reinvestment risk because longer-dated bonds that are at the top of the ladder, which presumably were purchased when interest rates were higher, should be yielding higher returns.1

In its simplest form, the bond ladder may consist of bonds maturing over a period of years (e.g., two to six years). Exhibit 1 shows a conceptual example of this construction process using notional USD 10,000 equal investments in five municipal bonds with sequential year maturity dates.

Exhibit 1: Simple Example of a Short-Term Municipal Bond Ladder

Source: S&P Dow Jones Indices LLC. Chart is provided for illustrative purposes.

1 Over any period of time, interest rates can rise and/or fall. The laddering of an actual portfolio may not necessarily show uniformly increasing or decreasing interest rates.

Bond laddering is a strategy that calls for maturity weighting, which involves dividing bond investments among several different bonds with increasingly longer maturities.

PRACTICE ESSENTIALS®

49

CONTRIBUTORS

J.R. RiegerGlobal HeadFixed Income [email protected]

Tyler ClingSenior ManagerFixed Income [email protected]

FIXED INCOME 301 | U.S.

Laddering a Portfolio of Municipal BondsIn any home construction project, chances are a ladder will be used to reach a higher point. One ascends the ladder, rung by rung, until the goal is reached. The concept of the ladder can also apply when constructing a sound municipal bond portfolio. In this paper, we explain the possible risks, potential return, and the diversification potential of using a ladder strategy when investing in bonds.

AN EXAMPLE OF BOND LADDERING

Bond laddering is a strategy that calls for maturity weighting, which involves dividing bond investments among several different bonds with increasingly longer maturities. Municipal bond ladders may be constructed to address both interest rate and reinvestment risk. If interest rates rise, the strategy calls for reinvestment of the funds from bonds that are maturing at the bottom of the ladder into bonds earning higher yields, and these are in turn added to the top of the ladder. If rates fall, this strategy seeks to mitigate reinvestment risk because longer-dated bonds that are at the top of the ladder, which presumably were purchased when interest rates were higher, should be yielding higher returns.1

In its simplest form, the bond ladder may consist of bonds maturing over a period of years (e.g., two to six years). Exhibit 1 shows a conceptual example of this construction process using notional USD 10,000 equal investments in five municipal bonds with sequential year maturity dates.

Exhibit 1: Simple Example of a Short-Term Municipal Bond Ladder

Source: S&P Dow Jones Indices LLC. Chart is provided for illustrative purposes.

1 Over any period of time, interest rates can rise and/or fall. The laddering of an actual portfolio may not necessarily show uniformly increasing or decreasing interest rates.

Bond laddering is a strategy that calls for maturity weighting, which involves dividing bond investments among several different bonds with increasingly longer maturities.

Laddering a Portfolio of Municipal Bonds July 2015

2

Investors must determine how many rungs their municipal bond ladder should have and the ultimate height of the ladder. The time between maturities is a variable chosen based on the trade-off between reinvestment risk and the lack of access to the money invested. If the goal is to keep the municipal bond ladder in place over time, then as the earliest bond matures, the ladder strategy replaces it with a bond of equal principal at the longer end of the maturity ladder (see Exhibit 2).

Exhibit 2: Continuing the Short-Term Municipal Bond Ladder

Source: S&P Dow Jones Indices LLC. Past performance is no guarantee of future results. Chart is provided for illustrative purposes.

The strategy illustrated in Exhibits 1 and 2 calls for the construction of a diversified portfolio of bonds from different issuers at each rung of the ladder.

BOND LADDERING PORTFOLIO BENEFITS

Laddering a bond portfolio versus investing in a single bond may provide the following potential benefits.

• Potentially decreased volatility in the portfolio value as interest rates change.

• The option to reinvest the principal of the maturing bond into longer-dated bonds, which may result in higher yields compared to shorter-term bonds.

• If equal weighted investments are made each year, the laddered portfolio may provide a higher total return as interest rates change.

