1. Senior Research Consultant, NEPC
Dulari Pancholi
Senior Research Consultant, NEPC

2. 2017 Current Opportunities
Trim US Equity Gains
Overweight Non-US Developed Market Equities
Emerging Market Equities Remain Attractive
Allocate to TIPS from Core Bonds
Reduce High Yield for Other Credit Strategies
Fund Emerging Local Debt from Risk Assets
Add Macro Hedge Fund Strategies

3. Summary: Credit Beta Group Trends
Beta Subset
Q1 2017
Q2 2017
Comments: Q2 2017
Developed Corporate Credit
Investment Grade
Negative
Concerns around fund flows
High Yield
Neutral
Spread compression elevates future risk-adjusted return concerns
Bank Loans
Positive
Positive/
Negative convexity, high percent of cov-lite is a concern
Private Credit
Europe and Asia are preferred over the US
Emerging Market Credit
EMD Local
Attractive real rates DM vs EM, FX volatility remain a concern but dispersed among EM countries
Structured
Credit
CLO
Mezzanine over equity, unless equity has edge

4. Summary: Equity Beta Group Trends
Beta Subset
Q1 2017
Q2 2017
Comments: Q2 2017
Liquid
Global
Positive
International Equity allocations; complements small cap allocation
United States
Neutral
Consider passive; For non core exposure consider concentrated/ flexible
International
Consider scaling in throughout 2017 to take advantage of volatility
Emerging Markets
Consumption theme still exists; EM small is more expensive
Illiquid
Special Situations
Opportunistic special situations funds with flexible and nimble approaches
Asia
Seek managers with strong local networks and those with industry or operational focus to drive growth and profitability

5. Summary: Multi-Asset Beta Group Trends
Beta Subset
Q1 2017
Q2 2017
Comments: Q2 2017
GAA
Benchmark Relative
Negative
Low return outlook strains ability to offer a differentiated return profile
Absolute Return
Positive
Macro orientation offers low correlation
Risk Parity
Risk Parity Dynamic
Tactically adjust risk exposure
Global Macro
Systematic GM
Core macro exposure & diversification
CTA/Managed Futures
Maintain positive view on diversification
Diversified Macro
Core allocation within a macro portfolio
Thematic Macro
Emerging markets trading opportunities
Other Diversifiers
Neutral
Providing unique and uncorrelated exposure

6. Three Different way to Implement an Impact Strategy
Thematic
VOTE
Active
Engagement
Negative
Screening
ESG
Integration
Strategy Focus
Investment Universe
Performance
Level of Impact
Pro-actively seeking opportunities in targeted areas (e.g. Renewable Energy)
Actively engage in corporate voting process to push key agenda
Screening out certain securities for non-financial reasons
ESG Factors built-in as part of the investment process
Varied across asset classes
Sizable and includes mainstream managers
Growing in size, but most funds are smaller and newer
Small but growing
May lag benchmarks due to restricted universe
Performance studies show neutral to positive impact
Varied and will have sizable tracking error due to sector focus
TBD
Low
Low/Medium
High
TBD

7. Information Disclaimer
Past performance is no guarantee of future results.
Information on market indices was provided by sources external to NEPC. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within.
The goal of this report is to provide a basis for substantiating asset allocation recommendations.
All investments carry some level of risk. Diversification and other asset allocation techniques do not ensure profit or protect against losses.
This report is provided as a management aid for the client’s internal use only. This report may contain confidential or proprietary information and may not be copied or redistributed to any party not legally entitled to receive it.