1. Insights from the 2016 Fidelity Global Institutional Investor Survey
The Art and Science of Investment Decision Making: Factors That May Drive the Need for Change
Insights from the 2016 Fidelity Global Institutional Investor Survey
For institutional use only.

2. Fourteen Years Conducting Primary Research Expanded and evolved to become one of the largest institutional research studies
2002 First U.S. Defined Benefit (DB) survey
2005 First Endowment & Foundation survey
KEY MILESTONES
2007 First Canadian DB survey
2008 Completed North American Survey
2009 Created Pyramis Pulse Poll
2010 North American/ European Survey
2011 First Asian Pulse Poll
2012 First Global Institutional Survey
2014 Expanded Global Survey
2016 Expanded Global Institutional Survey
197 pensions 1 country <$1 Trillion
2002–2005
2006–2007
2008
2009
2010
2011
2012
2014
2016
933 institutions
25 countries
$21 Trillion
2002
GEOGRAPHIC REACH
2016
For institutional use only.

3. 2016 Survey Demographics 933 institutional investors, 25 countries, $21 trillion in investable assets
RESPONDENTS BY ORGANIZATION (%)+ 30 27 21 17 1
Private Sector Pension
Public Sector Pension
Insurance Company
Endowment/ Foundation
Sovereign Wealth Fund
RESPONDENTS BY REGION (%) 45 27 12 11 5
Americas*
Continental Europe**
Asia Pacific***
United Kingdom
Japan
+Not shown: 4% “Other” segment which consists of trade unions, law firms, heath and medical centers, etc.
*Includes United States, Canada, Mexico and Brazil
**Includes Denmark, Finland, France, Germany, Iceland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland
***Includes Australia, China, Hong Kong, Singapore, South Africa, South Korea, Taiwan.
For institutional use only.

4. Key Themes: Art and Science of Investment Decision Making More inputs, more decisions, alternative asset classes should prompt institutions to revisit their investment process
In recent years, the sophistication and complexity of institutional investor portfolios has grown, and will continue to grow, as they seek to navigate volatility and grow assets in the current economic environment.
On average, institutions feel they can generate nearly 2% annualized excess return with roughly half of that coming from a more dynamic portfolio management (tactical asset allocation and individual manager outperformance).
Institutions are expected to make a greater number of investment decisions in the future, both from more asset allocation changes and higher manager turnover; Some have also added more factors into the decision-making process.
Today, 25% of institutions define their investment process as highly systematic/disciplined, while 9% classify their decision-making style as “ad-hoc”; Remaining 66% put themselves somewhere in between.
A disciplined investment process: 1. Clearly defines your goals/objectives and strategy for achieving them 2. Cuts through short term “noise”, reduces behavioral biases 3. Identifies what to buy, when to buy it, and when to sell 4. Helps evaluate what worked and why.
- Maybe Cathy can discuss this?
Each institution’s decision-making process is unique however, more dynamic investment decision making, higher manager turnover and a number of other factors suggest institutions should revisit their investment decision making approach.
Future investment success may come not only from WHAT investments are made but also from HOW those investment decisions are made.
For institutional use only.

5. WHAT IS YOUR INVESTMENT PORTFOLIO’S PRIMARY INVESTMENT OBJECTIVE?
Primary Investment Objective Majority of institutions are still looking to grow their portfolios
WHAT IS YOUR INVESTMENT PORTFOLIO’S PRIMARY INVESTMENT OBJECTIVE?
Growth*
Preservation**
41%
Private Sector Pension
57%
44%
Public Sector Pension
55%
40%
Insurance
60%
48%
Endowment/Foundation
52%
54%
Sovereign Wealth Fund
46%
43%
Global/Overall View
56%
Other segment consists of trade unions law firms, heath and medical centers, etc.
*Growth includes capital growth and funded status growth options.
**Preservation includes capital preservation and funded status preservation.
NOTE: 1% of organizations answered “other.”
For institutional use only.