• If the portfolio is further diversified by using bonds from different issuers, regions, and purposes, the laddered portfolio may reduce default and liquidity risk.

• Income generation if the ladder portfolio is built using bonds that pay periodic interest or coupons. Advisors have the ability to adjust these cash flows by choosing municipal bonds with different interest payment dates.

Laddering a bond portfolio may provide many potential benefits, compared with only investing in a single bond.

50


3

LADDERING: INDIVIDUAL BONDS VERSUS ETFs

Depending on the size of an individual’s portfolio, investors may consider using bond funds or ETFs rather than individual bonds. Municipal bond ladders built with funds or ETFs may offer the following.

• Diversification: Bonds are typically sold in minimum denominations or multiples of minimum denominations. For corporate bonds and treasury bonds, minimum denominations are typically USD 1,000. For municipal bonds, minimum denominations are higher, at USD 5,000. For investors with smaller portfolios, these relatively high minimum denominations may limit their ability to diversify. Constructing a bond ladder via bond funds may mitigate these risks by spreading assets across multiple securities.

• Lower Trading Costs: Using funds to construct a laddered portfolio may lower transaction costs because fund managers are better able to pool capital and purchase bonds in larger lots. Additionally, fund managers could have better access to dealer inventory and could perform market surveillance to identify desired bonds.

• Increased Liquidity: Individual bonds trade in the OTC market, and daily liquidity can vary dramatically by the name of the issuer (borrower), quality of the bond, and other criteria such as coupon and maturity. In the event an investor needs to liquidate one or more rungs of the ladder, an ETF, which trades on an organized exchange, is more likely to provide better liquidity than an individual bond trading in the OTC market.

MATURITY-DATE FUNDS OFFER CUSTOMIZATION AND POTENTIALLY LOWER TRANSACTION COSTS

Maturity-date bond funds and ETFs provide an easy way to customize a portfolio while retaining the diversification and liquidity benefits of a fund structure. Investors can use these funds to target maturities and to build laddered portfolios in a similar fashion to using individual bonds, which may suit the needs of investors or institutions looking for large cash flows at defined dates. For example, parents preparing for their child’s college education that begins in 2020 could purchase bond funds maturing in 2020 through 2022 in roughly equal investments assuming the cost will increase each year by roughly the same as the yield of the funds.

Maturity-date bond funds are also expected to generate lower transaction costs than traditional bond funds because bonds will usually be held to maturity, rather than sold once they no longer meet fund criteria. A good example would be a 7-10 year bond fund versus a fund that matures in seven years (or eight, nine, or ten years)—for example a 2021 fund. The portfolios would be similar in 2014, except that the maturity of the former will be spread over four years versus a maturity of one year for the latter. However, as time progresses, the 7-10-year fund is forced to sell roughly 25% of its portfolio every year because bonds with seven years to maturity in 2014 will have maturities of six years in 2015. The 7-10 year fund then must add new bonds that have now aged and become 10-year bonds, whereas the 2021 fund will not be forced to sell bonds prior to the target date because it can theoretically hold the same bonds until maturity. Turnover will only result from creations and redemptions or from security selection decisions by the fund manager (the latter will generally be absent from an index fund). Thus, the expected one-way turnover of the 2021 fund will be lower by approximately 25% per year than that of the 7-10 year fund.

Maturity-date bond funds and ETFs provide an easy way to customize a portfolio while retaining the diversification and liquidity benefits of a fund structure.

51


4

A TOOL FOR BENCHMARKING MUNICIPAL BOND LADDERS

To assist in evaluating decisions related to laddering municipal bond portfolios, S&P Dow Jones Indices publishes a detailed set of data about the municipal bond market: the S&P AMT-Free Municipal Series Indices (see Exhibit 3).

