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Adjustment to How We Calculate Benchmarks

On any performance report that we give you, you will see a benchmark that aligns with the allocation that you are invested in. Here is an example for someone who is invested in a 60% stock and 40% bond portfolio.

The “60% Stock / 40% Bond Benchmark” is a blend of the 4 market segments listed below the blended benchmark1, as well as the Dow Jones US Real Estate Index (which is not listed on the report because it is a very small portion of the blended portfolio and there is limited space).

For this specific benchmark, the bond portion (40%) is represented solely by the Bloomberg Barclays US Aggregate Bond Index. This index represents the investment grade portion of the US market by including about 40-45% of eligible bonds in their index.

While we always thought this was a relatively limited index to measure the bond portion of the portfolio against, it was really the best option we had. Now, after upgrading to a new technology provider, we can expand the blended benchmark (ex: 60% Stock / 40% Bond Benchmark) to include indexes that align with the actual global debt landscape. We’ve already been doing this on the stock portion of the blended benchmark as the weightings are adjusted to reflect the actual global stock landscape (such as how much US markets are weighted versus international or emerging market regions – the blended benchmark reflects the global reality, not the specific weightings in your portfolio).

We are going to leave the report looking the same, but we will add two more indexes to count towards the bond portion of the blended benchmarks (similar to how the Dow Jones US Real Estate Index is contributing to the blended benchmark but is not shown on your report). The two new indexes are: Bloomberg Barclays US Corporate High Yield Bond Index and Bloomberg Barclays Aggregate Ex-USD (Hedged) Index.

The weightings of these indexes will be similar to the global bond landscape. If you were in a 100% bond allocation, your underlying benchmark would now be 30% Bloomberg Barclays US Aggregate Bond Index, 5% Bloomberg Barclays US Corporate High Yield Bond Index and 65% Bloomberg Barclays Aggregate Ex-USD (Hedged) Index.

We feel this improves the blended benchmark to more accurately reflect the current global investment landscape and will therefore better reflect any over/under weighting we choose to implement in the portfolios we manage.

1This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing. Weightings in the image are: 42% Russell 3000, 12% MSCI EAFE, 4.2% MSCI Emerging Markets, 1.8% Dow Jones US Real Estate, 40% Bloomberg Barclays US Agg Bond.

Index Definitions:

Russell 3000 Index - a market-capitalization-weighted equity index maintained by the FTSE Russell that tracks the performance of the 3,000 largest U.S.-traded stocks.

EAFE Index - a market-capitalization-weighted equity index maintained by MSCI that covers non-U.S. and Canadian equity markets. It serves as a performance benchmark for the major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and the Middle East.

MSCI Emerging Markets – a float-adjusted market capitalization index maintained by MSCI that is used to measure equity market performance in 26 developing economies.

Dow Jones US Real Estate – an index designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.

Bloomberg Barclays US Agg Bond - a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.