6. Investment Concerns External environment most concerning as institutions look to grow assets
WHAT IS YOUR TOP CONCERN REGARDING YOUR INVESTMENT PORTFOLIO?
(Top 3 answers shown)
TOP CONCERNS
Ability to manage risk portfolio risk
Volatility
Low return environment
GLOBAL RESPONSE 9%
28%
Low return environment
Private Sector Pension
26%
38%
13%
Public Sector Pension
31%
30%
16%
27%
Market Volatility
Insurance
25%
19%
17%
Endowment/Foundation
22%
16%
13%
Managing Portfolio Risk
15%
Sovereign Wealth Fund
46% 8%
Other segment consists of trade unions law firms, heath and medical centers, etc.
Other responses: impact of regulatory and accounting changes (12%), rising interest rates (9%), Current funded status (7%), Ability of asset managers to generate excess return (4%), Other (1%).
For institutional use only.

7. Required and Excess Return Expectations Despite concerns, 96% believe they can generate annualized excess return of 2%
WHAT IS YOUR LONG TERM REQUIRED RATE OF RETURN AND EXPECTED EXCESS RETURN?
Expected Excess
Required Return
Private Sector Pension
5.8
1.7
7.5%
Public Sector Pension
6.0
1.8
7.8%
Insurance
6.2
2.1
8.2%
Endowment/Foundation
5.5
1.8
7.3%
Sovereign Wealth Fund
7.5
2.3
9.8%
Other segment consists of trade unions law firms, heath and medical centers, etc.
For institutional use only.

8. Expected Sources of Excess Return Half from more dynamic portfolio management; growth tied to accuracy of decisions
OVER THE NEXT 3 YEARS, PLEASE ESTIMATE THE PERCENTAGE OF YOUR TOTAL EXCESS RETURN THAT WILL COME FROM EACH SOURCE
Private Sector Pension
Public Sector Pension
Insurance
Endowment/Foundation
Sovereign Wealth Fund
Other segment consists of trade unions law firms, heath and medical centers, etc.
For institutional use only.

9. Expected Asset Allocation Changes: Global Responses More complex investments, portfolio changes expected in next two years
WHAT ARE YOUR EXPECTED ASSET ALLOCATION CHANGES OVER THE NEXT 1-2 YEARS? (GLOBAL RESPONSES)
72% - 1% -
64% 8%
55% - 1% -
46%
24% -
42% 8%
46% -
11%
Increasing -
40%
11% -
41% 6% -
29%
33% -
28%
37% -
26% 6% -
15%
59% -
14%
32%
13% -
11%
Decreasing
2016
2012
2016
2012
2016
2012
2016
2012
2016
2012
2016
2012
2016
2012
Domestic Equity
Non-Domestic Equity
Domestic Fixed Income
Non-Domestic Fixed
Liquid Alternatives
Illiquid Alternatives
Cash
Income
Note: Responses of “no change” and “do not use asset class” are not shown above results use expected changes for hedge funds and private equity as proxies for liquid and illiquid alternatives, respectively Canadian results use global equity, domestic core fixed income and investment grade corporate as proxies for non-domestic equity, domestic fixed income and non-domestic fixed income, respectively.
For Institutional Use Only

10. Average Number of Investment Decisions Today Expected to rise in the future
HOW MANY INVESTMENT DECISIONS* DOES YOUR ORGANIZATION MAKE IN AN AVERAGE YEAR?
Private Sector Pension 10
Public Sector Pension 14
Insurance 15
Endowment/Foundation 10
Sovereign Wealth Fund 16
12=Average
*Asset allocation and manager hiring/firing.
For institutional use only.

11. Discipline of Investment Decision-Making Process Institutions run spectrum of pure “art” to pure “science” 9%
25%
“Art”
“Science”
For institutional use only.

12. Factors Influencing Asset Allocation Decisions Behavioral biases can have a significant impact on investment process
Past performance of asset class
Previous successes/failures with similar investments
Expected return from asset class
Risk tolerance
Economic forecast
Time Horizon
Consultant recommendation
Board dynamics
Asset allocation of peers
Media (e.g., articles, conferences)
Board member emotions (e.g., confidence, fear)
For institutional use only.

13. Factors Influencing Asset Allocation Decisions Behavioral biases can have a significant impact on investment process
Past performance of asset class
Previous successes/failures with similar investments
Expected return from asset class
Risk tolerance
Economic forecast
Time Horizon
Consultant recommendation
Board of dynamics
“Science”
Asset allocation of peers
Media (e.g., articles, conferences)
Board member emotions (e.g., confidence, fear)
For institutional use only.