Exhibit 3: Characteristics of the S&P AMT-Free Municipal Series

Index NameWeighted

Average Coupon

Weighted Average

Price

Weighted Years to Maturity

Weighted AverageYield-to-Maturity

Weighted Average Yield-to-

WorstS&P AMT-Free Municipal Series 2015 Index 4.43 104.13 1.04 0.43 0.43 S&P AMT-Free Municipal Series 2016 Index 4.47 107.31 2.04 0.84 0.84S&P AMT-Free Municipal Series 2017 Index 4.56 110.14 3.03 1.14 1.14S&P AMT-Free Municipal Series 2018 Index 4.59 112.55 4.59 1.37 1.37S&P AMT-Free Municipal Series 2019 Index 4.54 113.82 5.04 1.67 1.67S&P AMT-Free Municipal Series 2020 Index 4.50 114.57 6.04 1.92 1.92S&P AMT-Free Municipal Series 2021 Index 4.62 115.87 7.05 2.19 2.19S&P AMT-Free Municipal Series 2022 Index 4.65 116.50 8.05 2.37 2.37S&P AMT-Free Municipal Series 2023 Index 4.61 116.56 9.05 2.53 2.53S&P AMT-Free Municipal Series 2024 Index 4.43 104.13 1.04 0.43 0.43

Source: S&P Dow Jones Indices LLC. Data as of June 30, 2015. Past performance is no guarantee of future results. Table is provided for illustrative purposes.

The S&P AMT-Free Municipal Series Indices were designed to be replicable. This index series was built with municipal bond constituents that are investment grade, have a minimum par amount of USD 2 million, and meet bond selection criteria designed to avoid provisions affecting cash flows. Data on these indices is updated daily and is available for advisors to download at www.spdji.com.

LIKE WHAT YOU READ? Sign up to receive updates on a broad range of index-related topics and complimentary events.

The S&P AMT-Free Municipal SeriesIndices were built with municipal bond constituents that are investment grade, have a minimum par amount of USD 2 million, and meet bond selection criteria designed to avoid provisions affecting cash flows.

52

The One to Deliver the World

indexology® shapes investing www.spdji.com/indexology

© 2015 by S&P Dow Jones Indices LLC, a part of McGraw Hill Financial. All rights reserved. S&P® and Indexology® are registered trademarks of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund. This is not an offer of services in any jurisdiction where S&P Dow Jones Indices does not have the necessary licenses.

Tuning in to opportunity requires a unique vantage point. At S&P Dow Jones Indices, we transmit unmatched investment signals to your doorstep. Capture a world of local index insights, wherever you may be.

53

CONTRIBUTOR

J.R. RiegerGlobal Head of Fixed [email protected]

October 2015

Should Municipal Bonds Be Considered “Core”?In the current financial environment, the often misunderstood municipal bond market is not considered to be a “core” asset class by many investors, nor is it labeled as such by institutions offering financial products to investors. It can be argued that investment-grade municipal bonds have some qualifications to be “core.”

In this paper, we have examined some of the reasons U.S. investment-grade municipal bonds should be considered a “core” asset class.

Large and Diverse Market

According to SIFMA, the municipal bond market had over USD 3.7 trillion outstanding as of June 2015. There are approximately 1.5 million different municipal bonds outstanding, issued from tens of thousands of different issuers.

High Quality

The average rating (from Moody's, Standard & Poor’s Ratings Services, or Fitch) of investment-grade bonds in the S&P National AMT-Free Municipal Bond Index is higher than the average rating of bonds in the S&P 500®

Bond Index.

Exhibit 1: Investment-Grade Ratings of Municipal Bonds Versus CorporateBonds

Source: S&P Dow Jones Indices, LLC. Data as of Oct. 19, 2015. Chart is provided for illustrative purposes.Notes: Pre-refunded accounts for 0.6% of the 9.8% municipal AAA. S&P 500 Bond Index has 0.05% NR rated bonds due to the Hospira Inc. rating withdrawal.

0%

5%

10%

15%

20%

25%

S&P National AMT-Free Municipal Bond Index S&P 500 Bond Index

54

Should Municipal Bonds Be Considered “Core”? October 2015

2

Low Default Rate

According to our research, the mid-year 2015 12-month trailing default rate for municipal bonds was 0.165% (as measured by the number of defaults versus the number of bond deals outstanding). Apart from U.S. Treasuries, it would be difficult to find another category of U.S. bonds that has had a lower a default rate.

Exhibit 2: 12-Month Trailing Default Rates

Year

New Monetary Defaults S&P Municipal Bond Index S&P Municipal Bond High Yield

IndexU.S. Speculative-Grade

Corporate BondsNo. of Deals

Entering Default*Total No. of

Deals in Index Default % Total No. of Deals in Index Default % Default %

2011 46 20,307 0.227 3,032 1.520 1.98

2012 30 20,802 0.144 3,005 1.000 2.60

2013 23 21,523 0.107 2,848 0.807 2.10

2014 35 20,568 0.170 2,769 1.264 1.52June 2015 37 22,470 0.165 2,835 1.305 2.10

Source: S&P Dow Jones Indices, LLC, Standard & Poor’s Ratings Services Global Fixed Income Research. Data as of June 30, 2015. Table is provided for illustrative purpose. Past performance is no guarantee of future results. *Deals in index defaulting on principal and/or interest for the first time.

Duration

It is a common assumption that municipal bonds have longer durations than corporate bonds. As of Oct. 19, 2015, the modified duration of the S&P National AMT-Free Municipal Bond Index (tracking only investment-grade bonds) is two years shorter than the modified duration of the S&P 500 Investment Grade Corporate Bond Index. All else being equal, a shorter duration may indicate less drastic price movements when rates rise or fall.

Exhibit 3: Durations of Investment-Grade Municipal Bonds Versus U.S. Corporate Bonds

Source: S&P Dow Jones Indices, LLC. Data as of Oct. 19, 2015. Past performance is no guarantee of future results. Chart is provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance.

3

4

5

6

7

8

9

Yea

rs

S&P 500 Investment Grade Corporate Bond Index S&P National AMT-Free Municipal Bond Index

55


3

Yield

The nominal yield of tax-exempt municipal bonds is generally lower than that of corporate bonds. However, when studied from the perspective of how much return an investor actually keeps after taxes, the story is different. Taxable equivalent yield (TEY) is the yield at which a taxable bond would have to return for the investor to keep the same return as a tax-free municipal bond. The TEY of municipal bonds is competitive to that of taxable bonds (see Exhibit 4).

Exhibit 4: Yields of Municipal Bonds Versus U.S. Corporate Bonds

Source: S&P Dow Jones Indices, LLC. Data as of Oct. 19, 2015. TEY is calculated using a 35% tax rate. Past performance is no guarantee of future results. Chart is provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosures at the end of this document for more information on the inherent limitations associated with back-tested performance.

Liquidity

U.S. municipal bonds are indeed less liquid than their corporate bond counterparts, and that lower liquidity may play an important role in the yields and prices of municipal bonds. The liquidity penalty is difficult to measure. Most municipal bonds that are sold in the market have a smaller par amount than corporate bonds. In addition, due to the number of different issuers and the number of municipal bonds outstanding, there are usually a larger number of unique municipal bonds available in the market than in the corporate bond market. However, investment-grade municipal bonds are far from illiquid. During the 12-month period ending July 2015, an average of 66.6% of the 9,500+ bonds in the S&P National AMT-Free Municipal Bond Index traded each month. The average traded size of those bonds during that period was over USD 242,000.1

1 Sources: S&P Dow Jones Indices, LLC. and the Municipal Securities Rule Making Board (MSRB). Data as of Nov. 30, 2014.

1.50

2.00

2.50

3.00

3.50

4.00

%

S&P 500 Investment Grade Corporate Bond Index YTW S&P National AMT-Free Municipal Bond Index TEYS&P National AMT-Free Municipal Bond Index YTW

56


4

Viable Option for a Wide Range of Investors

In a high-tax environment, like the one experienced in early 2015, tax-exempt municipal bonds can be considered an option for many investors, rather than just the wealthy or the top 1%.