14. Factors Influencing Asset Allocation Decisions Behavioral biases can have a significant impact on investment process
Past performance of asset class
Previous successes/failures with similar investments
Expected return from asset class
Risk tolerance
“Art”
Economic forecast
Time Horizon
Consultant recommendation
Board dynamics
Asset allocation of peers
Media (e.g., articles, conferences)
Board member emotions (e.g., confidence, fear)
For institutional use only.

15. Manager Hiring Factors and Evaluation Period Focus on performance with short evaluation periods; may result in higher turnover
HOW MUCH DOES EACH IMPACT HIRING DECISIONS FOR NEW ASSET MANAGERS?
LENGTH OF TRACK RECORD NEEDED, IN YEARS, TO…
...Determine if a manager is skilled or lucky
...Evaluate a prospective asset manager
28%
Investment Performance
27%
Investment Team
19%
Portfolio Characteristics
17%
Investment Philosophy/Process 9%
Non-Investment
Related Factors
4.2
3.4
2.3
3.3
2.5 P
Private Sector Pension r iv
ate Se c t o r Pe n s i on
3.4
Public Sector Pension
Public Sector Pension
2.5
Insurance
Insurance
1.4
Endowment/Foundation
Endowment/Foundation
2.3
Sovereign Wealth Fund
Sovereign Wealth Fund
1.5
For institutional use only.

16. Changes to Decision Making Process Evolving decision making process varies by region; results still being evaluated
HAVE YOU CHANGED YOUR DECISION MAKING PROCESS IN THE LAST THREE YEARS?
HOW DO YOU FEEL THESE CHANGES HAVE IMPACTED YOUR DECISION MAKING RESULTS?
Americas
Europe/Asia
46%
11%
Yes
67%
No Strong Opinion
32%
Very Positively 1%
Very Negatively
54%
89% No
For institutional use only.

17. Ideas for a More Effective and Repeatable Investment Process Recognize and reduce behavioral biases, understand successes, failures
Acknowledge markets/manager performance may be unpredictable and random in the short term (i.e., be realistic about expectations and skill).
Understand cycles of asset classes and factors that drive manager performance (and identity where you are in the current cycle).
Be willing to make investments/hire managers that are out of favor (i.e., buy low).
Have the discipline to hold onto investments/managers over the long-term despite short-term underperformance, particularly if other factors haven’t changed.
Set criteria up front for potentially exiting an investment or terminating a manager. Do not let frustration or emotion drive investment decision.
Conduct post mortem after exiting an investment or manager (i.e., Why did this work (not work)? What did we miss? Was our timing random luck?).
For institutional use only.

18. Important Information
This material contains statements that are "forward-looking statements," which are based upon certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different than those presented. Survey Summary: Fidelity Institutional Asset Management® conducted its survey of institutional investors in the summer of 2016, including 933 investors in 25 countries (174 U.S. corporate pension plans, 77 U.S. government pension plans, 51 non-profits and other U.S. institutions, 101 Canadian, 20 other North American, 350 European, 150 Asian, and 10 African institutions including pensions, insurance companies and financial institutions). Assets under management represented by respondents totaled more than USD $21 trillion. The surveys were executed in association with Strategic Insight, Inc. in North America and the Financial Times in all other regions. CEOs, COOs, CFOs, and CIOs responded to an online questionnaire or telephone inquiry.
For institutional use only.

19. Institutional.fidelity.com/globalsurvey
For more information
Institutional.fidelity.com/globalsurvey
For use with institutional investors, investment professionals, and plan sponsors. Unless otherwise noted, all data sourced from the Fidelity Global Institutional Investor Survey. Views expressed are as of Dec. 15, 2016, and may change based on market and other conditions. Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with any investment or transaction described herein. Fiduciaries are solely responsible for exercising independent judgment in evaluating any transaction(s) and are assumed to be capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies. Fidelity has a financial interest in any transaction(s) that fiduciaries, and if applicable, their clients, may enter into involving Fidelity’s products or services. All trademarks or service marks presented herein belong to FMR LLC or an affiliate, except for third-party trademarks and service marks, which belong to their respective owners. Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. FIAM does not provide legal or tax advice, and we encourage you to consult your lawyer, accountant, or other advisor before making any financial decisions. If receiving this piece through your relationship with Fidelity Institutional Asset Management® (FIAM), this publication may be provided by Fidelity Investments Institutional Services Company, Inc., Fidelity Institutional Asset Management Trust Company, or FIAM LLC, depending on your relationship. © 2016 FMR LLC. All rights reserved.
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