Public Good

U.S. municipal bonds serve as an important infrastructure funding source. Roads, highways, bridges, tunnels, airports, ports, schools, and so much more are built and maintained because they are funded by bonds.

Conclusion

The large and diverse municipal bond market tends to have an overall higher quality and has historically shown a low default rate when compared to U.S. corporate bonds. The relatively short durations seen in municipal bonds also draw attention to the asset class, along with its competitive yield characteristics. Municipal bonds could be an option for a wide range of investors, and their liquidity and relevance to U.S. infrastructure could make them increasingly important as time goes on. In summary, investment-grade municipal bonds have many of the characteristics of other asset classes that are considered to be “core.”

57


6

PERFORMANCE DISCLOSURESThe S&P 500 Low Volatility High Dividend Index (the “Index”) was launched on September 17, 2012. The S&P 500 Dividend Aristocrats Index (the “Index”) was launched on May 2, 2005. The S&P High Yield Dividend Aristocrats Index (the “Index”) was launched on September 15, 2006. The Dow Jones U.S. Select Dividend Index (the “Index”) was launched on November 3, 2003. The Dow Jones U.S. Dividend 100 Index (the “Index”) was launched on August 31, 2011. The S&P 500 Low Volatility Index (the “Index”) was launched on April 20, 2011. All information presented prior to the Launch Date are back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect on the Launch Date. Complete index methodology details are available at www.spdji.com.



Another limitation of using back-tested information is that the back-tested calculation is generally prepared with the benefit of hindsight. Back-tested information reflects the application of the index methodology and selection of index constituents in hindsight. No hypothetical record can completely account for the impact of financial risk in actual trading. For example, there are numerous factors related to the equities (or fixed income, or commodities) markets in general which cannot be, and have not been accounted for in the preparation of the index information set forth, all of which can affect actual performance.


The top 5 fixed income blog posts from Q3 2015. Read the full posts at www.indexologyblog.com

Inside the S&P 500®... Bonds!

The companies in the S&P 500 are often described as leading companies in leading industries. The S&P 500 is the go-to index for analyzing, tracking and understanding large cap stocks in the US market. Its history goes back over 50 years...

Investment-Grade Corporate Bonds, Smooth Sailing

There is an old weather-predicting proverb that goes “red skies at night sailors delight; red skies in the morning sailors take warning.” Well, there has been a lot of red over the last two mornings, and it has not been in the hot August skies but more so in the global financial markets...

Equity Markets May Be “Sassy”, But Bond Markets Are The “Cool” Kids On The Block…

Bond markets may not be the most “sassy” of all the asset classes, but they certainly are a lot “cooler” in light of the global equity sell-off of the last two days. Bond markets are traditionally...

Navigating Rising Rates: Municipal Bond Ladders With rising rates potentially on the horizon, protecting the value of bond portfolios is top of mind for many investors. Holding bonds to maturity via a bond ladder can be considered a way to navigate these volatile investing waters...

Record Supply of Chinese Muni Bonds

The Chinese Ministry of Finance (MoF) recently rolled out another muni replacement program of legacy local government debt, as the previous muni replacement quota of RMB 1 trillion only addresses about half of the local government debt that is due to expire in 2015. With the robust expansion plan...

INDEXOLOGY ® BLOG BITES

Stay up to date with the latest posts on Indexology®

























59

























PERFORMANCE DISCLOSURE S&P Dow Jones Indices defines various dates to assist our clients in providing transparency on their products. The First Value Date is the first day for which there is a calculated value (either live or back-tested) for a given index. The Base Date is the date at which the Index is set at a fixed value for calculation purposes. The Launch Date designates the date upon which the values of an index are first considered live; index values provided for any date or time period prior to the index’s Launch Date are considered back-tested. S&P Dow Jones Indices defines the Launch Date as the date by which the values of an index are known to have been released to the public, for example via the company’s public Web site or its datafeed to external parties. For Dow Jones-branded indices introduced prior to May 31, 2013, the Launch Date (which prior to May 31, 2013, was termed “Date of Introduction”) is set at a date upon which no further changes were permitted to be made to the index methodology, but that may have been prior to the Index’s public release date.


Another limitation of using back-tested information is that the back-tested calculation is generally prepared with the benefit of hindsight. Back-tested infor-mation reflects the application of the index methodology and selection of index constituents in hindsight. No hypothetical record can completely account for the impact of financial risk in actual trading. For example, there are numerous factors related to the equities (or fixed income, or commodities) markets in general which cannot be, and have not been accounted for in the preparation of the index information set forth, all of which can affect actual performance.


GENERAL DISCLAIMER© 2015 S&P Dow Jones Indices LLC, a part of McGraw Hill Financial. All rights reserved. Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a part of McGraw Hill Financial. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Trademarks have been licensed to S&P Dow Jones Indices LLC. Redistribution, reproduction and/or photocopying in whole or in part are prohibited without written permission. This document does not constitute an offer of services in jurisdictions where S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates (collectively “S&P Dow Jones Indices”) do not have the necessary licenses. All information provided by S&P Dow Jones Indices is impersonal and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. Past performance of an index is not a guarantee of future results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. S&P Dow Jones Indices makes no assurance that investment products based on the index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor, and S&P Dow Jones Indices makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any of the statements set forth in this document. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. Closing prices for S&P US benchmark indices and Dow Jones US benchmark indices are calculated by S&P Dow Jones Indices based on the closing price of the individual constituents of the index as set by their primary exchange. Closing prices are received by S&P Dow Jones Indices from one of its third party vendors and verified by comparing them with prices from an alternative vendor. The vendors receive the closing price from the primary exchanges. Real-time intraday prices are calculated similarly without a second verification. These materials have been prepared solely for informational purposes based upon information generally available to the public and from sources believed to be reliable. No content contained in these materials (including index data, ratings, credit-related analyses and data, research, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse-engineered, reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of S&P Dow Jones Indices. The Content shall not be used for any unlawful or unauthorized purposes. S&P Dow Jones Indices and its third-party data providers and licensors (collectively “S&P Dow Jones Indices Parties”) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Dow Jones Indices Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content. THE CONTENT IS PROVIDED ON AN “AS IS” BASIS. S&P DOW JONES INDICES PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Dow Jones Indices Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages. S&P Dow Jones Indices keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P Dow Jones Indices may have information that is not available to other business units. S&P Dow Jones Indices has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. In addition, S&P Dow Jones Indices provides a wide range of services to, or relating to, many organizations, including issuers of securities, investment advisers, broker-dealers, investment banks, other financial institutions and financial intermediaries, and accordingly may receive fees or other economic benefits from those organizations, including organizations whose securities or services they may recommend, rate, include in model portfolios, evaluate or otherwise address. S&P acquired the GSCI from Goldman Sachs on February 2, 2007 and it was subsequently renamed the S&P GSCI. Goldman Sachs began first publishing the GSCI related indices in 1991 but has calculated the historical value of the GSCI beginning January 2, 1970 based on actual prices from that date forward and the selection criteria, methodology and procedures in effect during the applicable periods of calculation (or, in the case of all calculation periods prior to 1991, based on the selection criteria, methodology and procedures adopted in 1991). The GSCI has been normalized to a value of 100 on January 2, 1970, in order to permit comparisons of the value of the GSCI to be made over time.

JOIN THE CONVERSATION: www.indexologyblog.com | www.spdji.com

Date post:	24-Jul-2016
Category:	Documents
Upload:	asset-tv
View:	224 times
Download:	1 times

Chasing Certrainty in Uncertain Times

Documents